EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
ASK JEEVES, INC.,
a Delaware corporation;
ANSWER ACQUISITION CORP.,
a Delaware corporation;
and
DIRECT HIT TECHNOLOGIES, INC.,
a Delaware corporation
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Dated as of January 25, 2000
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EXHIBITS
Exhibit A - Certain definitions
Exhibit B - Form of Voting Agreement
Exhibit C - Form of Escrow Agreement
Exhibit D - Form of Stockholder Representation Letter
Exhibit E - Persons to sign Parent Affiliate Lock-Up
Exhibit F - Form of Parent Affiliate Lock-Up Agreement
Exhibit G - Form of Noncompetition Agreement
Exhibit H - RESERVED
Exhibit I - RESERVED
Exhibit J - FIRPTA Statement
Exhibit K - Form of Registration Rights Agreement
Exhibit L - Form of legal opinion of Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
Exhibit M - Form of legal opinion of Cooley Godward LLP
Exhibit N - Form of Tax Representation Letters
TABLE OF CONTENTS
PAGE
SECTION 1. DESCRIPTION OF TRANSACTION..........................................1
1.1 Merger of Merger Sub into the Company...............................1
1.2 Effect of the Merger................................................1
1.3 Closing; Effective Time.............................................1
1.4 Articles of Incorporation and Bylaws; Directors and Officers........2
1.5 Conversion of Shares................................................2
1.6 Stock Options.......................................................5
1.7 Closing of the Company's Transfer Books.............................6
1.8 Exchange of Certificates; Escrow Shares.............................6
1.9 Appraisal Rights....................................................8
1.10 Tax Consequences....................................................9
1.11 Further Action......................................................9
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................9
2.1 Due Organization; No Subsidiaries; Etc..............................9
2.2 Certificate of Incorporation and Bylaws; Records....................9
2.3 Capitalization, Etc................................................10
2.4 Financial Statements...............................................11
2.5 Absence of Changes.................................................11
2.6 Title to Assets....................................................13
2.7 Equipment; Leasehold...............................................13
2.8 Title to Real Property.............................................13
2.9 Intellectual Property..............................................14
2.10 Contracts..........................................................15
2.11 Liabilities........................................................17
2.12 Compliance with Legal Requirements.................................17
2.13 Governmental Authorizations........................................17
2.14 Tax Matters........................................................17
2.15 Employee and Labor Matters; Benefit Plans..........................18
2.16 Environmental Matters..............................................19
2.17 Insurance..........................................................19
2.18 Related Party Transactions.........................................20
TABLE OF CONTENTS
(CONTINUED)
PAGE
2.19 Legal Proceedings; Orders..........................................20
2.20 Authority; Binding Nature of Agreement.............................21
2.21 Non-Contravention; Consents........................................21
2.22 Full Disclosure....................................................22
2.23 Vote Required......................................................22
2.24 No Brokers.........................................................22
2.25 No Existing Discussions............................................22
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............22
3.1 Corporate Existence and Power......................................22
3.2 Authority; Binding Nature of Agreement.............................22
3.3 No Conflict; Consents..............................................23
3.4 SEC Filings; Financial Statements..................................23
3.5 Valid Issuance.....................................................23
3.6 Merger Sub.........................................................23
3.7 Legal Proceedings..................................................23
3.8 Absence of Certain Changes.........................................24
SECTION 4. CERTAIN COVENANTS OF THE COMPANY...................................24
4.1 Access and Investigation...........................................24
4.2 Operation of the Business of the Company...........................24
4.3 Notification; Updates to Disclosure Schedule.......................26
4.4 No Negotiation.....................................................26
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES................................27
5.1 Filings and Consents...............................................27
5.2 Company Stockholders' Meeting......................................27
5.3 Public Announcements...............................................27
5.4 Parent Affiliate Lock-Up...........................................28
5.5 Commercially Reasonable Efforts....................................28
5.6 Termination of Agreements..........................................28
5.7 Employee and Related Matters.......................................28
5.8 Protection of Proprietary Assets...................................29
5.9 FIRPTA Matters.....................................................29
TABLE OF CONTENTS
(CONTINUED)
PAGE
5.10 Notification.......................................................29
5.11 Tax-Free Reorganization............................................29
5.12 Nasdaq National Market Listing.....................................30
5.13 Indemnification of Directors and Officers of the Company...........30
5.14 Blue Sky Laws......................................................30
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB.......30
6.1 Accuracy of Representations........................................30
6.2 Performance of Covenants...........................................31
6.3 Stockholder Approval...............................................31
6.4 Consents...........................................................31
6.6 Agreements and Documents...........................................31
6.7 Absence of Material Adverse Effect.................................32
6.8 Stock Certificates.................................................32
6.9 FIRPTA Compliance..................................................32
6.10 No Restraints......................................................32
6.11 No Legal Proceedings...............................................32
6.12 Rule 506 Exemption.................................................33
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.................33
7.1 Accuracy of Representations........................................33
7.2 Performance of Covenants...........................................33
7.3 Stockholder Approval...............................................33
7.4 Agreements and Documents...........................................33
7.5 Listing............................................................34
7.6 Absence of Material Adverse Effect.................................34
7.7 No Restraints......................................................34
7.8 Tax Opinion........................................................34
SECTION 8. TERMINATION........................................................34
8.1 Termination Events.................................................34
8.2 Termination Procedures.............................................35
8.3 Effect of Termination..............................................35
SECTION 9. INDEMNIFICATION, ETC...............................................35
TABLE OF CONTENTS
(CONTINUED)
PAGE
9.1 Survival of Representations, Etc...................................35
9.2 Indemnification....................................................36
9.3 Exclusive Remedy...................................................37
9.4 No Contribution....................................................37
9.5 Defense of Third Party Claims......................................37
SECTION 10. MISCELLANEOUS PROVISIONS...........................................38
10.1 Stockholders' Agent................................................38
10.2 Further Assurances.................................................38
10.3 Fees and Expenses..................................................39
10.4 Attorneys' Fees....................................................39
10.5 Notices............................................................39
10.6 Time of the Essence................................................40
10.7 Headings...........................................................40
10.8 Counterparts.......................................................40
10.9 Governing Law......................................................40
10.10 Successors and Assigns.............................................40
10.11 Remedies Cumulative; Specific Performance..........................40
10.12 Waiver.............................................................40
10.13 Amendments.........................................................41
10.14 Severability.......................................................41
10.15 Parties in Interest................................................41
10.16 Entire Agreement...................................................41
10.17 Waiver of Jury Trial...............................................41
10.18 Construction.......................................................41
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of January 25, 2000, by and among ASK JEEVES, INC.,
a Delaware corporation ("Parent"); ANSWER ACQUISITION CORP., a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger Sub"); and
DIRECT HIT TECHNOLOGIES, INC., a Delaware corporation (the "Company").
Certain capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of
Merger Sub with and into the Company in accordance with this Agreement and the
9Delaware General Corporation Law (the "Merger"). Upon consummation of the
Merger, Merger Sub will cease to exist, and the Company will become a wholly
owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
C. This Agreement has been approved by the respective boards of
directors of Parent, Merger Sub and the Company.
D. Contemporaneously with the execution and delivery of this
Agreement, the holders of capital stock of the Company representing
approximately 60% of the voting capital stock of the Company are executing and
delivering to Parent a voting agreement (a "Voting Agreement") of even date
herewith substantially in the form of Exhibit B.
AGREEMENT
The parties to this Agreement intending to be legally bound hereby agree
as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as defined
in Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth
in this Agreement and in the applicable provisions of the Delaware General
Corporation Law.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxx Godward LLP, Five Xxxx Xxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000 at
10:00 a.m. on a date to be agreed upon by the parties as soon as practicable,
but no later than one business day, after the satisfaction (or, to the extent
permitted, waiver) of the conditions set forth in Sections 6 and 7. (The date on
which the
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Closing actually takes place is referred to in this Agreement as the
"Closing Date.") Contemporaneously with or as promptly as practicable after the
Closing, a properly executed certificate of merger conforming to the
requirements of the Delaware General Corporation Law shall be filed with the
Secretary of State of the State of Delaware. The Merger shall become effective
at the time such certificate of merger is filed with the Secretary of State of
the State of Delaware (the "Effective Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless otherwise determined by Parent and the Company prior to the Effective
Time:
(a) the certificate of incorporation of the Surviving
Corporation shall be amended and restated as of the Effective Time in a
form acceptable to Parent;
(b) the bylaws of the Surviving Corporation shall be amended
and restated as of the Effective Time to conform to the bylaws of Merger
Sub as in effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals selected by
Parent prior to the Closing.
1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.8(c) and 1.9, at the Effective Time,
by virtue of the Merger and without any further action on the part of Parent,
Merger Sub, the Company or any stockholder of the Company:
(i) each share of Company Common Stock outstanding
immediately prior to the Effective Time shall be converted into the right
to receive the Applicable Fraction (as defined below) of a share of the
common stock (par value $0.001 per share) of Parent ("Parent Common
Stock");
(ii) each share of Series A Preferred Stock, $0.001 par
value per share, of the Company ("Company Series A Preferred Stock")
outstanding immediately prior to the Effective Time shall be converted
into the right to receive the Applicable Fraction of a share of Parent
Common Stock and the Series A Preference Fraction of a share of Parent
Common Stock;
(iii) each share of Series B Preferred Stock, $0.001 par
value per share, of the Company ("Company Series B Preferred Stock")
outstanding immediately prior to the Effective Time shall be converted
into the right to receive the Applicable Fraction of a share of Parent
Common Stock and the Series B Preference Fraction of a share of Parent
Common Stock; and
(iv) each share of the common stock (par value $0.001 per
share) of Merger Sub outstanding immediately prior to the Effective Time
shall be converted into one share of common stock of the Surviving
Corporation.
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The capitalized terms used above without definition shall have the following
meanings:
"AGGREGATE CONSIDERATION" means the number of shares of Parent Common
Stock obtained by deriving the sum of (A) 4,750,000, plus (B) the product
obtained by multiplying the Unvested Remaining Employee Shares by the Parent
Stock Conversion Ratio, plus (C) the product obtained by multiplying the
Unvested Terminated Employee Shares by the Parent Stock Conversion Ratio.
"APPLICABLE FRACTION" means the fraction (A) having a numerator equal to
the Aggregate Consideration less the Preference Shares, and (B) having a
denominator equal to the Fully Diluted Company Shares.
"CHANGE OF CONTROL SHARES" means the shares and options to purchase
Company Common Stock that will vest as a result of the Merger in accordance with
the provisions of the Company's option plans or option agreements.
"FULLY DILUTED COMPANY SHARES" means the Fully Diluted Vested Shares and
the Unvested Remaining Employee Shares.
"FULLY DILUTED UNVESTED SHARES" means the sum of (A) the number of
Unvested shares of capital stock of the Company, plus (B) the aggregate number
of shares of capital stock of the Company issuable upon the exercise of any
Unvested option, in each case outstanding immediately prior to the Effective
Time (excluding the Terminated Officer Shares, the Change of Control Shares and
the Option Plan Termination Shares).
"FULLY DILUTED VESTED SHARES" means the sum of (A) the aggregate number
of Vested shares of capital stock of the Company (including the Terminated
Officer Shares, the Change of Control Shares and the Option Plan Termination
Shares) outstanding immediately prior to the Effective Time, plus (B) the
aggregate number of shares of capital stock of the Company (if any) issuable
upon the exercise of any Vested option (including the Terminated Officer Shares,
the Change of Control Shares and the Option Plan Termination Shares),
outstanding warrant or other right to acquire capital stock of the Company, or
the conversion of any convertible securities, outstanding immediately prior to
the Effective Time.
"OPTION PLAN TERMINATION SHARES" means the shares of Company Common Stock
and options to purchase Company Common Stock that will vest pursuant to the
provisions of the Company's 1998 Stock Option Plan and 1998-A Stock Option Plan
(but not pursuant to any applicable option agreement) upon termination of
employment following the Merger.
"PARENT CLOSING PRICE" means the closing price as listed on The Nasdaq
National Market in U.S. dollars of one share of Parent Common Stock on the day
immediately prior to the Closing Date.
"PARENT STOCK CONVERSION RATIO" means the fraction (A) having the
numerator equal to 4,750,000, and (B) having the denominator equal to the Fully
Diluted Vested Shares.
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"PREFERENCE SHARES" means the sum of the Series A Preference Shares and
the Series B Preference Shares.
"SERIES A PREFERENCE FRACTION" means the fraction (A) having the
numerator equal to 0.2667, and (B) the denominator equal to the Parent Closing
Price.
"SERIES A PREFERENCE SHARES" means the number of shares of Parent Common
Stock obtained by deriving the product of (A) the number of shares of Company
Series A Preferred Stock outstanding immediately prior to the Effective Time,
multiplied by (B) the Series A Preference Fraction.
"SERIES B PREFERENCE FRACTION" means the fraction (A) having the
numerator equal to 1.51067, and (B) the denominator equal to the Parent Closing
Price.
"SERIES B PREFERENCE SHARES" means the number of shares of Parent Common
Stock obtained by deriving the product of (A) the number of shares of Company
Series B Preferred Stock outstanding immediately prior to the Effective Time,
multiplied by (B) the Series B Preference Fraction.
"TERMINATED OFFICER SHARES" means the shares of Company Common Stock and
options to purchase Company Common Stock which will be Vested as a result of the
expected termination of Messrs. XxXxxxxxx and Xxxxx and Xx. XxXxxxxxx.
"UNVESTED" means that shares (or, if unexercised, shares underlying
options) are subject to repurchase rights by the Company or any successor to the
Company.
"UNVESTED REMAINING EMPLOYEE SHARES" means the Fully Diluted Unvested
Shares less the Unvested Terminated Employee Shares.
"UNVESTED TERMINATED EMPLOYEE SHARES" means the aggregate number of
shares of Company Common Stock set forth on SCHEDULE 1.5 attached hereto (such
schedule to be updated immediately prior to the Closing to reflect vesting as of
such date) under the column heading "Unvested Terminated Employee Shares."
"VESTED" means that shares (or, if unexercised, shares underlying
options) are not subject to repurchase rights by the Company or any successor to
the Company.
(b) To the extent not prohibited by the applicable agreement,
if any shares of Company Common Stock outstanding immediately prior to the
Effective Time are unvested or are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted stock purchase
agreement or other agreement with the Company (to the extent the restriction
does not terminate in accordance with its terms as a result of the Merger), then
the shares of Parent Common Stock issued in exchange for such shares of Company
Common Stock will also be unvested and subject to the same repurchase option,
risk of forfeiture or other condition, and the certificates representing such
shares of Parent Common Stock may accordingly be marked with appropriate
legends.
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(c) A portion of the shares of Parent Common Stock issued in
the Merger shall be delivered into escrow and held as specified in Section 1.8
hereof.
(d) In the event Parent at any time or from time to time
between the date of this Agreement and the Effective Time declares or pays any
dividend on Parent Common Stock payable in Parent Common Stock or in any right
to acquire Parent Common Stock, or effects a subdivision of the outstanding
shares of Parent Common Stock into a greater number of shares of Parent Common
Stock (by stock dividends, combinations, splits, recapitalizations and the
like), or in the event the outstanding shares of Parent Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares of Parent Common Stock, then the Applicable Fraction shall be
appropriately adjusted.
1.6 STOCK OPTIONS. At the Effective Time, each option to purchase
shares of capital stock of the Company that is then outstanding, whether vested
or unvested (a "Company Option"), shall be assumed by Parent in accordance with
the terms (as in effect as of the date of this Agreement and without regard to
any provisions thereof which permit modification to such terms by the Board of
Directors of Company or Parent) of the Company's 1998-A Stock Plan (the "Stock
Plan") and the stock option agreement by which such Company Option is evidenced.
All rights with respect to Company Common Stock under outstanding Company
Options shall thereupon be converted into rights with respect to Parent Common
Stock. Accordingly, from and after the Effective Time, (i) each Company Option
assumed by Parent may be exercised solely for shares of Parent Common Stock,
(ii) the number of shares of Parent Common Stock subject to each such assumed
Company Option shall be equal to the number of shares of Company Common Stock
that were subject to such Company Option immediately prior to the Effective Time
multiplied by the Applicable Fraction, rounded down to the nearest whole number
of shares of Parent Common Stock, (iii) the per share exercise price for the
Parent Common Stock issuable upon exercise of each such assumed Company Option
shall be determined by dividing the exercise price per share of Company Common
Stock subject to such Company Option, as in effect immediately prior to the
Effective Time, by the Applicable Fraction, and rounding the resulting exercise
price up to the nearest whole cent and (iv) all restrictions on the exercise of
each such assumed Company Option shall continue in full force and effect, and
the term, exercisability, vesting schedule and other provisions of such Company
Option shall otherwise remain unchanged and shall continue to have, and be
subject to, the same terms and conditions as set forth in the Stock Plan and/or
stock option agreement by which such Company Option is evidenced immediately
prior to the Effective Time; PROVIDED, HOWEVER, that each such assumed Company
Option shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction effected by Parent after the
Effective Time; and PROVIDED, FURTHER, that if the employment of the holder of a
Company Option is terminated by Parent other than for Cause or such holder
terminates his or her employment with Parent for Good Reason, in each case
within 180 days of the Closing Date, then, in addition to the portion of the
Company Option which vests in accordance with its terms as a result of this
transaction or such termination, an additional 25% of the shares originally
issuable under such Company Option shall vest effective upon the date of such
termination. The foregoing acceleration provision shall also apply to each
holder of a Company Option who does not become an employee of Parent pursuant to
Section 5.7 hereof. In addition, if any Company Option is exercised prior to the
first anniversary of the Closing Date, then Parent shall deliver to such
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holder a certificate representing 90 percent of the number of whole
shares of Parent Common Stock that such holder has the right to receive
pursuant to this Section 1.6 and shall deliver to the escrow agent under the
Escrow Agreement in the form of Exhibit C hereto (the "Escrow Agreement"), on
behalf of such holder, a certificate representing 10 percent of the number of
whole shares of Parent Common Stock that such holder has the right to receive
pursuant to the provisions of this Section 1.6, which shall be deemed to be
Escrow Shares for purposes of this Agreement and the Escrow Agreement. Such
holder shall be deemed to be a Merger Stockholder for purposes of Sections 9
and 10.1 of this Agreement and the Escrow Agreement. By exercising a Company
Option prior to the first anniversary of the Closing Date, the holder shall
be deemed to have approved Sections 9 and 10.1 of this Agreement and the
Escrow Agreement. The Company and Parent shall take all action that may be
necessary to effectuate the provisions of this Section 1.6. Following the
Closing, Parent will send to each holder of an assumed Company Option a
written notice setting forth (i) the number of shares of Parent Common Stock
subject to such assumed Company Option, (ii) the exercise price per share of
Parent Common Stock issuable upon exercise of such assumed Company Option and
(iii) Parent's commitment with respect to accelerated vesting upon a
termination of employment as described in this Section 1.6. It is the
intention of the parties that the Company Options assumed by Parent qualify
following the Effective Time as incentive stock options as defined in Section
422 of the Code to the extent that such Company Options qualified as
incentive stock options immediately prior to the Effective Time. Parent shall
file with the SEC, no later than coincident with the effectiveness of the
Resale Registration Statement contemplated by the Registration Rights
Agreement attached as Exhibit K hereto, a registration statement on Form S-8
registering the shares of Parent Common Stock issuable upon exercise of any
Company Options assumed by Parent pursuant to this Section 1.6. Parent shall
use its commercially reasonable efforts to maintain the effectiveness of such
Registration Statement for so long as such Company Options remain
outstanding. Parent shall take all necessary corporate action to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
upon exercise of Company Options assumed in accordance with this Section 1.6.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
holders of certificates representing shares of the Company's capital stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as stockholders of the Company, and the stock transfer books of the
Company shall be closed with respect to all shares of such capital stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of the Company's capital stock shall be made on such stock transfer
books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of the Company's capital
stock (a "Company Stock Certificate") is presented to the Surviving Corporation
or Parent, such Company Stock Certificate shall be canceled and shall be
exchanged as provided in Section 1.8.
1.8 EXCHANGE OF CERTIFICATES; ESCROW SHARES.
(a) At or prior to the Effective Time, Parent shall reserve for
exchange in accordance with this Section 1, (i) the aggregate number of shares
of Parent Common Stock issuable pursuant to Section 1.5 in exchange for
outstanding shares of Company Common Stock and Company Preferred Stock and (ii)
cash for fractional shares in the amount described in Section 1.8(c). At the
Closing, each Company stockholder that does not perfect its appraisal
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rights and is otherwise entitled to receive shares of Parent Common Stock
pursuant to Section 1.5 (a "Merger Stockholder") shall surrender to Parent
all certificates representing shares of Company Common Stock or Company
Preferred Stock (properly endorsed for transfer). At or as soon as
practicable after the Effective Time, Parent shall deliver to each Merger
Stockholder a certificate representing 90 percent of the number of whole
shares of Parent Common Stock that such Merger Stockholder has the right to
receive pursuant to the provisions of Section 1.5. At or as soon as
practicable after the Effective Time, Parent shall deliver to the escrow
agent under the Escrow Agreement, on behalf of the Merger Stockholders, a
certificate representing 10 percent of the number of whole shares of Parent
Common Stock that the Merger Stockholders have the right to receive pursuant
to the provisions of Sections 1.5 (the "Escrow Shares"). With respect to
those Merger Stockholders whose shares of Company Common Stock are subject to
a repurchase right by the Company (a "Restricted Stock Purchase Agreement")
and to the extent such repurchase right does not terminate in accordance with
its terms as a result of the Merger, the number of Escrow Shares deposited on
behalf of each such Merger Stockholder shall be prorated between such Merger
Stockholder's unreleased shares under a Restricted Stock Purchase Agreement
and shares that have been released from the Company's repurchase right based
on the number of shares that constitute unreleased shares under a Restricted
Stock Purchase Agreement and the number of shares that have been so released
as of the Effective Time. If any Company Stock Certificate shall have been
lost, stolen or destroyed, Parent may, in its discretion and as a condition
precedent to the issuance of any certificate representing Parent Common
Stock, require the owner of such lost, stolen or destroyed Company Stock
Certificate to provide an appropriate affidavit and indemnity agreement
against any claim that may be made against Parent or the Surviving
Corporation with respect to such Company Stock Certificate.
(b) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Company Stock Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of any fractional share shall be paid to any such holder, until
such holder surrenders such Company Stock Certificate in accordance with this
Section 1.8 (at which time such holder shall be entitled receive all such
dividends and distributions and such cash payment).
(c) No fractional shares of Parent Common Stock shall be issued
in connection with the Merger, and no certificates for any such fractional
shares shall be issued. In lieu of such fractional shares, any holder of capital
stock of the Company who would otherwise be entitled to receive a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of Parent
Common Stock issuable to such holder) shall, upon surrender of such holder's
Company Stock Certificate(s), be paid in cash the dollar amount (rounded to the
nearest whole cent), without interest, determined by multiplying such fraction
by the closing price at the Effective Time for Parent Common Stock.
(d) The shares of Parent Common Stock to be issued in the
Merger shall be characterized as "restricted securities" for purposes of Rule
144 under the Securities Act, and each certificate representing any such shares
shall, until such time that the shares are not so restricted under the
Securities Act, bear a legend identical or similar in effect to the following
legend (together with any other legend or legends required by applicable state
securities laws or otherwise, if any):
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"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED
OR HYPOTHECATED UNLESS REGISTERED UNDER THE ACT OR UNLESS AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS
AVAILABLE."
(e) Parent and the Surviving Corporation shall be entitled to
deduct and withhold from any consideration payable or otherwise deliverable to
any holder or former holder of capital stock of the Company pursuant to this
Agreement such amounts as Parent or the Surviving Corporation may be required to
deduct or withhold therefrom under the Code or under any provision of state,
local or foreign tax law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise have been
paid.
(f) Neither Parent nor the Surviving Corporation shall be
liable to any holder or former holder of capital stock of the Company for any
shares of Parent Common Stock (or dividends or distributions with respect
thereto), or for any cash amounts, delivered to any public official pursuant to
any applicable abandoned property, escheat or similar law.
(g) The Escrow Shares shall be maintained in an escrow fund
(the "Escrow Fund") for purposes of satisfying claims brought pursuant to
Section 9 and for the period of time set forth in the Escrow Agreement.
1.9 APPRAISAL RIGHTS.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company for which, as of the
Company Stockholders' Meeting (as defined in Section 5.2 hereof), the holder
thereof has demanded an appraisal of their value in accordance with Section 262
of the Delaware General Corporation Law ("Dissenting Shares") shall not be
converted into or represent the right to receive Parent Common Stock in
accordance with Section 1.5, and the holder or holders of such shares shall be
entitled only to such rights as may be granted to such holder or holders in
Section 262 of the Delaware General Corporation Law; PROVIDED, HOWEVER, that if
the status of any such shares as Dissenting Shares shall not be perfected in
accordance with Section 262 of the Delaware General Corporation Law, or if any
such shares shall lose their status as Dissenting Shares then, as of the later
of the Effective Time or the time of the failure to perfect such status or the
loss of such status, such shares shall automatically be converted into and shall
represent only the right to receive (upon the surrender of the certificate or
certificates representing such shares) Parent Common Stock in accordance with
Section 1.5.
(b) The Company shall give Parent (i) prompt notice of any
written demand received by the Company at or prior to the Company Stockholders'
Meeting to require the Company to purchase Dissenting Shares pursuant to Section
262 of the Delaware General Corporation Law and of any other demand, notice or
instrument delivered to the Company prior to the Effective Time pursuant to the
Delaware General Corporation Law, and (ii) the opportunity to participate in all
negotiations and proceedings with respect to any such demand,
8
notice or instrument. The Company shall not make any payment or settlement
offer prior to the Effective Time with respect to any such demand unless
Parent shall have consented in writing to such payment or settlement offer.
1.10 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code and the parties agree to report the Merger as such on their respective tax
returns. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.11 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Corporation or Parent
with full right, title and possession of and to all rights and property of
Merger Sub and the Company, the officers and directors of the Surviving
Corporation and Parent shall be fully authorized (in the name of Merger Sub, in
the name of the Company and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants, to and for the benefit of the
Indemnitees, subject to such exceptions as are disclosed in the Disclosure
Schedule (the parties acknowledge that disclosure contained in any part of the
Disclosure Schedule shall be deemed to be disclosed in all other parts to which
the relevance of such disclosure is reasonably apparent), as follows:
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all necessary corporate power and authority: (i) to conduct its business in the
manner in which its business is currently being conducted and is currently
proposed to be conducted; (ii) to own and use its assets in the manner in which
its assets are currently owned and used and (iii) to perform its obligations
under all Company Contracts.
(b) The Company is not and has never been required to be
qualified, authorized, registered or licensed to do business as a foreign
corporation in any jurisdiction.
(c) Part 2.1(c) of the Disclosure Schedule accurately sets
forth (i) the names of the members of the Company's board of directors, (ii) the
names of the members of each committee of the Company's board of directors and
(iii) the names and titles of the Company's officers.
(d) The Company does not own any controlling interest in any
Entity, and the Company has never owned, beneficially or otherwise, any shares
or other securities of, or any direct or indirect equity interest in, any
Entity. The Company has not agreed and is not obligated to make any future
investment in or capital contribution to any Entity.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to Parent accurate and complete copies of: (a) the Company's
certificate of
9
incorporation and bylaws, including all amendments thereto; (b) the stock
records of the Company and (c) except as set forth in Part 2.2 of the
Disclosure Schedule, the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise
without a meeting) of the stockholders of the Company, the board of directors
of the Company and all committees of the board of directors of the Company.
There has not been any violation of any of the provisions of the Company's
certificate of incorporation or bylaws, and the Company has not taken any
action that is inconsistent in any material respect with any resolution
adopted by the Company's stockholders, the Company's board of directors or
any committee of the Company's board of directors. The books of account,
stock records, minute books and other records of the Company are accurate,
up-to-date and complete in all material respects.
2.3 CAPITALIZATION, ETC.
(a) As of the date hereof, the authorized capital stock of the
Company consists of (i) 35,000,000 shares of Company Common Stock, of which
9,878,892 shares are issued and outstanding and (ii) 10,942,678 shares of
Preferred Stock, 5,187,501 of which are designated as Series A Preferred, all of
which are issued and outstanding, 1,323,912 of which are designated as Series B
Preferred Stock, all of which are issued and outstanding, and 4,431,265 of which
are designated as Series C Preferred Stock, 4,431,263 of which are issued and
outstanding. The Company has reserved an additional 1,758,607 shares of Company
Common Stock for issuance under the Stock Plan to employees, advisory board
members, officers or directors of, or consultants to, the Company, of which
options to acquire 1,462,646 shares of Common Stock have been granted and are
currently outstanding. The number of shares of Company Common Stock subject to
unvested Company Options and the number of unvested shares of Company Common
Stock subject to Restricted Stock Purchase Agreements (in each case after giving
effect to the Merger) is not in excess of an aggregate of 1,628,380 shares of
Company Common Stock.
(b) All of the outstanding shares of Company Common Stock and
Company Preferred Stock have been duly authorized and validly issued and are
fully paid and nonassessable, have been issued in compliance with all applicable
federal and state securities laws and were not issued in violation of or subject
to any preemptive rights or other rights to subscribe for or purchase securities
of the Company. There are no preemptive rights applicable to any shares of
capital stock of the Company.
(c) Except as set forth in Section 2.3(a) or Part 2.3(c) of the
Disclosure Schedule, there is no: (i) outstanding subscription, option, call,
warrant or right (whether or not currently exercisable) to acquire any shares of
the capital stock or other securities of the Company; (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of the Company; (iii)
Contract under which the Company is or may become obligated to sell or otherwise
issue any shares of its capital stock or any other securities or (iv) to the
knowledge of the Company, condition or circumstance that may give rise to or
provide a basis for the assertion of a claim by any Person to the effect that
such Person is entitled to acquire or receive any shares of capital stock or
other securities of the Company.
10
(d) Except as set forth in Part 2.3(d) of the Disclosure
Schedule, the Company has not repurchased, redeemed or otherwise reacquired any
of its shares of capital stock or other securities. All securities so reacquired
by the Company were reacquired in compliance with (i) all applicable Legal
Requirements and (ii) all requirements set forth in applicable Contracts.
2.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):
(i) The audited balanced sheets of the Company as of
December 31, 1998, and the related audited income statements, statements
of shareholders' equity and cash flows with the notes thereto and the
unqualified report and opinion of Deloitte & Touche LLP relating thereto;
and
(ii) The unaudited balance sheet of the Company as of
September 30, 1999 (the "Unaudited Interim Balance Sheet"), and the
related unaudited income statement of the Company for the nine months
then ended.
(b) The Company Financial Statements are accurate and complete
in all material respects and present fairly the financial position of the
Company as of the respective dates thereof and the results of operations (and in
the case of the financial statements referred to in Section 2.4(a)(i), cash
flows) of the Company for the period covered thereby. The Company Financial
Statements have been prepared in accordance with generally accepted accounting
principals applied on a consistent basis throughout the periods covered (except
that the financial statements referred to in Section 2.4(a)(ii) do not contain
footnotes and are subject to normal and recurring year-end audit adjustments,
which will not, individually or in the aggregate, be material in magnitude.)
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the
Disclosure Schedule, since September 30, 1999:
(a) there has not been any material adverse change in the
business, condition, operations or financial performance of the Company,
and, to the knowledge of the Company, no event has occurred that will, or
could reasonably be expected to, have a Material Adverse Effect on the
Company;
(b) there has not been any material loss, damage or destruction
to, or any material interruption in the use of, any of the material
assets of the Company;
(c) the Company has not declared, accrued, set aside or paid
any dividend or made any other distribution in respect of any shares of
capital stock, nor has the Company repurchased, redeemed or otherwise
reacquired any shares of its capital stock or other securities;
(d) except as described in Section 2.3 or Part 2.3 of the
Disclosure Schedule, the Company has not sold, issued or authorized the
issuance of (i) any capital stock or other security, (ii) any option or
right to acquire any capital stock or any other security or
11
(iii) any instrument convertible into or exchangeable for any capital
stock or other security of the Company;
(e) there has been no amendment to the certificate of
incorporation or bylaws of the Company, and the Company has not effected
or been a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(f) the Company has not formed any subsidiary or acquired any
equity interest or other interest in any other Entity;
(g) the Company has not made any capital expenditure that, when
added to all other capital expenditures made on behalf of the Company
since September 30, 1999, exceeds $50,000;
(h) the Company has not (i) entered into or permitted any of
the assets owned or used by it to become bound by any Contract that is or
would constitute a Material Contract (as defined below) or (ii) amended
or prematurely terminated, or waived any material right or remedy under,
any such Contract;
(i) the Company has not (i) acquired, leased or licensed any
right or other asset from any other Person, (ii) sold or otherwise
disposed of, or leased or licensed, any right or other asset to any other
Person, or (iii) waived or relinquished any right, except in each case
for rights or other assets acquired, leased, licensed or disposed of in
the ordinary course of business and on a consistent basis;
(j) the Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account
receivable or other indebtedness;
(k) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any
Encumbrance, except for pledges of immaterial assets made in the ordinary
course of business and on a consistent basis;
(l) the Company has not (i) lent money to any Person (other
than pursuant to routine advances made to employees for travel and
business expenses in the ordinary course of business) or (ii) incurred or
guaranteed any indebtedness for borrowed money;
(m) the Company has not changed any of its methods of
accounting or accounting practices in any respect;
(n) the Company has not made any material Tax election other
than in the ordinary course of business;
(o) the Company has not commenced or settled any Legal
Proceeding;
(p) the Company has not entered into any material transaction
or taken any other material action outside the ordinary course of
business or inconsistent with its past practices; and
12
(q) the Company has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(p)" above.
2.6 TITLE TO ASSETS.
(a) The Company owns, and has good, valid and marketable title
to, all assets purported to be owned by it in the Company's Registration
Statement on Form S-1, as filed with Securities and Exchange Commission, except
for such imperfections of title which are not material in character, amount or
extent, and which do not materially detract from the value, or materially
interfere with the present use, of the assets subject thereto or affected
thereby. Except as set forth in Part 2.6(a) of the Disclosure Schedule, all of
such assets are owned by the Company free and clear of any liens or other
Encumbrances, except for (x) any lien for current taxes not yet due and payable
and (y) minor liens that have arisen in the ordinary course of business and that
do not (in any individual case or in the aggregate) materially detract from the
value of the assets subject thereto or materially impair the operations of the
Company.
(b) Part 2.6(b) of the Disclosure Schedule identifies all
assets that are material to the business of the Company and that are being
leased or licensed to the Company.
2.7 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets
owned by or leased to the Company are adequate for the uses to which they are
being put, are in good operating condition and repair (ordinary wear and tear
excepted) and are adequate for the conduct of the business of the Company in the
manner in which such business is currently being conducted.
(b) The Company does not own any leasehold interest in real
property, except for the leasehold created under the real property lease
identified in Part 2.8 of the Disclosure Schedule.
2.8 TITLE TO REAL PROPERTY. The Company does not own any real property
or interests in real property other than leasehold interests in real property.
Part 2.8 of the Disclosure Schedule sets forth a complete list of all real
property and interest in real property leased by the Company ("Leased Real
Property"). The Company has good and valid title to the leasehold interests in
all Leased Real Property, in each case free and clear of all Encumbrances,
except (i) such as are set forth in Part 2.8 of the Disclosure Schedule, (ii)
leases, subleases and similar agreements set forth in Part 2.8 of the Disclosure
Schedule, (iii) easements, covenants, rights-of-way and other similar
restrictions of record that do not (in any case or in the aggregate) materially
detract from the value of the assets subject thereto or materially impair the
operations of the Company, (iv) minor liens that have arisen in the ordinary
course of business and have been or will be paid promptly and that do not (in
any case or in the aggregate) materially detract from the value of the assets
subject thereto or materially impair the operations of the Company and (vi) any
Encumbrance on the landlord's interest in any Leased Real Property, including
any deeds of trust, mortgages or other monetary liens.
13
2.9 INTELLECTUAL PROPERTY.
(a) Part 2.9(a)(i) of the Disclosure Schedule sets forth each
trademark, trade name, service xxxx, service name, patent, patent application
and registered copyright owned by the Company. Part 2.9(a)(ii) of the Disclosure
Schedule identifies and provides a brief description of each trademark, trade
name, service xxxx, service name, patent and patent application licensed to the
Company by any Person (except for any trademark, trade name, service xxxx,
service name, patent and patent application that is licensed to the Company
under any third party software license generally available to the public at a
cost of less than $10,000), and identifies the license agreement under which
such trademark, trade name, service xxxx, service name, patent and patent
application is being licensed to the Company. Except as set forth in Part
2.9(a)(iii) of the Disclosure Schedule, the Company has valid and marketable
title to all of the Company Proprietary Assets identified in Part 2.9(a)(i) of
the Disclosure Schedule, free and clear of all liens and other Encumbrances, and
has a valid right to use all Proprietary Assets identified in Part 2.9(a)(ii) of
the Disclosure Schedule. Except as set forth in Part 2.9(a)(iv) of the
Disclosure Schedule, the Company has not developed jointly with any other Person
any Company Proprietary Asset with respect to which such other Person has any
rights.
(b) The Company has taken reasonable measures and precautions
to protect and maintain the confidentiality and secrecy of all Company
Proprietary Assets (except Company Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all Company Proprietary Assets. Except as set forth in Part 2.9(b)(i) of the
Disclosure Schedule, the Company has not (other than pursuant to license
agreements identified in Part 2.10 of the Disclosure Schedule) disclosed or
delivered to any Person, or permitted the disclosure or delivery to any Person
of, (i) the source code, or any portion or aspect of the source code, of any
Company Proprietary Asset or (ii) the object code, or any portion or aspect of
the object code, of any Company Proprietary Asset. Except as set forth in Part
2.9(b)(ii) of the Disclosure Schedule, all current and former employees,
consultants and independent contractors that are or were involved in the
creation, invention, research or development of the Company Proprietary Assets
have executed and delivered to the Company an agreement that is substantially
identical to the form of the Employee Inventions and Proprietary Rights
Assignment Agreement previously delivered to Parent.
(c) None of the Company Proprietary Assets or the use or
exercise of any Company Proprietary Asset infringes any patent, copyright, trade
secret, trademark or other intellectual property right of any other Person
existing as of the date hereof and/or the Closing Date. The Company is not
misappropriating or making any unlawful use of, and the Company has not at any
time misappropriated or made any unlawful use of, any Proprietary Asset owned or
used by any other Person. The Company has not received any notice or other
communication of any actual or alleged infringement, misappropriation or
unlawful use of, any Proprietary Asset owned or used by any other Person. To the
knowledge of the Company, no other Person is infringing, misappropriating or
making any unlawful use of, and no Proprietary Asset owned or used by any other
Person infringes any Company Proprietary Asset.
(d) Except as set forth in Part 2.9(d) of the Disclosure
Schedule, (i) the Company has not licensed any of the Company Proprietary Assets
to any Person on an exclusive basis and (ii) the Company has not entered into
any covenant not to compete or Contract limiting
14
its ability to exploit fully any of its Proprietary Assets or to transact
business in any market or geographical area or with any Person.
(e) Except as set forth in Part 2.9(e) of the Disclosure
Schedule, the Company's products and products under development and the
internally developed computer systems and software are Date Compliant. Except as
set forth in Part 2.9(e) of the Disclosure Schedule, to the knowledge of the
Company, the third party computer systems and software used by the Company in
its internal operations are Date Compliant. The Company has delivered to Parent
accurate and complete copies of all memoranda, analyses, reports, correspondence
and other documents existing as of the date hereof and relating to the Date
Compliance status of the Company's products, products under development and
internally used systems and software which have been received by the Company
from third parties or prepared internally by the Company (to the extent that
such documents are not subject to the attorney-client privilege).
(f) No internally developed product, system, program or
software module designed, developed, sold, licensed or otherwise made available
by the Company to any Person, and to the knowledge of the Company, no third
party product, system, program or software module sold, licensed or otherwise
made available by the Company to any Person, contains any "back door," "time
bomb," "Trojan horse," "worm," "drop dead device," "virus" or other software
routines or hardware components designed to permit unauthorized access or to
disable or erase software, hardware or data without the consent of the user.
There is no coded user limit.
2.10 CONTRACTS.
(a) Part 2.10(a) of the Disclosure Schedule identifies:
(i) each Company Contract relating to the employment of,
or the performance of services by, any employee, consultant or
independent contractor;
(ii) each Company Contract imposing any restriction on
the Company's right or ability (A) to compete with any other Person or
(B) to transact business or deal in any other manner with any other
Person;
(iii) each Company Contract creating or involving any
agency relationship, distribution arrangement or franchise relationship
involving annual payments in excess of $50,000 or with a term of longer
than one year;
(iv) each Company Contract relating to the acquisition,
issuance or transfer of any securities;
(v) each Company Contract creating or relating to
(i) any partnership or (ii) joint venture or any sharing of revenues,
profits, losses, costs or liabilities involving annual payments in excess
of $5,000 or with a term of longer than one year;
(vi) each Company Contract with any Related Party (as
defined in Section 2.18);
15
(vii) each Company Contract with a corporate or similar
sponsor involving annual payments in excess of $5,000 or with a term of
longer than 180 days;
(viii) any other Company Contract that contemplates or
involves (A) the payment or delivery of cash or other consideration in an
amount or having a value in excess of $50,000 in the aggregate or (B) the
performance of services having a value in excess of $50,000 in the
aggregate, in each case other than Contracts that have a term of less
than 60 days or that may be terminated by the Company (without penalty)
within 60 days after the delivery of a termination notice by the Company;
(ix) each Company Contract relating to the license of any
patent, copyright, trade secret or other proprietary right to or from the
Company other than any patent, copyright, trade secret or other
proprietary right that is licensed to the Company under any third party
software license generally available to the public at a cost of less than
$10,000;
(x) each Company Contract relating to the grant of
rights to manufacture, produce, assemble, license, market, or sell the
Company's products to any other person or otherwise affecting the
Company's exclusive right to develop, manufacture, assemble, distribute,
market or sell its products;
(xi) each Company Contract relating to indemnification by
the Company with respect to infringements of proprietary rights (other
than indemnification obligations arising from purchase or sale agreements
entered into in the ordinary course of business); and
(xii) any other Company Contract that is material to the
business of the Company.
(Contracts in the respective categories described in clauses "(i)" through
"(xii)" above are referred to in this Agreement as "Material Contracts.")
(b) The Company has delivered to Parent accurate and complete
copies of all written Material Contracts identified in Part 2.10 of the
Disclosure Schedule, including all amendments thereto. Part 2.10 of the
Disclosure Schedule provides an accurate description of the terms of each
Material Contract that is not in written form. Each Material Contract identified
in Part 2.10 of the Disclosure Schedule is in full force and effect, and, to the
knowledge of the Company, is enforceable by the Company in accordance with its
terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
(c) Except as set forth in Part 2.10 of the Disclosure
Schedule:
(i) the Company has not violated or breached, or
committed any default under, any Company Contract, and, to the knowledge
of the Company, no other Person has violated or breached, or committed
any default under, any Company Contract, except where such violations,
breaches or defaults which have not had and will not reasonably be
expected to have a Material Adverse Effect on the Company;
16
(ii) to the knowledge of the Company, no event has
occurred, and no circumstance or condition exists, that (with or without
notice or lapse of time) will, or could reasonably be expected to,
(A) result in a violation or breach of any of the provisions of any
Company Contract, (B) give any Person the right to declare a default
under or exercise any remedy for breach of any Company Contract,
(C) give any Person the right to accelerate the maturity or performance
of any Company Contract or (D) give any Person the right to cancel,
terminate or modify any Company Contract;
(iii) the Company has not received any notice or other
communication regarding any actual or possible violation or breach of, or
default under, any Company Contract; and
(iv) the Company has not waived any of its material
rights under any Material Contract.
2.11 LIABILITIES. The Company does not have any accrued, contingent or
other liabilities of any nature, either matured or unmatured (whether or not
required to be reflected in financial statements in accordance with generally
accepted accounting principles, and whether due or to become due), which are not
set forth in the Company Financial Statements except for the liabilities
incurred in the ordinary course of business consistent with past practices or
identified in Part 2.11 of the Disclosure Schedule.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at all
times been, in compliance with all applicable Legal Requirements, except where
the failure to comply with such Legal Requirements has not had and will not
reasonably be expected to have a Material Adverse Effect on the Company. Except
as set forth in Part 2.12 of the Disclosure Schedule, the Company has never
received any notice or other communication from any Governmental Body regarding
any actual or possible violation of, or failure to comply with, any Legal
Requirement.
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by the Company, and the
Company has delivered to Parent accurate and complete copies of all Governmental
Authorizations identified in Part 2.13 of the Disclosure Schedule. The
Governmental Authorizations identified in Part 2.13 of the Disclosure Schedule
are valid and in full force and effect, and collectively constitute all
Governmental Authorizations necessary to enable the Company to conduct its
business in the manner in which its business is currently being conducted. The
Company is, and at all times has been, in substantial compliance with the terms
and requirements of the respective Governmental Authorizations identified in
Part 2.13 of the Disclosure Schedule. The Company has never received any notice
or other communication from any Governmental Body regarding (a) any actual or
possible violation of or failure to comply with any term or requirement of any
material Governmental Authorization or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
material Governmental Authorization.
2.14 TAX MATTERS. The Company has filed all federal, state, local and
foreign tax returns that are required to have been filed or has requested
extension thereof and has paid all taxes, including sales and withholding taxes,
penalties and interest, assessments, fees and other
17
charges to the extent that the same have become due and payable. No tax
assessment or deficiency has been made or proposed against the Company nor
has the Company received any notice of any proposed tax audit, assessment or
deficiency. No claim or proceeding is pending or to the Company's knowledge
has been threatened against or with respect to the Company in respect of any
tax. As of the Closing Date, there will be no agreement, plan, arrangement or
other Contract covering any employee or independent contractor or former
employee or independent contractor of the Company that, considered
individually or considered collectively with any other such Contracts, will,
or could reasonably be expected to, give rise directly or indirectly to the
payment by the Company or Parent of any amount to any employee or former
employee of the Company in connection with liabilities of such employee or
independent contractor or former employee or independent contractor pursuant
to Section 280G. The Company is not, and has never been, a party to or bound
by any tax indemnity agreement, tax sharing agreement, tax allocation
agreement or similar agreement.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.15(a) of the Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by the Company for
the benefit of any employee of the Company ("Employee") and that is not listed
in Part 2.15(c) of the Disclosure Schedule.
(b) Except as set forth in Part 2.15(a) of the Disclosure
Schedule, the Company does not maintain, sponsor or contribute to, and, to the
knowledge of the Company, the Company has not at any time in the past
maintained, sponsored or contributed to, any employee pension benefit plan for
the benefit of Employees or former Employees (a "Pension Plan").
(c) The Company maintains, sponsors or contributes only to
those employee welfare benefit plans for the benefit of Employees or former
Employees that are described in Part 2.15(c) of the Disclosure Schedule (the
"Welfare Plans").
(d) With respect to each Plan, the Company has delivered to
Parent: (i) an accurate and complete copy of such Plan (including all amendments
thereto) and (ii) an accurate and complete copy of all reports, summary plan
descriptions, material employee communications, trust or other funding
agreements, financial statements and Contract relating to or with respect to
such Plan;
(e) Except as set forth in Part 2.15(e) of the Disclosure
Schedule, no Welfare Plan provides death, medical or health benefits (whether or
not insured) with respect to any current or former Employee after any such
Employee's termination of service (other than (i) benefit coverage mandated by
applicable law and (ii) benefits the full cost of which are borne by current or
former Employees (or the Employees' beneficiaries)).
18
(f) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements.
(g) Except as set forth in Part 2.15(g) of the Disclosure
Schedule or as otherwise contemplated by this Agreement, neither the execution,
delivery or performance of this Agreement, nor the consummation of the Merger or
any of the other transactions contemplated by this Agreement, will result in any
payment (including any bonus or severance payment) to any current or former
Employee or director of the Company (whether or not under any Plan), or
materially increase the benefits payable under any Plan, or result in any
acceleration of the time of payment or vesting of any such benefits.
(h) Part 2.15(h) of the Disclosure Schedule contains a list of
all salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. The Company is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its Employees.
All of the employees of the Company are "at will" employees.
(i) Except as set forth in Part 2.15(i) of the Disclosure
Schedule, the Company has good labor relations, and the Company does not have
any reason to believe that (i) the consummation of the Merger or any of the
other transactions contemplated by this Agreement will have a material adverse
effect on the labor relations of the Company or (ii) any of the employees of the
Company intends to terminate his or her employment with the Company.
2.16 ENVIRONMENTAL MATTERS. The Company is in compliance in all
material respects with all applicable Environmental Laws, which compliance
includes the possession by the Company of all permits and other Governmental
Authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof. The Company has not received any notice or
other communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that the Company is not in
compliance with any Environmental Law, and, to the knowledge of the Company,
there are no circumstances that may prevent or interfere with the compliance by
the Company with any Environmental Law in the future. To the knowledge of the
Company, no current or prior owner of any property leased or controlled by the
Company has received any notice or other communication (in writing or
otherwise), whether from a Government Body, citizens group, employee or
otherwise, that alleges that such current or prior owner, lessee or operator or
the Company is not in compliance with any Environmental Law. All Governmental
Authorizations currently held by the Company pursuant to Environmental Laws are
identified in Part 2.16 of the Disclosure Schedule. There has been no release or
discharge by the Company (or, to the knowledge of the Company, by any current or
prior owner, lessee or operator of any property leased or controlled by the
Company) of any Materials of Environmental Concern that would or would
reasonably be expected to give rise to an obligation by the Company to effect
any environmental cleanup or remediation.
2.17 INSURANCE. Part 2.17 of the Disclosure Schedule identifies all
insurance policies, other than those listed in Part 2.15(a) or (c), maintained
by, at the expense of or for the benefit of
19
the Company, identifies any material claims made thereunder, and includes a
summary of the amounts and types of coverage and the deductibles under each
such insurance policy. Each of the insurance policies identified in Part 2.17
of the Disclosure Schedule is in full force and effect. The Company has not
received any notice or other communication regarding any actual or possible
(a) cancellation or invalidation of any insurance policy, (b) refusal of any
coverage or rejection of any claim under any insurance policy or (c) material
adjustment in the amount of the premiums payable with respect to any
insurance policy.
2.18 RELATED PARTY TRANSACTIONS.
(a) Except as set forth in Part 2.18(a) of the Disclosure
Schedule: (a) no Related Party has, and no Related Party has at any time had,
any direct or indirect interest in any material asset used in or otherwise
relating to the business of the Company; (b) no Related Party is, or has at any
time been, indebted to the Company; (c) no Related Party has entered into, or
has had any direct or indirect financial interest in, any Material Contract,
transaction or business dealing involving the Company; (d) no Related Party is
competing, or has at any time competed, directly or indirectly, with the
Company; and (e) no Related Party has any claim or right against the Company
(other than rights to receive compensation for services performed as an employee
of the Company or for reimbursement of travel or business expenses incurred in
the ordinary course of business or pursuant to any option granted under the
Stock Plan). (For purposes of this Section 2.18 each of the following shall be
deemed to be a "Related Party": (i) each of the stockholders of the Company;
(ii) each individual who is, or who has at any time been, an officer of the
Company; (iii) each member of the immediate family of each of the individuals
referred to in clauses "(i)" and "(ii)" above; and (iv) any trust or other
Entity (other than the Company) in which any one of the individuals referred to
in clauses "(i)", "(ii)" and "(iii)" above holds (or in which more than one of
such individuals collectively hold), beneficially or otherwise, a material
voting, proprietary or equity interest.)
(b) Part 2.18(b) of the Disclosure Schedule sets forth an
accurate description of any transfer of capital stock of the Company that has
ever occurred between or among any existing or former stockholders of the
Company. Exhibit E identifies each person who is (or who may be deemed to be) an
"affiliate" (as that term is used in Rule 145 under the Securities Act) of the
Company as of the date of this Agreement.
2.19 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.19(a) of the Disclosure
Schedule, there is no pending Legal Proceeding, and, to the knowledge of the
Company, no Person has threatened to commence any Legal Proceeding: (i) that
involves the Company or any of the assets owned or used by the Company and that
could have a Material Adverse Effect on the Company; or (ii) that challenges, or
that may have the effect of preventing, delaying, making illegal or otherwise
interfering with, the Merger or any of the other transactions contemplated by
this Agreement. To the knowledge of the Company, except as set forth in Part
2.19 of the Disclosure Schedule, no event has occurred, and no claim, dispute or
other condition or circumstance exists, that will, or that could reasonably be
expected to, give rise to or serve as a basis for the commencement of any such
Legal Proceeding which could have a Material Adverse Effect on the Company.
20
(b) Except as set forth in Part 2.19(b) of the Disclosure
Schedule, no Legal Proceeding has ever been commenced by or has ever been
pending against the Company.
(c) There is no order, writ, injunction, judgment or decree to
which the Company, or any of the assets owned or used by the Company, is
subject. To the knowledge of the Company, none of the stockholders of the
Company is subject to any order, writ, injunction, judgment or decree that
relates to the business of the Company or to any of the assets owned or used by
the Company.
2.20 AUTHORITY; BINDING NATURE OF AGREEMENT. This Agreement has been
duly authorized, executed and delivered by, and constitutes the valid and
binding obligation of, the Company, enforceable against the Company in
accordance with its terms, except insofar as enforceability may be affected by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, and general principles of equity.
2.21 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.21 of
the Disclosure Schedule, neither (1) the execution, delivery or performance of
this Agreement or any of the other agreements referred to in this Agreement, nor
(2) the consummation of the Merger or any of the other transactions contemplated
by this Agreement, will directly or indirectly (with or without notice or lapse
of time):
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of the certificate of incorporation or bylaws of
the Company or (ii) any resolution adopted by the stockholders of the
Company, the board of directors of the Company or any committee of the
board of directors of the Company;
(b) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of
the transactions contemplated by this Agreement or to exercise any remedy
or obtain any relief under, any Legal Requirement or any order, writ,
injunction, judgment or decree to which the Company, or any of the assets
owned or used by the Company, is subject;
(c) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right
to revoke, withdraw, suspend, cancel, terminate or modify, any material
Governmental Authorization that is held by the Company or that otherwise
relates to the business of the Company or to any of the assets owned or
used by the Company;
(d) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any Material
Contract, or give any Person the right to (i) declare a default or
exercise any remedy under any such Material Contract, (ii) accelerate the
maturity or performance of any such Material Contract or (iii) cancel,
terminate or modify any such Material Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the
Company (except for minor liens that will not, in any case or in the
aggregate, materially detract from the value of the assets subject
thereto or materially impair the operations of the Company.
21
Except as set forth in Part 2.21 of the Disclosure Schedule, the Company is not
and will not be, required to make any filing with, or give any notice to, or to
obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
2.22 FULL DISCLOSURE. None of the representations or warranties made by
the Company in this Agreement (including, and as modified by, the Disclosure
Schedule) or in the Company Closing Certificate, (i) contains or will contain
any untrue statement of a material fact or (ii) omits or will omit to state any
material fact necessary in order to make the representations and warranties
contained herein (in the light of the circumstances under which such
representations and warranties were made or provided) not misleading.
2.23 VOTE REQUIRED. The affirmative vote of the holders of a majority
of the outstanding shares of Company Common Stock and Company Preferred Stock,
voting together as a single class (the "Required Vote"), is the only vote of the
holders of any class or series of the Company's capital stock necessary to adopt
and approve this Agreement, the Merger and the other transactions contemplated
by this Agreement.
2.24 NO BROKERS. Except for FleetBoston Xxxxxxxxx Xxxxxxxx, Inc. (whose
fee will be shared with Xxxxxx Xxxxxx Partners LLC, SoundView Technology Group
and Wit Capital Corporation), no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based on arrangements made by or on
behalf of the Company.
2.25 NO EXISTING DISCUSSIONS. Except as set forth in Part 2.25 of the
Disclosure Schedule, neither the Company nor any Representative of the Company
is engaged, directly or indirectly, in any discussions or negotiations with any
other Person (other than Parent and Merger Sub) relating to any Acquisition
Transaction.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant,
subject to exceptions disclosed on the Parent Disclosure Schedule, to the
Company as follows:
3.1 CORPORATE EXISTENCE AND POWER. Each of Parent and Merger Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate power required to conduct
its business as now conducted, and is duly qualified to do business and is in
good standing in each jurisdiction in which the conduct of its business or the
ownership or leasing of its properties requires such qualification, except where
the failure to be so qualified would not have a Material Adverse Effect on
Parent.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to enter into and to
perform their obligations under this Agreement; and the execution, delivery and
performance by Parent and Merger Sub of this Agreement (including the
contemplated issuance of Parent Common Stock in the Merger in accordance with
this Agreement) have been duly authorized by all necessary action on the part of
Parent and Merger Sub and their respective boards of directors. No vote of
Parent's stockholders
22
is needed to approve the Merger. This Agreement has been duly executed and
delivered by Parent and Merger Sub and constitutes the legal, valid and
binding obligation of Parent and Merger Sub, enforceable against them in
accordance with its terms, subject to (a) laws of general application
relating to bankruptcy, insolvency and the relief of debtors and (b) rules of
law governing specific performance, injunctive relief and other equitable
remedies.
3.3 NO CONFLICT; CONSENTS. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby by Parent
and Merger Sub are not prohibited by, and will not violate or conflict with, any
provision of the certificate of incorporation or bylaws of Parent or Merger Sub,
or of any Legal Requirement or any provision of any Contract to which Parent or
Merger Sub is a party, except where any of the foregoing would not have,
individually or in the aggregate, a Material Adverse Effect on Parent. No
Consent of any Governmental Body is necessary on the part of Parent or Merger
Sub for the consummation by Parent and Merger Sub of the transactions
contemplated by this Agreement.
3.4 SEC FILINGS; FINANCIAL STATEMENTS. Parent has filed with the
Securities and Exchange Commission (the "SEC") and has heretofore made available
to the Company true and complete copies of, all forms, reports, schedules,
statements and other documents required to be filed by it and its subsidiaries
since June 30, 1999 under the Securities Act and the Exchange Act (collectively,
the "Parent SEC Documents"). As of their respective dates or, if amended, as of
the date of the last such amendment, the Parent SEC Documents and any forms,
reports, schedules, statements and other documents Parent may file with the SEC
subsequent to the date hereof until the Closing, including, without limitation,
any financial statements or schedules included therein, complied or will comply
in all material respects with the applicable requirements of the Securities Act
and the Exchange Act, and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were or will be made, not misleading. Each of the consolidated
balance sheets (including the related notes) included in the Parent SEC
Documents fairly presented in all material respects the financial position of
Parent and its consolidated subsidiary as of the respective dates thereof, and
the other related statements (including the related notes) included therein
fairly presented in all material respects the results of operations and cash
flows of Parent and its consolidated subsidiary for the respective periods or as
of the respective dates set forth therein. Each of the consolidated balance
sheets and statements of operations and cash flows (including the related notes)
included in the Parent SEC Documents has been prepared in all material respects
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, except as otherwise noted
therein and subject, in the case of unaudited interim financial statements, to
normal year-end adjustments.
3.5 VALID ISSUANCE. The Parent Common Stock to be issued in the Merger
and upon exercise of Company Options assumed in accordance with the provisions
of this Agreement will, when issued in accordance with the provisions of this
Agreement, be validly issued, fully paid and nonassessable, will not be subject
to any preemptive rights and will have been issued pursuant to an effective
exemption from registration under the Securities Act.
3.6 MERGER SUB. Merger Sub has been formed solely for the purpose of
executing and delivering this Agreement and consummating the transactions
contemplated hereby. Merger
23
Sub has not engaged in any business or activity other than activities related
to its corporate organization and the execution and delivery of this
Agreement.
3.7 LEGAL PROCEEDINGS. Except as disclosed in the Parent SEC
Documents, there is no pending Legal Proceeding, and, to the knowledge of Parent
and Merger Sub, no Person has threatened to commence any Legal Proceeding: (i)
that involves the Parent, Merger Sub or any of their respective assets owned or
used by them and that could have a Material Adverse Effect on Parent; or (ii)
that challenges, or that may have the effect of preventing, delaying, making
illegal or otherwise interfering with, the Merger or any of the other
transactions contemplated by this Agreement.
3.8 ABSENCE OF CERTAIN CHANGES. Since the date of the Parent SEC
Documents (and except as disclosed therein), Parent has conducted business in
the ordinary course and there has not occurred (i) any amendments or changes to
its certificate of incorporation or by-laws of Parent; (ii) any damage to, or
destruction or loss of any assets of Parent that could have a Material Adverse
Effect on Parent or (iii) any event which has had or could reasonably be
expected to result in or have a Material Adverse Effect on Parent.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Closing Date or earlier termination of this Agreement
pursuant to the provisions of Section 8.1 (the "Pre-Closing Period"), the
Company shall, and shall cause its Representatives to: (a) provide Parent and
Parent's Representatives with reasonable access to the Company's
Representatives, personnel and assets and to all existing books, records, tax
returns, work papers and other documents and information relating to the
Company; and (b) provide Parent and Parent's Representatives with copies of such
existing books, records, tax returns, work papers and other documents and
information relating to the Company, and with such additional financial,
operating and other data and information regarding the Company, as Parent may
reasonably request.
4.2 OPERATION OF THE BUSINESS OF THE COMPANY. Without the prior
written consent of Parent, which shall not be unreasonably withheld, during the
Pre-Closing Period:
(a) the Company shall conduct its business and operations in
the ordinary course and in substantially the same manner as such business
and operations have been conducted prior to the date of this Agreement;
(b) the Company shall use commercially reasonable efforts to
preserve intact its current business organization, keep available the
services of its current officers and employees and maintain its relations
and good will with all suppliers, customers, landlords, creditors,
employees and other Persons having business relationships with the
Company;
(c) the Company shall keep in full force all insurance policies
identified in Part 2.17 of the Disclosure Schedule;
24
(d) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of
capital stock, and the Company shall not repurchase, redeem or otherwise
reacquire any shares of capital stock or other securities except from
former employees, directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any termination
of service to the Company;
(e) except for the issuance of shares of Company Common Stock
upon exercise or conversion of presently outstanding Company Preferred
Stock or Company Options, the Company shall not sell, issue or authorize
the issuance of (i) any capital stock or other security, (ii) any option
or right to acquire any capital stock or other security or (iii) any
instrument convertible into or exchangeable for any capital stock or
other security;
(f) except as contemplated by this Agreement, the Company shall
not amend or permit the adoption of any amendment to the certificate of
incorporation or bylaws of the Company, or effect or permit the Company
to become a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(g) the Company shall not form any subsidiary or acquire any
equity interest or other interest in any other Entity;
(h) the Company shall not make any capital expenditure, except
for capital expenditures that, when added to all other capital
expenditures made on behalf of the Company during the Pre-Closing Period,
do not exceed $50,000 per month;
(i) the Company shall not (i) enter into, or permit any of the
assets owned or used by it to become bound by, any Contract that is or
would constitute a Material Contract or (ii) amend or prematurely
terminate, or waive any material right or remedy under, any such Material
Contract;
(j) the Company shall not (i) lend money to any Person (except
that the Company may make routine travel advances to employees in the
ordinary course of business) or (ii) incur or guarantee any indebtedness
for borrowed money;
(k) the Company shall not (i) establish, adopt or amend any
Employee Benefit Plan, except to change health insurance providers, or as
may be required by applicable law to maintain its legal status, (ii)
other than in the ordinary course of business consistent with past
practice, pay any bonus or make any profit-sharing payment, cash
incentive payment or similar payment to, or increase the amount of the
wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees or
(iii) hire any new employee;
(l) the Company shall not change any of its methods of
accounting or accounting practices in any material respect;
(m) the Company shall not make any tax election;
25
(n) the Company shall not commence or settle any Legal
Proceeding; and
(o) the Company shall not agree or commit to take any of the
actions described in clauses "(e)" through "(n)" above.
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company shall promptly
notify Parent in writing of: (i) the discovery by the Company of any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes in any material respect an
inaccuracy in or breach of any representation or warranty made by the Company in
this Agreement; (ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute in any material respect an inaccuracy in or breach of any
representation or warranty made by the Company in this Agreement if (a) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance or (b)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement; (iii) any breach of any covenant or
obligation of the Company; and (iv) any event, condition, fact or circumstance
that would make the satisfaction of any of the conditions set forth in Section 6
or Section 7 impossible or unlikely prior to February 15, 2000.
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 4.3(a) requires any change in the
Disclosure Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Disclosure Schedule were dated as of the date
of the occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Company shall promptly deliver to Parent an update to the
Disclosure Schedule specifying such change. Except as expressly set forth in
this Agreement, no such update shall be deemed to supplement or amend the
Disclosure Schedule for the purpose of (i) determining the accuracy of any of
the representations and warranties made by the Company in this Agreement or (ii)
determining whether any of the conditions set forth in Section 6 has been
satisfied.
4.4 NO NEGOTIATION. During the Pre-Closing Period, the Company shall
not, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry,
proposal or offer from any Person (other than Parent) relating to a
possible Acquisition Transaction;
(b) participate in any discussions or negotiations or enter
into any agreement with, or provide any non-public information to, any
Person (other than Parent) relating to or in connection with a possible
Acquisition Transaction; or
(c) consider, entertain or accept any proposal or offer from
any Person (other than Parent) relating to a possible Acquisition
Transaction.
26
The Company shall promptly notify Parent in writing of any material inquiry,
proposal or offer relating to a possible Acquisition Transaction that is
received by the Company or any of its affiliates during the Pre-Closing Period.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a) shall make all
filings, if any, and give all notices, if any, required to be made and given by
such party in connection with the Merger and the other transactions contemplated
by this Agreement and (b) shall use all commercially reasonable efforts to
obtain all Consents, if any, required to be obtained (pursuant to any applicable
Legal Requirement or Contract, or otherwise) by such party in connection with
the Merger and the other transactions contemplated by this Agreement. The
Company shall (upon request) promptly deliver to Parent a copy of each such
filing made, each such notice given and each such Consent obtained by the
Company during the Pre-Closing Period.
5.2 COMPANY STOCKHOLDERS' MEETING. No later than January 27, 2000, the
Company and Parent shall finalize an Information Statement relating to the
approval of the Merger by the Company's stockholders and the exercise of
appraisal rights in connection therewith (the "Information Statement"). The
Parent and the Company shall provide and include in the Information Statement
such information relating to the Parent and the Company and their respective
stockholders as required pursuant to the provisions of applicable securities and
corporate laws (including, without limitation, Rule 502 under the Securities
Act). The Company shall, in accordance with its certificate of incorporation and
bylaws and the applicable requirements of the Delaware General Corporation Law,
call and hold a special meeting of its stockholders as promptly as practicable
for the purpose of permitting them to consider and to vote upon and approve the
Merger and this Agreement (the "Company Stockholders' Meeting"). The Information
Statement shall include a solicitation of consents necessary to prevent the
acceleration of stock options in connection with this Agreement from giving rise
to a "parachute payment." The Company shall cause a copy of the Information
Statement to be mailed to each stockholder of the Company who is entitled to
vote on the Merger. As promptly as practicable after the delivery of copies of
the Information Statement to all stockholders entitled to vote at the Company
Stockholders' Meeting, the Company shall use its best efforts (i) to solicit
from each of such stockholders a proxy in favor of the approval of the Merger
and this Agreement and in favor of approval of items necessary to prevent the
acceleration of stock options in connection with this Agreement from giving rise
to a "parachute payment," (ii) to cause each of such stockholders who is not an
"accredited investor" (as defined in Rule 501 under the Securities Act) to
appoint a "purchaser representative" (as defined in Rule 501 under the
Securities Act) in connection with evaluating the merits and risks of investing
in Parent Common Stock and (iii) to cause each of such stockholders to execute
and deliver to Parent a Stockholder Representation Letter in the form of Exhibit
D hereto. In lieu of calling and holding the Company Stockholders' Meeting, the
Company may solicit written consents in accordance with its certificate of
incorporation and bylaws and the applicable requirements of the Delaware General
Corporation Law (and the parties hereto acknowledge that the Company currently
intends to do so). Parent will reasonably cooperate with the Company with
respect to the matters set forth in this Section 5.2. Parent and the Company
will each promptly provide all information relating to its business or
operations necessary for inclusion in the Information Statement to satisfy all
27
requirements of applicable state and federal securities and corporate laws.
5.3 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, (a) the
Company shall not (and the Company shall not permit any of its Representatives
to) issue any press release or make any public statement regarding this
Agreement or the Merger, or regarding any of the other transactions contemplated
by this Agreement, without Parent's prior written consent, and (b) Parent will
use reasonable efforts to consult with the Company prior to issuing any press
release or making any public statement regarding the Merger.
5.4 PARENT AFFILIATE LOCK-UP. The Parent shall use all commercially
reasonable efforts to cause each Person identified on Exhibit E hereto (the
"Parent Affiliates") to sign a Lock-Up Agreement in the form attached hereto as
Exhibit F hereto (the "Parent Affiliate Lock-Up") within 48 hours of the public
announcement of the execution of this Agreement. The Parent certifies that the
Parent Affiliates represent all executive officers, directors and venture
capital investors of Parent.
5.5 COMMERCIALLY REASONABLE EFFORTS. During the Pre-Closing Period,
(a) the Company shall use all commercially reasonable efforts to cause the
conditions set forth in Section 6 to be satisfied on a timely basis and (b)
Parent and Merger Sub shall use all commercially reasonable efforts to cause the
conditions set forth in Section 7 to be satisfied on a timely basis.
5.6 TERMINATION OF AGREEMENTS. Prior to the Closing, the Company shall
use all commercially reasonable efforts to ensure that: (a) (i) the Voting
Agreement dated July 16, 1999, (ii) all provisions in Contracts that provide any
Person with rights of any nature with respect to the board of directors of the
Company (except as provided generally by the Company's certificate of
incorporation and bylaws or by applicable law or otherwise relating to
indemnification or exculpation rights) and (iii) the Culliss License Agreement
are validly and effectively terminated as of the Effective Time and (b) the
intellectual property licensed to the Company pursuant to the Culliss License
Agreement, the patents and patent applications set forth in Part 2.9(a)(ii) of
the Disclosure Schedule and the domain name "xxxxxxxxx.xxx" are assigned to the
Company by Xxxx Xxxxxxx.
5.7 EMPLOYEE AND RELATED MATTERS.
(a) Parent shall offer at-will employment with Parent or its
affiliates, including the Company, to all of the Company's employees (other than
those identified prior to Closing) at the Closing at base compensation levels
equal to or greater than each such employee's base compensation level as an
employee of the Company on the date hereof. Prior to the Closing, Parent shall
provide to such Company employees offer letters setting forth the specific terms
of their employment. Those employees that are identified prior to the Closing as
being terminated shall receive: (i) continued base compensation at current
levels for a period of 90 days following the Closing Date (the "Transition
Period") regardless of any service as an employee of the Company or Parent
during the Transition
28
Period (unless an employee voluntarily terminates his or her employment prior
to the end of the Transition Period); and (ii) a severance payment equal to
90 days' base compensation at the end of the Transition Period (provided such
employee remains an employee of the Company or Parent during the Transition
Period, and provided further that if the employee is terminated without Cause
or terminates his or her employment for Good Reason during the Transition
Period, he or she shall be entitled to receive such severance payment). Those
employees of the Company that continue to be employees of Parent or any of
its affiliates, including the Company, following the Closing would, subject
to any necessary transition period and the terms of such plans, be eligible
to participate in Parent's health, vacation, employee stock purchase, 401(k)
and other plans, to the same extent as comparably situated employees of
Parent and would receive credit under Parent's benefit plans for service as
an employee of the Company. For not less than one year following the Closing
Date, Parent shall maintain, or shall cause the Company, to maintain,
compensation and employee benefit plans and arrangements and perquisites for
those persons who remain employees of the Company after the Closing Date
that, in the aggregate, are substantially comparable to (or more favorable
than) those provided pursuant to the compensation and employee benefit plans
and arrangements and perquisites in effect on the date hereof.
(b) After the Closing, Parent may issue options, on Parent's
standard terms, to employees of the Company that continue to be employees of
Parent or any of its affiliates, including the Company, after the Closing.
(c) The Company shall use commercially reasonable efforts to
cause the Key Employees to execute and deliver a Noncompetition Agreement in the
form of Exhibit G hereto, but the Company makes no assurance in this regard.
5.8 PROTECTION OF PROPRIETARY ASSETS. The Company shall use
commercially reasonable efforts to cause all current and former employees,
consultants and independent contractors that are or were involved in the
creation, invention, research or development of the Company Proprietary Assets,
to execute and deliver to the Company an agreement that is substantially
identical to the form of the Confidential Information and Invention Assignment
Agreement, Consultant Confidential Information and Invention Assignment
Agreement or Advisory Board Agreement, as applicable.
5.9 FIRPTA MATTERS. At the Closing the Company shall deliver to Parent
a statement (in the form attached as Exhibit J) conforming to the provisions of
Sections 1.1445-2(c)(3) and 1.897-2(h)(2) of the United States Treasury
Regulations, along with written authorization for Parent, as agent for the
Company, to deliver the notice to the Internal Revenue Service upon the Closing
under Section 1.897-2(h)(2).
5.10 NOTIFICATION. During the Pre-Closing Period, Parent shall promptly
notify the Company in writing of: (i) the discovery by Parent or Merger Sub of
any event, condition, fact or circumstance that occurred or existed on or prior
to the date of this Agreement and that caused or constitutes, in any material
respect, an inaccuracy in or breach of any representation or warranty made by
Parent or Merger Sub in this Agreement; (ii) any event, condition, fact or
circumstance that occurs, arises or exists after the date of this Agreement and
that would cause or constitute, in any material respect, an inaccuracy in or
breach of any representation or warranty made by Parent or Merger Sub in this
Agreement if (a) such representation or warranty had been made as of the time of
the occurrence, existence or discovery of such event, condition, fact or
circumstance or (b) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement; (iii) any breach of
any covenant or obligation of Parent
29
or Merger Sub; and (iv) any event, condition, fact or circumstances that
Parent becomes aware of that would make the satisfaction of any of the
conditions set forth in Section 6 or Section 7 impossible or unlikely prior
to February 15, 2000.
5.11 TAX-FREE REORGANIZATION. Parent and the Company shall each use
its best efforts to cause the Merger to be treated as a reorganization within
the meaning of Section 368(a) of the Code and to obtain an opinion of its
respective counsel to such effect as contemplated by Section 7.8. Parent and
the Company shall each execute and deliver the tax representation letters in
the form of Exhibit N. None of Parent, Merger Sub and the Company shall take,
or cause or permit to be taken, any action before, at or after the Effective
Time that could reasonably be expected to cause or otherwise contribute to
the Merger not being treated as a reorganization within the meaning of
Section 368(a) of the Code.
5.12 NASDAQ NATIONAL MARKET LISTING. Parent shall file an application
to list on the Nasdaq National Market the shares of Parent Common Stock
issuable, and those required to be reserved for issuance, in connection with the
Merger, as soon as practicable (and in no event later than two business days
after the date hereof) and will pay all necessary filing fees in connection
therewith.
5.13 INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY. In
addition to any rights that the directors or officers of the Company may have
under separate indemnification agreements with the Company, from and after the
Effective Time, Parent will cause the Surviving Corporation to fulfill and honor
in all respects the obligations of the Company pursuant to any indemnification
provision and any exculpation provision in effect on the date hereof. The
certificate of incorporation and the bylaws of the Surviving Corporation shall
contain provisions with respect to indemnification and exculpation from
liability substantially similar to those set forth in the Company's certificate
of incorporation and bylaws on the date of this Agreement, and during the period
commencing at the Effective Time and ending on the sixth anniversary of the
Effective Time, such provisions shall not be amended, repealed or otherwise
modified in any manner that would adversely affect the rights thereunder of any
Person who was an officer or director of the Company at or prior to the
Effective Time.
5.14 BLUE SKY LAWS. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common Stock in connection with the
Merger.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction (or waiver by Parent), at or prior to the Closing, of each
of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by the Company in Sections 2.3 and 2.20 of this Agreement shall
have been accurate in all respects as of the date of this Agreement (without
giving effect to any update to the Disclosure Schedule) and shall be accurate in
all respects as of the Closing Date as if made at the Closing (without giving
effect to any update to the Disclosure Schedule). Each of the other
30
representations and warranties made by the Company in this Agreement and in each
of the other agreements and instruments delivered to Parent in connection with
the transactions contemplated by this Agreement (i) shall have been accurate in
all material respects as of the date of this Agreement (without giving effect to
any update to the Disclosure Schedule), except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties shall be accurate in all material
respects on and as of such date (without giving effect to any update to the
Disclosure Schedule)) and (ii) shall be accurate in all respects as of the
Closing Date as if made at the Closing (without giving effect to any update to
the Disclosure Schedule, and without giving effect to any "Material Adverse
Effect" or other materiality qualification, or any similar qualifications),
except in the case of clause (ii) to the extent (x) such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties shall be accurate in all respects on and as of
such date (without giving effect to any update to the Disclosure Schedule, and
without giving effect to any "Material Adverse Effect" or other materiality
qualification, or any similar qualifications) except to the extent such
inaccuracies would not have a Material Adverse Effect on the Company) and (y)
such inaccuracies would not have a Material Adverse Effect on the Company.
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations
that the Company is required to comply with or to perform at or prior to the
Closing shall have been complied with and performed in all material respects.
6.3 STOCKHOLDER APPROVAL. The Merger and this Agreement shall have
been duly approved by the stockholders of the Company by the requisite vote
under applicable law and the Company's certificate of incorporation and by at
least 90% of the outstanding shares of Company Preferred Stock and Company
Common Stock, voting together as a single class.
6.4 CONSENTS. All Consents (a) required to be obtained from any
Governmental Entity and (b) otherwise required to be obtained, in each case in
connection with the Merger and the other transactions contemplated by this
Agreement shall have been obtained and shall be in full force and effect, except
in the case of clause (b) to the extent that the failure to obtain any such
Consents has not had, and is not reasonably likely to have, a Material Adverse
Effect on the Company.
6.5 EMPLOYEE MATTERS. Parent shall have received no evidence that
either of the Key Employees has indicated that he does not intend to continue
his employment with the Company after the Closing.
6.6 AGREEMENTS AND DOCUMENTS. Parent and the Company shall have
received the following agreements and documents, each of which shall be in full
force and effect:
(a) Reserved;
(b) Noncompetition Agreements in the form of Exhibit G hereto,
executed by the Key Employees;
(c) a FIRPTA Statement in the form of Exhibit J hereto,
executed by the Company:
31
(d) Stockholder Representation Letters in the form of Exhibit D
hereto, executed by Merger Stockholders holding at least 90% of the
outstanding shares of capital stock of the Company immediately prior to
the Closing;
(e) a Registration Rights Agreement in the form of Exhibit M
hereto, executed by Merger Stockholders holding at least 90% of the
outstanding shares of capital stock of the Company immediately prior to
the Closing;
(f) an Escrow Agreement in the form of Exhibit C hereto,
executed by the Escrow Agent and Merger Stockholders holding at least 90%
of the outstanding shares of capital stock of the Company immediately
prior to the Closing;
(g) a legal opinion of Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP, dated
as of the Closing Date, in the form of Exhibit L hereto;
(h) a certificate executed by the Company and containing the
representation and warranty of the Company that the conditions set forth
in Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.7, 6.8, 6.10 and 6.11 have been
duly satisfied (the "Company's Closing Certificate");
(i) a certificate of merger executed by the Company to be filed
with the Secretary of State of the State of Delaware in accordance with
Section 1.3;
(j) written resignations of all directors of the Company,
effective as of the Closing Date; and
(k) the valid and effective termination as of the Effective
Time of the agreements and provisions referred in Section 5.6 and the
assignment to the Company as of the Effective Time of all intellectual
property referenced in Section 5.6.
6.7 ABSENCE OF MATERIAL ADVERSE EFFECT. There shall have been no event
since the date of this Agreement which has had or would reasonably be expected
to have a Material Adverse Effect on the Company.
6.8 STOCK CERTIFICATES. Parent shall have received certificates
representing at least 90% of the capital stock of the Company, duly endorsed in
blank or accompanied by stock powers duly endorsed in blank in proper form for
transfer, with appropriate transfer stamps, if any, affixed and, immediately
following the Closing, Parent shall own 100 percent of the outstanding capital
stock and rights to acquire capital stock of the Company.
6.9 FIRPTA COMPLIANCE. The Company shall have provided to Parent the
FIRPTA Statement referred to in Section 6.6(c), along with written authorization
for Parent, as agent for the Company and on Company's behalf, to deliver the
notice under Section 1.897-2(h)(2) to the Internal Revenue Service upon the
Closing.
6.10 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal
32
Requirement enacted or deemed applicable to the Merger that makes
consummation of the Merger illegal.
6.11 NO LEGAL PROCEEDINGS. No Governmental Body or other Person shall
have commenced or threatened to commence any Legal Proceeding (a) challenging or
seeking the recovery of a material amount of damages in connection with the
Merger, (b) seeking to prohibit or limit the exercise by Parent of any material
right pertaining to its ownership of stock of Merger Sub or the Company or (c)
claiming to own any capital stock of the Company, or option or other right to
acquire capital stock of the Company, or right to receive consideration as a
result of the Merger.
6.12 RULE 506 EXEMPTION. The issuance of Parent Common Stock to the
Merger Stockholders shall be exempt from registration under the Securities Act
pursuant to Rule 506 under the Securities Act.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction (or waiver), at or prior to the Closing, of the following
conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Parent in this Agreement and in each of the other agreements
and instruments delivered to the Company in connection with the transactions
contemplated by this Agreement (i) shall have been accurate in all material
respects as of the date of this Agreement (without giving effect to any update
to the Disclosure Schedule), except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties shall be accurate in all material respects on and
as of such date (without giving effect to any update to the Disclosure
Schedule)) and (ii) shall be accurate in all respects as of the Closing Date as
if made at the Closing (without giving effect to any update to the Disclosure
Schedule, and without giving effect to any "Material Adverse Effect" or other
materiality qualification, or any similar qualifications), except in the case of
clause (ii) to the extent (x) such representations and warranties expressly
relate to an earlier date (in which case such representations and warranties
shall be accurate in all respects on and as of such date (without giving effect
to any update to the Disclosure Schedule, and without giving effect to any
"Material Adverse Effect" or other materiality qualification, or any similar
qualifications) except to the extent such inaccuracies would not have a Material
Adverse Effect on Parent) and (y) such inaccuracies would not have a Material
Adverse Effect on Parent.
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations
that Parent and Merger Sub are required to comply with or to perform at or prior
to the Closing shall have been complied with and performed in all material
respects.
7.3 STOCKHOLDER APPROVAL. The Merger and this Agreement shall have
been duly approved by the stockholders of the Company by the requisite vote
under applicable law and the Company's certificate of incorporation.
33
7.4 AGREEMENTS AND DOCUMENTS. The Company shall have received the
following documents:
(a) a Registration Rights Agreement in the form of Exhibit K
hereto, executed by Parent;
(b) Reserved;
(c) an Escrow Agreement in the form of Exhibit C hereto,
executed by Parent;
(d) a legal opinion of Xxxxxx Godward LLP, dated as of the
Closing Date, in the form of Exhibit M hereto;
(e) a certificate executed by Parent and Merger Sub containing
the representation and warranty of the Parent and Merger Sub that the
conditions set forth in Sections 7.1, 7.2 and 7.5 have been duly
satisfied; and
(f) a Parent Affiliate Lock-Up from each Parent Affiliate.
7.5 LISTING. The shares of Parent Common Stock to be issued in the
Merger and such other shares of Parent Common Stock required to be reserved for
issuance in connection with the Merger shall have been approved for listing
(subject to notice of issuance) on the Nasdaq National Market.
7.6 ABSENCE OF MATERIAL ADVERSE EFFECT. There shall have been no event
since the date of this Agreement which has had or would reasonably be expected
to have a Material Adverse Effect on the Parent.
7.7 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
7.8 TAX OPINION. Parent and the Company shall have received written
opinions from their respective tax counsel (Xxxxxx Godward LLP and Xxxxx,
Xxxxxxx & Xxxxxxxxx, LLP, respectively), in a customary form reasonably
acceptable to the Company, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, and such
opinions shall not have been withdrawn, PROVIDED, HOWEVER, that if counsel to
either Parent or the Company does not render such opinion, this condition shall
nonetheless be deemed to be satisfied if the other party's counsel renders such
opinion to such party in a form reasonably acceptable to such party; and
PROVIDED, FURTHER, that the Company shall not be permitted to waive this
condition with any respect to the opinion of Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
unless this condition is also waived with respect to the opinion of Xxxxxx
Godward LLP. In rendering the opinions contemplated by this Section, counsel
shall rely upon reasonably requested representations and certificates of Parent,
Merger Sub and the Company, including the tax representation letters in the form
of Exhibit N.
34
SECTION 8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(a) by Parent if the Closing has not taken place on or before
February 15, 2000 (other than as a result of any failure on the part of
the Parent or Merger Sub to comply with or perform any covenant or
obligation of Parent or Merger Sub set forth in this Agreement or in any
other agreement or instrument delivered to the Company);
(b) by the Company if the Closing has not taken place on or
before February 15, 2000 (other than as a result of the failure on the
part of the Company to comply with or perform any covenant or obligation
of the Company set forth in this Agreement or in any other agreement or
instrument delivered to Parent);
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other
action, having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger; or
(d) by the mutual written consent of Parent and the Company.
8.2 TERMINATION PROCEDURES. If Parent wishes to terminate this
Agreement pursuant to Section 8.1(a) or Section 8.1(c), Parent shall deliver to
the Company a written notice stating that Parent is terminating this Agreement
and setting forth a brief description of the basis on which Parent is
terminating this Agreement. If the Company wishes to terminate this Agreement
pursuant to Section 8.1(b), the Company shall deliver to Parent a written notice
stating that the Company is terminating this Agreement and setting forth a brief
description of the basis on which it is terminating this Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 8.1 and 8.2, all further obligations of the parties under this Agreement
shall terminate; PROVIDED, HOWEVER, that: (a) none of the parties shall be
relieved of any obligation or liability arising from any prior willful breach by
such party of any provision of this Agreement and (b) the parties shall, in all
events, remain bound by and continue to be subject to the provisions set forth
in Section 10 and Section 5.4.
SECTION 9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS, ETC.
(a) The representations and warranties made by the Company
(including the representations and warranties set forth in Section 2) shall
survive the Closing and shall expire on the first anniversary of the Closing
Date (the "Termination Date"); PROVIDED, HOWEVER, that if, at any time prior to
the Termination Date, any Indemnitee (acting in good faith) delivers to the
Stockholders' Agent a written notice alleging the existence of an inaccuracy in
or a breach of any of the representations and warranties made by the Company
(and setting forth in reasonable detail the basis for such Indemnitee's belief
that such an inaccuracy or breach may exist) and asserting a claim for recovery
under Section 9.2 based on such alleged inaccuracy or breach, then
35
the claim asserted in such notice shall survive the Termination Date until
such time as such claim is fully and finally resolved. Without limiting any
remedy that the stockholders of the Company may have under federal securities
laws or other than pursuant to the terms of this Agreement, all
representations and warranties made by Parent and Merger Sub shall terminate
and expire as of the Closing Date, and any liability of Parent or Merger Sub
with respect to such representations and warranties shall thereupon cease.
(b) The representations, warranties, covenants and obligations
of the Company, and the rights and remedies that may be exercised by the
Indemnitees, shall not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by or knowledge of, any of
the Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, each statement or other
item of information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
the Company in this Agreement.
9.2 INDEMNIFICATION.
(a) From and after the Closing Date (but subject to Section
9.1(a), 9.2(b), 9.3 and the other limitations set forth in this Section 9), the
stockholders of the Company and holders of Company Options who shall have
received, or shall be entitled to receive, Parent Common Stock pursuant to
Sections 1.5 and 1.8 of this Agreement (the "Indemnitors"), severally (and not
jointly) and in proportion to their original contributions to the Escrow Fund,
shall hold harmless and indemnify each of the Indemnitees from and against, and
the Escrow Fund (as defined in the Escrow Agreement) shall be available to
compensate and reimburse each of the Indemnitees for, any Damages that are
directly or indirectly suffered or incurred by any of the Indemnitees or to
which any of the Indemnitees may otherwise become subject (regardless of whether
or not such Damages relate to any third-party claim) and that arise from or as a
result of, or are directly or indirectly connected with: (i) any inaccuracy in
or breach of any representation or warranty set forth in Section 2 (as modified
by the Disclosure Schedule) (without giving effect to any "Material Adverse
Effect" or other materiality qualification or any similar qualification
contained or incorporated directly or indirectly in such representation or
warranty, and without giving effect to any update to the Disclosure Schedule
delivered by the Company to Parent after the date of this Agreement and prior to
the Closing); (ii) any inaccuracy in or breach of any representation or warranty
set forth in Section 2 (as modified by the Disclosure Schedule) as if such
representation and warranty had been made on and as of the Closing Date (without
giving effect to any "Material Adverse Effect" or other materiality
qualification or any similar qualification contained or incorporated directly or
indirectly in such representation or warranty, but giving effect to any update
to the Disclosure Schedule delivered by the Company to Parent prior to the
Closing to the extent that Parent would be entitled to terminate this Agreement
as a result of such update); (iii) any breach of any covenant or obligation of
the Company (including the covenants set forth in Sections 4 and 5); or (iv) any
Legal Proceeding relating to any inaccuracy or breach of the type referred to in
clause "(i)," "(ii)" or "(iii)" above (including any Legal Proceeding commenced
by any Indemnitee for the purpose of enforcing any of its rights under this
Section 9); PROVIDED, HOWEVER, that, except as set forth in Section 9.3 with
respect to claims based upon fraud, the aggregate amount for which the
Indemnitors are required to
36
indemnify the Indemnitees pursuant to this Section 9.2 will not exceed the
Escrow Fund (as defined in the Escrow Agreement).
(b) DEDUCTIBLE. The Indemnitors shall not be required to make
any indemnification payment pursuant to Section 9.2(a) until such time as the
total amount of all Damages (including the Damages arising from such inaccuracy
or breach and all other Damages arising from any other inaccuracies in or
breaches of any representations or warranties) that have been directly or
indirectly suffered or incurred by any one or more of the Indemnitees, or to
which any one or more of the Indemnitees has or have otherwise become subject,
exceeds $500,000 in the aggregate. If the total amount of such Damages exceeds
$500,000, then the Indemnitees shall be entitled to be indemnified against and
compensated and reimbursed only for the portion of such Damages exceeding
$500,000.
9.3 EXCLUSIVE REMEDY. With the exception of claims based upon fraud,
from and after the Closing, recourse of Parent to the Escrow Fund pursuant to
this Agreement and the Escrow Agreement shall be the sole and exclusive remedy
of Parent and the other Indemnitees for monetary damages under the
indemnification provisions contained in, and for any breach of, this Agreement
(it being understood that nothing in this Section 9.3 or elsewhere in this
Agreement shall effect Parent's rights to specific performance or other
equitable remedies with respect to the covenants referred to in this Agreement
to be performed after the Closing).
9.4 NO CONTRIBUTION. No stockholders of the Company shall have any
right of contribution, right of indemnity or other right or remedy against
Merger Sub or the Company in connection with any indemnification obligation or
any other liability to which she, he or it may become subject under or in
connection with this Agreement; PROVIDED, HOWEVER, that nothing contained herein
shall limit the indemnification and exculpation rights described in Section 5.13
hereof.
9.5 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against
Merger Sub or the Company, against Parent or against any other Person) with
respect to which any of the Indemnitors may, in Parent's reasonable judgment,
become obligated to hold harmless, indemnify, compensate or reimburse any
Indemnitee pursuant to this Section 9, Parent shall have the right, at its
election, to proceed with the defense of such claim or Legal Proceeding on its
own. The Merger Stockholders shall be entitled, at their expense, to participate
in any defense of such claim or Legal Proceeding. If Parent so proceeds with the
defense of any such claim or Legal Proceeding:
(a) each Indemnitor shall make available to Parent any
documents and materials in his or its possession or control that may be
necessary to the defense of such claim or Legal Proceeding; and
(b) Parent shall have the right to settle, adjust or compromise
such claim or Legal Proceeding only with the consent of the Stockholders'
Agent (as defined in Section 10.1); PROVIDED, HOWEVER, that such consent
shall not be unreasonably withheld.
Parent shall give the Stockholders' Agent prompt notice of the commencement of
any such Legal Proceeding against Parent, Merger Sub or the Company; PROVIDED,
HOWEVER, any failure on the
37
part of Parent to so notify the Stockholders' Agent shall not limit any of
the obligations of the Indemnitors under this Section 9 (except to the extent
such failure materially prejudices the defense of such Legal Proceeding). If
Parent does not elect to proceed with the defense of any such claim or Legal
Proceeding, the Stockholders' Agent may proceed with the defense of such
claim or Legal Proceeding with counsel reasonably satisfactory to Parent;
PROVIDED, HOWEVER, that the Stockholders' Agent may not settle, adjust or
compromise any such claim or Legal Proceeding without the prior written
consent of Parent (which consent may not be unreasonably withheld).
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 STOCKHOLDERS' AGENT. By virtue of their approval of the Merger and
this Agreement and, in the case of the holders of Company Options, by virtue of
their exercise of Company Options, the Merger Stockholders shall have approved,
among other matters, the indemnification and escrow terms set forth in Section 9
and shall irrevocably appoint Xxxx XxXxxxxxx as their agent for purposes of
Section 9 (the "Stockholders' Agent") to give and receive notices and
communications, to authorize delivery to Parent of Parent Common Stock, cash or
other property from the Escrow Fund, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand dispute
resolution pursuant to Section 3 of the Escrow Agreement and comply with orders
of courts and awards of arbitrators with respect to indemnification claims, and
to take all actions necessary or appropriate in the judgment of the
Stockholders' Agent for the accomplishment of the foregoing. Xxxx XxXxxxxxx
hereby accepts his appointment as the Stockholders' Agent. Parent shall be
entitled to deal exclusively with the Stockholders' Agent on all matters
relating to Section 9, and shall be entitled to rely conclusively (without
further evidence of any kind whatsoever) on any document executed or purported
to be executed on behalf of any Indemnitor by the Stockholders' Agent, and on
any other action taken or purported to be taken on behalf of any Indemnitor by
the Stockholders' Agent, as fully binding upon such Indemnitor. If the
Stockholders' Agent shall die, become disabled or otherwise be unable to fulfill
his responsibilities as agent of the Indemnitors, then the Indemnitors shall,
within ten days after such death or disability, appoint a successor agent and,
promptly thereafter, shall notify Parent of the identity of such successor. Any
such successor shall become the "Stockholders' Agent" for purposes of Section 9
and this Section 10.1. If for any reason there is no Stockholders' Agent at any
time, all references herein to the Stockholders' Agent shall be deemed to refer
to the Indemnitors. The Stockholders' Agent shall not be responsible for any act
done or omitted thereunder as Stockholders' Agent while acting in good faith and
in the exercise of reasonable judgment. The Merger Stockholders shall jointly
and severally indemnify the Stockholders' Agent and hold the Stockholders' Agent
harmless against any loss, liability or expense incurred without gross
negligence, bad faith or willful misconduct on the part of the Stockholders'
Agent and arising out of or in connection with the acceptance or administration
of the Stockholders' Agent's duties hereunder, including the reasonable fees and
expenses of any legal counsel or other professional retained by the
Stockholders' Agent. By virtue of their approval of the Merger and this
Agreement, and, in the case of the holders of Company Options, by virtue of
their exercise of Company Options, the Merger Stockholders hereby agree to pay
the reasonable costs and expenses, including those of any legal counsel or other
professional retained by the Stockholders' Agent, in connection with the
acceptance and administration of the Stockholders' Agent's duties hereunder.
Subject to the prior right of Parent to make claims for Damages, the
Stockholders' Agent shall have the right to
38
recover from the Escrow Fund prior to any distribution to the Merger
Stockholders and the holders of Company Options, the reasonable costs and
expenses, including those of any legal counsel or other professional retained
by the Stockholders' Agent, in connection with the acceptance and
administration of the Stockholders' Agent's duties hereunder.
10.2 FURTHER ASSURANCES. Each party hereto shall execute and cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
10.3 FEES AND EXPENSES. Parent shall bear and pay all fees, costs and
expenses (including legal fees incurred by the Company and accounting fees) that
have been incurred or that are incurred by Parent, Merger Sub and the Company in
connection with the transactions contemplated by this Agreement (collectively,
the "Transaction Costs"); provided, however, that Parent shall have no
obligation to bear and pay the Transaction Costs of the Company if the Merger is
not consummated; and provided, further, that Parent shall have no obligation to
bear and pay any Transaction Costs of the Company that exceed $8,000,000. Such
excess Transaction Costs will be paid by the Company and borne by the Merger
Stockholders by deducting from the Escrow Fund, a number of shares of Parent
Common Stock having an aggregate value equal to the amount of the Transaction
Costs of the Company that exceed $8,000,000 in the aggregate.
10.4 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 NOTICES. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
IF TO PARENT OR MERGER SUB:
ASK JEEVES, INC.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Chief Financial Officer, with a copy to General
Counsel
Facsimile No.: (000) 000-0000
WITH A COPY TO:
Cooley Godward LLP
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
39
Facsimile No.: (000) 000-0000
IF TO THE COMPANY:
DIRECT HIT TECHNOLOGIES, INC.
00 Xxxxx Xxxxxxx
Xxxxxx, XX 00000
Attention: Chief Executive Officer, with a copy to Chief
Financial Officer
Facsimile No.: (000) 000-0000
WITH A COPY TO:
Testa, Hurwitz, & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx
Facsimile No: (000) 000-0000
IF TO THE STOCKHOLDERS' AGENT OR ANY OF THE INDEMNITORS:
Xxxx XxXxxxxxx
00 Xxxxxxxxx Xxxxx Xxxx
Xxxxxxx, XX 00000
Facsimile No.:
------------
10.6 TIME OF THE ESSENCE. For the purposes of this Agreement and the
transactions contemplated by this Agreement, time is of the essence.
10.7 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
10.9 GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed in all respects by, the internal laws of the State of
Delaware (without giving effect to principles of conflicts of laws).
10.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon each
of the parties hereto and each of their respective successors and assigns, if
any. This Agreement shall inure to the benefit of: the Company; Parent; Merger
Sub; the other Indemnitees; and the respective successors and assigns, if any,
of the foregoing. Merger Sub may freely assign any or all of its rights under
this Agreement (including its indemnification rights under Section 9), in whole
or in part, to any other Person without obtaining the consent or approval of any
other party hereto or of any other Person.
10.11 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that,
40
in the event of any breach or threatened breach by any party to this
Agreement of any covenant, obligation or other provision set forth in this
Agreement for the benefit of any other party to this Agreement, such other
party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus
to enforce the observance and performance of such covenant, obligation or
other provision and (b) an injunction restraining such breach or threatened
breach.
10.12 WAIVER. No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. No Person shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
10.13 AMENDMENTS. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.14 SEVERABILITY. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.15 PARTIES IN INTEREST. Except for the provisions of Sections 1.5 and
10.1, none of the provisions of this Agreement is intended to provide any rights
or remedies to any Person other than the parties hereto and their respective
successors and assigns, if any.
10.16 ENTIRE AGREEMENT. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof; PROVIDED, HOWEVER, that the Non-disclosure Agreement
executed on behalf of Parent and the Company on October 22, 1999 shall not be
superseded by this Agreement and shall remain in effect in accordance with its
terms until the earlier of (a) the Closing Date or (b) the date on which such
Non-disclosure Agreement is terminated in accordance with its terms.
10.17 WAIVER OF JURY TRIAL. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any Legal Proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.
10.18 CONSTRUCTION.
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(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections", "Schedules" and "Exhibits" are intended to refer to
Sections of this Agreement and Schedules and Exhibits to this Agreement.
42
The parties hereto have caused this Agreement to be executed and
delivered as of the date first written above.
ASK JEEVES, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxx
--------------------------------------
Title: Chief Executive Officer & President
-------------------------------------
ANSWER ACQUISITION CORP.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxx
--------------------------------------
Title: Chief Executive Officer & President
-------------------------------------
DIRECT HIT TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ Xxxxxxx Xxxxxxx
----------------------------------------
Name: Xxxxxxx Xxxxxxx
--------------------------------------
Title: Chief Executive Officer
-------------------------------------
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EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUISITION TRANSACTION. "Acquisition Transaction" means any transaction
involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the business or assets of the Company;
(b) the issuance, disposition or acquisition of (i) any capital
stock or other equity security of the Company, (ii) any option, call,
warrant or right (whether or not immediately exercisable) to acquire any
capital stock or other equity security of the Company or (iii) any
security, instrument or obligation that is or may become convertible into
or exchangeable for any capital stock or other equity security of the
Company; or
(c) any merger, consolidation, business combination,
reorganization or similar transaction involving the Company.
AGREEMENT. "Agreement" means the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached (including the Disclosure
Schedule), as it may be amended from time to time.
CAUSE. "Cause" means a termination of employment exclusively for these
reasons: (a) indictment or conviction of any felony or of any crime involving
dishonesty; (b) participation in any fraud against the Company; (c) breach of
duties to the Company, including persistent unsatisfactory performance of job
duties; or (d) intentional damage to any property of the Company.
COMPANY COMMON STOCK. "Company Common Stock" means a share of common
stock, $0.001 par value, of the Company.
COMPANY CONTRACT. "Company Contract" means any Contract: (a) to which the
Company is a party; (b) by which the Company or any of its assets is or may
become bound or under which the Company has, or may become subject to, any
obligation; or (c) under which the Company has or may acquire any right or
interest.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" means any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
CONSENT. "Consent" means any approval, consent, ratification, permission,
waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" means any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
A-1
CULLISS LICENSE AGREEMENT. "Culliss License Agreement" means the
Exclusive Patent License Agreement dated as of April 28, 1998 between Direct Hit
Technologies, Inc. and Xxxx Xxxxxxx.
DAMAGES. "Damages" include any loss, damage, injury, decline in value,
lost opportunity, liability, claim, demand, settlement, judgment, award, fine,
penalty, tax, fee (including reasonable attorneys' fees), charge, cost
(including reasonable costs of investigation) or expense of any nature, net of
any indemnity actually received from third parties, or in the case of damages
with respect to which the Company or Parent has a claim against a third party,
net of any amounts actually received from such third party.
DATE COMPLIANCE. "Date Compliance" means that all input, processing,
sorting, storing, display and output of date data, (a) is accurate, including
calculation of days (e.g. the day of the week for a particular date) and leap
years, (b) results in no interruption, or change in operation or performance,
including as a result of dates in any century or spanning centuries and (c) is
unambiguous as to century.
DISCLOSURE SCHEDULE. "Disclosure Schedule" means the schedule (dated as
of the date of the Agreement) delivered to Parent on behalf of the Company .
ENCUMBRANCE. "Encumbrance" means any lien, pledge, hypothecation, charge,
mortgage, security interest, encumbrance, claim, infringement, interference,
option, right of first refusal, preemptive right, community property interest or
restriction of any nature (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset and any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).
ENTITY. "Entity" means any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
ENVIRONMENTAL LAW. "Environmental Law" means any federal, state, local or
foreign Legal Requirement relating to pollution or protection of human health or
the environment (including ambient air, surface water, ground water, land
surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
EXCHANGE ACT. "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
GOOD REASON. "Good Reason" means (a) change in position with the Company
or Parent which materially reduces an employee's level of responsibility; (b) a
material reduction in an employee's level of compensation (including base
salary, fringe benefits and participation in corporate-performance based bonus
or incentive programs); or (c) a relocation of an employee's
A-2
place of employment by more than fifty (50) miles, provided and only if such
change, reduction or relocation is effected by the Company or Parent without
an employee's consent.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" means any: (a)
permit, license, certificate, franchise, permission, clearance, registration,
qualification or authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement; or (b) right under any Contract with any Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" means any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
INDEMNITEES. "Indemnitees" means the following Persons: (a) Parent; (b)
Parent's current and future officers, directors and affiliates (including Merger
Sub); (c) the respective successors and assigns of the Persons referred to in
clauses "(a)"and "(b)" above; PROVIDED, HOWEVER, that the stockholders of the
Company are not deemed to be "Indemnitees."
KEY EMPLOYEES. "Key Employees" shall mean: Xxxx Xxxxxxx and Xxxx Xxxxxxx.
KNOWLEDGE. Information shall be deemed to be known to or to the
"knowledge" of a party hereto if that information is actually known or
reasonably should be known by any officer or director of such party.
LEGAL PROCEEDING. "Legal Proceeding" means any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, audit, examination or
investigation commenced, brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Body or any arbitrator or arbitration
panel.
LEGAL REQUIREMENT. "Legal Requirement" means any federal, state, local,
municipal, foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Body.
MATERIAL ADVERSE EFFECT. A violation, event or other matter will be
deemed to have a "Material Adverse Effect" on a party if such violation, event
or other matter (considered together with all other matters that would
constitute exceptions to the representations and warranties set forth in the
Agreement or in such party's Closing Certificate would have a material adverse
effect on the business, properties, condition (financial or otherwise),
operations or financial performance of such party, but shall exclude any change
in Parent's stock price in and of itself, but shall exclude any material adverse
effect that is directly attributable to a disruption in the conduct of such
party's business arising from the transactions contemplated by this Agreement or
the public announcement thereof.
A-3
MATERIALS OF ENVIRONMENTAL CONCERN. "Materials of Environmental Concern"
include chemicals, pollutants, contaminants, wastes, toxic substances, petroleum
and petroleum products and any other substance that is now or hereafter
regulated by any Environmental Law or that is otherwise a danger to health,
reproduction or the environment.
PERSON. "Person" means any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" means any: patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, trade secret, know-how,
customer list, computer software, computer program, invention, design,
blueprint, engineering drawing or other intellectual property right.
REPRESENTATIVES. "Representatives" means officers, directors, employees,
agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" means the United States Securities and Exchange Commission.
SECURITIES ACT. "Securities Act" means the Securities Act of 1933, as
amended.
A-4
EXHIBIT B
FORM OF VOTING AGREEMENT
VOTING AGREEMENT
THIS VOTING AGREEMENT is entered into as of January 25, 2000 by and
between ASK JEEVES, INC., a Delaware corporation ("Parent"), and
___________________________ ("Stockholder").
RECITALS
A. Parent, Answer Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and Direct Hit, Inc., a
Delaware corporation (the "Company"), are entering into an Agreement and Plan of
Merger and Reorganization of even date herewith (the "Reorganization Agreement")
which provides (subject to the conditions set forth therein) for the merger of
Merger Sub with and into the Company (the "Merger").
B. In order to induce Parent and Merger Sub to enter into the
Reorganization Agreement, Stockholder is entering into this Voting Agreement.
AGREEMENT
The parties to this Voting Agreement, intending to be legally bound,
agree as follows:
SECTION 1: CERTAIN DEFINITIONS
For purposes of this Voting Agreement:
(a) "COMPANY COMMON STOCK" shall mean the common stock, $0.001
par value, of the Company.
(b) "COMPANY PREFERRED STOCK" shall mean the Series A Preferred
Stock, $0.001 par value, Series B Preferred Stock, $0.001 par value, and Series
C Preferred Stock, $0.001 par value, of the Company.
(c) "EXPIRATION DATE" shall mean, the earlier of (i) the date
upon which the Reorganization Agreement is validly terminated or (ii) the date
upon which the Merger becomes effective.
(d) Stockholder shall be deemed to "OWN" or to have acquired
"OWNERSHIP" of a security if Stockholder: (i) is the record owner of such
security or (ii) is the "beneficial owner" (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934) of such security.
(e) "PERSON" shall mean any (i) individual, (ii) corporation,
limited liability company, partnership or other entity or (iii) governmental
authority.
(f) "SUBJECT SECURITIES" shall mean: (i) all securities of the
Company (including all shares of Company Common Stock and Company Preferred
Stock and all options,
1
warrants and other rights to acquire shares of Company Common Stock and
Company Preferred Stock) Owned by Stockholder as of the date of this
Agreement and (ii) all additional securities of the Company (including all
additional shares of Company Common Stock and Company Preferred Stock and all
additional options, warrants and other rights to acquire shares of Company
Common Stock and Company Preferred Stock) of which Stockholder acquires
Ownership during the period from the date of this Agreement through the
Expiration Date.
(g) A Person shall be deemed to have a effected a "TRANSFER" of
a security if such Person directly or indirectly: (i) sells, pledges, encumbers,
grants an option with respect to, transfers or disposes of such security or any
interest in such security or (ii) enters into an agreement or commitment
contemplating the possible sale of, pledge of, encumbrance of, grant of an
option with respect to, transfer of or disposition of such security or any
interest therein.
SECTION 2: TRANSFER OF SUBJECT SECURITIES
2.1 TRANSFEREE OF SUBJECT SECURITIES TO BE BOUND BY THIS AGREEMENT.
Stockholder agrees that, during the period from the date of this Voting
Agreement through the Expiration Date, Stockholder shall not cause or permit any
Transfer of any of the Subject Securities to be effected.
2.2 TRANSFER OF VOTING RIGHTS. Stockholder agrees that, during the
period from the date of this Voting Agreement through the Expiration Date,
Stockholder shall ensure that: (a) none of the Subject Securities is deposited
into a voting trust and (b) no proxy is granted, and no voting agreement or
similar agreement is entered into, with respect to any of the Subject
Securities.
SECTION 3: VOTING OF SHARES
3.1 VOTING AGREEMENT. Stockholder agrees that, during the period from
the date of this Voting Agreement through the Expiration Date:
(a) at any meeting of stockholders of the Company, however
called, Stockholder shall (unless otherwise directed in writing by Parent) cause
all outstanding shares of Company Common Stock and Company Preferred Stock that
are Owned by Stockholder as of the record date fixed for such meeting to be
voted in favor of the approval and adoption of the Reorganization Agreement and
the approval of the Merger, in favor of each of the other actions contemplated
by the Reorganization Agreement and against any matter that impedes the
consummation of the Reorganization Agreement; and
(b) in the event written consents are solicited or otherwise
sought from stockholders of the Company with respect to the approval or adoption
of the Reorganization Agreement, with respect to the approval of the Merger or
with respect to any of the other actions contemplated by the Reorganization
Agreement, Stockholder shall (unless otherwise directed in writing by Parent)
cause to be executed, with respect to all shares of Company Common Stock and
Company Preferred Stock that are Owned by Stockholder as of the record date
fixed for the consent to the proposed action, a written consent or written
consents to such proposed action.
2
3.2 PROXY; FURTHER ASSURANCES.
(a) Contemporaneously with the execution of this Voting
Agreement: (i) Stockholder shall deliver to Parent a proxy in the form attached
to this Voting Agreement as EXHIBIT A, which shall be irrevocable to the fullest
extent permitted by law, with respect to the shares referred to therein (the
"Proxy") and (ii) Stockholder shall cause to be delivered to Parent an
additional proxy (in the form attached hereto as EXHIBIT A) executed on behalf
of the record owner of any outstanding shares of Company Common Stock and
Company Preferred Stock that are owned beneficially (within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934), but not of record, by
Stockholder.
(b) Stockholder shall, at his own expense, perform such further
acts and execute such further documents and instruments as may reasonably be
required to vest in Parent the power to carry out and give effect to the
provisions of this Voting Agreement.
SECTION 4: WAIVER OF APPRAISAL RIGHTS
Stockholder hereby irrevocably and unconditionally waives, and agrees to
cause to be waived and to prevent the exercise of, any rights of appraisal, any
dissenters' rights and any similar rights relating to the Merger or any related
transaction that Stockholder may have by virtue of the ownership of any
outstanding shares of Company Common Stock or Company Preferred Stock Owned by
Stockholder.
SECTION 5: NO SOLICITATION
Stockholder agrees that, during the period from the date of this Voting
Agreement through the Expiration Date, Stockholder shall not, directly or
indirectly, and Stockholder shall ensure that his Representatives (as defined in
the Reorganization Agreement) do not, directly or indirectly: (i) solicit,
initiate, encourage or induce the making, submission or announcement of any
Acquisition Proposal (as defined in the Reorganization Agreement) or take any
action that could reasonably be expected to lead to an Acquisition Proposal;
(ii) furnish any information regarding the Company or any direct or indirect
subsidiary of the Company to any Person in connection with or in response to an
Acquisition Proposal or potential Acquisition Proposal or (iii) engage in
discussions with any Person with respect to any Acquisition Proposal.
Stockholder shall immediately cease and discontinue, and Stockholder shall
ensure that his Representatives immediately cease and discontinue, any existing
discussions with any Person that relate to any Acquisition Proposal.
SECTION 6: REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder hereby represents and warrants to Parent as follows:
6.1 AUTHORIZATION, ETC. Stockholder has the absolute and unrestricted
right, power, authority and capacity to execute and deliver this Voting
Agreement and the Proxy and to perform his obligations hereunder and thereunder.
This Voting Agreement and the Proxy have
3
been duly executed and delivered by Stockholder and constitute legal, valid
and binding obligations of Stockholder, enforceable against Stockholder in
accordance with their terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors and (ii) rules
of law governing specific performance, injunctive relief and other equitable
remedies.
6.2 NO CONFLICTS OR CONSENTS.
(a) The execution and delivery of this Voting Agreement and the
Proxy by Stockholder do not, and the performance of this Voting Agreement and
the Proxy by Stockholder will not: (i) conflict with or violate any law, rule,
regulation, order, decree or judgment applicable to Stockholder or by which he
or any of his properties is or may be bound or affected; or (ii) result in or
constitute (with or without notice or lapse of time) any breach of or default
under, or give to any other Person (with or without notice or lapse of time) any
right of termination, amendment, acceleration or cancellation of, or result
(with or without notice or lapse of time) in the creation of any encumbrance or
restriction on any of the Subject Securities pursuant to, any contract to which
Stockholder is a party or by which Stockholder or any of his affiliates or
properties is or may be bound or affected.
(b) The execution and delivery of this Voting Agreement and the
Proxy by Stockholder do not, and the performance of this Voting Agreement and
the Proxy by Stockholder will not, require any consent or approval of any
Person.
6.3 TITLE TO SECURITIES. As of the date of this Voting Agreement: (a)
Stockholder holds of record (free and clear of any encumbrances or restrictions)
the number of outstanding shares of Company Common Stock and Company Preferred
Stock set forth under the heading "Shares Held of Record" on the signature page
hereof; (b) Stockholder holds (free and clear of any encumbrances or
restrictions) the options, warrants and other rights to acquire shares of
Company Common Stock and Company Preferred Stock set forth under the heading
"Options and Other Rights" on the signature page hereof; (c) Stockholder Owns
the additional securities of the Company set forth under the heading "Additional
Securities Beneficially Owned" on the signature page hereof and (d) Stockholder
does not directly or indirectly Own any shares of capital stock or other
securities of the Company, or any option, warrant or other right to acquire (by
purchase, conversion or otherwise) any shares of capital stock or other
securities of the Company, other than the shares and options, warrants and other
rights set forth on the signature page hereof.
6.4 ACCURACY OF REPRESENTATIONS. The representations and warranties
contained in this Voting Agreement are accurate in all respects as of the date
of this Voting Agreement, will be accurate in all respects at all times through
the Expiration Date and will be accurate in all respects as of the date of the
consummation of the Merger as if made on that date.
SECTION 7: ADDITIONAL COVENANTS OF STOCKHOLDER
7.1 FURTHER ASSURANCES. From time to time and without additional
consideration, Stockholder shall (at Stockholder's sole expense) execute and
deliver, or cause to be executed and delivered, such additional transfers,
assignments, endorsements, proxies, consents and other
4
instruments, and shall (at Stockholder's sole expense) take such further
actions, as Parent may request for the purpose of carrying out and furthering
the intent of this Voting Agreement.
7.2 LEGEND. Immediately after the execution of this Voting Agreement
(and from time to time upon the acquisition by Stockholder of Ownership of any
shares of Company Common Stock and Company Preferred Stock prior to the
Expiration Date), upon request of Parent Stockholder shall ensure that each
certificate evidencing any outstanding shares of Company Common Stock and
Company Preferred Stock or other securities of the Company Owned by Stockholder
bears a legend in the following form:
THE SECURITY OR SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE VOTING AGREEMENT DATED AS
OF JANUARY 24, 2000, BETWEEN THE HOLDER AND ANSWER, AS IT MAY BE AMENDED,
A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
ISSUER.
SECTION 8: MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by Stockholder in this Voting Agreement shall survive any
termination of the Reorganization Agreement.
8.2 TERMINATION. This Agreement shall terminate and shall have no
further force or effect as of the Expiration Date.
8.3 INDEMNIFICATION. Stockholder shall hold harmless and indemnify
Parent and Parent's affiliates from and against, and shall compensate and
reimburse Parent and Parent's affiliates for, any loss, damage, claim,
liability, fee (including attorneys' fees), demand, cost or expense (regardless
of whether or not such loss, damage, claim, liability, fee, demand, cost or
expense relates to a third-party claim) that is directly or indirectly suffered
or incurred by Parent or any of Parent's affiliates, or to which Parent or any
of Parent's affiliates otherwise becomes subject, and that arises directly or
indirectly from, or relates directly or indirectly to, (a) any inaccuracy in or
breach of any representation or warranty contained in this Voting Agreement if
the Reorganization Agreement is terminated, or (b) any failure on the part of
Stockholder to observe, perform or abide by, or any other breach of, any
restriction, covenant, obligation or other provision contained in this Voting
Agreement or in the Proxy.
8.4 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Voting Agreement shall be paid by the party
incurring such costs and expenses.
8.5 NOTICES. Any notice or other communication required or permitted
to be delivered to either party under this Voting Agreement shall be in writing
and shall be deemed properly delivered, given and received when delivered (by
hand, by registered mail, by courier or express delivery service or by
facsimile) to the address or facsimile telephone number set forth
5
beneath the name of such party below (or to such other address or facsimile
telephone number as such party shall have specified in a written notice given
to the other party):
if to Stockholder:
at the address set forth below Stockholder's signature on
the signature page hereof
if to Parent:
0000 Xxxxxx Xx., Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Secretary
Fax: (000) 000-0000
8.6 SEVERABILITY. If any provision of this Voting Agreement or any
part of any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (c) the
invalidity or unenforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Voting Agreement. Each
provision of this Voting Agreement is separable from every other provision of
this Voting Agreement, and each part of each provision of this Voting Agreement
is separable from every other part of such provision.
8.7 ENTIRE AGREEMENT. This Voting Agreement, the Proxy and any other
documents delivered by the parties in connection herewith constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings between the
parties with respect thereto. No addition to or modification of any provision of
this Voting Agreement shall be binding upon either party unless made in writing
and signed by both parties.
8.8 ASSIGNMENT; BINDING EFFECT. Except as provided herein, neither
this Voting Agreement nor any of the interests or obligations hereunder may be
assigned or delegated by Stockholder and any attempted or purported assignment
or delegation of any of such interests or obligations shall be void. Subject to
the preceding sentence, this Voting Agreement shall be binding upon Stockholder
and his heirs, estate, executors, personal representatives, successors and
assigns, and shall inure to the benefit of Parent and its successors and
assigns. Without limiting any of the restrictions set forth in Section 2 or
elsewhere in this Voting Agreement, this Voting Agreement shall be binding upon
any Person to whom any Subject Securities are transferred. Nothing in this
Voting Agreement is intended to confer on any Person (other than Parent and its
successors and assigns) any rights or remedies of any nature.
6
8.9 SPECIFIC PERFORMANCE. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Voting Agreement or
the Proxy was not performed in accordance with its specific terms or was
otherwise breached. Stockholder agrees that, in the event of any breach or
threatened breach by Stockholder of any covenant or obligation contained in this
Voting Agreement or in the Proxy, Parent shall be entitled (in addition to any
other remedy that may be available to it, including monetary damages) to seek
and obtain (a) a decree or order of specific performance to enforce the
observance and performance of such covenant or obligation, and (b) an injunction
restraining such breach or threatened breach. Stockholder further agrees that
neither Parent nor any other Person shall be required to obtain, furnish or post
any bond or similar instrument in connection with or as a condition to obtaining
any remedy referred to in this Section 8.9, and Stockholder irrevocably waives
any right he may have to require the obtaining, furnishing or posting of any
such bond or similar instrument.
8.10 NON-EXCLUSIVITY. The rights and remedies of Parent under this
Voting Agreement are not exclusive of or limited by any other rights or remedies
which it may have, whether at law, in equity, by contract or otherwise, all of
which shall be cumulative (and not alternative). Without limiting the generality
of the foregoing, the rights and remedies of Parent under this Voting Agreement,
and the obligations and liabilities of Stockholder under this Voting Agreement,
are in addition to their respective rights, remedies, obligations and
liabilities under common law requirements and under all applicable statutes,
rules and regulations. Nothing in this Voting Agreement shall limit any of
Stockholder's obligations, or the rights or remedies of Parent, under any
Affiliate Agreement between Parent and Stockholder; and nothing in any such
Affiliate Agreement shall limit any of Stockholder's obligations, or any of the
rights or remedies of Parent, under this Voting Agreement.
8.11 GOVERNING LAW; VENUE.
(a) This Voting Agreement and the Proxy shall be construed in
accordance with, and governed in all respects by, the laws of the State of
Delaware (without giving effect to principles of conflicts of laws).
(b) STOCKHOLDER IRREVOCABLY WAIVES THE RIGHT TO A JURY TRIAL IN
CONNECTION WITH ANY LEGAL PROCEEDING RELATING TO THIS VOTING AGREEMENT OR THE
PROXY OR THE ENFORCEMENT OF ANY PROVISION OF THIS VOTING AGREEMENT OR THE PROXY.
8.12 COUNTERPARTS. This Voting Agreement may be executed by the parties
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument.
8.13 CAPTIONS. The captions contained in this Voting Agreement are for
convenience of reference only, shall not be deemed to be a part of this Voting
Agreement and shall not be referred to in connection with the construction or
interpretation of this Voting Agreement.
8.14 ATTORNEYS' FEES. If any legal action or other legal proceeding
relating to this Voting Agreement or the enforcement of any provision of this
Voting Agreement is brought against Stockholder, the prevailing party shall be
entitled to recover reasonable attorneys' fees,
7
costs and disbursements (in addition to any other relief to which the
prevailing party may be entitled).
8.15 WAIVER. No failure on the part of Parent to exercise any power,
right, privilege or remedy under this Voting Agreement, and no delay on the part
of Parent in exercising any power, right, privilege or remedy under this Voting
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. Parent shall not be deemed to have waived any claim
available to Parent arising out of this Voting Agreement, or any power, right,
privilege or remedy of Parent under this Voting Agreement, unless the waiver of
such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of Parent; and any such
waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
8.16 CONSTRUCTION.
(a) For purposes of this Voting Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
(b) The parties agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Voting Agreement.
(c) As used in this Voting Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Voting Agreement to "Sections" and "Exhibits" are intended to refer to Sections
of this Voting Agreement and Exhibits to this Voting Agreement.
8
IN WITNESS WHEREOF, Parent and Stockholder have caused this Voting
Agreement to be executed as of the date first written above.
ASK JEEVES, INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
STOCKHOLDER
----------------------------
Name:
Address:
-------------------------
-------------------------
Facsimile:
-------------------------
WARRANTS, OPTIONS AND ADDITIONAL SECURITIES
SHARES HELD OF RECORD OTHER RIGHTS BENEFICIALLY OWNED
--------------------- --------------------- ---------------------
EXHIBIT A
TO THE VOTING AGREEMENT
IRREVOCABLE PROXY
The undersigned stockholder of Direct Hit, Inc., a Delaware
corporation (the "Company"), hereby irrevocably (to the fullest extent
permitted by law) appoints and constitutes Ask Jeeves, Inc., a Delaware
corporation ("Parent"), the attorney and proxy of the undersigned with full
power of substitution and resubstitution, to the full extent of the
undersigned's rights with respect to (i) the outstanding shares of capital
stock of the Company owned of record by the undersigned as of the date of
this proxy, which shares are specified on the final page of this proxy, and
(ii) any and all other shares of capital stock of the Company which the
undersigned may acquire on or after the date hereof. (The shares of the
capital stock of the Company referred to in clauses "(i)" and "(ii)" of the
immediately preceding sentence are collectively referred to as the "Shares.")
Upon the execution hereof, all prior proxies given by the undersigned with
respect to any of the Shares are hereby revoked, and the undersigned agrees
that no subsequent proxies will be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is granted
in connection with the Voting Agreement, dated as of the date hereof, between
Parent and the undersigned (the "Voting Agreement"), and is granted in
consideration of Parent entering into the Agreement and Plan of Merger and
Reorganization, dated as of the date hereof, among Parent, Answer Acquisition
Corp. and the Company (the "Reorganization Agreement").
The attorneys and proxies named above will be empowered, and may
exercise this proxy, to vote the Shares at any time until the earlier to
occur of the valid termination of the Reorganization Agreement or the
effective time of the merger contemplated thereby (the "Merger") at any
meeting of the stockholders of the Company, however called, or in connection
with any solicitation of written consents from stockholders of the Company,
in favor of the approval and adoption of the Reorganization Agreement and the
approval of the Merger, in favor of each of the other actions contemplated by
the Reorganization Agreement and against any matter that impedes the
consummation of the Merger.
The undersigned may vote the Shares on all other matters.
This proxy shall be binding upon the heirs, estate, executors,
personal representatives, successors and assigns of the undersigned
(including any transferee of any of the Shares).
If any provision of this proxy or any part of any such provision is
held under any circumstances to be invalid or unenforceable in any
jurisdiction, then (a) such provision or part thereof shall, with respect to
such circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (b) the invalidity or unenforceability of such provision or part
thereof under such circumstances and in such jurisdiction shall not affect
the validity or enforceability of such provision or part thereof under any
other circumstances or in any other jurisdiction, and (c) the invalidity or
unenforceability of such provision or part thereof shall not affect the
validity or enforceability of the remainder of such provision or the validity
or enforceability of any other provision of this
1.
proxy. Each provision of this proxy is separable from every other provision
of this proxy, and each part of each provision of this proxy is separable
from every other part of such provision.
2.
This proxy shall terminate upon the earlier of the valid termination
of the Reorganization Agreement or the effective time of the Merger.
Dated: January __, 2000
--------------------------------
Name:
Number of shares of Common Stock
owned of record as of the date of
this proxy:
--------------------------------
Number of shares of Preferred Stock
owned of record as of the date of
this proxy:
Series A Preferred Stock:
Series B Preferred Stock:
Series C Preferred Stock:
Number of shares of Common Stock
issuable upon exercise of options
owned of record as of the date of
this proxy.
--------------------------------
3.
EXHIBIT C
FORM OF ESCROW AGREEMENT
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") is made and entered into as of
February 2, 2000, by and among: ASK JEEVES, INC., a Delaware corporation
("Parent"), XXXX XXXXXXXXX, as Stockholders' Agent ("Stockholders' Agent"),
and STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, NATIONAL ASSOCIATION,
a national banking association (the "Escrow Agent").
RECITALS
A. Parent, Answer Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and Direct Hit
Technologies, Inc., a Delaware corporation (the "Company") have entered into
an Agreement and Plan of Merger and Reorganization dated as of January 25,
2000 (the "Reorganization Agreement"), pursuant to which Merger Sub will
merge with and into the Company and the stockholders of the Company (the
"Stockholders") will have the right to receive shares of Parent Common Stock.
B. Holders of Company Options (collectively with the Stockholders,
the "Merger Stockholders") will also have the right to receive shares of
Parent Common Stock upon the exercise of such options.
C. The Reorganization Agreement contemplates the establishment of
an escrow arrangement to secure the indemnification and other obligations of
the Merger Stockholders under the Reorganization Agreement.
D. Pursuant to Section 10.1 of the Reorganization Agreement and
Section 10 of this Agreement, the Merger Stockholders have irrevocably
appointed Xxxx XxXxxxxxx to serve as Stockholders' Agent hereunder and for,
among other things, all matters set forth in Section 9 of the Reorganization
Agreement and the expense reimbursement provisions of Section 10.3 of the
Reorganization Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINED TERMS. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given to them in the Reorganization
Agreement, a copy of which is attached hereto.
2. ESCROW AND INDEMNIFICATION.
(a) SHARES PLACED IN ESCROW. At the Effective Time, which
shall be set forth in a written notice from Parent to the Escrow Agent,
Parent shall issue a certificate for the shares of Parent Common Stock to be
delivered to the Escrow Agent and held in escrow in accordance with this
Agreement. At such time that the shares have been registered under the
Securities Act of 1933, as amended, the Company shall certify to the Escrow
Agent in writing that it has taken all necessary steps, including with any
transfer agent, to effect the removal of any restrictive legends. Such
certificate shall be issued in the name of Escrow Agent. As Company Options are
1.
exercised, Parent shall issue additional certificates representing 10% of
such exercised Options, for the shares of Parent Common Stock to be held in
accordance with this Agreement. Such additional certificates shall also be
issued in the name of Escrow Agent. The shares of Parent Common Stock being
held in escrow pursuant to this Agreement (the "Escrow Shares") and the
proceeds from any sale thereof shall constitute an escrow fund (the "Escrow
Fund") with respect to the indemnification obligations of the Merger
Stockholders under the Reorganization Agreement. The Escrow Fund shall be
held as a trust fund and shall not be subject to any lien, attachment,
trustee process or any other judicial process of any creditor of any Merger
Stockholder or of any party hereto. The Escrow Agent agrees to accept
delivery of the Escrow Shares and to hold the Escrow Fund in an escrow
account (the "Escrow Account"), subject to the terms and conditions of this
Agreement.
(b) VOTING OF ESCROW SHARES. Each Merger Stockholder shall
be entitled to exercise all voting rights with respect to the Escrow Shares
with respect to which it is the beneficial owner. The Escrow Agent shall have
no duties or responsibilities under this Section 2(b), including, without
limitation, the Escrow Agent shall not be responsible for the receipt or
solicitation of any proxy materials.
(c) DIVIDENDS, ETC. Parent and each of the Merger
Stockholders agree among themselves, for the benefit of Parent and the Escrow
Agent, that any securities or other property distributable (whether by way of
dividend, stock split or otherwise) in respect of or in exchange for any
Escrow Shares shall not be distributed to the record owners of such Escrow
Shares, but rather shall be distributed to and held by the Escrow Agent in
the Escrow Account. Ordinary cash dividends will be paid by Parent directly
to the Merger Stockholders and not to the Escrow Agent. Unless and until the
Escrow Agent shall actually receive such additional securities or other
property, it may assume without inquiry that the Escrow Shares currently
being held by it in the Escrow Account are all that the Escrow Agent is
required to hold. At the time any Escrow Shares are required to be released
from the Escrow Account to any Person pursuant to this Agreement, any
securities or other property previously received by the Escrow Agent in
respect of or in exchange for such Escrow Shares shall be released from the
Escrow to such Person.
(d) TRANSFERABILITY. The interests of the Merger
Stockholders in the Escrow Account and in the Escrow Shares shall not be
assignable or transferable, other than by operation of law or as otherwise
permitted herein. No transfer of any of such interests by operation of law
shall be recognized or given effect until Parent and the Escrow Agent shall
have received written notice of such transfer.
(e) FRACTIONAL SHARES. No fractional shares of Parent Common
Stock shall be retained in or released from the Escrow Account pursuant to
this Agreement. In connection with any release of Escrow Shares from the
Escrow Account, Parent and the Escrow Agent shall "round down" in order to
avoid retaining any fractional share in the Escrow Account and in order to
avoid releasing any fractional share from the Escrow Account. When shares are
"rounded down", no cash-in-lieu payments need to be made.
(f) INDEMNIFICATION. By executing this Agreement, the
Stockholders' Agent agrees to be bound by the indemnification provisions of
Section 9 of the Purchase Agreement and the expense reimbursements provisions
of Section 10.3.
2.
3. ADMINISTRATION OF ESCROW ACCOUNT. Except as otherwise provided
herein, the Escrow Agent shall administer the Escrow Account as follows:
(a) If any Indemnitee has or claims to have incurred or
suffered Damages for which it is or may be entitled to indemnification,
compensation or reimbursement under Section 9.2 or Section 10.3 of the
Reorganization Agreement, such Indemnitee may, on or prior to the first
anniversary of the Closing Date (the "Termination Date"), deliver a claim
notice (a "Claim Notice") to the Stockholders' Agent and to the Escrow Agent.
Each Claim Notice shall state that such Indemnitee believes that there is or
has been a breach of a representation, warranty or covenant contained in the
Reorganization Agreement or that such Indemnitee is otherwise entitled to
indemnification, compensation or reimbursement under Section 9.2 or Section
10.3 of the Reorganization Agreement and contain a brief description of the
circumstances supporting such Indemnitee's belief that there is or has been
such a breach or that such Indemnitee is so entitled to indemnification,
compensation or reimbursement and shall, to the extent possible, contain a
non-binding, preliminary estimate of the amount of Damages such Indemnitee
claims to have so incurred or suffered (the "Claimed Amount").
(b) Within 30 business days after receipt by the
Stockholders' Agent of a Claim Notice, the Stockholders' Agent may deliver to
the Indemnitee who delivered the Claim Notice and to the Escrow Agent a
written response (the "Response Notice") in which the Stockholders' Agent:
(i) agrees that a whole number of Escrow Shares having a "Stipulated Value"
(as defined below) equal to the full Claimed Amount, and/or, subject to
Section 3(j) and the availability in the Escrow Account, cash equal to the
full Claimed Amount may be released from the Escrow Account to the
Indemnitee; (ii) agrees that Escrow Shares having a Stipulated Value equal to
part, but not all, of the Claimed Amount (the "Agreed Amount") and/or,
subject to Section 3(j) and the availability in the Escrow Account, cash
equal to the Agreed Amount may be released from the Escrow Account to the
Indemnitee or (iii) indicates that no part of the Claimed Amount may be
released from the Escrow Account to the Indemnitee. Any part of the Claimed
Amount that is not to be released to the Indemnitee shall be the "Contested
Amount." If a Response Notice is not received by the Escrow Agent within such
30 business-day period, then the Stockholders' Agent shall be deemed to have
agreed that Escrow Shares having a Stipulated Value equal to the full Claimed
Amount may be released to the Indemnitee from the Escrow Account.
(c) If the Stockholders' Agent delivers a Response Notice
agreeing that Escrow Shares having a Stipulated Value and/or cash value,
equal to the full Claimed Amount may be released from the Escrow Account to
the Indemnitee, or if the Stockholders' Agent does not deliver a Response
Notice in accordance with Section 3(b), the Escrow Agent shall within three
(3) business days following the receipt of the Response Notice (or, if the
Escrow Agent has not received a Response Notice, within three (3) business
days following the expiration of the 30 business-day period referred to in
Section 3(b)), deliver to such Indemnitee such Escrow Shares and/or cash
equal to the Claimed Amount, provided that the Escrow Agent shall not be
liable for the Claimed Amount so released hereunder.
(d) If the Stockholders' Agent delivers a Response Notice
agreeing that Escrow Shares having a Stipulated Value equal to the Agreed
Amount and/or, subject to Section 3(j), cash equal to the Agreed Amount may
be released from the Escrow Account to the
3.
Indemnitee, the Escrow Agent shall within three (3) business days following
the receipt of the Response Notice deliver to such Indemnitee Escrow Shares
having a Stipulated Value equal to the Agreed Amount.
(e) If the Stockholders' Agent delivers a Response Notice
indicating that there is a Contested Amount, the Stockholders' Agent and the
Indemnitee shall attempt in good faith to resolve the dispute related to the
Contested Amount. If the Indemnitee and the Stockholders' Agent shall resolve
such dispute, such resolution shall be binding on all of the Merger
Stockholders and all of the Indemnitees and a settlement agreement shall be
signed by the Indemnitee and the Stockholders' Agent and sent to the Escrow
Agent, who shall, within three (3) business days following receipt thereof,
if applicable, release Escrow Shares and/or cash (to the extent available in
the Escrow Account) from the Escrow Account in accordance with such agreement.
(f) If the Stockholders' Agent and the Indemnitee are unable
to resolve the dispute relating to any Contested Amount within 45 business
days after the delivery of the Claim Notice, then the claim described in the
Claim Notice shall be settled by binding arbitration in the County of Santa
Xxxxx in the State of California in accordance with the Commercial
Arbitration Rules then in effect of the American Arbitration Association (the
"AAA Rules"). Arbitration will be conducted by three arbitrators; one
selected by Parent, one selected by the Stockholders' Agent and the third
selected by the first two arbitrators. If Parent or the Stockholders' Agent
fails to select an arbitrator prior to the expiration of the 45-business day
period referred to in the first sentence of this Section 3(f), then the other
shall be entitled to select the second arbitrator. The Stockholders' Agent,
Indemnitees and Parent agree to use all reasonable efforts to cause the
arbitration hearing to be conducted within 60 calendar days after the
appointment of the last of the three arbitrators and to use all reasonable
efforts to cause the arbitrators' decision to be furnished within 95 calendar
days after the appointment of the last of the three arbitrators. The
Stockholders' Agent, Indemnitees and Parent further agree that discovery
shall be completed at least 20 business days prior to the date of the
arbitration hearing. The arbitrators' decision shall relate solely to whether
the Indemnitee is entitled to recover the Contested Amount (or a portion
thereof), and the portion of such Contested Amount the Indemnitee is entitled
to recover. The final decision of the arbitrators shall be furnished to the
Stockholders' Agent, the Indemnitee and the Escrow Agent in writing and shall
constitute a conclusive determination of the issue in question, binding upon
the Merger Stockholders, the Indemnitee and the Escrow Agent and shall not be
contested by any of them. The non-prevailing party in any arbitration shall
pay the reasonable expenses (including attorneys' fees) of the prevailing
party, any additional reasonable fees and expenses (including reasonable
legal fees) of the Escrow Agent, and the fees and expenses associated with
the arbitration (including the arbitrators' fees and expenses). For purposes
of this Section 3(f), the non-prevailing party shall be deemed to be the
Indemnitee if it is entitled to recover less than 50% of the Contested
Amount; otherwise it shall be the Merger Stockholders.
(g) The Escrow Agent shall release Escrow Shares and/or
cash, as applicable (to the extent available in the Escrow Account), from the
Escrow Account in connection with any Contested Amount within 5 business days
after the delivery to it of: (i) a copy of a settlement agreement executed by
the Indemnitee and the Stockholders' Agent setting forth instructions to the
Escrow Agent as to the number of Escrow Shares and/or the amount of cash, if
any, to be
4.
released from the Escrow Account, with respect to such Contested Amount or
(ii) a copy of the award of the arbitrators referred to and as provided in
Section 3(f) setting forth instructions to the Escrow Agent as to the number
of Escrow Shares and/or the amount of cash, if any, to be released from the
Escrow Account, with respect to such Contested Amount.
(h) Notwithstanding anything to the contrary contained in
this Agreement, the parties hereto agree that within three (3) business days
after the Escrow Agent shall receive (i) written instructions from Parent
that Parent or the Company is repurchasing any Escrow Shares from any
Stockholder in accordance with applicable repurchase rights available to
Parent or the Company under a Restricted Stock Purchase Agreement with a
Merger Stockholder or otherwise, and (ii) a revised version of EXHIBIT B
setting forth the revised number of Escrow Shares (if any) being held on
behalf of each Merger Stockholder and a statement that the percentage
interests set forth in EXHIBIT B shall remain the same, the Escrow Agent
shall release such Escrow Shares from the Escrow Account to Parent.
(i) Any Escrow Shares and/or cash released from the Escrow
Account to an Indemnitee (other than pursuant to Section 3(h)) shall be
deemed to reduce the Escrow Fund pro rata with respect to each Stockholder in
accordance with each Stockholder's percentage interest in the Escrow Fund as
set forth in EXHIBIT B.
(j) At any time, the Stockholders' Agent may direct the
Escrow Agent in writing to sell all or any portion of the Escrow Shares on
behalf of any Merger Stockholder to the extent the Escrow Shares are not
subject to a right of repurchase as contemplated by Section 3(h) hereof, and
the Escrow Agent shall sell such shares as promptly as practicable in
accordance with the instructions of the Stockholders' Agent (but in any event
no sooner than three (3) business days after receipt by the Escrow Agent of
instructions from the Stockholders' Agent). The proceeds from any such sale
shall be held in, and shall be a part of and in the same pro rata percentage
as listed on Exhibit B with respect to, the Escrow Fund, and any Claims shall
be satisfied by distributing to Parent Escrow Shares with a value determined
in accordance with Section 5(a) to the extent Escrow Shares remain in the
Escrow Fund prior to distributing any cash to Parent. The Escrow Agent shall
modify EXHIBIT B from time to time to reflect the allocation of each Merger
Stockholder's interest in the Escrow Fund between Escrow Shares and cash. The
Escrow Agent shall invest all cash in the Escrow Account at, and pursuant to,
the written direction of the Stockholders' Agent in Eligible Investments (as
defined below) (including any interest earned thereon) and shall not be
responsible or liable for any loss accruing from any investment made in
accordance herewith. Until otherwise instructed in writing by the
Stockholders' Agent, the Escrow Agent shall invest all such cash (and
reinvest any interest earnings thereon) in shares of the SSgA U.S. Treasury
Money Market Fund.
"Eligible Investments" shall mean (a) obligations issued or
guaranteed by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States is
pledged in support thereof); (b) obligations (including certificates of
deposit and banker's acceptances) of any domestic commercial bank having
capital and surplus in excess of $500,000,000; (c) repurchase obligations for
underlying securities of the type described in clause (a); or (d) shares of
the SSgA U.S. Treasury Money Market Fund or such other money market funds at
least 95% of the assets of which constitute obligations of the type described
in clause (a) above. No investment shall have a term of more
5.
than 90 days. If otherwise qualified, obligations of the Escrow Agent shall
qualify as Eligible Investments.
4. RELEASE OF ESCROW FUND.
(a) Within five business days after the Termination Date,
the Escrow Agent shall distribute or request the stock transfer agent for the
Parent Common Stock to distribute to each of the Merger Stockholders at such
Merger Stockholder's address set forth on EXHIBIT B such Merger Stockholder's
pro-rata portion of the Escrow Fund (less any portion distributed to the
Stockholders' Agent pursuant to Section 10 hereof) and based on the
percentage interests in the Escrow Fund set forth in EXHIBIT B, as revised
from time to time to reflect transactions contemplated by Section 3(j) hereof
or otherwise; PROVIDED, HOWEVER, that if prior to the Termination Date, any
Indemnitee has given a Claim Notice containing a claim which has not been
resolved prior to the Termination Date in accordance with Section 3, the
Escrow Agent shall retain in the Escrow Account after the Termination Date an
amount having a Stipulated Value equal to 100% of the Claimed Amount or
Contested Amount, as the case may be, with respect to all claims which have
not then been resolved, subject to the provisions of Section 3 herein.
(b) The Escrow Agent is not the stock transfer agent for the
Parent Common Stock. Accordingly, if a distribution of a number of shares of
Parent Common Stock is to be made, the Escrow Agent must requisition the
appropriate number of shares from such stock transfer agent, delivering to it
the appropriate stock certificates and related stock powers. For the purposes
of this Agreement, the Escrow Agent shall be deemed to have delivered Parent
Common Stock to the Person entitled to it when the Escrow Agent has delivered
such certificates and stock powers to such stock transfer agent with
instructions to deliver it to the appropriate Person. Distributions of Parent
Common Stock shall be made to Parent or the Merger Stockholders, as
appropriate, at the addresses described in Section 10(b). Whenever a
distribution is to be made to the Merger Stockholders, pro rata distributions
shall be made to each of them based on the percentage interests in the Escrow
Fund and at their addresses as set forth in EXHIBIT B, as revised from time
to time to reflect transactions contemplated by Section 3(j) hereof or
otherwise.
5. VALUATION OF ESCROW SHARES, ETC.
(a) STIPULATED VALUE. For purposes of this Agreement, the
"Stipulated Value" of each Escrow Share shall be deemed to be equal to the
average closing price of the Parent Common Stock for the 10 trading day
period ending three (3) trading days prior to the date of the release of the
applicable Escrow Shares to any Person as certified by the Company to the
Escrow Agent in writing.
(b) STOCK SPLITS. All numbers contained in, and all
calculations required to be made pursuant to, this Agreement shall be
adjusted as appropriate to reflect any stock split, reverse stock split,
stock dividend or similar transaction effected by Parent after the date
hereof; provided, however, that the Escrow Agent shall have received notice
of such stock split or other action and shall have received the appropriate
number of additional shares of Parent Common Stock or other property pursuant
to Section 2(c) hereof. In the event of any such stock split or
6.
other similar occurrence, Parent shall deliver to the Stockholders' Agent and
the Escrow Agent a revised version of EXHIBIT B setting forth the new number
of Escrow Shares held in the Escrow Fund. Unless and until the Escrow Agent
receives the certificates representing additional shares of Parent Common
Stock or other property pursuant to Section 2(c), together with a revised
version of EXHIBIT B, the Escrow Agent may assume without inquiry that no
such stock or other property has been or is required to be issued with
respect to Escrow Shares.
(c) EXCLUSIVE REMEDY. With the exception of claims based
upon fraud, from and after the Closing, recourse of Parent to the Escrow Fund
(adjusted as appropriate to reflect any stock split, reverse stock split,
stock dividend or similar transaction effected by Parent after the date
hereof) pursuant to the Reorganization Agreement and this Agreement shall be
the sole and exclusive remedy of Parent and the other Indemnitees for any
claim for monetary damages under the indemnification provisions contained in,
or for any breach of, the Reorganization Agreement or any agreements,
certificates or other documents delivered in connection therewith (it being
understood that nothing in this paragraph or elsewhere in this Agreement or
in the Reorganization Agreement shall effect Parent's rights to specific
performance or other similar equitable remedies with respect to covenants
referred to in the Reorganization Agreement to be performed after the
Closing).
6. FEES AND EXPENSES. Upon the execution of this Agreement by all
parties hereto and the initial deposit of the Escrow Fund in the Escrow
Account, fees and expenses, in accordance with EXHIBIT C attached hereto,
will be payable to the Escrow Agent. This annual Escrow Agent fee will cover
the first twelve months of the escrow. In accordance with EXHIBIT C attached
hereto, the Escrow Agent will also be entitled to reimbursement for
reasonable and documented out-of-pocket expenses, including those of its
counsel, incurred by the Escrow Agent in the performance of its duties
hereunder and the execution and delivery of this Agreement. All such fees and
expenses shall be paid by Parent.
7. LIMITATION OF ESCROW AGENT'S LIABILITY.
(a) The Escrow Agent undertakes to perform such duties as
are specifically set forth in this Agreement only, each of which duties are
ministerial in nature, and shall have no duty under, or obligation to
determine compliance with, any other agreement or document notwithstanding
their being referred to herein or attached hereto as an exhibit. The Escrow
Agent shall not be liable except for the performance of such duties as are
specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Escrow Agent. The
Escrow Agent shall not be deemed to be a fiduciary and shall not incur any
liability with respect to any action taken by it or for any inaction on its
part in reliance upon any notice, direction, instruction, consent, statement
or other document believed by it to be genuine and duly authorized, nor for
any other action or inaction except for its own willful misconduct or
negligence. The Escrow Agent may rely on and use the Stock Powers and shall
not be liable in connection therewith. In all questions arising under this
Agreement, the Escrow Agent may rely on the advice of counsel, and for
anything done, omitted or suffered in good faith by the Escrow Agent based
upon such advice the Escrow Agent shall not be liable to anyone. The Escrow
Agent shall not be required to take any action hereunder involving any
expense unless the payment of such expense is made or provided for in a
manner reasonably
7.
satisfactory to it. In no event shall the Escrow Agent be liable for
incidental, punitive or consequential damages.
(b) Parent hereby agrees to indemnify the Escrow Agent, its
officers, directors, employees and agents for, and hold it harmless against,
any loss, liability or expense incurred without negligence or willful
misconduct on the part of Escrow Agent, arising out of or in connection with
its carrying out of its duties hereunder. This right of indemnification shall
survive the termination of this Agreement, and the resignation of the Escrow
Agent. The costs and expenses of enforcing this right of indemnification
shall also be paid by Parent.
8. TERMINATION. This Agreement shall terminate on the Termination
Date or, if earlier, upon the release by the Escrow Agent of the entire
Escrow Fund in accordance with this Agreement; PROVIDED, HOWEVER, that if the
Escrow Agent has received from any Indemnitee a Claim Notice prior to the
Termination Date setting forth a claim that has not been resolved by the
Termination Date, then this Agreement shall continue in full force and effect
until the claim has been resolved and the Escrow Fund released in accordance
with this Agreement.
9. SUCCESSOR ESCROW AGENT. In the event the Escrow Agent becomes
unavailable or unwilling to continue as escrow agent under this Agreement,
the Escrow Agent may resign and be discharged from its duties and obligations
hereunder by giving its written resignation to the parties to this Agreement.
Such resignation shall take effect not less than 30 calendar days after it is
given to all parties hereto. Parent may appoint a successor Escrow Agent only
with the consent of a majority of the Merger Stockholders (which consent
shall not be unreasonably withheld or delayed). If the parties fail to agree
on a successor Escrow Agent within such time, the Escrow Agent shall have the
right to apply to a court of competent jurisdiction for the appointment of a
successor Escrow Agent. The successor Escrow Agent shall execute and deliver
to the Escrow Agent an instrument accepting such appointment, and the
successor Escrow Agent shall, without further acts, be vested with all the
estates, property rights, powers and duties of the predecessor Escrow Agent
as if originally named as Escrow Agent herein. The Escrow Agent shall act in
accordance with written instructions from Parent as to the transfer of the
Escrow Fund to a successor escrow agent.
10. STOCKHOLDERS' AGENT. By virtue of their approval of the Merger
and the Reorganization Agreement and their exercise of Company Options, the
Merger Stockholders shall have approved the indemnification and escrow terms
set forth in the Reorganization Agreement and this Agreement and shall have
agreed to irrevocably appoint Xxxx XxXxxxxxx as Stockholders' Agent, to give
and receive notices and communications, to authorize delivery to Parent of
Parent Common Stock, cash or other property from the Escrow Fund, to object
to such deliveries, to agree to, negotiate, enter into settlements and
compromises of, and demand dispute resolution pursuant to Section 3 of this
Agreement and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in
the judgment of the Stockholders' Agent for the accomplishment of the
foregoing. The Stockholders' Agent shall not be responsible for any act done
or omitted thereunder as Stockholders' Agent while acting in good faith and
in the exercise of reasonable judgment. The Merger Stockholders shall jointly
and severally indemnify the Stockholders' Agent and hold the Stockholders'
Agent harmless against any loss, liability or expense incurred without gross
negligence, bad faith or willful misconduct on the part of the Stockholders'
Agent and arising out
8.
of or in connection with the acceptance or administration of the
Stockholders' Agent's duties hereunder, including the reasonable fees and
expenses of any legal counsel or other professional retained by the
Stockholders' Agent. By virtue of their approval of the Merger and this
Agreement and their exercise of Company Options, the Merger Stockholders
hereby agree to pay (i) the reasonable fees of the Stockholders' Agent
relating to his services performed in such capacity as set forth on EXHIBIT D
hereto and (ii) all costs and expenses, including those of any legal counsel
or other professional retained by the Stockholders' Agent, in connection with
the acceptance and administration of the Stockholders' Agent's duties
hereunder. Subject to the prior right of Parent to make claims for Damages,
the Stockholders' Agent shall have the right to recover from the Escrow Fund,
prior to any distribution to the Merger Stockholders pursuant to Section 4(a)
or Section 4(b) hereof, a number of Escrow Shares set forth in a certificate
of the Stockholders' Agent delivered to the Escrow Agent at least two (2)
business days prior to the date on which a distribution is to be made to the
Merger Stockholders equal to the quotient obtained by dividing (i) any
reasonable fees, costs and expenses set forth in such certificate, including
those of any legal counsel or other professional retained by the
Stockholders' Agent, in connection with the acceptance and administration of
the Stockholders' Agent's duties hereunder, by (ii) the Stipulated Value or,
if available in the Escrow Fund, the cash equivalent thereof.
11. MISCELLANEOUS.
(a) ATTORNEYS' FEES. If any action or proceeding relating to
this Agreement or the enforcement of any provision of this Agreement is
brought against any party hereto (other than the Escrow Agent whose rights to
reimbursement are set forth in Sections 6 and 7 herein), the prevailing party
shall be entitled to recover reasonable attorneys' fees, costs and
disbursements (in addition to any other relief to which the prevailing party
may be entitled).
(b) NOTICES. Any notice or other communication required or
permitted to be delivered to any party under this Agreement shall be in
writing and shall be deemed properly delivered, given and received when
delivered (by hand, by registered mail, by courier or express delivery
service or by facsimile) to the address or facsimile telephone number set
forth in Section 10.5 of the Reorganization Agreement or to the Escrow Agent
at the address set forth below (or to such other address or facsimile
telephone number as such party shall have specified in a written notice given
to the other parties hereto):
State Street Bank and Trust Company of California, N.A.
Corporate Trust Division
000 Xxxx 0xx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Corporate Trust Administration
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
The Escrow Agent may assume that any Claim Notice, Response
Notice or other notice of any kind required to be delivered to the Escrow
Agent and any other Person has been received by such other Person if it has
been received by the Escrow Agent, but the Escrow Agent need not inquire into
or verify such receipt.
9.
(c) HEADINGS. The underlined headings contained in this
Agreement are for convenience of reference only, shall not be deemed to be a
part of this Agreement and shall not be referred to in connection with the
construction or interpretation of this Agreement.
(d) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which,
when taken together, shall constitute one agreement.
(e) GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the
State of Delaware (without giving effect to principles of conflicts of laws).
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon each of the parties hereto and each of their respective permitted
successors and assigns, if any. No Merger Stockholder may assign such Merger
Stockholder's rights under this Agreement without the express prior written
consent of Parent, PROVIDED, HOWEVER, that upon the death of a Merger
Stockholder, such Merger Stockholder's rights under this Agreement shall be
transferred to the person(s) who receive such Merger Stockholder's Parent
Common Stock under the laws of descent and distribution. Nothing in this
Agreement is intended to confer, or shall be deemed to confer, any rights or
remedies upon any person or entity other than the parties hereto and their
permitted successors and assigns. This Agreement shall inure to the benefit
of: the Merger Stockholders; Parent; Escrow Agent; the Stockholders' Agent
and the respective successors and assigns, if any, of the foregoing.
(g) WAIVER. No failure on the part of any Person to exercise
any power, right, privilege or remedy under this Agreement, and no delay on
the part of any Person in exercising any power, right, privilege or remedy
under this Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power,
right, privilege or remedy shall preclude any other or further exercise
thereof or of any other power, right, privilege or remedy. No Person shall be
deemed to have waived any claim arising out of this Agreement, or any power,
right, privilege or remedy under this Agreement, unless the waiver of such
claim, power, right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of such Person; and any such
waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
(h) AMENDMENTS. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of all of the parties hereto; provided,
however, that any amendment duly executed and delivered by the Stockholders'
Agent shall be deemed to have been duly executed and delivered by all of the
Merger Stockholders and provided further that in the event the Escrow Agent
shall receive other property pursuant to Section 2(c) above, then the
Agreement may be amended, modified or altered by the parties hereto to set
forth the duties and obligations of the Escrow Agent with respect to such
other property.
(i) SEVERABILITY. In the event that any provision of this
Agreement, or the application of any such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and
10.
the application of such provision to Persons or circumstances other than
those as to which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and shall continue
to be valid and enforceable to the fullest extent permitted by law.
(j) PARTIES IN INTEREST. None of the provisions of this
Agreement is intended to provide any rights or remedies to any Person other
than the parties hereto and their respective successors and assigns, if any.
(k) ENTIRE AGREEMENT. This Agreement and the other
agreements referred to herein set forth the entire understanding of the
parties hereto relating to the subject matter hereof and thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter hereof and thereof.
(l) WAIVER OF JURY TRIAL. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any Legal Proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.
(m) TAX REPORTING INFORMATION AND CERTIFICATION OF TAX
IDENTIFICATION NUMBERS.
(i) The parties hereto agree that, for tax reporting
purposes, all interest on or other income, if any, attributable to the Escrow
Fund or any other amount held in escrow by the Escrow Agent pursuant to this
Agreement shall be allocable to the Merger Stockholders in accordance with
their percentage interests in the Escrow Fund set forth in EXHIBIT B;
PROVIDED, HOWEVER, that if Parent or the Company shall have repurchased any
Escrow Shares in accordance with Section 3(h), then all interest on or other
income, if any, attributable to the Escrow Shares or any other amount held in
escrow by the Escrow Agent pursuant to this Agreement accrued after such
repurchase shall be allocable to the Merger Stockholders based on the number
of Escrow Shares held on behalf of each Stockholder at the time of the
accrual of such interest or other income (it being understood that, for
purposes of permitting the Escrow Agent to make such allocations, Parent and
the Stockholders' Agent shall jointly (i) calculate revised percentage
interests for the Merger Stockholders based on such number of Escrow Shares
and (ii) submit such calculations in writing to the Escrow Agent).
(ii) Parent and the Stockholders' Agent agree to
provide the Escrow Agent with certified tax identification numbers for each
of them and the Merger Stockholders by furnishing appropriate forms W-9 (or
Forms W-8, in the case of non-U.S. persons) and any other forms and documents
that the Escrow Agent may reasonably request (collectively, "Tax Reporting
Documentation") to the Escrow Agent within 30 days after the date hereof. The
parties hereto understand that, if such Tax Reporting Documentation is not so
certified to the Escrow Agent, the Escrow Agent shall be required by the
Internal Revenue Code, as it may be amended from time to time, to withhold
and remit to the Internal Revenue Service a portion of any interest or other
income earned on the investment of monies or other property held by the
Escrow Agent pursuant to this Agreement.
11.
(n) CONSTRUCTION.
(i) For purposes of this Agreement, whenever the
context requires: the singular number shall include the plural, and vice
versa; the masculine gender shall include the feminine and neuter genders;
the feminine gender shall include the masculine and neuter genders; and the
neuter gender shall include the masculine and feminine genders.
(ii) The parties hereto agree that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be applied in the construction or interpretation of
this Agreement.
(iii) As used in this Agreement, the words "include"
and "including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
12.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
ASK JEEVES, INC.
------------------------------------------
By:
---------------------------------------
Title:
------------------------------------
SIGNATURE PAGE TO ESCROW AGREEMENT
STOCKHOLDERS' AGENT:
------------------------------------------
By:
---------------------------------------
Title:
------------------------------------
SIGNATURE PAGE TO ESCROW AGREEMENT
STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, NATIONAL ASSOCIATION
------------------------------------------
By:
---------------------------------------
Title:
------------------------------------
SIGNATURE PAGE TO ESCROW AGREEMENT
EXHIBIT A
TO THE ESCROW AGREEMENT
MERGER STOCKHOLDERS
EXHIBIT B
TO THE ESCROW AGREEMENT
----------------------------------------------------------------------------------------------------
PRO RATA PERCENTAGE
SHARES TO BE HELD IN CASH HELD IN ESCROW INTEREST IN ESCROW
STOCKHOLDER ADDRESS ESCROW ACCOUNT ACCOUNT FUND
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
EXHIBIT C
TO THE ESCROW AGREEMENT
ESCROW FEES AND EXPENSES
EXHIBIT D
TO THE ESCROW AGREEMENT
STOCKHOLDERS' AGENT FEES
EXHIBIT D
FORM OF STOCKHOLDER REPRESENTATION LETTER
STOCKHOLDER REPRESENTATION LETTER
THIS STOCKHOLDER REPRESENTATION LETTER ("Letter") is being executed and
delivered as of February 2, 2000 by the undersigned stockholder of DIRECT HIT
TECHNOLOGIES, INC., a Delaware corporation (the "Company"), to and in favor of,
and for the benefit of, ASK JEEVES, INC., a Delaware corporation ("Parent") and
its affiliates.
RECITALS
A. The undersigned stockholder of the Company (the "Stockholder")
represents to Parent that the Stockholder owns shares of the common stock, $.001
par value per share, or preferred stock, $.001 par value per share, of the
Company. Said shares are referred to in this Letter as the "Shares."
B. Pursuant to an Agreement and Plan of Merger and Reorganization,
dated as of January 25, 2000 (the "Reorganization Agreement"), by and among
Parent, Answer Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), and the Company, it is contemplated that
Merger Sub will merge with and into the Company (the merger of Merger Sub with
and into the Company being referred to in this Letter as the "Merger") with the
Company continuing as the surviving corporation. Upon the consummation of the
Merger, the Company's stockholders are to receive shares of common stock of
Parent ("Parent Common Stock") in exchange for their shares of capital stock of
the Company, any outstanding options to purchase common stock of the Company are
to be converted into options to purchase Parent Common Stock in accordance with
the Reorganization Agreement and the Company is to become a wholly-owned
subsidiary of Parent. Accordingly, it is contemplated that the Stockholder will
receive shares of Parent Common Stock in the Merger.
C. Capitalized terms used in this Letter have the meaning ascribed to
them in the Reorganization Agreement unless otherwise stated herein.
CERTIFICATION
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The Stockholder
represents, warrants and certifies to Parent as follows:
(a) The Stockholder is aware (i) that the Parent Common Stock
to be issued to the Stockholder in the Merger will not be issued pursuant to a
registration statement under the Securities Act of 1933, as amended (the "Act"),
but will instead be issued in reliance on the exemption from registration set
forth in Section 4(2) of the Act and in Regulation D under the Act and (ii) that
neither the Merger nor the issuance of such Parent Common Stock has been
approved or reviewed by the SEC or by any other Governmental Body.
(b) The Stockholder is aware that the Parent Common Stock to be
issued in the Merger cannot be resold unless such Parent Common Stock is
registered under the Act or unless an exemption from registration is available.
The Stockholder is also aware that: (i) except pursuant to the Registration
Rights Agreement and the Reorganization Agreement, Parent is under no obligation
to file a registration statement with respect to the Parent Common Stock to be
issued to the Stockholder in the Merger; and (ii) the provisions of Rule 144
under the Act will
1.
permit resale of the Parent Common Stock to be issued to the Stockholder in
the Merger only under limited circumstances, and such Parent Common Stock
must be held by the Stockholder for at least one year before it can be sold
pursuant to Rule 144.
(c) The Parent Common Stock to be issued to the Stockholder in
the Merger will be acquired by the Stockholder for investment and for his own
account, and not with a view to, or for resale in connection with, any
unregistered distribution thereof.
(d) The Stockholder has received and examined the Information
Statement, Parent's Quarterly Report on Form 10Q for the quarter ended September
30, 1999 and Parent's Final Prospectus dated June 30, 1999, including the risk
factors described therein. Without limiting the generality of the foregoing, the
Stockholder specifically acknowledges that the stock price of Parent Common
Stock has been, and will likely continue to be, extremely volatile.
(e) The Stockholder has been given the opportunity: (i) to ask
questions of, and to receive answers from, persons acting on behalf of the
Company and Parent concerning the terms and conditions of the Merger and the
contemplated issuance of Parent Common Stock in the Merger, and the business,
properties, prospects and financial condition of the Company and Parent; and
(ii) to obtain any additional information (to the extent the Company or Parent
possesses such information or is able to acquire it without unreasonable effort
or expense and without breach of confidentiality obligations) that is necessary
to verify the accuracy of the information set forth in the documents, provided
or made available to the Stockholder.
(f) The Stockholder, either alone or with his designated
purchaser representative, has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of the
Stockholder's contemplated investment in the Parent Common Stock to be issued in
the Merger.
(g) The Stockholder is an "accredited investor" (as such term
is defined in Rule 501 under the Act).
Yes ____ No ____
(h) The Stockholder understands that stop transfer instructions
will be given to Parent's transfer agent with respect to the Parent Common Stock
to be issued to the Stockholder in the Merger, and that there will be placed on
the certificate or certificates representing such Parent Common Stock a legend
identical or similar in effect to the following legend (together with any other
legend or legends required by applicable state securities laws or otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS
REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT IS AVAILABLE."
2.
2. RELIANCE. The Stockholder acknowledges that Parent and its counsel
will rely on his representations, warranties and certifications set forth in
Section 1 above for purposes of determining his suitability as an investor in
Parent Common Stock and for purposes of confirming the availability of an
exemption from the registration requirements of the Act.
3. PROHIBITIONS AGAINST TRANSFER. The Stockholder shall not effect
any sale, transfer or other disposition of any of the Parent Common Stock that
the Stockholder is to receive in the Merger unless:
(a) such sale, transfer or other disposition is effected
pursuant to an effective registration statement under the Act;
(b) such sale, transfer or other disposition is made in
conformity with the requirements of Rule 144 under the Act, as evidenced by a
broker's letter and a representation letter executed by the Stockholder
(reasonably satisfactory in form and content to Parent) stating that such
requirements have been met;
(c) counsel reasonably satisfactory to Parent shall have
advised Parent in a written opinion letter (reasonably satisfactory in form and
content to Parent), upon which Parent may rely, that such sale, transfer or
other disposition will be exempt from registration under the Act; or
(d) an authorized representative of the SEC shall have rendered
written advice to the Stockholder to the effect that the SEC would take no
action, or that the staff of the SEC would not recommend that the SEC take
action, with respect to such sale, transfer or other disposition, and a copy of
such written advice and all other related communications with the SEC shall have
been delivered to Parent.
The Stockholder has executed and delivered this Letter as of the date
first written above.
-------------------------------------
(Signature)
Name:
--------------------------------
State of Residence:
-----------------
3.
EXHIBIT E
PERSONS TO SIGN PARENT AFFILIATE LOCK-UP AGREEMENTS
EXHIBIT F
FORM OF PARENT AFFILIATE LOCK-UP AGREEMENT
EXHIBIT G
FORM OF NONCOMPETITION AGREEMENT
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is being executed and delivered as of
February 2, 2000 by _________________ (the "Stockholder") in favor of, and
for the benefit of ASK JEEVES, INC., a Delaware corporation ("Parent") and
DIRECT HIT TECHNOLOGIES, INC., a Delaware corporation (the "Company").
RECITALS
A. As a Stockholder and employee of the Company, the Stockholder has
obtained extensive and valuable knowledge and confidential information
concerning the business of the Company.
B. Pursuant to an Agreement and Plan of Merger and Reorganization,
dated as of January 25, 2000, among Parent, Answer Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and the
Company (the "Reorganization Agreement") providing for the merger of Merger Sub
with and into the Company (the "Merger"), holders of shares of the common stock
of the Company will receive shares of common stock of Parent in exchange for
their shares of common stock of the Company, and the Company will become a
wholly owned subsidiary of Parent.
C. In connection with the Merger (and as a condition to the
consummation of the Merger), and to enable Parent to secure more fully the
benefits of such Merger, Parent has required that the Stockholder enter into
this Noncompetition Agreement, and the Stockholder is entering into this
Noncompetition Agreement in order to induce Parent to consummate the Merger
contemplated by the Reorganization Agreement.
AGREEMENT
In order to induce Parent to consummate the transactions contemplated by
the Reorganization Agreement, and for other good and valuable consideration, the
Stockholder agrees as follows:
1. NONCOMPETITION. The Stockholder agrees that for the longer of the
period he or she is an employee of Parent or any of its affiliates, including
the Company, or eighteen (18) months after the consummation of the Merger (the
"Noncompetition Period"), the Stockholder will not, and will not permit any
affiliates to, engage in, or directly or indirectly have any interest in, any
person, firm, corporation, partnership or business (whether as an advisor,
principal, consultant, independent contractor, agent, partner, officer,
director, stockholder, employee, member of any association or otherwise) that
engages in, any of the following, anywhere in the world: any activity engaged in
by the Company as of the date of the consummation of the Merger, including
without limitation, engaging in, participating in, investing in, providing
services to or otherwise dealing with any business: (a) related to any Internet
search or directory
1.
technology (whether for the Internet generally or within any subset, such as
within a specific Internet site or an Intranet), or (b) offering or using
with any Internet search or directory technology: (i) information retrieval
technology, (ii) natural language technology, or (iii) methods of ranking
information or results based on popularity, relevance, volume of use, or
associations. Notwithstanding the foregoing, nothing in this agreement shall
prohibit the Shareholder from owning as a passive investor up to two percent
(2%) of the outstanding stock of any publicly traded company.
2. NO HIRING OR SOLICITATION OF EMPLOYEES. The Stockholder agrees
that, during the Noncompetition Period, the Stockholder shall not, and shall not
permit any affiliates to: (a) hire any Specified Employee, as defined below, or
(b) directly or indirectly, personally or through others, encourage, induce,
attempt to induce, solicit or attempt to solicit (on the Stockholder's own
behalf or on behalf of any other Person) any Specified Employee to leave his or
her employment with Parent or any of its affiliates, including the Company. For
purposes of this Section 3, "Specified Employee" shall mean any individual who
(i) is or was an employee of the Company on the date of this Noncompetition
Agreement or during the 180-day period ending on the date of this Noncompetition
Agreement, and (ii) remains or becomes an employee of Parent or any of Parent's
subsidiaries (including the Company) on the date of this Noncompetition
Agreement or at any time during the Noncompetition Period.
3. EFFECTIVE DATE. This Noncompetition Agreement shall become
effective upon consummation of the Merger.
4. GENERAL PROVISIONS.
(a) This Noncompetition Agreement will be governed by the laws
of the State of Delaware applicable to agreements made and to be performed
entirely within such state.
(b) The parties to this agreement agree that, in the event of
any breach or threatened breach by the Stockholder of any covenant, obligation
or other provision of paragraph 1 or 2 hereof, Parent shall be entitled (in
addition to any other remedy that may be available to it) to (i) a decree or
order of specific performance or mandamus to enforce the observance and
performance of such covenant, obligation or other provision and (ii) an
injunction restraining such breach or threatened breach. If any action or
proceeding relating to this Noncompetition Agreement or the enforcement of any
provision of this Noncompetition Agreement is brought against any party hereto,
the prevailing party shall be entitled to recover reasonable attorneys' fees,
costs and disbursements (in addition to any other relief to which the prevailing
party may be entitled).
(c) This Noncompetition Agreement sets forth the entire
agreement and understanding between Parent and the Stockholder relating to this
agreement not to compete with Parent and supersedes all prior verbal discussion
between the parties. Any change to any terms hereof must be executed in writing
and signed by the Stockholder and Parent.
(d) This Noncompetition Agreement will be binding upon the
Stockholder's heirs, executors, administrators and other legal representatives
and will be for the benefit of Parent and its respective successors and assigns.
2.
5. SEVERABILITY. If any provision of this Noncompetition Agreement or
any part of any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction and (c) the
invalidity or unenforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Noncompetition
Agreement. Each provision of this Noncompetition Agreement is separable from
every other provision of this Noncompetition Agreement, and each part of each
provision of this Noncompetition Agreement is separable from every other part of
such provision.
6. ARBITRATION. Should any dispute arise with respect to
Stockholder's agreement not to compete with Parent, such dispute shall be
conclusively resolved by final, binding and confidential arbitration in
accordance with the Voluntary Labor Arbitration Rules of the American
Arbitration Association ("AAA"), rather than by a jury court or administrative
agency. THE STOCKHOLDER IRREVOCABLY WAIVES THE RIGHT TO A JURY TRIAL IN
CONNECTION WITH ANY LEGAL PROCEEDING RELATING TO THIS NONCOMPETITION AGREEMENT
OR THE ENFORCEMENT OF ANY PROVISION OF THIS NONCOMPETITION AGREEMENT.
7. ATTORNEYS' FEES. If any legal action or other legal proceeding
relating to this Noncompetition Agreement or the enforcement of any provision of
this Noncompetition Agreement is brought against the Stockholder, the prevailing
party shall be entitled to recover reasonable attorneys' fees, costs and
disbursements (in addition to any other relief to which the prevailing party may
be entitled).
8. NON-EXCLUSIVITY. The rights and remedies of Parent and the Company
under this Noncompetition Agreement are not exclusive of or limited by any other
rights or remedies which they may have, whether at law, in equity, by contract
or otherwise, all of which shall be cumulative (and not alternative). Without
limiting the generality of the foregoing, the rights and remedies of Parent and
the Company under this Noncompetition Agreement, and the obligations and
liabilities of the Stockholder under this Noncompetition Agreement, are in
addition to their respective rights, remedies, obligations and liabilities under
the law of unfair competition, under laws relating to misappropriation of trade
secrets, under other laws and common law requirements and under all applicable
rules and regulations. Nothing in this Noncompetition Agreement shall limit any
of the Stockholder's obligations, or the rights or remedies of Parent or the
Company, under the Reorganization Agreement; and nothing in the Reorganization
Agreement shall limit any of the Stockholder's obligations, or any of the rights
or remedies of Parent or the Company under this Noncompetition Agreement. No
breach on the part of Parent or the Company or any other party of any covenant
or obligation contained in the Reorganization Agreement, or any other agreement
shall limit or otherwise affect any right or remedy of Parent or the Company
under this Noncompetition Agreement.
3.
9. WAIVER. No failure on the part of Parent or the Company to
exercise any power, right, privilege or remedy under this Noncompetition
Agreement, and no delay on the part of Parent or the Company in exercising any
power, right, privilege or remedy under this Noncompetition Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
IN WITNESS WHEREOF, the Stockholder has duly executed and
delivered this Noncompetition Agreement as of the date first above written.
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NAME OF STOCKHOLDER
Address:
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Telephone No.:( )
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Facsimile:( )
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4.
EXHIBIT H
RESERVED
EXHIBIT I
RESERVED
EXHIBIT J
FIRPTA STATEMENT
EXHIBIT K
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is made and entered
into as of February __, 2000, by and among ASK JEEVES, INC., a Delaware
corporation ("Parent"), and the stockholders of DIRECT HIT TECHNOLOGIES,
INC., a Delaware corporation (the "Company"), identified on EXHIBIT A hereto
(the "Stockholders").
RECITALS
A. Parent, Answer Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and the Company have
entered into an Agreement and Plan of Merger and Reorganization dated as of
January 25, 2000 (the "Reorganization Agreement"), pursuant to which Merger
Sub will merge with and into the Company (the "Merger") and the Stockholders
will have the right to receive shares of common stock of Parent. Capitalized
terms used in this Agreement and not otherwise defined shall have the
meanings given to them in the Reorganization Agreement.
B. Parent has agreed to provide the Stockholders with certain
registration rights as more fully described herein.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
SECTION 1. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms
shall have the following respective meanings:
"AFFILIATE STOCKHOLDERS" means each director and executive
officer of the Company immediately prior to the Merger and each holder of 5%
or more of the outstanding capital stock of the Company immediately prior to
the Merger.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"REGISTRABLE SHARES" means the shares of Parent Common Stock
issued to the Stockholders pursuant to the Reorganization Agreement
(including any shares of Parent Common Stock issuable upon the exercise of
any stock option assumed by Parent if such shares of Parent Common Stock have
not been registered on a Form S-8 Registration Statement at the time of
issuance) and any shares of Parent Common Stock issued in respect thereof as
a result of any stock split, stock dividend, share exchange, merger,
consolidation or similar recapitalization; PROVIDED, HOWEVER, that
Registrable Shares shall cease to be Registrable Shares when (i) a
registration statement covering such Registrable Shares shall have become
effective under the
1
Securities Act, and such Registrable Shares shall have been disposed of in
accordance with the Registration Statement, or (ii) such Registrable Shares
may be transferred pursuant to Rule 144 under the 1933 Act, as such rule may
be amended from time to time, or any successor rule or regulation ("Rule
144") in any single calendar quarter and PROVIDED FURTHER, that Registrable
Shares shall include all of the shares of Parent Common Stock held in any
"Escrow Account" pursuant to the Escrow Agreement dated of even date herewith
among certain of the Stockholders, Parent, the Stockholders' Agent (as
defined therein) and State Street Bank and Trust Company of California, N.A.,
as escrow agent (the "Escrow Agreement").
"REGISTRATION EXPENSES" shall mean all expenses incurred by
Parent in complying with Sections 2.1 and 2.2 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for Parent, reasonable fees and disbursements not to
exceed twenty-five thousand dollars ($25,000) of a single special counsel for
the Stockholders, blue sky fees and expenses and the expense of any special
audits incident to or required by any such registration (including the
compensation of regular employees of Parent which shall be paid in any event
by Parent).
"REGISTRATION STATEMENT" shall mean any registration statement
under the Securities Act, including any final prospectus, exhibit, supplement
or any endorsement included in or relating to the registration statement,
referenced in Sections 2.1 and 2.2.
"SEC" or "COMMISSION" means the Securities and Exchange
Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 PIGGYBACK REGISTRATION.
(a) GENERAL. Parent shall notify the Affiliate Stockholders
in writing at least seven (7) days prior to the filing of any Registration
Statement for purposes of an underwritten, secondary public offering of
securities of Parent (excluding registration statements relating to employee
benefit plans or with respect to corporate reorganizations or other
transactions under Rule 145 of the Securities Act) (a "Secondary Offering")
and will afford each such Affiliate Stockholder an opportunity to include in
such Registration Statement all or part of the Registrable Shares held by
such Affiliate Stockholder, as determined in accordance with this Section
2.1(a). The aggregate amount of Registrable Securities and other shares of
Parent Common Stock to be included in a Secondary Offering (the "Included
Shares") will be determined by the Company, considering the advice of the
managing underwriters of such Secondary Offering, and the aggregate amount of
Registrable Securities included in the Included Shares will be determined by
calculating the aggregate amount of Registrable Securities and other shares
of Parent Common Stock that the Affiliate Stockholders and the Persons
identified on Exhibit E to the Reorganization Agreement (the "Parent
Affiliates") propose to include in a Secondary Offering and allocating to the
Affiliate Stockholders a pro rata portion of the Included Shares based on
their percentage interest in Parent's fully diluted equity (the "Affiliate
Stockholders' Pro Rata Portion"). By way of clarification, each Parent
Affiliate and each
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Affiliate Stockholder shall be entitled to sell in the Secondary Offering the
same percentage of their holdings in Parent. Each Affiliate Stockholder
desiring to include in any such Registration Statement all or any part of the
Registrable Shares held by it shall, within seven (7) days after the
above-described notice from Parent, so notify Parent in writing. Such notice
shall state the intended method of disposition of the Registrable Shares by
such Affiliate Stockholder. The Affiliate Stockholders shall have no further
rights under this Section 2.1 following the effectiveness of a Registration
Statement under Section 2.2.
(b) UNDERWRITING. The right of any such Affiliate
Stockholder to be included in a Registration pursuant to this Section 2.1
shall be conditioned upon such Affiliate Stockholder's participation in such
underwriting and the inclusion of such Affiliate Stockholder's Registrable
Shares in the underwriting to the extent provided herein. All Affiliate
Stockholders shall enter into a lock -up agreement in customary form with the
underwriter or underwriters selected for such underwriting by Parent (the
"Secondary Offering Lock-Up") and all Affiliate Stockholders electing to be
included in a Registration pursuant to this Section 2.1 shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by Parent; provided, however, that Parent
shall not permit the underwriter or underwriters to require the Affiliate
Stockholders to sign a Secondary Offering Lock-Up relating to and restricting
the resale of their remaining shares of Parent Common Stock with a duration
in excess of ninety (90) days from the date of effectiveness of the
Registration Statement for a Secondary Offering. If any Affiliate Stockholder
disapproves of the terms of any such underwriting, each Affiliate Stockholder
may elect to withdraw therefrom by written notice to Parent and the
underwriter, delivered at least ten (10) business days prior to the effective
date of the Registration Statement. Any Registrable Shares withdrawn from
such underwriting shall be withdrawn from the registration.
(c) RIGHT TO TERMINATE REGISTRATION. Parent shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.1 prior to the effectiveness of such registration whether or not
any Affiliate Stockholder has elected to include securities in such
registration; provided, however, that if Parent terminates or withdraws such
registration, Parent shall prepare and file with the SEC the Registration
Statement(s) referenced in Section 2.2 hereof within fifteen (15) days of
such termination or withdrawal. The Registration Expenses of such withdrawn
registration shall be borne by Parent in accordance with Section 2.3 hereof.
(d) LOCK-UP OF PARENT INVESTORS. Parent shall obtain from
the investors identified in Schedule E to the Reorganization Agreement an
agreement (to which the Stockholders' Agent shall be a party) not to sell,
distribute or otherwise transfer any of their shares of Parent Common Stock
except in accordance with Section 2.1 hereof or prior to the effectiveness of
the Resale Registration Statement contemplated by Section 2.2 hereof.
2.2 RESALE REGISTRATION. No later than ten (10) days after the date
on which a Registration Statement relating to a Secondary Offering is
declared effective, Parent shall prepare and file with the SEC one or more
Registration Statement(s) covering the resale of the Registrable Shares (the
"Resale Registration Statement(s)") not included in and sold under the
Registration Statement relating to a Secondary Offering. Parent shall use
commercially
3
reasonable efforts to cause the Resale Registration Statement(s) to be
declared effective as soon as practicable after the filing thereof, and in no
event later than immediately after the expiration of any Secondary Offering
Lock-Up. If Parent does not file with the SEC a Registration Statement
relating to a Secondary Offering on or prior to February 15, 2000, then
Parent shall prepare and file with the SEC the Resale Registration
Statement(s) referenced in this Section 2.2 as promptly as practicable and in
no event later than March 1, 2000. Subject to the terms of this Agreement,
Parent shall use commercially reasonable efforts to cause the Resale
Registration Statement(s) to remain effective until the date on which all
Registrable Shares covered by the Resale Registration Statement(s) have been
sold to the public pursuant to the Registration Statement(s) (the
"Registration Effective Period"). The parties hereto acknowledge and agree
that Parent may take such action as is necessary to register with the SEC the
Registrable Shares for resale on Form S-3 instead of Form S-1 at such time as
Parent becomes eligible to use Form S-3 for the registration of shares of its
capital stock.
2.3 EXPENSES OF REGISTRATION. Except as specifically provided
herein, all Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Sections 2.1 and 2.2
herein shall be borne by Parent.
2.4 OBLIGATIONS OF PARENT. Whenever required to effect the
registration of the Registrable Shares pursuant to Section 2.1 or 2.2, Parent
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in
connection with the Registration Statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by the Registration Statement for the period set forth in
Sections 2.1 and 2.2 above.
(b) Furnish to the Stockholders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Shares owned by them.
(c) Use its commercially reasonable efforts to register and
qualify the securities covered by the Registration Statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Stockholders; PROVIDED that Parent shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions.
(d) Use its commercially reasonable efforts to periodically
amend such registration statement to include such information as may be
necessary (including quarterly financial results for periods after the date
such Registration Statement becomes effective) to maintain the effectiveness
of the Registration Statement and cause it to contain current information.
4
(e) Notify each Stockholder (such notification being
referred to herein as the "Notice") covered by the Registration Statement at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act of the happening of any event as a result of which the
prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
Promptly thereafter, Parent shall use its commercially reasonable efforts to
prepare and file with the SEC (in no event later than five (5) days after the
Notice) (such filing date being referred to herein as the "Amendment Date")
and furnish to each Stockholder as promptly as practicable a reasonable
number of copies of a supplement to or an amendment of such prospectus as may
be necessary so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing; provided, however, that in no event
shall the total number of trading days from all Notices to all respective
Amendment Dates exceed ten (10) in any fiscal quarter of Parent.
(f) Use its commercially reasonable efforts to furnish, on
the date that such Registrable Shares are delivered to the underwriters for
sale, if such securities are being sold through underwriters, (i) an opinion,
dated as of such date, of the counsel representing Parent for the purposes of
such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the
underwriters, if any, and (ii) a letter dated as of such date, from the
independent certified public accountants of Parent, in form and substance as
is customarily given by independent certified public accountants to
underwriters in an underwritten public offering addressed to the underwriters.
(g) To the extent not already covered by the Registration
Statement, use its commercially reasonable efforts to promptly amend the
Registration Statement to cover, or prepare and file with the SEC a
Registration Statement covering, the resale of any shares issued to the
Stockholders' Agent as payment for fees and expenses incurred by the
Stockholders' Agent under the Escrow Agreement.
2.5 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Stockholder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation
or implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of
Parent to take any action pursuant to Sections 2.1 and 2.2 that the
Stockholders shall furnish to Parent such information regarding themselves,
the Registrable Shares held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Shares.
2.6 INDEMNIFICATION. In the event any Registrable Shares are
included in a registration statement under Sections 2.1 or 2.2:
5
(a) To the extent permitted by law, Parent will indemnify
and hold harmless each Stockholder, the partners, officers and directors of
each Stockholder, any underwriter (as defined in the Securities Act) for such
Stockholder and each person, if any, who controls such Stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any of the following statements, omissions or violations (collectively a
"Violation") by Parent: (i) any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by Parent of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law in connection with the
offering covered by the Registration Statement; and Parent will pay as
incurred to each such Stockholder, partner, officer, director, underwriter or
controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED HOWEVER, that the indemnity agreement
contained in this Section 2.6(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of Parent, which consent shall not
be unreasonably withheld, nor shall Parent be liable in any such case for any
such loss, claim, damage, liability or action to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Stockholder, partner, officer, director,
underwriter or controlling person of such Stockholder.
(b) To the extent permitted by law, each Stockholder will
indemnify and hold harmless Parent, each of its directors, its officers and
each person, if any, who controls Parent within the meaning of the Securities
Act, any underwriter and any other Stockholder selling securities under such
Registration Statement or any of such other Stockholder's partners, directors
or officers or any person who controls such Stockholder, against any losses,
claims, damages or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Stockholder
under an instrument duly executed by such Stockholder and stated to be
specifically for use in connection with such registration; and each such
Stockholder will pay as incurred any legal or other expenses reasonably
incurred by Parent or any such director, officer, controlling person,
underwriter or other Stockholder, or partner, officer, director or
controlling person of such other Stockholder in connection with investigating
or defending any such loss, claim, damage, liability or action if it is
judicially determined in a final, non-appealable decision that there was such
a Violation; PROVIDED, HOWEVER, that the indemnity agreement contained in
this Section 2.6(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such
6
settlement is effected without the consent of the Stockholder, which consent
shall not be unreasonably withheld; PROVIDED FURTHER, that in no event shall
any indemnity under this Section 2.6 exceed the net proceeds from the
offering received by such Stockholder.
(c) Promptly after receipt by an indemnified party under
this Section 2.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 2.6,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to both the indemnifying party and the
indemnified party; PROVIDED, HOWEVER, that an indemnified party shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if materially prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 2.6, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 2.6.
(d) If the indemnification provided for in this Section 2.6
is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
Violation(s) that resulted in such loss, claim, damage or liability, as well
as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by a
court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
PROVIDED, that in no event shall any contribution by a Stockholder hereunder
exceed the net proceeds from the offering received by such Stockholder.
(e) The obligations of Parent and Stockholders under this
Section 2.6 shall survive completion of any offering of Registrable Shares in
a Registration Statement and the termination of this agreement. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
7
2.7 RULE 144 REPORTING. With a view to making available to the
Stockholders the benefits of certain rules and regulations of the SEC which
may permit the sale of the Registrable Shares to the public without
registration, Parent agrees to:
(a) Make and keep public information available, as those
terms are understood and defined in SEC Rule 144 or any similar or analogous
rule promulgated under the Securities Act, at all times;
(b) File with the SEC, in a timely manner, all reports and
other documents required of Parent under the Exchange Act; and
(c) So long as a Stockholder owns any Registrable Shares,
furnish to such Stockholder forthwith upon request: a written statement by
Parent as to its compliance with the reporting requirements of said Rule 144
of the Securities Act, and of the Exchange Act; a copy of the most recent
annual or quarterly report of Parent; and such other reports and documents as
a Stockholder may reasonably request in availing itself of any rule or
regulation of the SEC allowing it to sell any such securities without
registration.
2.8 CESSATION OF OFFERING. Upon receipt of any notice from Parent
of the happening of any event of the kind described in Section 2.4(e) (and
subject to the limitations set forth herein), each Stockholder shall
immediately discontinue disposition of the Registrable Shares pursuant to the
Registration Statement covering such shares until the Stockholders' receipt
of the copies of the supplemented or amended prospectus contemplated by
Section 2.4(e), and, if so directed by Parent, deliver to Parent all copies
of the prospectus covering such Registrable Shares in such Stockholder's
possession at the time of receipt of such notice.
2.9 NO MORE FAVORABLE RIGHTS. Parent has not and shall not grant to
any third party any registration rights more favorable than or inconsistent
with any of those contained herein, so long as any of the registration rights
under this Agreement remains in effect except (i) to the extent such more
favorable rights have been modified or waived in connection with the
transactions contemplated by the Reorganization Agreement and (ii) to the
extent the rights issued under the Registration Rights Agreement entered into
in connection with the acquisition of Net Effect Systems, Inc. may be deemed
to be more favorable than or inconsistent with any of those contained herein.
SECTION 3. MISCELLANEOUS
3.1 GOVERNING LAW. This Agreement shall be governed by and
construed under the internal laws of the State of Delaware (without giving
effect to principles of conflicts of laws).
3.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any
Stockholder and the closing of the transactions contemplated hereby. All
statements as to factual matters contained in any certificate or other
instrument delivered by or on behalf of Parent pursuant hereto in connection
with the transactions contemplated hereby shall be deemed to be
representations and warranties by Parent hereunder solely as of the date of
such certificate or instrument.
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3.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Shares from time to time;
PROVIDED, HOWEVER, that prior to the receipt by Parent of adequate written
notice of the transfer of any Registrable Shares specifying the full name and
address of the transferee, Parent may deem and treat the person listed as the
holder of such shares in its records as the absolute owner and holder of such
shares for all purposes, including the payment of dividends or any redemption
price. The obligations contained in this Agreement shall be assumed by any
successor in interest of Parent.
3.4 ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound in any manner by any
representations, warranties, covenants and agreements except as specifically
set forth herein.
3.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
3.6 AMENDMENT AND WAIVER. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of Parent and the Stockholders owning of record at least
seventy-five percent (75%) of the Registrable Shares then outstanding. Any
amendment or waiver effected in accordance with this Section 3.6 shall be
binding upon each Stockholder and Parent; PROVIDED, HOWEVER, that no such
amendment or waiver shall disproportionately affect a Stockholder adversely
without such Stockholder's consent. By acceptance of any benefits under this
Agreement, the Stockholders hereby agree to be bound by the provisions
hereunder.
3.7 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery
to the party to be notified, (b) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall
be sent to the party to be notified at the address as set forth on the
signature pages hereof or Exhibit A hereto or at such other address as such
party may designate by ten (10) days advance written notice to the other
parties hereto.
3.8 ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party
in such dispute shall be entitled to recover from the losing party all fees,
costs and expenses of enforcing any right of such prevailing party under or
with respect to this Agreement, including without limitation, such
9
reasonable fees and expenses of attorneys and accountants, which shall
include, without limitation, all fees, costs and expenses of appeals.
3.9 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
3.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10
This Registration Rights Agreement has been executed and delivered as
of the date first stated above.
ASK JEEVES, INC.
By:
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Name:
--------------------------------------
Title:
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SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
STOCKHOLDER:
By:
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Name:
--------------------------------------
Title:
-------------------------------------
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
EXHIBIT A
STOCKHOLDERS
EXHIBIT L
FORM OF LEGAL OPINION OF XXXXX, XXXXXXX & XXXXXXXXX, LLP
EXHIBIT M
FORM OF LEGAL OPINION OF XXXXXX GODWARD LLP
EXHIBIT N
FORM OF TAX REPRESENTATION LETTERS
