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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
GO2NET, INC.
SILICON ACQUISITION CORP.
SILICON INVESTOR, INC.
AND
CERTAIN SHAREHOLDERS OF
SILICON INVESTOR, INC.
DATED
APRIL 22, 1998
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TABLE OF CONTENTS
ARTICLE I
THE MERGER...........................................................1
1.1 THE MERGER..................................................2
1.2 EFFECTIVE TIME..............................................2
1.3 EFFECT OF THE MERGER........................................2
1.4 CERTIFICATE OF INCORPORATION; BY-LAWS.......................2
1.5 DIRECTORS AND OFFICERS......................................3
1.6 ADDITIONAL ACTIONS..........................................3
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES..................................3
2.1 MERGER CONSIDERATION........................................3
2.2 CONVERSION OF SHARES........................................3
2.3 EXCHANGE OF CERTIFICATES....................................5
2.4 NO FRACTIONAL SECURITIES....................................6
2.5 STOCK TRANSFER BOOKS........................................6
2.6 NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK................6
2.7 ADJUSTMENT EVENT............................................6
2.8 ESCROW......................................................6
2.9 TAX CONSEQUENCES............................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
PRINCIPAL SHAREHOLDERS...............................................7
3.1 CORPORATE ORGANIZATION......................................7
3.2 AUTHORIZATION...............................................8
3.3 CONSENTS AND APPROVALS; NO VIOLATIONS.......................8
3.4 CAPITALIZATION..............................................9
3.5 FINANCIAL STATEMENTS........................................9
3.6 ABSENCE OF UNDISCLOSED LIABILITIES.........................10
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.......................10
3.8 LEGAL PROCEEDINGS, ETC.....................................10
3.9 TAXES......................................................11
3.10 TITLE TO PROPERTIES AND RELATED MATTERS....................12
3.11 INTELLECTUAL PROPERTY; PROPRIETARY RIGHTS;
EMPLOYEE RESTRICTIONS......................................13
3.12 CONTRACTS..................................................15
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3.13 EMPLOYEES; EMPLOYEE BENEFITS...............................16
3.14 COMPLIANCE WITH APPLICABLE LAW.............................18
3.15 ABILITY TO CONDUCT THE BUSINESS............................19
3.16 MAJOR CUSTOMERS............................................19
3.17 CONSULTANTS, SALES REPRESENTATIVES AND OTHER AGENTS........19
3.18 ACCOUNTS RECEIVABLE........................................19
3.19 INSURANCE..................................................20
3.20 BANK ACCOUNTS; POWERS OF ATTORNEY..........................20
3.21 MINUTE BOOKS, ETC..........................................20
3.22 RELATED PERSON INDEBTEDNESS AND CONTRACTS..................20
3.23 BROKERS; PAYMENTS..........................................20
3.24 COMPANY ACTION.............................................21
3.25 INFORMATION IN PROXY STATEMENT.............................21
3.26 POOLING OF INTERESTS.......................................21
3.27 DISCLOSURE.................................................21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL
SHAREHOLDERS........................................................21
4.1 AUTHORIZATION ETC..........................................21
4.2 PARENT COMMON STOCK........................................22
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND
ACQUISITION.........................................................24
5.1 CORPORATE ORGANIZATION.....................................24
5.2 AUTHORIZATION..............................................25
5.3 CONSENTS AND APPROVALS; NO VIOLATIONS......................25
5.4 CAPITALIZATION.............................................26
5.5 SEC REPORTS AND FINANCIAL STATEMENTS.......................27
5.6 ABSENCE OF CERTAIN CHANGES.................................28
5.7 LITIGATION.................................................28
5.8 COMPLIANCE WITH APPLICABLE LAW.............................29
5.9 INFORMATION IN PROXY STATEMENT.............................29
5.10 DISCLOSURE.................................................29
5.11 TAX TREATMENT OF MERGER....................................29
5.12 POOLING OF INTERESTS.......................................29
5.13 INTELLECTUAL PROPERTY; PROPRIETARY RIGHTS;
EMPLOYEE RESTRICTIONS......................................29
5.14 CONTRACTS..................................................30
5.15 RELATED PERSON INDEBTEDNESS AND CONTRACTS .................31
5.16 BROKERS FEES...............................................31
5.17 PARENT ACTION..............................................32
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5.18 TRADING BY AFFILIATES......................................32
ARTICLE VI
CONDUCT OF BUSINESS OF THE COMPANY AND THE PARENT PRIOR
TO THE EFFECTIVE TIME...............................................32
6.1 CONDUCT OF BUSINESS OF THE COMPANY.........................32
6.2 CONDUCT OF BUSINESS OF THE PARENT..........................33
6.3 CONDUCT OF BUSINESS OF ACQUISITION.........................34
6.4 OTHER NEGOTIATIONS.........................................34
ARTICLE VII
ADDITIONAL AGREEMENTS...............................................35
7.1 ACCESS TO PROPERTIES AND RECORDS...........................35
7.2 STOCKHOLDER APPROVAL.......................................35
7.3 AFFILIATES' LETTERS........................................36
7.4 REASONABLE EFFORTS; ETC....................................36
7.5 MATERIAL EVENTS............................................36
7.6 POOLING OF INTERESTS.......................................36
7.7 FEES AND EXPENSES; ACCOUNTS PAYABLE........................36
7.8 EMPLOYEES..................................................37
7.9 NASDAQ NATIONAL MARKET LISTING.............................37
7.10 TAX TREATMENT..............................................37
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE PARENT AND
ACQUISITION.........................................................38
8.1 REPRESENTATIONS AND WARRANTIES TRUE........................38
8.2 PERFORMANCE................................................38
8.3 AUTHORIZATION OF MERGER....................................38
8.4 AFFILIATES LETTERS.........................................38
8.5 POOLING OF INTERESTS.......................................39
8.6 ABSENCE OF LITIGATION......................................39
8.7 CONSENTS...................................................39
8.8 ADDITIONAL AGREEMENTS......................................39
8.9 OPINION OF COMPANY COUNSEL.................................40
8.10 DELIVERY OF CERTIFICATES FOR CANCELLATION..................40
8.11 APPRAISAL RIGHTS...........................................40
8.12 CERTIFICATE OF MERGER......................................40
8.13 PAYMENT OF INDEBTEDNESS....................................40
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ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND
THE PRINCIPAL SHAREHOLDERS..........................................40
9.1 REPRESENTATIONS AND WARRANTIES TRUE........................40
9.2 PERFORMANCE................................................41
9.3 ABSENCE OF LITIGATION......................................41
9.4 CONSENTS...................................................41
9.5 ADDITIONAL AGREEMENTS......................................41
9.6 OPINION OF XXXXXXXX, XXXXXXX & XXXXXXX.....................41
9.7 TAX OPINION................................................41
9.8 CERTIFICATE OF MERGER......................................42
9.9 SHARES OF PARENT COMMON STOCK..............................42
ARTICLE X
TERMINATION.........................................................42
10.1 TERMINATION................................................42
10.2 EFFECT OF TERMINATION......................................43
ARTICLE XI
INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND
WARRANTIES..........................................................43
11.1 INDEMNITY OBLIGATIONS OF THE HOLDERS.......................43
11.2 APPOINTMENT OF REPRESENTATIVE..............................43
11.3 NOTIFICATION OF CLAIMS.....................................44
11.4 DURATION...................................................45
11.5 ESCROW.....................................................45
11.6 NO CONTRIBUTION............................................46
ARTICLE XII
REGISTRATION RIGHTS.................................................46
12.1 REGISTRABLE SHARES.........................................46
12.2 REQUIRED REGISTRATION......................................46
12.3 EFFECTIVENESS; SUSPENSION RIGHT............................46
12.4 PIGGYBACK REGISTRATION.....................................47
12.5 EXPENSES...................................................48
12.6 INDEMNIFICATION............................................48
12.7 PROCEDURES FOR SALE OF SHARES UNDER REGISTRATION
STATEMENT..................................................50
12.8 TRANSFERABILITY OF REGISTRATION RIGHTS.....................51
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ARTICLE XIII
MISCELLANEOUS PROVISIONS............................................51
13.1 AMENDMENT..................................................51
13.2 WAIVER OF COMPLIANCE.......................................51
13.3 NOTICES....................................................51
13.4 ASSIGNMENT.................................................53
13.5 NO THIRD PARTY BENEFICIARIES...............................53
13.6 PUBLIC ANNOUNCEMENTS.......................................53
13.7 COUNTERPARTS...............................................53
13.8 HEADINGS...................................................53
13.9 ENTIRE AGREEMENT...........................................53
13.11 GOVERNING LAW..............................................54
EXHIBITS
Exhibit A Silicon Investor Voting Agreement
Exhibit B go2net Voting Agreement
Exhibit C Certificate of Merger
Exhibit D Form of Letter of Transmittal
Exhibit E Escrow Agreement
Exhibit F Form of Affiliate Letter
Exhibit G Form of Employment and Non-Competition Agreement
Exhibit H Form of Stock Option Agreement
Exhibit I Opinion of Venture Law Group
Exhibit J Opinion of Xxxxxxxx, Xxxxxxx & Xxxxxxx
Exhibit K Tax Opinion of Venture Law Group
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated April 22, 1998 by and among go2net,
Inc., a corporation organized under the laws of the State of Delaware (the
"Parent"), Silicon Acquisition Corp., a corporation organized under the laws of
the State of Delaware and a wholly-owned subsidiary of the Parent
("Acquisition"), Silicon Investor, Inc., a corporation organized under the laws
of the State of Delaware (the "Company"), and certain shareholders of the
Company, each of whom is listed on the signature page hereto (each a "Principal
Shareholder" and, collectively, the "Principal Shareholders").
WHEREAS, the respective Boards of Directors of the Parent, Acquisition
and the Company have approved the merger of Acquisition with and into the
Company (the "Merger"), pursuant to which the Company will be the surviving
corporation and the shareholders of the Company and all holders of options to
purchase capital stock of the Company (collectively, the "Holders") will be
entitled to receive the consideration provided for in this Agreement, all upon
the terms and subject to the conditions set forth herein;
WHEREAS, 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") and be accounted for as a pooling of interests
under the requirements of Opinion No. 16 (Business Combinations) of the
Accounting Principles Board of the American Institute of Certified Public
Accountants;
WHEREAS, as a condition and inducement to Parent's willingness to enter
into this Agreement, the Principal Shareholders and certain other shareholders
of the Company have, concurrently with the execution of this Agreement, executed
and delivered a Voting Agreement in the form attached hereto as EXHIBIT A,
pursuant to which the Principal Shareholders and such other shareholders have
agreed to vote their shares of the Company's capital stock in favor of the
Merger and to grant Parent irrevocable proxies to vote such shares; and
WHEREAS, as a condition and inducement to the Company's willingness to
enter into this Agreement, certain affiliates of Parent have, concurrently with
the execution of this Agreement, executed and delivered a Voting Agreement in
the form attached hereto as EXHIBIT B, pursuant to which such affiliates have
agreed to vote their shares of Parent's Common Stock in favor of the Merger and
to grant the Company irrevocable proxies to vote such shares.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements set forth herein, and intending to be
legally bound hereby, the parties hereby agree as follows:
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ARTICLE I
THE MERGER
1.1 THE MERGER. (a) At the Effective Time (as defined in
Section 1.2), and subject to and upon the terms and conditions of this Agreement
and the Delaware General Corporation Law (the "DGCL"), Acquisition shall be
merged with and into the Company, the separate corporate existence of
Acquisition shall cease, and the Company shall continue as the surviving
corporation. The Company as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving Corporation."
(b) CLOSING. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Article X and subject to the satisfaction or waiver of the conditions set forth
in Articles VIII and IX, the consummation of the Merger (the "Closing") will
take place as promptly as practicable (and in any event within two business
days) after satisfaction or waiver of the conditions set forth in Articles VIII
and IX, at the offices of Xxxxxxxx, Xxxxxxx & Xxxxxxx, A Professional
Corporation, 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx, unless another date,
time or place is agreed to in writing by the Company and the Parent. The date of
such Closing is referred to herein as the "Closing Date".
1.2 EFFECTIVE TIME. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Articles VIII and IX, the
parties hereto shall cause the Merger to be consummated by filing a certificate
of merger as contemplated by the DGCL in the form of EXHIBIT C hereto (the
"Certificate of Merger"), together with any required related certificates, with
the Secretary of State of the State of Delaware, in such form as required by,
and executed in accordance with the relevant provisions of, the DGCL (the time
of such filing being the "Effective Time").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Acquisition shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Acquisition shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 CERTIFICATE OF INCORPORATION; BY-LAWS.
(a) CERTIFICATE OF INCORPORATION. Unless otherwise determined
by the Parent prior to the Effective Time, at the Effective Time, the
Certificate of Incorporation of Acquisition, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended in accordance with the DGCL and such
Certificate of Incorporation.
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(b) BY-LAWS. Unless otherwise determined by the Parent prior
to the Effective Time, the By-Laws of Acquisition, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation
until thereafter amended in accordance with the DGCL, the Certificate of
Incorporation of the Surviving Corporation and such By-Laws.
1.5 DIRECTORS AND OFFICERS. The directors of Acquisition
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Acquisition immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
1.6 ADDITIONAL ACTIONS. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other acts or things are necessary or
desirable to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, its right, title or interest in or to any of the rights, properties
or assets of Acquisition or the Company acquired or to be acquired by reason of,
or as a result of, the Merger, or otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors shall
be authorized to execute and deliver, in the name and on behalf of Acquisition
or the Company, all such deeds, bills of sale, assignments and assurances and to
do, in the name and on behalf of Acquisition or the Company, all such other acts
and things necessary or desirable to vest, perfect or confirm any and all right,
title or interest in, to or under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this Agreement.
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES
2.1 MERGER CONSIDERATION. Except as set forth in Section 2.2(e)
hereof, the consideration payable in the Merger to holders of shares of the
Company's Common Stock, par value $.00001 per share ("Company Common Stock"),
shall consist solely of shares of the Common Stock, par value $.01 per share, of
the Parent ("Parent Common Stock"), such shares of Parent Common Stock to be
issuable at the Closing in accordance with the terms of this Agreement.
2.2 CONVERSION OF SHARES.
(a) CONVERSION OF SHARES. Each share of Company Common Stock
issued and outstanding as of the Effective Time (other than shares owned by
holders who have properly exercised their rights of appraisal within the meaning
of Section 262 of the DGCL ("Dissenting Shares")) shall, by virtue of the Merger
and without any action on the part of the holder thereof, automatically be
converted into that number of shares of Parent Common Stock as shall be
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obtained by dividing (A) 1,250,000 (the "Merger Consideration") by (B) the
number of Fully Diluted Shares (as hereinafter defined), with the resulting
quotient (carried to two decimal places) being referred to herein as the
"Exchange Ratio." "Fully Diluted Shares" shall be equal to the total number of
outstanding shares of Company Common Stock calculated on a fully diluted, fully
converted basis as though all convertible debt and equity securities and options
(whether vested or unvested) and warrants had been converted or exercised. The
Exchange Ratio shall not change as a result of fluctuations in the market price
of Parent Common Stock between the date of this Agreement and the Effective
Time. The aggregate number of shares of Parent Common Stock issued pursuant to
this Section 2.2(a) shall be referred to in this Agreement as the "Merger
Shares."
(b) TREASURY SHARES. Each share of Company Common Stock held
in the Company's treasury as of the Effective Time, if any, shall, by virtue of
the Merger, be canceled without payment of any consideration therefor.
(c) STOCK OPTIONS. At the Effective Time, the outstanding
options to purchase an aggregate of 100,000 shares of Company Common Stock (each
a "Stock Option") granted under the Company's 1996 Stock Plan (the "Company
Stock Option Plan"), whether vested or unvested, shall be deemed assumed by the
Parent and deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Stock Option prior to the Effective
Time (including terms and conditions relating to such Stock Option's term,
exercisability, vesting schedule and status as an "incentive stock option" under
Section 422 of the Code), the number (rounded down to the nearest whole number)
of shares of Parent Common Stock equal to the aggregate of that number of shares
of Parent Common Stock (based on the Exchange Ratio) as the holder of such Stock
Option would have been entitled to receive pursuant to the Merger had such
holder exercised such Option in full immediately prior to the Effective Time
(not taking into account whether or not such Option was in fact exercisable).
The exercise price for such Stock Options shall be the price per share equal to
(x) the aggregate exercise price for Company Common Stock otherwise purchasable
pursuant to such Stock Option divided by (y) the number of shares of Parent
Common Stock deemed purchasable pursuant to such Stock Option (the exercise
price per share, so determined, being rounded up to the nearest full cent). No
payment shall be made for fractional shares. The aggregate number of shares of
Parent Common Stock issuable upon the exercise of Options assumed by Parent
pursuant to this Section 2.2(c) shall be referred to in this Agreement as the
"Option Shares." Any adjustment to an incentive stock option made under this
Section 2.2(c) shall comply with Section 424(a) of the Code.
(d) ACQUISITION SHARES. Each share of common stock, par value
$0.01 per share, of Acquisition issued and outstanding at the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, automatically be converted into one fully paid and nonassessable share
of common stock of the Surviving Corporation, as such shares of common stock are
constituted immediately following the Effective Time.
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(e) DISSENTING SHARES. Any Dissenting Shares shall be
converted into the right to receive from the Surviving Corporation such
consideration as may be determined to be due with respect to each such
Dissenting Share pursuant to Section 262 of the DGCL; PROVIDED, HOWEVER, Shares
that are Dissenting Shares at the Effective Time of the Merger and are held by a
holder who shall, after the Effective Time of the Merger, withdraw his demand
for appraisal or lose his right of appraisal as provided in the Section 262 of
the DGCL, shall be deemed to be converted, as of the Effective Time of the
Merger, into the right to receive the Merger Shares in accordance with the
procedures specified in Section 2.3. The Company shall give Parent (i) prompt
notice of any written demands for appraisal, withdrawals of demands for
appraisal and any other instruments served pursuant to Section 262 of the DGCL
received by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under Section 262 of the DGCL.
The Company will not voluntarily make any payment with respect to any demands
for appraisal and will not, except with the prior written consent of Parent,
settle or offer to settle any such demands. It is understood and agreed that the
obligation to make any payment under Section 262 of the DGCL shall be
exclusively that of the Surviving Corporation and that Parent shall be under no
obligation to perform and discharge any such obligation or to reimburse or make
any contribution to the capital of the Surviving Corporation to enable it to
perform and discharge any such obligation.
2.3 EXCHANGE OF CERTIFICATES.
(a) At the Closing, certificates (the "Certificates")
representing all of the issued and outstanding shares of Company Common Stock
shall be surrendered for cancellation and termination in the Merger. At the
Effective Time, each Certificate shall be cancelled in exchange for a
certificate representing the number of whole shares of Parent Common Stock
(other than the Escrow Shares, as defined below) into which the Company Common
Stock evidenced by the Certificates so surrendered shall have been converted
pursuant to Section 2.2(a) of this Agreement. The surrender of Certificates
shall be accompanied by duly completed and executed Letters of Transmittal in
the form of EXHIBIT D attached hereto. Until surrendered, each outstanding
Certificate which prior to the Effective Time represented shares of Company
Common Stock shall be deemed for all corporate purposes to evidence ownership of
the number of whole shares of Parent Common Stock into which the shares of
Company Common Stock have been converted but shall, subject to applicable
appraisal rights under the DGCL and Section 2.2(e), have no other rights.
Subject to appraisal rights under the DGCL and Section 2.2(e), from and after
the Effective Time, the holders of shares of Company Common Stock shall cease to
have any rights in respect of such shares and their rights shall be solely in
respect of the Parent Common Stock into which such shares of Company Common
Stock have been converted.
(b) If any shares of Parent Common Stock are to be issued in
the name of a person other than the person in whose name the Certificate(s)
surrendered in exchange therefor is registered, it shall be a condition to the
issuance of such shares that (i) the Certificate(s) so surrendered shall be
transferable, and shall be properly assigned, endorsed or accompanied by
appropriate stock powers, (ii) such transfer shall otherwise be proper and (iii)
the person
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requesting such transfer shall pay Parent, or its exchange agent, any transfer
or other taxes payable by reason of the foregoing or establish to the
satisfaction of Parent that such taxes have been paid or are not required to be
paid. Notwithstanding the foregoing, neither Parent nor the Company shall be
liable to a holder of shares of Company Common Stock for shares of Parent or the
Company issuable to such holder pursuant to the provisions of Section 2.2(a) of
this Agreement that are delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(c) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, Parent shall issue in
exchange for such lost, stolen or destroyed Certificate the shares of Parent
Common Stock issuable in exchange therefor pursuant to the provisions of Section
2.2(a) of this Agreement. The Board of Directors of Parent may in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed Certificate to provide to Parent an indemnity
agreement against any claim that may be made against Parent with respect to the
Certificate alleged to have been lost, stolen or destroyed.
2.4 NO FRACTIONAL SECURITIES. No fractional shares of Parent
Common Stock shall be issuable by the Parent upon the conversion of shares of
Company Common Stock in the Merger pursuant to Section 2.2(a) hereof. In lieu of
any such fractional shares, each holder of Company Common Stock who would
otherwise have been entitled to receive a fraction of a share of Parent Common
Stock shall be entitled to receive instead an amount in cash equal to such
fraction multiplied by the Closing Market Price. For purposes of this Agreement,
the term "Closing Market Price" shall mean the average of the last quoted sale
price for shares of Parent Common Stock on The Nasdaq SmallCap Market for each
of the ten trading days preceding the Effective Time.
2.5 STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of Company Common Stock thereafter on the records of
the Company.
2.6 NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK. The Merger
Shares delivered upon the surrender for exchange of shares of Company Common
Stock in accordance with the terms hereof shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.
2.7 ADJUSTMENT EVENT. If, between the date hereof and the
Effective Time, the issued and outstanding shares of Parent Common Stock shall
have been combined, split, reclassified or otherwise changed into a different
number of shares or a different class of shares, an appropriate
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adjustment to the Exchange Ratio shall be made to fully reflect such change in
such manner as is reasonably acceptable to the Parent and the Company.
2.8 ESCROW. At the Effective Time, Parent will deposit in escrow
certificates representing seven and one-half percent (7 1/2%) of the Merger
Shares (which shall reduce on a pro rata basis the Merger Shares otherwise
issuable to the Holders of Company Common Stock under Section 2.2(a)) registered
in the name of U.S. Trust National Association, as Escrow Agent, and instruments
or other documentation representing Stock Options to purchase seven and one-half
percent (7 1/2%) of the Option Shares issuable to each Holder under Section
2.2(c) (collectively, the "Escrow Shares"). The Escrow Shares shall be held as
security for the indemnification obligations under Article XI pursuant to the
provisions of an Escrow Agreement (the "Escrow Agreement ") in the form of
EXHIBIT E attached hereto.
2.9 TAX CONSEQUENCES. For Federal income tax purposes, the Merger
is intended to constitute a reorganization within the meaning of Section 368(a)
of the Code, and that this Agreement shall constitute a "plan of reorganization"
within the meaning of Section 368(a) of the Code.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE PRINCIPAL SHAREHOLDERS
The Company and each of the Principal Shareholders jointly and
severally represent and warrant to the Parent and Acquisition as set forth
below, subject to the exceptions set forth in the disclosure schedules attached
hereto (the "Disclosure Schedules"), the section numbers and letters of which
correspond to the section and subsection numbers and letters of this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, any
information disclosed in one section of the Disclosure Schedules shall, should
the existence of the information be relevant to any other section of the
Disclosure Schedules, be deemed to be disclosed in all sections of the
Disclosure Schedules, but only to the extent that the relevance of such
information to such other section is reasonably apparent in the section of the
Disclosure Schedules on which such information is disclosed. The disclosure of
any information shall not be deemed to constitute an acknowledgment that such
information is required to be disclosed in connection with the representations
and warranties made by the Company in this Agreement or that it is material, nor
shall such information be deemed to establish a standard of materiality
3.1 CORPORATE ORGANIZATION. (a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has no Subsidiaries (as that term is hereinafter defined).
The Company has all requisite corporate power and authority to own, operate and
lease the properties and assets it now owns, operates and leases and to carry on
its business as presently conducted. The Company is duly qualified to transact
business as a foreign corporation and in good standing in the jurisdictions set
forth in
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Schedule 3.1, which are the only jurisdictions where such qualification is
required by reason of the nature of the properties and assets currently owned,
operated or leased by the Company or the business currently conducted by it,
except for such jurisdictions where the failure to be so qualified would not
have a SI Material Adverse Effect (as defined below). The Company has previously
delivered to the Parent complete and correct copies of its Certificate of
Incorporation (certified by the secretary of state of the jurisdiction in which
it was formed as of a recent date) and its By-Laws (certified by the Secretary
of the Company as of a recent date). Except as set forth in Schedule 3.1,
neither the Certificate of Incorporation nor the By-Laws of the Company have
been amended since the respective dates of certification thereof, nor has any
action been taken for the purpose of effecting any amendment of such
instruments. The term "SI Material Adverse Effect" means, for purposes of this
Agreement, any change, event or effect that is, or that would be, materially
adverse to the business, operations, assets, liabilities, financial condition or
results of operations of the Company.
3.2 AUTHORIZATION. The Company has full corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly approved by
the Board of Directors and shareholders of the Company, and no other corporate
action on the part of the Company is necessary to approve and authorize the
execution and delivery of this Agreement or (subject to the filing of the
Certificate of Merger pursuant to the DGCL) the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding agreement of the Company,
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors,
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in law or in equity.
3.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Subject to the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware and compliance with applicable federal and state securities laws, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not: (i) violate or conflict with any
provision of the Certificate of Incorporation or By-Laws of the Company, (ii)
breach, violate or constitute an event of default (or an event which with the
lapse of time or the giving of notice or both would constitute an event of
default) under, give rise to any right of termination, cancellation,
modification or acceleration under, or require any consent or the giving of any
notice under, any note, bond, indenture, mortgage, security agreement, lease,
license, franchise, permit, agreement or other instrument or obligation to which
the Company is a party, or by which the Company or any of its properties or
assets may be bound, or result in the creation of any lien, claim or encumbrance
or other right of any third party of any kind whatsoever upon the properties or
assets of the Company pursuant to the terms of any such instrument or
obligation, other than any breach, violation, default, termination,
cancellation, modification or acceleration which would not have a SI Material
Adverse Effect, (iii) violate or conflict with any law, statute,
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15
ordinance, code, rule, regulation, judgment, order, writ, injunction, decree or
other instrument of any Federal, state, local or foreign court or governmental
or regulatory body, agency or authority applicable to the Company or by which
any of its properties or assets may be bound, except for such violations and
conflicts which would not have a SI Material Adverse Effect or result in a fine
or penalty in excess of $10,000 individually or in the aggregate or (iv)
require, on the part of the Company, any filing or registration with, or permit,
license, exemption, consent, authorization or approval of, or the giving of any
notice to, any governmental or regulatory body, agency or authority, other than
any filing, registration, permit, license, exemption, consent, authorization,
approval or notice which if not obtained or made would not have a SI Material
Adverse Effect or result in a fine or penalty in excess of $10,000 individually
or in the aggregate. Without limiting the generality of clause (ii) above
neither the Company nor any of the Holders is a party to any agreement,
arrangement or understanding which contemplates the sale of the business of the
Company, in whole or in part, whether by means of a sale of shares, sale of
assets, merger, consolidation or otherwise.
3.4 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of Company Common Stock, of which 10,353,992 shares are issued
and outstanding. Schedule 3.4(a) sets forth a complete and correct list of the
record and beneficial ownership of the issued and outstanding shares of Company
Common Stock. All of the issued and outstanding shares of Company Common Stock
were duly authorized and validly issued and are fully paid and nonassessable,
and were not issued in violation of any preemptive rights or Federal or state
securities laws. Except as disclosed in Schedule 3.4(a) hereto, the Company has
never repurchased or redeemed any shares of its capital stock, and there are no
amounts owed or which may be owed to any person by the Company as a result of
any repurchase or redemption of shares of its capital stock. Except as disclosed
in Schedule 3.4(a) hereto, there are no agreements, arrangements or
understandings to which the Company is a party or by which it is bound to redeem
or repurchase any shares of its capital stock. Except as set forth in Schedule
3.4(a), there are no outstanding options, warrants or other rights to purchase,
or any securities convertible into or exchangeable for, shares of the capital
stock of the Company, and there are no agreements, arrangements or
understandings to which the Company is a party or by which it is bound pursuant
to which the Company is or may be required to issue additional shares of its
capital stock.
(b) The Company does not own, directly or indirectly, any
equity securities, or options, warrants or other rights to acquire equity
securities, or securities convertible into or exchangeable for equity
securities, of any other corporation, or any partnership interest in any general
or limited partnership or unincorporated joint venture (a "Subsidiary").
3.5 FINANCIAL STATEMENTS. Attached hereto as Schedule 3.5 are the
balance sheets of the Company as of March 31, 1998, December 31, 1997, December
31, 1996, and December 31, 1995 and the statements of revenues collected and
expenses paid for the fiscal years or periods
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16
then ended (hereinafter collectively referred to as the "Financial Statements").
The Financial Statements (i) have been prepared from the books and records of
the Company, (ii) have been prepared on a cash basis during the periods covered
thereby and (iii) present fairly in all material respects the financial
condition and results of operations of the Company as at the dates, and for the
periods, stated therein, except that the Financial Statements are subject to
normal year-end adjustments which will not be individually or in the aggregate
material in amount or effect and do not include footnotes.
3.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except (i) for liabilities
and expenses arising under the agreements set forth in Schedule 3.6, and (ii)
for obligations incurred since March 31, 1998 in the ordinary course of
business, which are not individually or in the aggregate, material in amount,
the Company does not have any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 3.7, since March 31, 1998, the Company has carried on its business in
the ordinary course and consistent with past practice. Except as set forth on
Schedule 3.7 hereto, since March 31, 1998, the Company has not: (i) incurred any
material obligation or liability (whether absolute, accrued, contingent or
otherwise) except in the ordinary course of business and consistent with past
practice; (ii) experienced any SI Material Adverse Effect; (iii) made any change
in any accounting principle or practice or in its methods of applying any such
principle or practice; (iv) suffered any material damage, destruction or loss,
whether or not covered by insurance, affecting its properties, assets or
business; (v) mortgaged, pledged or subjected to any lien, charge or other
encumbrance, or granted to third parties any rights in, any of its assets,
tangible or intangible; (vi) sold or transferred any of its assets, except in
the ordinary course of business and consistent with past practice, or canceled
or compromised any debts or waived any claims or rights of a material nature;
(vii) issued any additional shares of capital stock or any rights, options or
warrants to purchase, or securities convertible into or exchangeable for, shares
of its capital stock other than shares of Company Common Stock issued upon
exercise of employee stock options; (viii) declared or paid any dividends on or
made any distributions (however characterized) in respect of shares of its
capital stock; (ix) repurchased or redeemed any shares of its capital stock; (x)
granted any general or specific increase in the compensation payable or to
become payable to any of their Employees (as that term is hereinafter defined)
or any bonus or service award or other like benefit, or instituted, increased,
augmented or improved any Benefit Plan (as that term is hereinafter defined); or
(xi) entered into any agreement to do any of the foregoing.
3.8 LEGAL PROCEEDINGS, ETC. Except as set forth in Schedule 3.8
hereto, there are no suits, actions, claims, proceedings (including, without
limitation, arbitral or administrative proceedings) or investigations pending
or, to the best knowledge of the Company or any Principal Shareholder,
threatened against the Company or its properties, assets or business or, to the
best knowledge of the Company or any Principal Shareholder, pending or
threatened against any of the officers, directors, employees, agents or
consultants of the Company in connection
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17
with the business of the Company. There are no such suits, actions, claims,
proceedings or investigations pending, or, to the best knowledge of the Company
or any Principal Shareholder, threatened challenging the validity or propriety
of the transactions contemplated by this Agreement. There is no judgment, order,
injunction, decree or award (whether issued by a court, an arbitrator or an
administrative agency) to which the Company is a party, or involving the
Company's properties, assets or business, which is unsatisfied or which requires
continuing compliance therewith by the Company.
3.9 TAXES.
(a) Except as set forth in Schedule 3.9, the Company has duly
and timely filed, or will duly and in a timely manner file, all material Tax
returns and other filings in respect of Taxes (as that term is hereinafter
defined) required to be filed by it or which are required to be filed by it on
or prior to the Effective Time, and have in a timely manner paid (or will in a
timely manner pay) all material Taxes which are (or will be) due for all periods
ending on or before the Effective Time, whether or not shown on such returns.
All such Tax returns have been, or will be when filed, accurately and completely
prepared in all material respects in compliance with all laws, rules and
regulations. The provisions for Taxes payable reflected in the Financial
Statements are adequate under generally accepted accounting principles.
(b) Except as set forth in Schedule 3.9 hereto, there are no
actions or proceedings currently pending or, to the best knowledge of the
Company or any Principal Shareholder, threatened against the Company by any
governmental authority for the assessment or collection of Taxes, no claim for
the assessment or collection of Taxes has been asserted against the Company, and
there are no matters under discussion with any governmental authority regarding
claims for the assessment or collection of Taxes. Any Taxes that have been
claimed or imposed as a result of any examinations of any tax return of the
Company by any governmental authority are being contested in good faith and have
been disclosed in writing to the Parent. Except as set forth in Schedule 3.9,
there are no agreements or applications by the Company for an extension of time
for the assessment or payment of any Taxes nor any waiver of the statute of
limitations in respect of Taxes. There are no Tax liens on any of the assets of
the Company, except for liens for Taxes not yet due or payable that are being
contested in good faith in appropriate proceedings.
(c) For purposes of this Agreement, the terms "Tax" and
"Taxes" shall mean and include any and all United States, state, local, foreign
or other income, sales, use, withholding, employment, payroll, social security,
property taxes and all other taxes of any kind, deficiencies, fees or other
governmental charges, including, without limitation, any installment payment for
taxes and contributions or other amounts determined with respect to compensation
paid to directors, officers, employees or independent contractors from time to
time imposed by or required to be paid to any governmental authority (including
penalties and additions to tax thereon, penalties for failure to file a return
or report, and interest on any of the foregoing).
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(d) There is no agreement, plan or arrangement 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 agreement, plan or arrangement, will, or could reasonably be expected
to, give rise directly or indirectly to the payment of any amount that would not
be deductible pursuant to Section 280G of the Code or that would be subject to
an excise tax under Section 4999 of the Code.
(e) 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 or arrangement and none of them has any liability for Taxes
of any person (other than the Company) under Treasury Regulation 1.1502-6 (or
any similar provision of state, local or foreign law).
(f) The Company has withheld amounts from its employees and
other persons required to be withheld under the tax, social security,
unemployment and other withholding provisions of all federal, state, local and
foreign laws.
3.10 TITLE TO PROPERTIES AND RELATED MATTERS. (a) Except as set
forth on Schedule 3.10(a), the Company has good and valid title to all personal
property, tangible or intangible, which the Company purports to own, including
the properties reflected on the balance sheet at March 31, 1998 (the "Balance
Sheet") or acquired after the date thereof (other than properties and assets
sold or otherwise disposed of in the ordinary course of business and consistent
with past practice since March 31, 1998), free and clear of any claims, liens,
pledges, security interests or encumbrances of any kind whatsoever (other than
(i) purchase money security interests and common law vendor's liens, in each
case for goods purchased on open account in the ordinary course of business and
having a fair market value of less than $5,000 in each individual case), (ii)
liens for Taxes not yet due and payable, and (iii) such imperfections of title
and encumbrances, if any, that are not material in character, amount or extent
and that do not materially detract from the value, or materially interfere with
the use of, the property subject thereto or affected thereby.
(b) The Company does not own any real property or any interest
in real property, except for the leasehold created under the lease referred to
in Schedule 3.10(d).
(c) Schedule 3.10(c) sets forth a complete and correct list of
all equipment, machinery, instruments, vehicles, furniture, fixtures and other
items of personal property currently owned, leased or used by the Company with a
book value as of March 31, 1998, in each case of $5,000 or more. All such
personal property is in satisfactory operating condition (ordinary and
reasonable wear and tear excepted), is physically located in or about one of the
Company's places of business and is owned by the Company or is leased by the
Company under one of the leases set forth in Schedule 3.10(d). Except as
disclosed in Schedule 3.10(c), none of such personal property is subject to any
agreement or commitment for its use by any person other than the Company. The
maintenance and operation of such personal property has been in material
conformance with all applicable laws and regulations. There are no assets leased
by the
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19
Company or used in the business of the Company that are owned, directly or
indirectly, by any Related Person (as that term is hereinafter defined).
(d) Schedule 3.10(d) sets forth a complete and correct list of
all real property and personal property leases to which the Company is a party.
The Company has previously delivered to the Parent complete and correct copies
of each lease (and any amendments or supplements thereto) listed in Schedule
3.10(d). Except as set forth in Schedule 3.10(d), (i) each such lease is valid
and binding and in full force and effect; (ii) neither the Company nor (to the
best knowledge of the Company or any Principal Shareholder) any other party is
in default under any such lease, and no event has occurred which constitutes, or
with the lapse of time or the giving of notice or both would constitute, a
default by the Company or (to the best knowledge of the Company or any Principal
Shareholder) a default by any other party under such lease; (iii) to the best
knowledge of the Company or any Principal Shareholder, there are no disputes or
disagreements between the Company and any other party with respect to any such
lease; and (iv) the lessor under each such lease has consented or been given
notice (or prior to the Closing shall have consented or been given notice),
where such consent or the giving of such notice is necessary, sufficient that
such lease shall remain in full force and effect following the consummation of
the transactions contemplated by this Agreement without requiring modification
in the rights or obligations of the lessee under any such lease.
3.11 INTELLECTUAL PROPERTY; PROPRIETARY RIGHTS; EMPLOYEE
RESTRICTIONS. (a) The Company has disclosed in Schedule 3.11 all registered
copyrights, copyright registrations and copyright applications, trademark
registrations and applications for registration, patents and patent
applications, trademarks, service marks, trade names, or Internet domain names
(collectively, "Intellectual Property Rights") used by the Company in the
Company's business as presently conducted, including all Intellectual Property
Rights used in connection with or contained in all versions of the Company's
World Wide Web sites (including xxxxxxxxxx.xxx, xxxxxxxxxxxxxxx.xxx,
xxx.xxxxxxxxxx.xxx and xxx.xxxxxxxxxxxxxxx.xxx) and all licenses, assignments
and releases of Intellectual Property Rights of others in material works
embodied in its products. All Intellectual Property Rights purported to be owned
by the Company held by any employee, officer or consultant are owned by the
Company by operation of law or have been validly assigned to the Company. The
Intellectual Property Rights are sufficient in all material respects to carry on
the business of the Company as presently conducted. The Company has exclusive
ownership of or license to use all Intellectual Property Rights identified in
Schedule 3.11 or has obtained any licenses, releases or assignments reasonably
necessary to use all third parties' Intellectual Property Rights in works
embodied in its products. The present business activities or products of the
Company do not infringe any Intellectual Property Rights of others. The Company
has not received any notice or other claim from any person asserting that any of
the Company's present activities infringe in any material respect or may
infringe any Intellectual Property Rights of such person.
The Company has the right to use all trade secrets, customer
lists, log files, hardware designs, programming processes, software and other
information required for or
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incident to its products or its business as presently conducted in any material
respect. The Company has taken all reasonable measures to protect and preserve
the security and confidentiality of its trade secrets and other confidential
information. All employees and consultants of the Company involved in the
design, review, evaluation or development of products or Intellectual Property
Rights have executed nondisclosure and assignment of inventions agreements
sufficient to protect the confidentiality of the Company's trade secrets and
other confidential information and to vest in the Company exclusive ownership of
such Intellectual Property Rights. To the knowledge of the Company and the
Principal Shareholders, all trade secrets and other confidential information of
the Company are not part of the public domain or knowledge, nor, to the best
knowledge of the Company and the Principal Shareholders, have they been
misappropriated by any person having an obligation to maintain such trade
secrets or other confidential information in confidence for the Company. To the
knowledge of the Company and the Principal Shareholders, no employee or
consultant of the Company has used any trade secrets or other confidential
information of any other person in the course of their work for the Company.
The Company is the exclusive owner of all right, title and
interest in its Intellectual Property Rights as purported to be owned by the
Company, and to the Company's and the Principal Shareholders' knowledge, such
Intellectual Property Rights are valid and in full force and effect. No
university, government agency (whether federal or state) or other organization
which sponsored research and development conducted by the Company or has any
claim of right to or ownership of or other encumbrance upon the Intellectual
Property Rights of the Company. The Company is not aware of any infringement by
others of its copyrights or other Intellectual Proprietary Rights in any of its
products, technology or services, or any violation of the confidentiality of any
of its proprietary information. To the Company's and the Principal Shareholders'
knowledge, the Company is not making unlawful use of any confidential
information or trade secrets of any past or present employees of the Company.
Neither the Company nor, to the knowledge of the Company and
the Principal Shareholders, any of the Company's employees, have any agreements
or arrangements with former employers of such employees relating to confidential
information or trade secrets of such employers or are bound by any consulting
agreement relating to confidential information or trade secrets of another
entity that are being violated by such persons. The activities of the Company's
employees on behalf of the Company do not violate in any material respects any
agreements or arrangements known to the Company which any such employees have
with former employers or any other entity to whom such employees may have
rendered consulting services. For the purposes of this Section 3.11,
Intellectual Property Rights also includes any and all intellectual property
rights, licenses, databases, computer programs and other computer software user
interfaces, know-how, trade secrets, customer lists, proprietary technology,
processes and formulae, source code, object code, algorithms, architecture,
structure, display screens, layouts, development tools, instructions, templates,
marketing materials created by the Company, inventions, trade dress, logos and
designs.
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(b) The Company has all franchises, permits, licenses and
other rights and privileges reasonably necessary to permit it to own its
property and to conduct its business as it is presently conducted other than any
franchises, permits, licenses and other rights and privileges which if not held
by the Company would not have a SI Material Adverse Effect or result in a fine
or penalty in excess of $10,000 individually or in the aggregate.
(c) The management information systems (including all computer
hardware and software) owned, licensed or otherwise used by the Company will not
perform differently and experience any material malfunctions or usage problems
due to the change in the calendar year from 1999 to the year 2000.
3.12 CONTRACTS. (a) Except as set forth in Schedule 3.12(a) (or in
Schedule 3.4, Schedule 3.10(d) or Schedule 3.13(a)), the Company is not a party
to, or subject to:
(i) any contract, arrangement or understanding,
or series of related contracts, arrangements or understandings, which involves
annual expenditures or receipts by the Company of more than $10,000;
(ii) any note, indenture, credit facility,
mortgage, security agreement or other contract, arrangement or understanding
relating to or evidencing indebtedness for money borrowed or a security interest
or mortgage in the assets of the Company;
(iii) any guaranty issued by the Company;
(iv) any contract, arrangement or understanding
relating to the acquisition, issuance or transfer of any securities;
(v) any contract, arrangement or understanding
relating to the acquisition, transfer, distribution, use, development, sharing
or license of any technology or Intellectual Property Rights other than licenses
granted in the ordinary course of business with a term of less than one year;
(vi) any contract, arrangement or understanding
granting to any person the right to use any property or property right of the
Company other than licenses granted in the ordinary course of business with a
term of less than one year;
(vii) any contract, arrangement or understanding
restricting the Company's or any Subsidiary's right to (A) engage in any
business activity or compete with any business, or (B) develop or distribute any
technology;
(viii) any contract, arrangement or understanding
relating to the employment of, or the performance of services of, any employee,
consultant or independent contractor and pursuant to which the Company is
required to pay more than $10,000 per year;
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22
(ix) any contract, arrangement or understanding
with a Related Person (as that term is hereinafter defined); or
(x) any outstanding offer, commitment or
obligation to enter into any contract or arrangement of the nature described in
subsections (i) through (vi) of this subsection 3.12(a).
(b) The Company has previously made available for
inspection and copying to the Parent complete and correct copies (or, in the
case of oral contracts, a complete and correct description) of each contract
(and any amendments or supplements thereto) listed on Schedule 3.12(a). Except
as set forth in Schedule 3.12(b), (i) each contract listed in Schedule 3.12(a)
is in full force and effect; (ii) neither the Company nor (to the best knowledge
of the Company or any Principal Shareholder) any other party is in default under
any such contract, and no event has occurred which constitutes, or with the
lapse of time or the giving of notice or both would constitute, a default by the
Company or (to the best knowledge of the Company or any Principal Shareholder) a
default by any other party under such contract; (iii) to the best knowledge of
the Company or any Principal Shareholder, there are no disputes or disagreements
between the Company and any other party with respect to any such contract; and
(iv) each other party to each such contract has consented or been given notice
(or prior to the Closing shall have consented or been given notice), where such
consent or the giving of such notice is necessary, sufficient that such contract
shall remain in full force and effect following the consummation of the
transactions contemplated by this Agreement without modification in the rights
or obligations of the Company thereunder.
(c) Except as set forth and described in
Schedule 3.12(d), the Company has not issued any warranty or any agreement or
commitment to indemnify any person other than in the ordinary course of
business.
3.13 EMPLOYEES; EMPLOYEE BENEFITS.
(a) Schedule 3.13(a) sets forth the names of all current
employees of the Company (the "Employees") and such Employee's job title, the
location of employment of such Employee, such Employee's current salary, the
amount of any bonuses or other compensation paid since December 31, 1996 to such
Employee, the date of employment of such Employee and the accrued vacation time
of such Employee. The Company has accrued on its books and records all
obligations for salaries, benefits and other compensation with respect to its
Employees and former employees ("Former Employees"), to the extent required by
generally accepted accounting principles, including, but not limited to,
vacation pay, severance, bonuses, incentive and deferred compensation, and all
commissions and other fees payable to salespeople, sales representatives and
other agents. Schedule 3.13(a) hereto sets forth a true and correct statement of
the liability, if any, of the Company for accrued but unused sick pay. Except as
set forth on Schedule 3.13(a), there are no outstanding loans from the Company
to any officer, director, employee, agent or consultant of the Company, or to
any other Related Person. Schedule 3.13(a)
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hereto sets forth a complete and correct description of all severance policies
of the Company. Complete and correct copies of all written agreements with
Employees and all employment policies, and all amendments and supplements
thereto, have previously been delivered or made available to the Parent, and a
list of all such agreements and policies is set forth an Schedule 3.13(a). None
of the Employees has, to the knowledge of the Company or any Principal
Shareholder, indicated a desire to terminate his or her employment, or any
intention to terminate his or her employment upon a sale of, or business
combination relating to, the Company or in connection with the transactions
contemplated by this Agreement. Except as set forth on Schedule 3.13(a), since
March 31, 1998, the Company has not (i) increased the salary or other
compensation payable or to become payable to or for the benefit of any of the
Employees, (ii) increased the term or tenure of employment for any Employee,
except in the ordinary course of business consistent with past practice, (iii)
increased the amounts payable to any of the Employees upon the termination of
any such person's employment or (iv) adopted, increased, augmented or improved
benefits granted to or for the benefit of any of the Employees under any Benefit
Plan.
(b) Except as disclosed on Schedule 3.13(b), the Company has
complied in all material respects with Title VII of the Civil Rights Act of
1964, as amended, the Age Discrimination in Employment Act, as amended, the Fair
Labor Standards Act, as amended, the Immigration Reform and Control Act of 1986,
and all applicable laws, rules and regulations governing payment of minimum
wages and overtime rates, the withholding and payment of taxes from
compensation, discriminatory practices with respect to employment and discharge,
or otherwise relating to the conduct of employers with respect to Employees or
potential employees, and there have been no claims made or, to the best
knowledge of the Company or any Principal Shareholder, threatened thereunder
against the Company arising out of, relating to or alleging any violation of any
of the foregoing. Except as disclosed in Schedule 3.13(b), there are no material
controversies, strikes, work stoppages, picketing or disputes pending or, to the
knowledge of the Company or any Principal Shareholder, threatened between the
Company and any of the Employees or Former Employees; no labor union or other
collective bargaining unit represents or has ever represented any of the
Employees, including any "leased employees" (within the meaning of Section
414(n) of the Code); no organizational effort by any labor union or other
collective bargaining unit currently is under way or, to the best knowledge of
the Company or the Principal Shareholders, threatened with respect to any
Employees; and the consent of no labor union or other collective bargaining unit
is required to consummate the transactions contemplated by this Agreement.
(c) Schedule 3.13(c) sets forth a list of each material
defined benefit and defined contribution plan, stock ownership plan, employment
or consulting agreement, executive compensation plan, bonus plan, incentive
compensation plan or arrangement, deferred compensation agreement or
arrangement, agreement with respect to temporary employees or "leased employees"
(within the meaning of Section 414(n) of the Code), vacation pay, sickness,
disability or death benefit plan (whether provided through insurance, on a
funded or unfunded basis or otherwise), employee stock option, stock
appreciation rights or stock purchase plan,
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severance pay plan, arrangement or practice, employee relations policy, practice
or arrangement, and each other employee benefit plan, program or arrangement,
including, without limitation, each "employee benefit plan" within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), which has been maintained by the Company for the benefit of
or relating to any of the Employees or to any Former Employees or their
dependents, survivors or beneficiaries, whether or not legally binding, whether
written or oral or whether express or implied, all of which are hereinafter
referred to as the "Benefit Plans."
(d) Except as set forth on Schedule 3.13(d), each Benefit Plan
which is an "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) and which is intended to meet the requirements of Section 401(a) of the
Code meets such requirements; the trust, if any, forming part of such plan is
exempt from U.S. federal income tax under Section 501(a) of the Code; a
favorable determination letter has been issued by the Internal Revenue Service
(the "IRS") with respect to each plan and trust and each amendment thereto; and
nothing has occurred since the date of such determination letter that would
adversely affect the qualification of such plan; no Benefit Plan is a "voluntary
employees beneficiary association" (within the meaning of section 501(c)(9) of
the Code) and there have been no other "welfare benefit funds" (within the
meaning of Section 419 of the Code) relating to Employees or Former Employees;
no event or condition exists with respect to any Benefit Plan that could subject
the Company to any material Tax under Section 4980B of the Code. With respect to
each Benefit Plan, the Company has heretofore delivered or made available to the
Parent complete and correct copies of the following documents, where applicable
and to the extent available: (i) the most recent annual report (Form 5500
series), together with schedules, as required, filed with the IRS, and any
financial statements and opinion required by Section 103(a)(3) of ERISA, (ii)
the most recent determination letter issued by the IRS, (iii) the most recent
summary plan description and all modifications, as well as all other
descriptions distributed to Employees or set forth in any manuals or other
documents, (iv) the text of the Benefit Plan and of any trust, insurance or
annuity contracts maintained in connection therewith and (v) the most recent
actuarial report, if any, relating to the Benefit Plan.
(e) There has been and will be no "excess parachute payment"
(as that term is defined in Section 28OG(b)(1) of the Code) to any of the
Employees as a result of the consummation of the transactions contemplated
hereby.
3.14 COMPLIANCE WITH APPLICABLE LAW. Except as set forth in
Schedules 3.13 and 3.14, the Company is not in violation in any material respect
of any applicable safety, health, environmental or other law, statute,
ordinance, code, rule, regulation, judgment, order, injunction, writ or decree
of any Federal, state, local or foreign court or governmental or regulatory
body, agency or authority having, asserting or claiming jurisdiction over it or
over any part of its business, operations, properties or assets, except for any
violation which would not have a SI Material Adverse Effect or result in a fine
or penalty in excess of $10,000 individually or in the aggregate. The Company
has not received any notice alleging any such violation, nor to
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the best knowledge of the Company or any Principal Shareholder, is there any
inquiry, investigation or proceedings relating thereto.
3.15 ABILITY TO CONDUCT THE BUSINESS. There is no agreement,
arrangement or understanding, nor any judgment, order, writ, injunction or
decree of any court or governmental or regulatory body, agency or authority
applicable to the Company or to which the Company is a party or by which it (or
any of its properties or assets) is bound, that will prevent the use by the
Surviving Corporation, after the Effective Time, of the properties and assets
owned by, the business conducted by or the services rendered by the Company on
the date hereof, in each case on substantially the same basis as the same are
used, owned, conducted or rendered on the date hereof. The Company has in force,
and is in compliance with, in all material respects, all material governmental
permits, licenses, exemptions, consents, authorizations and approvals used in or
required for the conduct of their business as presently conducted, all of which
shall continue in full force and effect, without requirement of any filing or
the giving of any notice and without modification thereof, following the
consummation of the transactions contemplated hereby. The Company has not
received any notice of, and to the best knowledge of the Company or any
Principal Shareholder, there are no inquiries, proceedings or investigations
relating to or which could result in the revocation or modification of any such
permit, license, exemption, consent, authorization or approval.
3.16 MAJOR CUSTOMERS. Schedule 3.16 sets forth a complete and
correct list of the five largest advertising customers of the Company, in terms
of revenue recognized in respect of such customers during the fiscal year ended
December 31, 1997 and the three months ended March 31, 1998, showing the amount
of revenue recognized for each such customer during such periods. Except as set
forth and described in Schedule 3.16, to the knowledge of the Company or any
Principal Shareholder, the Company has not received any notice or other
communication (written or oral) from any of the customers listed in Schedule
3.16 hereto terminating or reducing in any material respect, or setting forth an
intention to terminate or reduce in the future, or otherwise reflecting a
material adverse change in, the business relationship between such customer and
the Company.
3.17 CONSULTANTS, SALES REPRESENTATIVES AND OTHER AGENTS.
Schedule 3.17 hereto sets forth a complete and correct list of the names and
addresses of each consultant, sales representative or other agent (other than
any such person performing solely clerical functions) currently engaged by the
Company who is not an employee of the Company and who has received compensation
in excess of $25,000 in respect of the fiscal year beginning January 1, 1997,
and ending December 31, 1997, the commission rates or other compensation
applicable with respect to each such person and the amount of commissions or
other compensation earned by each such person for the fiscal period ended
December 31, 1997. Complete and correct copies of all current agreements between
the Company and any such person have previously been delivered or made available
by the Company to the Parent.
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3.18 ACCOUNTS RECEIVABLE. All accounts receivable of the Company
and the Subsidiaries (i) arose from bona fide transactions in the ordinary
course of business and consistent with past practice, and (ii) except as set
forth on Schedule 3.18, are owned by the Company free and clear of any claim,
security interest, lien or other encumbrance.
3.19 INSURANCE. Schedule 3.19 hereto is a true and complete list of
all insurance policies carried by the Company with respect to its business,
together with, in respect of each such policy, the name of the insurer, the
number of the policy, the annual policy premium payable therefor, the limits of
coverage, the deductible amount (if any), the expiration date thereof and each
pending claim thereunder. Complete and correct copies of each certificate of
insurance have previously been delivered or made available by the Company to the
Parent. All such policies are in full force and effect. All premiums due thereon
have been paid in a timely manner.
3.20 BANK ACCOUNTS; POWERS OF ATTORNEY. Schedule 3.21 sets forth a
complete and correct list showing:
(i) all bank accounts of the Company, together
with, with respect to each such account, the account number, the names of all
signatories thereof, the authorized powers of each such signatory and the
approximate balance thereof on the date of this Agreement; and
(ii) the names of all persons holding powers of
attorney from the Company and a summary statement of the terms thereof.
3.21 MINUTE BOOKS, ETC. The minute books, stock certificate book
and stock ledger of the Company are complete and correct in all material
respects. The minute books of the Company contain accurate and complete records
of all meetings or written consents to action of the Board of Directors and
shareholders of the Company and accurately reflect all corporate actions of the
Company which are required by law to be passed upon by the Board of Directors or
shareholders of the Company.
3.22 RELATED PERSON INDEBTEDNESS AND CONTRACTS. Schedule 3.22 sets
forth a complete and correct summary of all contracts, commitments, arrangements
and understandings not described elsewhere in this Agreement between the Company
and any of the following (collectively, "Related Persons"): (i) the Holders;
(ii) the spouses and children of any of the Holders (collectively, "near
relatives"); (iii) any trust for the benefit of any of the Holders or any of
their respective near relatives; or (iv) any corporation, partnership, joint
venture or other entity or enterprise owned or controlled by any of the Holders
or by any of their respective near relatives.
3.23 BROKERS; PAYMENTS. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements
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made by or on behalf of the Company or any Principal Shareholder. The Company
has suspended or terminated, and has the legal right to terminate or suspend,
all negotiations and discussions of Acquisition Transactions (as defined in
Section 6.4) with parties other than Parent. No valid claim exists against the
Company or the Surviving Corporation or, based on any action by the Company,
against the Parent for payment of any "topping," "break-up" or "bust-up" fee or
any similar compensation or payment arrangement as a result of the transactions
contemplated hereby.
3.24 COMPANY ACTION. The Board of Directors of the Company, by
unanimous written consent or at a meeting duly called and held, has (i)
determined that the Merger is fair and in the best interests of the Company and
its shareholders, (ii) approved the Merger and this Agreement in accordance with
the provisions of the DGCL, and (iii) directed that this Agreement and the
Merger be submitted to the Company shareholders for their approval and resolved
to recommend that the Company's shareholders vote favor of the approval of this
Agreement and the Merger. The shareholders of the Company have approved the
Merger and this Agreement in accordance with the provisions of the DGCL.
3.25 INFORMATION IN PROXY STATEMENT. None of the information
relating to the Company or its business or relating to the Holders supplied by
the Company for inclusion in the proxy statement to be distributed in connection
with the meeting of the shareholders of the Parent referred to in Section 7.2
(the "Proxy Statement") will at the time of the mailing of the Proxy Statement
and any amendments thereof or supplements thereto and at the time of the
meetings referred to in Section 7.2, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
3.26 POOLING OF INTERESTS. To the knowledge of the Company and the
Principal Shareholders, neither the Company nor any of its affiliates has taken
or agreed to take any action which would prevent the Parent from accounting for
the business combination to be effected by the Merger as a pooling of interests.
3.27 DISCLOSURE. No representation or warranty by the Company or
the Principal Shareholders contained in this Agreement and no statement
contained in any of the Disclosure Schedules, certificate or other document or
instrument delivered or to be delivered pursuant to this Agreement by the
Company or its representatives contains or will contain any untrue statement of
a material fact or omits or will omit to state any material fact necessary to
make the statements contained therein not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL SHAREHOLDERS
4.1 AUTHORIZATION ETC. Each of the Principal Shareholders
represents and warrants, severally, to the Parent and Acquisition as follows:
(i) such Shareholder is the sole and exclusive
record and beneficial owner of the shares of the Company's capital stock set
forth opposite such Shareholder's name in Schedule 3.4 hereto, free and clear of
any claims, liens, pledges, options, rights of first refusal or other
encumbrances or restrictions of any nature whatsoever (other than restrictions
on transfer imposed under applicable securities laws), and, except as set forth
on Schedule 3.4 hereto, there are no agreements, arrangements or understandings
to which such Shareholder is a party (other than this Agreement) involving the
purchase, sale or other acquisition or disposition of the shares owned by such
Shareholder; (ii) such Shareholder shall (A) concurrently with such
Shareholder's execution and delivery of this Agreement, execute and deliver to
Parent the Voting Agreement in the form of EXHIBIT A hereto pursuant to which
Shareholder agrees to vote all shares of capital stock owned by such Shareholder
in favor of the Merger and the adoption of this Agreement by the Company, (B) at
the Effective Time, deliver to the Parent certificates representing all shares
of Company Common Stock owned by such Shareholder, each such certificate to be
duly endorsed for transfer and free and clear of any claims, liens, pledges,
options, rights of first refusal or other encumbrances or restrictions of any
nature whatsoever (other than restrictions imposed under applicable securities
laws); (iii) such Shareholder has all necessary legal capacity, right, power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, and this Agreement constitutes a valid and
binding obligation of such Shareholder enforceable in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditors, rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in law
or in equity; and (iv) the execution and delivery of this Agreement by such
Shareholder and the consummation of the transactions contemplated hereby will
not (A) violate or conflict with any provision of any partnership agreement or
other constitutional documents of any such Shareholder that is constituted as a
general or limited partnership, (B) breach, violate or constitute an event of
default (or an event which with the lapse of time or the giving of notice or
both would constitute an event of default) under, give rise to any right of
termination, cancellation, modification or acceleration under or require any
consent or the giving of any notice under, any note, bond, indenture, mortgage,
security agreement, lease, license, franchise, permit, agreement or other
instrument or obligation to which such Shareholder is a party, or by which such
Shareholder or the shares of Company Stock held by such Shareholder may be
bound, or result in the creation of any material lien, claim or encumbrance or
other right of any third party of any kind whatsoever upon the properties or
assets of such Shareholder pursuant to the terms of any such instrument or
obligation, which breach, violation or event of default would have a material
adverse effect on such Shareholder's ability to perform such Shareholder's
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29
obligations hereunder, or (C) violate or conflict with any law, statute,
ordinance, code, rule, regulation, judgment, order, writ, injunction, decree or
other instrument of any court or governmental or regulatory body, agency or
authority applicable to such Shareholder or by which such the shares of Company
Stock held by such Shareholder may be bound.
4.2 PARENT COMMON STOCK.
Each Principal Shareholder severally acknowledges, represents and
warrants to the Parent and Acquisition as follows:
(i) The Shareholder understands that the shares
of Parent Common Stock to be issued to the Shareholder in the Merger will not
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities law by reason of specific exemptions
under the provisions thereof which depend in part upon the other representations
and warranties made by the Shareholder in this Agreement. The Shareholder
understands that the Parent is relying upon the Shareholder's representation and
warranties contained in this Section 4.2 for the purpose of determining whether
this transaction meets the requirements for such exemptions. The information
contained in the Investor Questionnaire executed by such Shareholder and
delivered to Parent in connection with this Agreement is accurate, complete and
correct.
(ii) The Shareholder has such knowledge, skill
and experience in business, financial and investment matters so that the
Shareholder is capable of evaluating the merits and risks of an investment in
the Parent Common Stock pursuant to the transactions contemplated by this
Agreement or to the extent that the Shareholder has deemed it appropriate to do
so, the Shareholder has relied upon appropriate professional advice regarding
the tax, legal and financial merits and consequences of an investment in Parent
Common Stock pursuant to the transactions contemplated by this Agreement.
(iii) The Shareholder has made, either alone or
together with the Shareholder's advisors, such independent investigation of the
Parent, its management and related matters as the Shareholder deems to be, or
such advisors have advised to be, necessary or advisable in connection with an
investment in the Parent Common Stock through the transactions contemplated by
this Agreement; and the Shareholder and advisors have received all information
and data that the Shareholder and such advisors believe to be necessary in order
to reach an informed decision as to the advisability of an investment in the
Parent Common Stock pursuant to the transactions contemplated by this Agreement.
(iv) The Shareholder has reviewed the
Shareholder's financial condition and commitments, alone and together with the
Shareholder's advisors, and, based on such review, the Shareholder is satisfied
that (A) the Shareholder has adequate means of providing for the Shareholder's
financial needs and possible contingencies and has assets or sources of income
which, taken together, are more than sufficient so that he could bear the risk
of
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loss of the Shareholder's entire investment in the Parent Common Stock, (B) the
Shareholder has no present or contemplated future need to dispose of all or any
portion of the Parent Common Stock to satisfy any existing or contemplated
undertaking, need or indebtedness, and (C) the Shareholder is capable of bearing
the economic risk of an investment in the Parent Common Stock for the indefinite
future. The Shareholder shall furnish any additional information about the
Shareholder reasonably requested by the Parent to assure the compliance of this
transaction with applicable federal and state securities laws.
(v) The Shareholder understands that the shares
of the Parent Common Stock to be received by the Principal Shareholder in the
transactions contemplated hereby will be "restricted securities" under
applicable federal securities laws and that the Securities Act and the rules of
the Securities and Exchange Commission (the "SEC") promulgated thereunder
provide in substance that the Shareholder may dispose of such shares only
pursuant to an effective registration statement under the Securities Act or an
exemption from registration if available. The Shareholder further understands
that, except as provided in Article XII, the Parent has no obligation or
intention to register the sale of any of the shares of the Parent Common stock
to be received by the Shareholder in the transactions contemplated hereby, or
take any other action so as to permit sales pursuant to, the Securities Act.
Accordingly, except as provided in Article XII, the Shareholder understands that
the Shareholder may dispose of such shares only in transactions which are of a
type exempt from registration under the Securities Act, including (without
limitation) a "private placement," in which event the transferee will acquire
such shares as "restricted securities" and subject to the same limitations as in
the hands of the Shareholder. The Shareholder further understands that
applicable state securities laws may impose additional constraints upon the sale
of securities. As a consequence, the Shareholder understands that the
Shareholder may have to bear the economic risk of an investment in the Parent
Common Stock to be received by the Shareholder pursuant to the transactions
contemplated hereby for an indefinite period of time.
(vi) The Shareholder is acquiring shares of the
Parent Common Stock pursuant to the transactions contemplated hereby for
investment only and not with a view to or intention of or in connection with any
resale or distribution of such shares or any interest therein.
(vii) The certificate(s) evidencing the shares of
the Parent Common Stock to be issued pursuant to the transactions contemplated
hereby shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
any state securities laws and may not be sold or transferred
in the absence of such registration or an exemption therefrom
under the Securities Act of 1933, as amended, and applicable
state securities laws."
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION
The Parent and Acquisition jointly and severally represent and warrant
to the Company and the Principal Shareholders that:
5.1 CORPORATE ORGANIZATION. Each of the Parent and Acquisition is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of the Parent and Acquisition has all
requisite corporate power and authority to own, operate and lease the properties
and assets it now owns, operates and leases and to carry on its business as now
being conducted. The Parent and Acquisition are each duly qualified to transact
business as a foreign corporation and are each in good standing in the
jurisdictions set forth opposite their respective names in Schedule 5.1, which
are the only jurisdictions where such qualification is required by reason of the
nature of the properties and assets currently owned, operated or leased by the
Parent or Acquisition or the business currently conducted by them, except for
such jurisdictions where the failure to be so qualified would not have a go2net
Material Adverse Effect (as defined below). The Parent has previously delivered
to the Company complete and correct copies of (i) its Certificate of
Incorporation (certified by the Secretary of State of Delaware as of a recent
date) and its By-Laws (certified by the Secretary of the Parent as of a recent
date) and (ii) the Certificate of Incorporation of Acquisition and all
amendments thereto to the date hereof (certified by the Secretary of State of
the State of Delaware as of a recent date) and the By-Laws of Acquisition
(certified by the secretary of Acquisition as of a recent date). Neither the
Certificate of Incorporation nor the By-Laws of the Parent or Acquisition has
been amended since the respective dates of certification thereof, nor has any
action been taken for the purpose of effecting any amendment of such
instruments. The term "go2net Material Adverse Effect" means for purposes of
this Agreement, any change, event or effect that is, or would be, materially
adverse to the business, operation, assets, liabilities, financial condition or
results of operations of the Parent and Acquisition, taken as a whole.
5.2 AUTHORIZATION. Each of the Parent and Acquisition has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly approved by the Boards of Directors of the Parent and Acquisition and
by the Parent as the sole shareholder of Acquisition, and, subject to the
approval of this Agreement and the transactions contemplated hereby by the
stockholders of Parent, no other corporate proceedings on the part of the Parent
or Acquisition are necessary to approve and authorize the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Parent and
Acquisition and constitutes the valid and binding agreement of the Parent and
Acquisition, enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws
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affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or in law).
5.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Subject to (a) the
filing of the Proxy Statement with the SEC, (b) the filing of Certificate of
Merger with the Secretary of State of the State of Delaware and (c) compliance
with applicable federal and state securities laws, the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby will
not: (i) violate or conflict with any provisions of the Certificate of
Incorporation or By-Laws of the Parent or Acquisition; (ii) breach, violate or
constitute an event of default (or an event which with the lapse of time or the
giving of notice or both would constitute an event of default) under, give rise
to any right of termination, cancellation, modification or acceleration under,
or require any consent or the giving of any notice under, any note, bond,
indenture, mortgage, security agreement, lease, license, franchise, permit,
agreement or other instrument or obligation to which the Parent or Acquisition
is a party, or by which any of them or any of their respective properties or
assets may be bound, or result in the creation of any lien, claim or encumbrance
of any kind whatsoever upon the properties or assets of the Parent or
Acquisition pursuant to the terms of any such instrument or obligation, other
than any breach, violation, default, termination, cancellation, modification or
acceleration which would not have a go2net Material Adverse Effect; (iii)
violate or conflict with any law, statute, ordinance, code, rule, regulation,
judgment, order, writ, injunction or decree or other instrument of any Federal,
state, local or foreign court or governmental or regulatory body, agency or
authority applicable to the Parent or Acquisition or by which any of their
respective properties or assets may be bound, except for such violations or
conflicts which would not have a go2net Material Adverse Effect; or (iv)
require, on the part of the Parent or Acquisition, any filing or registration
with, or permit, license, exemption, consent, authorization or approval of, or
the giving of any notice to, any governmental or regulatory body, agency or
authority other than any filing, registration, permit, license, exemption,
consent, authorization, approval or notice which if not obtained or made would
not have a go2net Material Adverse Effect.
5.4 CAPITALIZATION. (a) The authorized capital stock of the Parent
consists of 9,000,000 shares of Parent Common Stock, of which 4,510,217 shares
are issued and outstanding as of March 31, 1998 and 1,000,000 shares of
Preferred Stock, none of which are issued or outstanding. All of the issued and
outstanding shares of Parent Common Stock are (and all shares of Parent Common
Stock to be issued in connection with the Merger, when issued in accordance with
this Agreement, shall be) duly authorized, validly issued, fully paid and
nonassessable, and none of such shares has been issued in violation of any
applicable preemptive rights. There are no agreements or commitments to which
the Parent is a party or by which it is bound for the redemption or repurchase
of any shares of its capital stock. Except for options issued under the Parent's
1996 Stock Option Plan and warrants to purchase 50,000 shares of Common Stock
(collectively, the "Stock Option Plan"), there are no outstanding options,
warrants or other rights to purchase, or securities convertible into or
exchangeable for, shares of the capital stock of the Parent, and (except as
contemplated by this Agreement and except with respect to options issued under
the Stock Option Plan) there are no agreements or commitments to which the
Parent is a
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33
party or by which it is bound pursuant to which the Parent is or may become
obligated to issue additional shares of its capital stock. As of March 31, 1998,
there were options to purchase an aggregate of 938,249 shares of Parent Common
Stock outstanding. In connection with the meeting of the Parent's stockholders
to be convened for purposes of voting upon the transactions contemplated by this
Agreement, the Parent will seek approval from its stockholders for an amendment
to the Parent's Certificate of Incorporation to increase the authorized number
of shares of Parent Common Stock to 50,000,000 and for an amendment to the 1996
Stock Option Plan to increase the number of shares of Parent Common Stock
reserved for the grant of options thereunder to 2,500,000.
(b) The authorized capital stock of Acquisition consists of
1,000 shares of common stock, par value $0.01 per share, of which 100 shares are
issued and outstanding, all of which shares are owned beneficially and of record
by the Parent. There are no outstanding options, warrants or other rights to
purchase, or securities convertible into or exchangeable for, shares of the
capital stock of Acquisition, and there are no agreements or commitments to
which Acquisition is a party or by which it is bound pursuant to which
Acquisition is or may become obligated to issue additional shares of its capital
stock.
5.5 SEC REPORTS AND FINANCIAL STATEMENTS.
(a) The Parent has heretofore delivered or made available to
the Company complete and correct copies of all reports and other filings filed
by the Parent with the SEC pursuant to the Securities Act of 1933, as amended,
and the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Acts") since and including the filing date of the
Registration Statement with respect to the Company's initial public offering
(such reports and other filings collectively referred to herein as the "SEC
Filings"). The SEC Filings constitute all of the documents required to be filed
by the Parent under the SEC Acts with the SEC since such date. All documents
required to be filed as exhibits to the SEC Filings have been so filed, and all
contracts so filed as exhibits are in full force and effect, except those which
are expired in accordance with their terms, and neither Parent nor any of its
subsidiaries is in default thereunder. As of their respective dates, the SEC
Filings did not contain any 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, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements of the Parent
included in the SEC Filings comply in all material respects with the published
rules and regulations of the SEC with respect thereto, and such audited
consolidated financial statements (i) were prepared from the books and records
of the Parent and its consolidated subsidiaries, (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes or schedules thereto)
and (iii) present fairly the financial position of the Parent and its
consolidated subsidiaries as at the dates thereof and the results of their
operations and cash flows (or changes in financial position, for the fiscal year
ended September 30, 1997 and earlier years) for the periods then ended. The
unaudited financial statements included in the SEC Filings comply in all
material respects with the published rules and regulations of the SEC with
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respect thereto; and such unaudited financial statements (i) were prepared from
the books and records of the Parent and its consolidated subsidiaries, (ii) were
prepared in accordance with generally accepted accounting principles, except as
otherwise permitted under the Exchange Act and the rules and regulations
thereunder, on a consistent basis (except as may be indicated therein or in the
notes or schedules thereto) and (iii) present fairly the financial position of
the Parent and its consolidated subsidiaries as at the dates thereof and the
results of their operations and cash flows (or changes in financial condition)
for the periods then ended, subject to normal year-end adjustments and any other
adjustments described therein or in the notes or schedules thereto. The
foregoing representations and warranties in this Section 5.5(a) shall also be
deemed to be made with respect to all filings made with the SEC on or before the
Effective Time.
(b) The Parent has heretofore delivered or made available to
the Company copies of the Parent's preliminary unaudited balance sheet as of
March 31, 1998 and its preliminary unaudited statement of income and cash flows
for the three and six month periods then ended (the "March 31 Financial
Statements"). The March 31 Financial Statements (i) have been prepared from the
books and records of the Parent, (ii) have been prepared in accordance with
generally accepted accounting principles during the periods covered thereby,
except that the March 31 Financial Statements do not contain footnotes, and
(iii) present fairly in all material respects the financial condition, results
of operations and cash flows of Parent as of the dates, and for the periods,
stated therein, except that the March 31 Financial Statements are subject to
normal year-ended adjustments which will not individually or in the aggregate be
material in amount or effect and do not include footnotes. No agreements will be
required to be filed as exhibits to the Parent's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998 as material agreements, as defined in
Regulation S-K promulgated in the Securities Act.
5.6 ABSENCE OF CERTAIN CHANGES. Except as set forth in
Schedule 5.6, since March 31, 1998, the Parent has carried on its business in
the ordinary course and consistent with past practice. Except as set forth on
Schedule 5.6 hereto, since March 31, 1998, the Parent has not: (i) incurred any
material obligation or liability (whether absolute, accrued, contingent or
otherwise) except in the ordinary course of business and consistent with past
practice; (ii) experienced any go2net Material Adverse Effect; (iii) made any
change in any accounting principle or practice or in its methods of applying any
such principle or practice; (iv) suffered any material damage, destruction or
loss, whether or not covered by insurance, affecting its properties, assets or
business; (v) mortgaged, pledged or subjected to any lien, charge or other
encumbrance, or granted to third parties any rights in, any of its assets,
tangible or intangible; (vi) sold or transferred any of its assets, except in
the ordinary course of business and consistent with past practice, or canceled
or compromised any debts or waived any claims or rights of a material nature;
(vii) issued any additional shares of capital stock or any rights, options or
warrants to purchase, or securities convertible into or exchangeable for, shares
of its capital stock other than options to purchase shares of Parent Common
Stock granted under its employee stock plans, shares of Parent Common Stock
issued upon exercise of employee stock options and shares of Parent Common Stock
issued upon the exercise of outstanding warrants; (viii) declared or paid any
dividends on or made any distributions (however characterized) in respect of
shares of its
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capital stock; (ix) repurchased or redeemed any shares of its capital stock; (x)
granted any general or specific increase in the compensation payable or to
become payable to any of its executive officers or any bonus or service award or
other like benefit such persons; or (xi) entered into any agreement to do any of
the foregoing.
5.7 LITIGATION. Except as set forth in Schedule 5.7 hereto, there
are no suits, actions, claims, proceedings (including, without limitation,
arbitral or administrative proceedings) or investigations pending or, to the
knowledge of the Parent, threatened against the Parent or its properties, assets
or business or, to the knowledge of the Parent, pending or threatened against
any of the officers, directors, employees, agents or consultants of the Parent
in connection with the business of the Parent. There are no such suits, actions,
claims, proceedings or investigations pending, or, to the knowledge of the
Parent, threatened challenging the validity or propriety of the transactions
contemplated by this Agreement. There is no judgment, order, injunction, decree
or award (whether issued by a court, an arbitrator or an administrative agency)
to which the Parent is a party, or involving the Parent's properties, assets or
business, which is unsatisfied or which requires continuing compliance therewith
by the Parent.
5.8 COMPLIANCE WITH APPLICABLE LAW. (a) Except as set forth in
Schedule 5.8 the Parent is not in violation of any applicable safety, health,
environmental or other law, statute, ordinance, code, rule, regulation,
judgment, order, injunction, writ or decree of any Federal, state, local or
foreign court or governmental or regulatory body, agency or authority having,
asserting or claiming jurisdiction over it or over any part of its business,
operations, properties or assets, except where any such violation would not have
a go2net Material Adverse Effect. The Parent has not received any notice
alleging any such violation, nor to the knowledge of the Parent, is there any
inquiry, investigation or proceedings relating thereto.
5.9 INFORMATION IN PROXY STATEMENT. None of the information
included in the Proxy Statement (other than information supplied by the Company
for inclusion in the Proxy Statement) will at the time of the mailing of the
Proxy Statement and any amendments thereof or supplements thereto and at the
time of the meetings of the stockholders of the Parent referred to in Section
7.2, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form with the provisions of
the Securities Act and the Exchange Act and will contain all disclosures
required thereby.
5.10 DISCLOSURE. No representation or warranty by the Parent or
Acquisition contained in this Agreement and no statement contained in any
Schedule, certificate or other document or instrument delivered or to be
delivered pursuant to this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make the statements contained therein not misleading.
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5.11 TAX TREATMENT OF MERGER. Neither the Parent nor any of its
Subsidiaries has taken any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger from qualifying as
a reorganization under Section 368(a) of the Code.
5.12 POOLING OF INTERESTS. To the knowledge of the Parent, neither
the Parent nor any of its affiliates has taken or agreed to take any action
which would prevent the Parent from accounting for the business combination to
be effected by the Merger as a pooling of interests.
5.13 INTELLECTUAL PROPERTY; PROPRIETARY RIGHTS; EMPLOYEE
RESTRICTIONS. (a) The Parent has disclosed in Schedule 5.13 all registered
copyrights, copyright registrations and copyright applications, trademark
registrations and applications for registration, patents and patent
applications, trademarks, service marks, trade names, or Internet domain names
(collectively, "Intellectual Property Rights") used by the Parent in the
Parent's business as presently conducted, including all Intellectual Property
Rights used in connection with or contained in all versions of the Parent's
World Wide Web sites (including xxx.xx0xxx.xxx, xxx.xxxxxxxxxxx.xxx,
xxx.xxxxxxxx.xxx and xxx.xxxxxxxxx.xxx) and all licenses, assignments and
releases of Intellectual Property Rights of others in material works embodied in
its products. All Intellectual Property Rights purported to be owned by the
Parent held by any employee, officer or consultant are owned by the Parent by
operation of law or have been validly assigned to the Parent. The Intellectual
Property Rights are sufficient in all material respects to carry on the business
of the Parent as presently conducted. The Parent has exclusive ownership of or
license to use all Intellectual Property Rights identified in Schedule 5.13 or
has obtained any licenses, releases or assignments reasonably necessary to use
all third parties' Intellectual Property Rights in works embodied in its
products. To the knowledge of the Parent, the present business activities or
products of the Parent do not infringe any Intellectual Property Rights of
others. The Parent has not received any notice or other claim from any person
asserting that any of the Parent's present activities infringe in any material
respect or may infringe any Intellectual Property Rights of such person.
The Parent has the right to use all trade secrets, customer
lists, log files, hardware designs, programming processes, software and other
information required for or incident to its products or its business as
presently conducted in any material respect. The Parent has taken all reasonable
measures to protect and preserve the security and confidentiality of its trade
secrets and other confidential information. All employees and consultants of the
Parent involved in the design, review, evaluation or development of products or
Intellectual Property Rights have executed nondisclosure and assignment of
inventions agreements sufficient to protect the confidentiality of the Parent's
trade secrets and other confidential information and to vest in the Parent
exclusive ownership of such Intellectual Property Rights. To the knowledge of
the Parent, all trade secrets and other confidential information of the Parent
are not part of the public domain or knowledge, nor, to the best knowledge of
the Parent, have they been misappropriated by any person having an obligation to
maintain such trade secrets or other confidential information in confidence for
the Parent. To the knowledge of the Parent, no employee or consultant of the
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Parent has used any trade secrets or other confidential information of any other
person in the course of their work for the Parent.
(b) The management information systems (including all
computer hardware and software) owned, licensed or otherwise used by the Parent
will not perform differently and experience any material malfunctions or usage
problems due to the change in the calendar year from 1999 to the year 2000.
5.14 CONTRACTS. (a) Except as set forth in Schedule 5.14(a) or in
the SEC Filings, the Parent is not a party to, or subject to:
(i) any contract, arrangement or understanding
relating to the acquisition, issuance or transfer of any securities;
(ii) any contract, arrangement or understanding
relating to the acquisition, transfer, distribution, use, development, sharing
or license of any technology or Intellectual Property Rights other than licenses
granted in the ordinary course of business with a term of less than one year;
(iii) any contract, arrangement or understanding
granting to any person the right to use any property or property right of the
Parent other than licenses granted in the ordinary course of business with a
term of less than one year; or
(iv) any contract, arrangement or understanding
with a go2net Related Person (as that term is hereinafter defined).
(b) The Parent has previously made available for
inspection and copying to the Company complete and correct copies (or, in the
case of oral contracts, a complete and correct description) of each contract
(and any amendments or supplements thereto) listed on Schedule 5.14(a). Except
as set forth in Schedule 5.14(b), (i) each contract listed in Schedule 5.14(a)
is in full force and effect; (ii) neither the Parent nor (to the best knowledge
of the Parent) any other party is in default under any such contract, and no
event has occurred which constitutes, or with the lapse of time or the giving of
notice or both would constitute, a default by the Company or (to the best
knowledge of the Parent) a default by any other party under such contract; (iii)
to the knowledge of the Parent, there are no disputes or disagreements between
the Parent and any other party with respect to any such contract; and (iv) each
other party to each such contract has consented or been given notice (or prior
to the Closing shall have consented or been given notice), where such consent or
the giving of such notice is necessary, sufficient that such contract shall
remain in full force and effect following the consummation of the transactions
contemplated by this Agreement without modification in the rights or obligations
of the Parent thereunder.
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5.15 RELATED PERSON INDEBTEDNESS AND CONTRACTS. Schedule 5.14 sets
forth a complete and correct summary of all contracts, commitments, arrangements
and understandings not described elsewhere in this Agreement or in Parent's
Proxy Statement for its 1998 Annual Meeting of Stockholders between the Parent
and any of the following (collectively, "go2net Related Persons"): (i) any
holders of in excess of 5% of the outstanding shares of Parent Common Stock;
(ii) the spouses and children of any of such holders (collectively, "near
relatives"); (iii) any trust for the benefit of any of such holders or any of
their respective near relatives; or (iv) any corporation, partnership, joint
venture or other entity or enterprise owned or controlled by any of such holders
or by any of their respective near relatives.
5.16 BROKERS FEES. Except for Xxxxxx Xxxxxxx, Inc., no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Parent.
5.17 PARENT ACTION. The Board of Directors of the Parent, by
unanimous written consent or at a meeting duly called and held, has (i) approved
the Merger and this Agreement in accordance with the provisions of the DGCL, and
(ii) directed that this Agreement and the Merger be submitted to the Parent
shareholders for their approval and resolved to recommend that the Parent's
shareholders vote favor of the approval of this Agreement and the Merger.
5.18 TRADING BY AFFILIATES. Except as set forth on Schedule 5.18,
no affiliate (as defined in the Exchange Act) of Parent has purchased or sold
shares of Parent Common Stock since Parent's initial public offering of
securities.
ARTICLE VI
CONDUCT OF BUSINESS OF THE COMPANY AND
THE PARENT PRIOR TO THE EFFECTIVE TIME
6.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period
commencing on the date hereof and continuing until the Effective Time, the
Company and each of the Principal Shareholders agree that the Company, except as
otherwise expressly contemplated by this Agreement or agreed to in writing by
the Parent:
(a) will carry on its business only in the ordinary course and
consistent with past practice;
(b) will not declare or pay any dividend on or make any other
distribution (however characterized) in respect of shares of its capital stock;
(c) will not, directly or indirectly, redeem or repurchase, or
agree to redeem or repurchase, any shares of its capital stock;
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(d) will not amend its Certificate of incorporation or
By-Laws;
(e) will not issue, or agree to issue, any shares of its
capital stock (except pursuant to the exercise of currently outstanding warrants
or options), or any options, warrants or other rights to acquire shares of its
capital stock, or any securities convertible into or exchangeable for shares of
its capital stock;
(f) will not combine, split or otherwise reclassify any shares
of its capital stock;
(g) will not form a Subsidiary;
(h) will use its commercially reasonable best efforts to
preserve intact its present business organization, keep available the services
of its officers and key employees and preserve its relationships with clients
and others having business dealings with it to the end that its goodwill and
ongoing business shall not be materially impaired at the Effective Time;
(i) will not (i) make any capital expenditures individually in
excess of $5,000 or in the aggregate in excess of $15,000, (ii) enter into any
license, distribution, OEM, reseller, joint venture or other similar agreement,
(iii) enter into or terminate any lease of, or purchase or sell, any real
property, (iv) enter into any leases of personal property involving individually
in excess of $5,000 annually or in the aggregate in excess of $15,000 annually,
(v) incur or guarantee any additional indebtedness for borrowed money, (vi)
create or permit to become effective any security interest, mortgage, lien,
charge or other encumbrance on its properties or assets, or (vii) enter into any
agreement to do any of the foregoing;
(j) will not adopt or amend any Benefit Plan for the benefit
of Employees, or increase the salary or other compensation (including, without
limitation, bonuses or severance compensation) payable or to become payable to
its Employees or accelerate, amend or change the period of exercisability or the
vesting schedule of options granted under any stock option plan or agreements
except as specifically required by the terms of such plans or agreements, or
enter into any agreement to do any of the foregoing;
(k) will not accelerate receivables or delay payables;
(l) will promptly advise the Parent of the commencement of, or
threat of (to the extent that such threat comes to the knowledge of the Company,
any Subsidiary or any of the Principal Shareholders), any claim, action, suit,
proceeding or investigation against, relating to or involving the Company or any
of its Subsidiaries or any of their directors, officers, employees, agents or
consultants in connection with their businesses or the transactions contemplated
hereby that could reasonably be expected to have a SI Material Adverse Effect;
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(m) will use its commercially reasonable best efforts to
maintain in full force and effect all insurance policies maintained by the
Company on the date hereof; and
(n) will not enter into any agreement to dissolve, merge,
consolidate or, except in the ordinary course, sell any material assets of the
Company or any of the Subsidiaries, or acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership or other business organization or division, or
otherwise acquire or agree to acquire any assets in excess of $15,000 in the
aggregate.
6.2 CONDUCT OF BUSINESS OF THE PARENT. During the period
commencing on the date hereof and continuing until the Effective Time, the
Parent agrees that, except as expressly contemplated by this Agreement or agreed
to in writing by the Company, the Parent:
(a) subject to the fiduciary duties of the Parent's Board of
Directors, as advised in writing by counsel, will carry on its business only in
the ordinary course consistent with past practice;
(b) will promptly advise the Company of the commencement of,
or threat of (to the extent that such threat comes to the knowledge of the
Parent or any Parent Subsidiary), any claim, action, suit, proceeding or
investigation against, relating to or involving the Parent or any Parent
Subsidiary or any of their directors, officers, employees, agents or consultants
in connection with their businesses or the transactions contemplated hereby;
(c) will not enter into any agreement to dissolve, merge,
consolidate or, except in the ordinary course, sell any material assets of the
Parent or any of the Parent Subsidiaries.
(d) will not take any action or cause its Subsidiaries to take
any action which could cause the Merger to fail to qualify as a reorganization
under the provisions of Section 368(a) of the Code;
(e) will not declare or pay any dividend on or make any other
distribution (however characterized) in respect of shares of its capital stock;
(f) will not, directly or indirectly, redeem or repurchase, or
agree to redeem or repurchase, any shares of its capital stock, except for the
repurchase of shares from terminated employees;
(g) will not amend its Certificate of incorporation or
By-Laws; except to increase the authorized shares of Parent Common Stock as
described in Section 5.4; and
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(h) will not combine, split or otherwise reclassify any shares
of its capital stock unless there is a proportionate equitable adjustment to the
Merger Shares.
6.3 CONDUCT OF BUSINESS OF ACQUISITION. During the period
commencing on the date hereof and continuing until the Effective Time,
Acquisition shall not engage in any activities of any nature except as provided
in or contemplated by this Agreement.
6.4 OTHER NEGOTIATIONS. Neither the Company nor any Principal
Shareholder will (nor will they permit any of their respective officers,
directors, employees, agents, partners and affiliates on their behalf to) take
any action to solicit, initiate, seek, encourage or support any inquiry,
proposal or offer from, furnish any information to, or participate in any
negotiations with, any corporation, partnership, person or other entity or group
(other than Parent) regarding any acquisition of the Company, any merger or
consolidation with or involving the Company, or any acquisition of any material
portion of the stock or assets of the Company, or any equity or debt financing
of the Company or any material license of Intellectual Property Rights (any of
the foregoing being referred to in this Agreement as an "Acquisition
Transaction") or enter into an agreement concerning any Acquisition Transaction
with any party other than Parent. If between the date of this Agreement and the
termination of this Agreement pursuant to Article X, the Company receives from a
third party any offer to negotiate or consummate an Acquisition Transaction, the
Company shall (i) notify Parent immediately (orally and in writing) of such
offer, including the identity of such party and the terms of any proposal
therein, and (ii) notify such third party of the Company's obligations under
this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 ACCESS TO PROPERTIES AND RECORDS. Between the date of this
Agreement and the Effective Time, the Company and the Parent will provide each
other and their respective accountants, counsel and other authorized advisors,
with reasonable access, during business hours, to their premises and properties
and their books and records (including, without limitation, contracts, leases,
insurance policies, litigation files, minute books, accounts, working papers and
tax returns filed and in preparation) and will cause its officers to furnish to
each other and their respective authorized advisors such additional financial,
tax and operating data and other information pertaining to their respective
businesses as the Company or the Parent, as the case may be, shall from time to
time reasonably request. All of such data and information shall be kept
confidential by Parent and the Company until the consummation of the Merger.
7.2 STOCKHOLDER APPROVAL. (a) As soon as reasonably practicable
after the execution and delivery of this Agreement, the Parent shall prepare and
file with the SEC by May 8, 1998 the Proxy Statement, and shall use all
reasonable efforts to have the Proxy Statement cleared by the SEC for mailing as
promptly as practicable. The Company shall cooperate fully with the Parent and
shall furnish the Parent with all information concerning the Company and the
Holders
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and shall take all such other action as the Parent may reasonably request in
connection with any such actions.
(b) Promptly after the clearance of the Proxy Statement by the
SEC and compliance with all state securities and blue sky laws, the Parent shall
take all action necessary to convene meetings of its stockholders for the
purpose of voting upon the transactions contemplated hereby and such other
matters as may be appropriate at such meetings, and in connection therewith
shall in a timely manner mail to its stockholders the Proxy Statement and, if
necessary after the Proxy Statement shall have been mailed, shall promptly and
in a timely manner circulate amended or supplemental materials and (if
necessary) resolicit proxies. Subject, in the case of the Parent, to any
fiduciary duties under applicable law as advised in writing by counsel, the
Parent will, through its Board of Directors, recommend to its stockholders
approval of the transactions contemplated by this Agreement. Parent shall use
commercially reasonable efforts to cause the stockholders' meeting to be held no
later than June 30, 1998.
(c) The Principal Shareholders each severally agree to vote
their shares of the capital stock of the Company for the approval and adoption
of this Agreement and the Merger. The Principal Shareholders each severally
agree that they (i) shall not dispose of or in any way encumber said shares
prior to the consummation of the transactions contemplated hereby, (ii) shall
take no action inconsistent with the approval and consummation of said
transactions and (iii) at the Closing shall surrender the stock certificates
representing all shares of Company Stock owned by them, duly endorsed for
transfer.
7.3 AFFILIATES' LETTERS. Concurrently with the execution of this
Agreement, all persons who are "affiliates" of the Company or Parent for
purposes of Rule 145 under the Securities Act, which shall include each of the
Principal Shareholders, shall deliver, and each of the Principal Shareholders
severally agrees to deliver to the Company, a signed, written agreement, in the
form attached as EXHIBIT F hereto, to the effect that such person will not sell,
or in any other way reduce such person's risk relative to (within the meaning of
the SEC's rules relating to pooling of interests accounting), any shares of
Parent Common Stock issued to such person pursuant to the Merger until such time
as financial statements (including combined revenues and net income) covering at
least 30 days of post-Merger operations have been published.
7.4 REASONABLE EFFORTS; ETC. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use his/its reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including obtaining any consents, authorizations, exemptions and
approvals from, and making all filings with, any governmental or regulatory
authority, agency or body which are necessary in connection with the
transactions contemplated by this Agreement.
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7.5 MATERIAL EVENTS. At all times prior to the Effective Time,
each party shall promptly notify the others in writing of the occurrence of any
event which will or may result in the failure to satisfy any of the conditions
specified in Article VIII or Article IX hereof.
7.6 POOLING OF INTERESTS. The Company, the Parent, Acquisition and
the Principal Shareholders will not take any actions that would prevent the
Merger from being accounted for as a pooling of interests.
7.7 FEES AND EXPENSES; ACCOUNTS PAYABLE. (a) The parties hereto
shall bear and pay all of their own fees, costs and expenses relating to the
transactions contemplated by this Agreement, including, without limitation, the
fees and expenses of their respective counsel, accountants, brokers and
financial advisors, provided that the Company shall have no unpaid expenses
(including liabilities for taxes accrued through the Closing in accordance with
generally accepted accounting principles) and accounts payable at Closing that
exceed the Company's cash balances after giving effect to the Closing. To the
extent such fees, expenses and accounts payable exceed the Company's cash
balances, the excess shall be paid by the Principal Shareholders. The Company
has submitted a budget to Parent for the fees and expenses to be incurred by the
Company in connection with the Merger. The Company shall use its best efforts to
complete the Merger within such budget.
(b) In the event the Effective Time does not occur on or
before July 31, 1998, primarily as a result of the breach of this Agreement by
any Principal Shareholder or the Company (despite satisfaction of all conditions
contained in Article IX) or as a result of the failure of the Company's
stockholders to approve the Merger, and either the Company or Parent elects to
terminate this Agreement under Article X, the Company and the Principal
Shareholders shall, jointly and severally, pay to the Parent a break-up fee of
$500,000, without limiting any other rights of the Parent under this Agreement
or otherwise.
(c) In the event that the Effective Time does not occur on or
before July 31, 1998, primarily as a result of the Parent's breach of this
Agreement (despite satisfaction of all conditions contained in Article VIII) or
as a result of the failure of Parent's stockholders to approve the Merger or as
a result of the failure of the letter described in Section 8.5 to be delivered
primarily as a result of any action by the Parent or any affiliate of the Parent
taken after the date of this Agreement in violation of Section 7.6 hereof, and
either the Company or Parent elects to terminate this Agreement under Article X,
the Parent will pay to the Company a breakup fee of $500,000, without limiting
any other rights of the Company or the Principal Shareholders under this
Agreement or otherwise.
7.8 EMPLOYEES. Parent shall offer employment with the Parent or
the Company to Xxxx Dryer, Xxxxxxx Dryer and Xxxx XxXxxxxx (the "Employees"),
subject to each employee signing the Employment and Non-Competition Agreement
referred to in Section 8.8 (i). Such Employees will be provided with benefit
plans by the Surviving Corporation or Parent which
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in the aggregate are no less favorable to such employees than those provided
from time to time by Parent and its Subsidiaries to similarly situated
employees.
7.9 NASDAQ NATIONAL MARKET LISTING. Parent shall cause the shares
of Parent Common Stock issuable in the Merger to be authorized for listing on
The Nasdaq SmallCap Market. Parent agrees to use reasonable efforts to apply for
the listing of Parent Common Stock on the Nasdaq National Market prior to
December 31, 1998, assuming all qualification requirements are met.
7.10 TAX TREATMENT. Each of the Parent, Acquisition, the Company
and the Principal Shareholders shall use their reasonable commercial efforts to
cause the Merger to qualify as a reorganization under Section 368(a) of the
Code. Parent and its Subsidiaries will not take, or cause the Company to take,
any action after the Effective Time which will cause the Merger to fail to
qualify as a reorganization under the provisions of Section 368(a) of the Code.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF
THE PARENT AND ACQUISITION
The obligation of the Parent and Acquisition to consummate the
transactions contemplated hereby shall be subject to the satisfaction, on or
prior to the Closing Date, of each of the following conditions (any of which may
be waived in writing by the Parent and Acquisition in their sole discretion):
8.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Company and of each of the Principal Shareholders which are
contained in this Agreement, or contained in any Schedule, certificate or other
instrument or document delivered or to be delivered pursuant to this Agreement,
shall be true and correct in all material respects at and as of the Closing Date
as though such representations and warranties were made on and as of the Closing
Date, and at the Closing the Company shall have delivered to the Parent and
Acquisition a certificate (signed on behalf of the Company by the President of
the Company) to that effect with respect to all such representations and
warranties made by the Company, and each Principal Shareholder shall have
executed and delivered to the Parent and Acquisition a certificate to that
effect with respect to all such representations and warranties made, jointly and
severally or severally, by such Shareholder.
8.2 PERFORMANCE. The Company and each of the Principal
Shareholders shall have performed and complied in all material respects with all
of the obligations under this Agreement which are required to be performed or
complied with by them on or prior to the Closing Date, and at the Closing the
Company shall have delivered to the Parent and Acquisition a certificate (duly
executed on behalf of the Company by the President and the Chief Financial
Officer of the Company) to that effect with respect to all such obligations
required to have been performed or
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complied with by the Company on or before the Closing Date, and each of the
Principal Shareholders shall have executed and delivered to the Parent and
Acquisition a certificate to that effect with respect to all such obligations
required to have been performed or complied with by such Shareholders on or
before the Closing Date.
8.3 AUTHORIZATION OF MERGER. This Agreement and the consummation
of the transactions contemplated hereby shall have been duly approved and
adopted by the requisite affirmative vote of the stockholders of the Parent, in
accordance with applicable law and the rules and regulations of the National
Association of Securities Dealers, Inc.
8.4 AFFILIATES LETTERS. The Company shall have obtained from each
of the Principal Shareholders and each other person who is an "affiliate" (as
such term is defined in Rule 145 of the Securities Act) of the Company an
executed letter agreement in the form annexed as EXHIBIT F hereto and shall have
delivered such letter agreements to the Parent.
8.5 POOLING OF INTERESTS. Ernst & Young LLP, independent
accountants to the Parent, shall have delivered a letter addressed to the
Parent, dated the Closing Date, regarding that firm's concurrence with Parent's
management and the Company's management conclusion that the business combination
to be effected in the Merger will qualify as a pooling of interests transaction
under generally accepted accounting principles if consummated in accordance with
this Agreement.
8.6 ABSENCE OF LITIGATION. No statute, rule or regulation shall
have been enacted or promulgated, and no order, decree, writ or injunction shall
have been issued and shall remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental or regulatory body,
agency or authority shall have been instituted by any person (or instituted or
threatened by any governmental or regulatory body, agency or authority), and no
investigation by any governmental or regulatory body, agency or authority shall
have been commenced with respect to the transactions contemplated hereby or with
respect to the Company which would have a material adverse effect on the
transactions contemplated hereby or on the business of the Company and the
Subsidiaries taken as a whole.
8.7 CONSENTS. All approvals, consents, waivers and authorizations
required to be obtained by the Company or any Principal Shareholder in
connection with the Merger and the other transactions contemplated by this
Agreement (including those identified on Schedule 3.3) shall have been obtained
and shall be in full force and effect.
8.8 ADDITIONAL AGREEMENTS. Parent shall have the following
agreements:
(i) the Employment and Non-Competition Agreement in the
form of EXHIBIT G hereto, duly executed by each of Xxxx Dryer, Xxxx Dryer and
Xxxx XxXxxxxx;
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(ii) the Stock Option Agreements in the form of EXHIBIT H
hereto, duly executed by each of Xxxx Dryer, Xxxxxxx Dryer and Xxxx XxXxxxxx;
(iii) the Escrow Agreement annexed as EXHIBIT E hereto,
duly executed by Xxxx Dryer, as Representative of the Holders under such Escrow
Agreement (and countersigned by holders of all of the outstanding Company Common
Stock and holders of all of the outstanding Stock Options where required on the
addendum thereto), together with counterparts signed by the escrow agent named
therein and blank stock powers executed by each of the holders with respect to
such holder's portion of the Escrow Shares;
(iv) Resignations of all officers and directors of the
Company, effective as of the Effective Time; and
(v) the Letter of Transmittal in the form of EXHIBIT D
duly executed by holders of at least 95% of the outstanding shares of Company
Stock and holders of all of the outstanding Stock Options (the "Letter of
Transmittal"), and
8.9 OPINION OF COMPANY COUNSEL. The Company shall have delivered
to the Parent an opinion of Venture Law Group, counsel to the Company and the
Principal Shareholders, in substantially the form attached as EXHIBIT I hereto.
8.10 DELIVERY OF CERTIFICATES FOR CANCELLATION. The share
certificates representing all of the issued and outstanding shares of Company
Common Stock as of the Closing Date, duly endorsed in blank, shall have been
surrendered for cancellation.
8.11 APPRAISAL RIGHTS. The holders of at least 95% of the issued
and outstanding shares of Company Stock shall have voted in favor of the
approval of the Merger and the transactions contemplated hereby and holders of
no more than 5% of the issued and outstanding shares of Company Stock shall have
demanded appraisal rights in respect of the Merger.
8.12 CERTIFICATE OF MERGER. The Company shall have executed and
delivered to the Parent counterparts of the Certificate of Merger to be filed
with the Secretary of State of the State of Delaware in connection with the
Merger.
8.13 PAYMENT OF INDEBTEDNESS. At or prior to the Effective Time,
the Company shall have paid in full all outstanding indebtedness and accounts
payable such that at the Closing the Company shall not have any outstanding
indebtedness or accounts payable.
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ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY AND THE PRINCIPAL SHAREHOLDERS
The obligation of the Company and the Principal Shareholders to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction, on or prior to the Closing Date, of each of the following
conditions (any of which may be waived in writing by the Company and the
Shareholders in their sole discretion):
9.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of each of the Parent and Acquisition contained in this Agreement, or
contained in any Schedule, certificate or other instrument or document delivered
or to be delivered pursuant to this Agreement, shall be true and correct in all
material respects at and as of the Closing Date as though such representations
and warranties were made on and as of the Closing Date, and at the Closing each
of the Parent and Acquisition shall have delivered to the Company and the
Shareholders a certificate (signed on its behalf by its President and its Chief
Financial Officer) to that effect with respect to all such representations and
warranties made by such entity.
9.2 PERFORMANCE. Each of the Parent and Acquisition shall have
performed and complied in all material respects with all of the obligations
under this Agreement which are required to be performed or complied with by them
on or prior to the Closing Date, and at the Closing each of the Parent and
Acquisition shall have delivered to the Company and the Shareholders a
certificate, signed on its behalf by its President and its Chief Financial
Officer, to that effect with respect to all such obligations required to have
been performed or complied with by such entity on or before the Closing Date.
9.3 ABSENCE OF LITIGATION. No statute, rule or regulation shall
have been enacted or promulgated, and no order, decree, writ or injunction shall
have been issued and shall remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental or regulatory body,
agency or authority shall have been instituted by any person (or instituted or
threatened by any governmental or regulatory body, agency or authority) and no
investigation by any governmental or regulatory body, agency or authority shall
have been commenced with respect to the transactions contemplated hereby or with
respect to the Parent or the Parent Subsidiaries which would have a material
adverse effect on the transactions contemplated hereby or on the business of the
Parent and the Parent Subsidiaries taken as a whole.
9.4 CONSENTS. All approvals, consents, waivers and authorizations
required to be obtained by Parent or Acquisition in connection with the Merger
and the other transactions contemplated by this Agreement (including those
identified on Schedule 5.3) shall have been obtained and shall be in full force
and effect.
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9.5 ADDITIONAL AGREEMENTS. The Parent shall have executed and
delivered (and shall have agreed to cause the Surviving Corporation to execute
and deliver immediately following the Effective Time, as applicable)
counterparts of the following agreements;
(i) the Employment and Non-Competition Agreements
referred to in Section 8.8(i) hereof;
(ii) the Stock Option Agreements referred to in
Section 8.8(ii) hereof; and
(iii) the Escrow Agreement referred to in Section 8.8(iii)
hereof, together with counterparts signed by the escrow agent named therein;
9.6 OPINION OF XXXXXXXX, XXXXXXX & XXXXXXX. The Parent shall have
delivered to the Company an opinion of Xxxxxxxx, Xxxxxxx & Xxxxxxx in
substantially the form annexed as EXHIBIT J hereto.
9.7 TAX OPINION. Venture Law Group shall have rendered its tax
opinion, dated the Closing Date in substantially the form annexed as EXHIBIT K
hereto.
9.8 CERTIFICATE OF MERGER. The Parent and Acquisition shall have
executed and delivered to the Company counterparts of the Certificate of Merger
to be filed with the Secretary of the State of the State of Delaware in
connection with the Merger.
9.9 SHARES OF PARENT COMMON STOCK. Subject to the deposit into
escrow of shares of Parent Common Stock contemplated under Section 2.8, at the
Closing the Parent shall deliver to the Principal Shareholders the shares of
Parent Common Stock issuable to the Principal Shareholders pursuant to Section
2.2(a) hereof.
ARTICLE X
TERMINATION
10.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by the mutual written consent of the Company and the
Parent;
(b) by either the Company or the Parent
(i) if any court or governmental or regulatory
agency, authority or body shall have enacted, promulgated or issued any statute,
rule, regulation, ruling, writ or injunction, or taken any other action,
restraining, enjoining or otherwise prohibiting the
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transactions contemplated hereby and all appeals and means of appeal therefrom
have been exhausted; or
(ii) if the Effective Time shall not have
occurred on or before July 31, 1998; provided, however, that the right to
terminate this Agreement pursuant to this Section 10.1(b)(ii) shall not be
available to any party whose (or whose affiliate(s)') breach of any
representation or warranty or failure to perform or comply with any obligation
under this Agreement or the Voting Agreement has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before such date; or
(iii) if the stockholders of the Parent shall have
failed to approve the Merger at the meeting referred to in Section 7.2 (unless
the failure to obtain such approval results from any breach of this Agreement by
Parent or the breach of the go2net Voting Agreement).
(c) by the Company, if any of the conditions specified in
Article IX have not been met or waived prior to such time as such condition can
no longer be satisfied; or
(d) by the Parent, if any of the conditions specified in
Article VIII shall not have been met or waived prior to such time as such
condition can no longer be satisfied.
10.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement, this Agreement shall forthwith become void and there shall be no
liability on the part of any of the parties hereto or (in the case of the
Company, the Parent and Acquisition) their respective officers or directors,
except for Sections 7.7 and 13.6 and the last sentence of Section 7.1, which
shall remain in full force and effect, and except that nothing herein shall
relieve any party from liability for a breach of this Agreement prior to the
termination hereof.
ARTICLE XI
INDEMNIFICATION; SURVIVAL OF
REPRESENTATIONS AND WARRANTIES
11.1 INDEMNITY OBLIGATIONS OF THE HOLDERS. Each of the Holders
hereby jointly and severally agrees to indemnify and hold the Parent harmless
from, and to reimburse the Parent for, any Indemnity Claims (as that term is
hereinafter defined) arising under the terms and conditions of this Agreement.
For purposes of this Agreement, the term "Indemnity Claim" shall mean any and
all losses, damages, deficiencies, liabilities, obligations, actions, claims,
suits, proceedings, demands, assessments, judgments, recoveries, fees, costs and
expenses (including, without limitation, all out-of-pocket expenses, reasonable
investigation expenses and reasonable fees and disbursements of accountants and
counsel) of any nature whatsoever, net of insurance proceeds actually realized
or to be realized by Parent (collectively, "Losses") arising out of, based upon
or resulting from (i) any inaccuracy in or breach of any representation and
warranty of the Company or the Holders which is contained in this Agreement or
the Letter of Transmittal or any Schedule
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or certificate delivered pursuant hereto or thereto; or (ii) any breach or
nonfulfillment of, or any failure to perform, any of the covenants, agreements
or undertakings of the Company (which covenants, agreements or undertakings were
to be performed or complied with on or prior to the consummation of the Merger)
or the Holders which are contained in or made pursuant to the terms and
conditions of this Agreement or the Letter of Transmittal.
11.2 APPOINTMENT OF REPRESENTATIVE. Each of the Holders hereby
appoints Xxxx Dryer as such Holder's exclusive agent to act on such Holder's
behalf with respect to any and all Indemnity Claims arising under this
Agreement. In such representative capacity, Xxxx Dryer or any person who shall
succeed in such representative capacity pursuant to the terms of the Escrow
Agreement referred to in Sections 8.8 and 9.5 hereof, is sometimes referred to
in this Agreement as the "Representative." The Representative shall take, and
the Holders agree that the Representative shall take, any and all actions which
he believes are necessary or appropriate under this Agreement for and on behalf
of the Holders, as fully as if the Holders were acting on their own behalf,
including, without limitation, defending all Indemnity Claims, consenting to,
compromising or settling all Indemnity Claims, conducting negotiations with the
Parent and its representatives regarding such claims, dealing with the Parent
and the Escrow Agent under the Escrow Agreement referred to in Sections 8.8 and
9.5 hereof with respect to all matters arising under such Escrow Agreement,
taking any and all other actions specified in or contemplated by this Agreement
and engaging counsel, accountants or other representatives in connection with
the foregoing matters. The Parent and such Escrow Agent shall have the right to
rely upon all actions taken or omitted to be taken by the Representative
pursuant to this Agreement and the Escrow Agreement, all of which actions or
omissions shall be legally binding upon each of the Holders. The Representative
shall not be liable for any act done or omitted hereunder as Representative
while acting in good faith and in the exercise of reasonable judgment; and any
act done or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith. The Holders shall severally and pro rata, indemnify
the Representative and hold him harmless against any loss, liability or expense
incurred without gross negligence or bad faith on the part of the Representative
and arising out of or in connection with the acceptance or administration of
their duties hereunder under this Agreement or the Escrow Agreement.
11.3 NOTIFICATION OF CLAIMS. Subject to the provisions of
Section 11.4 below, in the event of the occurrence of an event which the Parent
asserts constitutes an Indemnity Claim, Parent shall provide the Representative
(on behalf of the indemnifying parties) with prompt written notice of such event
and shall otherwise promptly make available to the Representative all relevant
information which is material to the claim and which is in the possession of the
indemnified party. If such event involves the claim of any third party (a
"Third-Party Claim"), the Representative as the indemnifying party shall have
the right to elect to join in the defense, settlement, adjustment or compromise
of any such Third-Party Claim, and, if he so elects to control such defense,
settlement, adjustment or compromise, and to employ counsel to assist such
indemnifying party in connection with the handling of such claim, at the sole
expense of the indemnifying party, to be paid from amounts held in escrow by the
Escrow Agent in accordance with the terms of the Escrow Agreement. Unless the
Representative elects to assume such
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defense, settlement, adjustment or compromise, Parent shall have the right to
settle any such Third-Party Claim; PROVIDED, HOWEVER, that Parent may not effect
the settlement, adjustment or compromise of any such Third-Party Claim without
the written consent of the Representative, which consent shall not be
unreasonably withheld. In the event that the Representative has consented in
writing to any such settlement, adjustment or compromise, the Representative
shall have no power or authority to object to the amount of any claim by Parent
against the escrow for indemnity with respect to such settlement, adjustment or
compromise. The Representative shall have the right to settle, adjust, or
compromise any Third-Party Claim, the defense of which is controlled by the
Representative, using amounts held in escrow; PROVIDED, HOWEVER, that, unless
the settlement, adjustment or compromise involves no more than the payment of an
amount that is less than the amount of funds then remaining in the escrow and
provides for the unconditional release of Parent, the Company and their
respective affiliates, the Representative may not effect the settlement,
adjustment, compromise or satisfaction of any such Third-Party Claim without the
consent of the Parent, which consent shall not be unreasonably withheld.
Parent's failure to give timely notice or to promptly furnish the Representative
with any relevant data and documents in connection with any Third-Party Claim
shall not constitute a defense (in part or in whole) to any claim for
indemnification by such party, except and only to the extent that such failure
shall result in any prejudice to the indemnifying party. In connection with any
Third-Party Claim, the indemnified party, or the indemnifying party if it has
assumed the defense of such claim pursuant to the preceding sentence, shall
diligently pursue the defense of such Third-Party Claim.
11.4 DURATION. Except as otherwise provided in this Agreement, all
representations, warranties, covenants and agreements of the parties contained
in or made pursuant to this Agreement, and the rights of the parties to seek
indemnification with respect thereto, shall survive the Closing but, except in
respect of any claims for indemnification as to which notice shall have been
duly given prior to the Escrow Release Date (as defined below), the
representations and warranties of the Company and the Holders contained in this
Agreement and the Letter of Transmittal shall expire on the earlier of (i) the
date Parent has received a signed opinion from its independent auditors
certifying the financial statements for Parent and its subsidiaries for the
fiscal year ending September 30, 1998 in connection with their completion of the
audit of such financial statements and (ii) December 31, 1998 (the "Escrow
Release Date"). To be duly given, any such notice shall set forth in reasonable
detail the nature of such claim, the provisions under this Agreement or the
Letter of Transmittal pursuant to which such claim is being asserted and, to the
extent feasible, a reasonable estimate of the anticipated amount of such claim
("Claim Notice").
11.5 ESCROW. At the Effective Time, seven and one-half percent
(7 1/2%) of the Merger Shares and instruments or other documentation
representing Stock Options to purchase seven and one-half percent (7 1/2%) of
the Option Shares (collectively, the "Escrow Shares") shall be delivered to U.S.
Bank, as escrow agent (the "Escrow Agent ") to be held for a period ending on
the Escrow Release Date, except Escrow Shares may be withheld after the Escrow
Release Date to satisfy claims for indemnification which are the subject to a
Claims Notice delivered prior to
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the Escrow Release Date. Parent may make a claim for any Losses indemnified
hereunder until the Escrow Release Date. The Escrow Shares shall be held and
disbursed by the Escrow Agent in accordance with an Escrow Agreement in the form
attached hereto as EXHIBIT E. For the purpose of any claim against the Escrow
Shares hereunder, the value per share of the Escrow Shares shall be deemed to be
the Closing Market Price (as defined in Section 2.4). Except with respect to
claims based on fraud committed by the Company or any Holder which are not
limited, if the Closing occurs, Parent agrees that Parent's sole and exclusive
remedy and recourse against each of the Holders under this Agreement for Losses
attributable to any inaccuracy or breach of any representation or warranty of
the Company or the Holders which is contained in this Agreement or the Letter of
Transmittal or any Schedule or certificate delivered pursuant hereto or thereto
or any breach or nonfulfillment of, or any failure to perform, any of the
covenants or undertakings of the Company or the Holders which are contained in
or made pursuant to this Agreement or the Letter of Transmittal shall be against
such Holder's pro rata share of the Merger Shares and Option Shares held in
escrow pursuant to the Escrow Agreement. Notwithstanding anything herein to the
contrary, the Holders shall have no liability for indemnification pursuant to
this Article XI until the aggregate Losses to the Parent and the Company exceed
$75,000, at which point each Holder shall be liable only for his or its pro rata
share of the amount of such Losses in excess of $75,000.
11.6 NO CONTRIBUTION. Each Holder hereby waives, and acknowledges
and agrees that such Holder shall not have and shall not exercise or assert (or
attempt to exercise or assert), any right of contribution, right of indemnity or
other right or remedy against the Parent or the Company in connection with any
indemnification obligation or any other liability which such Holder may become
subject under or in connection with this Agreement or the Escrow Agreement.
ARTICLE XII
REGISTRATION RIGHTS
12.1 REGISTRABLE SHARES. For purposes of this Agreement,
"Registrable Shares" shall mean the shares of Parent Common Stock issued in the
Merger; and any shares of Parent Common Stock issued upon the exercise of Stock
Options which are exercised prior to the filing of the Registration Statement
(as defined below) PROVIDED, HOWEVER, that a distribution of shares of Parent
Common Stock issued in the Merger without additional consideration, to
underlying beneficial owners (such as the general and limited partners,
shareholders of trust beneficiaries of a Holder) shall not be deemed such a sale
or transfer for purposes of this Article XII and such underlying beneficial
owners shall be entitled to the same rights under this Article XII as the
initial Holder from which the Registrable Shares were received and shall be
deemed a Holder for the purposes of this Article XII.
12.2 REQUIRED REGISTRATION. Parent shall use its best efforts to
prepare and file with the SEC, at least forty-five (45) days prior to the date
that Parent is scheduled to publicly issue its
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initial press release of Parent's financial results for the fiscal year ending
September 30, 1998 and reflecting at least thirty days of combined operations of
Parent and the Company (the "Pooling Release Date"), a registration statement on
Form S-3 (or such successor or other appropriate form) under the Securities Act
with respect to the Registrable Shares (the "Registration Statement") and to
effect all such registrations, qualifications and compliances (including,
without limitation, obtaining appropriate qualifications under applicable state
securities or "Blue sky" laws and compliance with any other applicable
governmental requirements or regulations) as any selling Holder may reasonably
request and that would permit or facilitate the sale of Registrable Shares
(provided however that Parent shall not be required in connection therewith to
qualify to do business or to file a general consent to service of process in any
such state or jurisdiction).
12.3 EFFECTIVENESS; SUSPENSION RIGHT.
(a) Parent will use its best efforts to maintain the
effectiveness of the Registration Statement and other applicable registrations,
qualifications and compliances until the earlier to occur of three (3) years
from the Closing Date and the date on which the Registrable Shares may be sold
in accordance with Rule 144(k) (the "Registration Effective Period"), and from
time to time will amend or supplement the Registration Statement and the
prospectus contained therein as and to the extent necessary to comply with the
Securities Act, the Exchange Act and any applicable state securities statute or
regulation, subject to the following limitations and qualifications.
(b) Following the later to occur of the Pooling Release Date
and such date as the Registration Statement is first declared effective, the
Holders will be permitted (subject in all cases to Section 12.6 below) to offer
and sell the Registrable Shares registered therein during the Registration
Effective Period in the manner described in the Registration Statement provided
that the Second Registration Statement remains effective and has not been
suspended.
(c) Notwithstanding any other provision of this Article XII
but subject to Section 12.6, Parent shall have the right at any time to require
that all Holders suspend further open market offers and sales of Registrable
Shares whenever, and for so long as, in the reasonable judgment of Parent after
consultation with counsel there is or may be in existence material undisclosed
information or events with respect to Parent (the "Suspension Right"). In the
event Parent exercises the Suspension Right, such suspension will continue for
the period of time reasonably necessary for disclosure to occur at a time that
is not detrimental to Parent and its shareholders or until such time as the
information or event is no longer material, each as determined in good faith by
Parent after consultation with counsel. Parent will promptly give the Holders
notice of any such suspension and will use all reasonable efforts to minimize
the length of the suspension.
12.4 PIGGYBACK REGISTRATION. The Parent agrees that if at any time
prior to the third anniversary of the Effective Time one or more of its
officers, directors or holders of its
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outstanding Parent Common Stock intend to offer equity securities to the public
for cash pursuant to any type of registration under the Securities Act, the
Parent will notify the Holders in writing at least twenty days (20) days prior
to the initial filing of a registration statement relating to such offering with
the SEC (the "Piggyback Registration Statement"). Thereafter, the Parent will
use its best efforts to include in such registration statement, in accordance
with the Securities Act, such Registrable Shares as any Holder of such
Registrable Shares shall request within ten (10) days of receipt of notification
from the Parent of its intention to file such registration statement; PROVIDED,
that the inclusion thereof will not preclude the Parent's use of the
registration form intended to be utilized by the Parent and FURTHER PROVIDED,
that the selling shareholders will agree, if requested by the underwriter, not
to sell those of their Registrable Shares not included in such registration
statement for 180 days following the effective date of the registration
statement; and FURTHER PROVIDED that the foregoing requirements shall not apply
in the event that the Parent proposes to file a registration statement in
connection with (i) any issuance of securities pursuant to any stock option,
stock purchase or other employee benefit plan; or (ii) any issuance of
securities in connection with any business combination, whether by way of
merger, consolidation, purchase of stock or assets or otherwise. If the
Registration Statement under which the Parent gives notice under this Section
12.4 is for an underwritten offering, the Parent shall so advise the Holders of
Registrable Shares. In such event, the right of any such Holder to be included
in a registration pursuant to this Section 12.4 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Shares in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Shares through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the Parent.
Notwithstanding any other provision of this Section 12.4, if the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares to be underwritten, the number of shares that may be included
in the underwriting shall be allocated, first, to the Parent; and second, to the
Holders and any other shareholder of the Parent electing to include shares
therein on a pro rata basis based upon the total number of shares of Parent
Common Stock held by such persons. No such reduction shall reduce the securities
being offered by the Parent for its own account to be included in the
registration and underwriting.
12.5 EXPENSES. The costs and expenses to be borne by Parent for
purposes of this Article XII shall include, without limitation, printing
expenses (including a reasonable number of prospectuses for circulation by the
selling Holders), legal fees and disbursements of counsel for Parent, "blue sky"
expenses, accounting fees and filing fees, but shall not include underwriting
commissions or similar charges, legal fees and disbursements of counsel for the
selling Holders.
12.6 INDEMNIFICATION.
(a) To the extent permitted by law, Parent will indemnify and
hold harmless each Holder, any underwriter (as defined in the Securities Act)
for such Holder, its officers, directors, shareholders or partners and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses,
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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"): (A) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or the Piggyback Registration Statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (B) 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 (C) 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; and Parent will pay to each such Holder (and its officers,
directors, shareholders or partners), underwriter or controlling person, 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
12.6(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; 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 (i) a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in the Registration Statement or
the Piggyback Registration Statement by any such Holder, or (ii) a Violation
that would not have occurred if such Holder had delivered to the purchaser the
version of the Prospectus most recently provided by Parent to the Holder as of
the date of such sale.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless Parent, each of its directors, each of its officers
who has signed the Registration Statement or the Piggyback Registration
Statement, each person, if any, who controls Parent within the meaning of the
Securities Act, any underwriter, any other Holder selling securities pursuant to
the Registration Statement or the Piggyback Registration Statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons 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
(which includes without limitation the failure of the Holder to comply with the
prospectus delivery requirements under the Securities Act, and the failure of
the Holder to deliver the most current prospectus provided by Parent prior to
such sale), 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 Holder expressly for use in the Registration Statement or such
Violation is caused by the Holder's failure to deliver to the purchaser of the
Holder's Registrable Shares a prospectus (or amendment or supplement thereto)
that had been made available to the Holder by Parent; and each such Holder will
pay any legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Section 12.6(b) in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this Section 12.6(b) shall not apply
to amounts paid in
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settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld. The aggregate indemnification and contribution
liability of each Holder under this aggregate indemnification and contribution
liability of each Holder under this Section 12.6(b) shall not exceed the net
proceeds received by such Holder in connection with sale of shares pursuant to
the Registration Statement or the Piggyback Registration Statement.
(c) Each person entitled to indemnification under this Section
12.6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought and shall permit the Indemnifying Party to assume the defense of any such
claim and any litigation resulting therefrom, provided that counsel for the
Indemnifying Party who conducts the defense of such claim or any litigation
resulting therefrom shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may participate
in such defense at such party's expense, and provided further that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 12.6 unless the
Indemnifying Party is materially prejudiced thereby. 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 that 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. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.
(d) To the extent that the indemnification provided for in
this Section 12.6 is held by a court of competent jurisdiction to be unavailable
to an Indemnified Party with respect to any loss, liability, claim, damage or
expense referred to herein, then the Indemnifying Party, in lieu of indemnifying
such Indemnified Party hereunder, shall contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one had and of the Indemnified Party on the other
in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue of alleged untrue statement of a material fact or the
omission or alleged 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.
12.7 PROCEDURES FOR SALE OF SHARES UNDER REGISTRATION STATEMENT.
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(a) NOTICE AND APPROVAL. If any Holder shall propose to sell
any Registrable Shares pursuant to the Registration Statement, it shall notify
Parent of its intent to do so (including the proposed manner and timing of all
sales) at least two (2) full trading days prior to such sale, and the provision
of such notice to Parent shall conclusively be deemed to reestablish and
reconfirm an agreement by such Holder to comply with the registration provisions
set forth in this Agreement. Unless otherwise specified in such notice, such
notice shall be deemed to constitute a representation that any information
previously supplied by such Holder expressly for inclusion in the Registration
Statement (as the same may have been superseded by subsequent such information)
is accurate as of the date of such notice. At any time within such two (2)
trading-day period, Parent may refuse to permit the Holder to resell any
Registrable Shares pursuant to the Registration Statement; provided, however,
that in order to exercise this right, Parent must deliver a certificate in
writing to the Holder to the effect that a delay in such sale is necessary
because a sale pursuant to the Registration Statement in its then-current form
without the addition of material, non-public information about Parent, could
constitute a violation of the federal securities laws. Notwithstanding the
foregoing, Parent will ensure that in any event the Holders shall have at least
twenty (20) trading days (prorated for partial quarters) available to sell
Registrable Shares during each calendar quarter (or portion thereof) from the
Pooling Release Date until the expiration of the applicable Registration
Effective Period.
(b) DELIVERY OF PROSPECTUS. For any offer or sale of any of
the Registrable Shares by a Holder in a transaction that is not exempt under the
Securities Act, the Holder, in addition to complying with any other federal
securities laws, shall deliver a copy of the final prospectus (or amendment of
or supplement to such prospectus) of Parent covering the Registrable Shares in
the form furnished to the Holder by Parent to the purchaser of any of the
Registrable Shares on or before the settlement date for the purchase of such
Registrable Shares.
(c) COPIES OF PROSPECTUSES. Subject to the provisions of this
Section 12.7, when a Holder is entitled to sell and gives notice of its intent
to sell Registrable Shares pursuant to the Registration Statement, Parent shall,
within two (2) trading days following the request, furnish to such Holder a
reasonable number of copies of a supplement to or in amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Shares, such prospectus shall not as of the date
of delivery to the Holder 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
statement therein not misleading or incomplete in the light of the circumstances
then existing.
12.8 TRANSFERABILITY OF REGISTRATION RIGHTS. The rights under this
Article XII are not transferable except (a) a transfer by will or intestacy, (b)
estate planning transfers consisting of gifts to the spouse or issue of the
transferee and transfers to trusts for the benefit of the spouse or issue of the
transferee, (c) a transfer to the constituent partners of a Holder that is a
partnership as part of a pro rata distribution of the shares of Parent Common
Stock held by such partnership so long as all such transferees appoint a single
representative as their attorney-in-fact for the
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purpose of receiving any notices and exercising their rights under this Article
XII, or (d) with the written consent of Parent.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 AMENDMENT. This Agreement may be amended by written agreement
among the Company and the Parent prior to the Effective Time.
13.2 WAIVER OF COMPLIANCE. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant or agreement contained herein may be waived only by a written notice
from the party or parties entitled to the benefits thereof. No failure by any
party hereto to exercise, and no delay in exercising, any right hereunder, shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder preclude any other or future exercise of that right by that
party.
13.3 NOTICES. All notices and other communications hereunder shall
be deemed given if given in writing and delivered personally, by registered or
certified mail, return receipt requested, postage prepaid, or by overnight
courier to the party to receive the same at its respective address set forth
below (or at such other address as may from time to time be designated by such
party to the others in accordance with this Section 13.3):
(a) if to the Company or the Principal Shareholders, to:
Silicon Investor, Inc.
0000 X. 00xx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxx Dryer
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with copies to:
Venture Law Group
A Professional Corporation
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxx Xxx Xxxxx, Esq.
(b) if to the Parent or Acquisition, to:
go2net, Inc.
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx
with copies to:
Xxxxxxxx, Xxxxxxx & Xxxxxxx
A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Xx., Esq.
(c) If to the Representative:
Xxxx Dryer
go2net, Inc.
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
All such notices and communications hereunder shall be deemed given
when received, as evidenced by the signed acknowledgment of receipt of the
person to whom such notice or communication shall have been personally
delivered, the acknowledgment of receipt returned to the sender by the
applicable postal authorities or the confirmation of delivery rendered by the
applicable overnight courier service.
13.4 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors (or, in the case of the Principal Shareholders, their
respective heirs, administrators, executors and personal representatives) and
permitted assigns. Neither this Agreement nor any rights, duties or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other parties hereto, except that vested rights to receive
payment or to initiate legal action
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with respect to causes of action that have accrued hereunder shall be assignable
by devise, descent or operation of law.
13.5 NO THIRD PARTY BENEFICIARIES. Neither this Agreement or any
provision hereof nor any Schedule, certificate or other instrument delivered
pursuant hereto, nor any agreement to be entered into pursuant hereto or any
provision hereof, is intended to create any right, claim or remedy in favor of
any person or entity, other than the parties hereto and their respective
successors (or, in the case of the Principal Shareholders, their respective
heirs, administrators, executors and personal representatives) and permitted
assigns.
13.6 PUBLIC ANNOUNCEMENTS. Promptly upon execution and delivery of
this Agreement, the Parent and the Company shall issue a press release in such
form as they shall mutually agree. Thereafter, and prior to the consummation of
the Merger or the termination of this Agreement, none of the parties hereto
shall, except as mutually agreed by the Parent and the Company, or except as may
be required by law or applicable regulatory authority (including, without
limitation, the rules applicable to Nasdaq SmallCap Market companies), issue any
reports, releases, announcements or other statements to the public relating to
the transactions contemplated hereby.
13.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.8 HEADINGS. The article and section headings contained in this
Agreement are solely for convenience of reference, are not part of the agreement
of the parties and shall not be used in construing this Agreement or in any way
affect the meaning or interpretation of this Agreement.
13.9 ENTIRE AGREEMENT. This Agreement, and the Schedules,
certificates and other instruments and documents delivered pursuant hereto,
together with the other agreements referred to herein and to be entered into
pursuant hereto, embody the entire agreement of the parties hereto in respect
of, and there are no other agreements or understandings, written or oral, among
the parties relating to, the subject matter hereof, other than the
Confidentiality Agreements. This Agreement supersedes all prior agreements and
understandings, written or oral, between the parties with respect to such
subject matter, other than the Confidentiality Agreements.
13.11 GOVERNING LAW. The parties hereby agree that this Agreement,
and the respective rights, duties and obligations of the parties hereunder,
shall be governed by and construed in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law thereunder,
except for the provisions of Article I hereto setting forth the provisions for
consummating, and the effects of, the Merger, which shall be governed by and
construed in accordance with the laws of the State of Delaware. Each of the
parties hereby
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(i) irrevocably consents and agrees that any legal or equitable action or
proceeding arising under or in connection with this Agreement shall be brought
exclusively in the Federal or state courts sitting in Denver, Colorado (prior to
the Effective Time) and in Seattle, Washington (after the Effective Time) and
any court to which an appeal may be taken in any such litigation, and (ii) by
execution and delivery of this Agreement, irrevocably submits to and accepts,
with respect to any such action or proceeding, for itself and in respect of its
properties and assets, generally and unconditionally, the jurisdiction of the
aforesaid courts, and irrevocably waives any and all rights such party may now
or hereafter have to object to such jurisdiction.
* * *
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IN WITNESS WHEREOF, the Parent, Acquisition, the Company and the
Principal Shareholders named below have caused this Agreement to be duly
executed and delivered as of the date first above written.
GO2NET, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
SILICON ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
SILICON INVESTOR, INC.
By: /s/ Xxxx Dryer
--------------------------------------------
Name: Xxxx Dryer
Title:
PRINCIPAL SHAREHOLDERS:
/s/ Xxxx Dryer
------------------------------------------------
Xxxx Dryer
/s/ Xxxxxxx Dryer
------------------------------------------------
Xxxxxxx Dryer
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