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Exhibit 10.1
AGREEMENT AND PLAN OF MERGER AND CONTRIBUTION
BY AND AMONG
CMGI, INC., ADSMART CORPORATION, FLYCAST COMMUNICATIONS CORPORATION
AND
ENGAGE TECHNOLOGIES, INC., AND FCET CORP.
January 19, 2000
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TABLE OF CONTENTS
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ARTICLE I - THE MERGER.........................................................1
1.1 The Merger..........................................................1
1.2 The Merger Closing..................................................1
1.3 Actions at the Merger Closing.......................................1
1.4 Additional Action...................................................2
1.5 Conversion of Shares................................................2
1.6 Dissenting Shares...................................................2
1.7 Fractional Shares...................................................3
1.8 Options.............................................................3
1.9 Conversion of Notes Held by CMGI....................................4
1.10 Conversion of Preferred Stock.......................................4
1.11 Notes...............................................................4
1.12 Certificate of Incorporation and By-laws............................5
1.13 No Further Rights...................................................5
1.14 Closing of Transfer Books...........................................5
ARTICLE II - THE CONTRIBUTION..................................................5
2.1 The Contribution....................................................5
2.2 The Contribution Closing............................................5
2.3 Actions at the Contribution Closing.................................5
2.4 Conversion of Shares................................................5
2.5 Options.............................................................6
2.6 InterStep Escrow....................................................6
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF CMGI...........................7
3.1 Organization, Qualification and Corporate Power.....................7
3.2 Authorization.......................................................7
3.3 Noncontravention....................................................7
3.4 No Broker...........................................................8
3.5 Investment..........................................................8
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF CMGI AND
ADSMART AS TO ADSMART..........................................................8
4.1 Organization, Qualification and Corporate Power.....................8
4.2 Capitalization......................................................9
4.3 Authorization of Transaction........................................9
4.4 Noncontravention...................................................10
4.5 Subsidiaries.......................................................10
4.6 Financial Statements...............................................11
4.7 Absence of Certain Changes.........................................11
4.8 Undisclosed Liabilities............................................12
4.9 Tax Matters........................................................12
4.10 Assets.............................................................13
4.11 Owned Real Property................................................13
4.12 Real Property Leases...............................................13
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4.13 Intellectual Property..............................................13
4.14 Contracts..........................................................14
4.15 Insurance..........................................................16
4.16 Litigation.........................................................16
4.17 Employees..........................................................16
4.18 Employee Benefits..................................................16
4.19 Environmental Matters..............................................18
4.20 Legal Compliance...................................................19
4.21 Permits............................................................19
4.22 Business Activity Restrictions.....................................18
4.23 Year 2000 Compliance...............................................18
4.24 Customers..........................................................21
4.25 Absence of Improper Payments.......................................21
4.26 Brokers' Fees......................................................21
4.27 Proxy Statement....................................................21
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF CMGI AND FLYCAST
AS TO FLYCAST 21
5.1 Flycast Merger Agreement...........................................22
5.2 Capitalization.....................................................22
5.3 Flycast-CMGI Option................................................22
5.4 Non-competition Agreements.........................................22
5.5 Intercompany Balance...............................................22
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF THE BUYER AND
THE TRANSITORY SUBSIDIARY.....................................................23
6.1 Organization, Qualification and Corporate Power....................23
6.2 Capitalization.....................................................23
6.3 Authorization of Transaction.......................................23
6.4 Noncontravention...................................................24
6.5 Reports and Financial Statements...................................24
6.6 Absence of Material Adverse Change.................................25
6.7 Litigation.........................................................25
6.8 Interim Operations of the Transitory Subsidiary....................25
6.9 Brokers' Fees......................................................25
6.10 Proxy Statement....................................................25
ARTICLE VII - COVENANTS.......................................................25
7.1 Closing Efforts....................................................25
7.2 Governmental and Third-Party Notices and Consents..................25
7.3 Operation of Adsmart and Flycast Businesses........................27
7.4 Expenses...........................................................29
7.5 Indemnification....................................................29
7.6 Listing of Merger Shares...........................................30
7.7 Rights Arising From Prior Acquisitions.............................30
7.8 Buyer Management Agreement.........................................29
7.9 Non-Solicitation...................................................29
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ARTICLE VIII - CONDITIONS TO CLOSING..........................................30
8.1 Condition to Each Party's Obligations..............................30
8.2 Conditions to Obligations of the Buyer and the
Transitory Subsidiary..............................................26
8.3 Conditions to Obligations of CMGI and Adsmart......................32
ARTICLE IX - INDEMNIFICATION..................................................32
9.1 Indemnification by CMGI............................................32
9.2 Indemnification Claims.............................................32
9.3 Survival of Representations and Warranties.........................33
9.4 Limitations........................................................33
ARTICLE X - TERMINATION.......................................................35
10.1 Termination of Agreement...........................................35
10.2 Effect of Termination..............................................36
ARTICLE XI -DEFINITIONS.......................................................36
ARTICLE XII - MISCELLANEOUS...................................................39
12.1 Press Releases and Announcements...................................39
12.2 No Third Party Beneficiaries.......................................39
12.3 Entire Agreement...................................................39
12.4 Succession and Assignment..........................................39
12.5 Counterparts Facsimile Signature...................................39
12.6 Headings...........................................................39
12.7 Notices............................................................39
12.8 Governing Law......................................................40
12.9 Amendments and Waivers.............................................40
12.10 Severability.....................................................40
12.11 Construction.....................................................41
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AGREEMENT AND PLAN OF MERGER
Agreement entered into as of January 19, 2000 by and among Engage
Technologies, Inc., a Delaware corporation (the "Buyer"), FCET Corp., a Delaware
corporation and a wholly-owned subsidiary of Buyer (the "Transitory
Subsidiary"), CMGI, Inc., a Delaware corporation ("CMGI"), ADSmart Corporation,
a Delaware corporation ("Adsmart") and Flycast Communications Corporation, a
Delaware corporation ("Flycast"). The Buyer, the Transitory Subsidiary, CMGI and
Adsmart are referred to collectively herein as the "Parties."
This Agreement contemplates (i) a merger of the Transitory Subsidiary into
Adsmart, pursuant to which the stockholders of Adsmart will receive common stock
of Buyer in exchange for their capital stock and (ii) a contribution of all of
the outstanding shares of common stock of Flycast by CMGI to Buyer in exchange
for shares of common stock of Buyer.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary shall merge with and into Adsmart (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Transitory Subsidiary shall cease and Adsmart shall continue as
the surviving corporation in the Merger (the "Surviving Corporation"). The
"Effective Time" shall be the time at which the Surviving Corporation files a
certificate of merger or other appropriate documents prepared and executed in
accordance with Section 251(c) of the Delaware General Corporation Law (the
"Certificate of Merger") with the Secretary of State of the State of Delaware.
The Merger shall have the effects set forth in Section 259 of the Delaware
General Corporation Law.
1.2 THE MERGER CLOSING. The closing of the Merger (the "Merger Closing")
shall take place at the offices of Xxxx and Xxxx LLP in Boston, Massachusetts,
on a date agreed upon by CMGI and Buyer, which shall not be later than three
business days after the satisfaction or waiver of all conditions (excluding the
delivery of any documents to be delivered at the Closing by any of the Parties)
set forth in Article VIII hereof (the "Closing Date"). The Merger Closing shall
take place concurrently with and is conditioned upon the Contribution Closing
(as defined below).
1.3 ACTIONS AT THE MERGER CLOSING. At the Merger Closing:
(a) the Surviving Corporation shall file with the Secretary of State of
the State of Delaware the Certificate of Merger;
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(b) each of the stockholders of record of Adsmart immediately prior to
the Effective Time (the "Adsmart Stockholders") shall deliver to the Buyer the
certificate(s) representing his, her or its Adsmart Shares (as defined below),
and
(c) the Buyer shall deliver certificates for the Merger Shares (as
defined below) to each Adsmart Stockholder in accordance with Section 1.5.
1.4 ADDITIONAL ACTION. The Surviving Corporation may, at any time after the
Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either Adsmart or the Transitory
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
1.5 CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger
and without any action on the part of any Party or the holder of any of the
following securities:
(a) Each share of common stock, $.01 par value per share, of Adsmart
("Adsmart Common Shares") issued and outstanding immediately prior to the
Effective Time (other than Adsmart Common Shares owned beneficially by the Buyer
or the Transitory Subsidiary, Dissenting Shares (as defined below) and Adsmart
Common Shares held in Adsmart's treasury) shall be converted into and represent
the right to receive such number of shares (the "Merger Shares") of common
stock, $.01 par value per share, of the Buyer ("Buyer Common Stock") as is
determined by dividing 5,611,852 by the sum of the number of Adsmart Common
Shares outstanding immediately prior to the Effective Time and the number of
Adsmart Common Shares subject to outstanding Adsmart Options (as defined below)
immediately prior to the Effective Time (the "Conversion Ratio").
(b) The Conversion Ratio shall be subject to equitable adjustment in
the event of any stock split, stock dividend, reverse stock split or similar
event affecting the Buyer Common Stock between the date of this Agreement and
the Effective Time.
(c) Each Adsmart Share held in Adsmart's treasury immediately prior to
the Effective Time and each Adsmart Share owned beneficially by the Buyer or the
Transitory Subsidiary shall be cancelled and retired without payment of any
consideration therefor.
(d) Each share of common stock, $.01 par value per share, of the
Transitory Subsidiary issued and outstanding immediately prior to the Effective
Time shall be converted into and thereafter evidence one share of common stock,
$.01 par value per share, of the Surviving Corporation.
1.6 DISSENTING SHARES.
(a) For purposes of this Agreement, "Dissenting Shares" means Adsmart
Common Shares held as of the Effective Time by an Adsmart Stockholder who has
not voted such Adsmart Common Shares in favor of the adoption of this Agreement
and the Merger and with respect to which appraisal shall have been duly demanded
and perfected in accordance with Section 262 of the Delaware General Corporation
Law and not effectively withdrawn or forfeited prior to the Effective Time.
Dissenting Shares shall not be converted into or represent
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the right to receive shares of Buyer Common Stock in the Merger, unless such
Adsmart Stockholder shall have forfeited his, her or its right to appraisal
under the Delaware General Corporation Law or properly withdrawn, his, her or
its demand for appraisal. If such Adsmart Stockholder has so forfeited or
withdrawn his, her or its right to appraisal of Dissenting Shares, then (i) as
of the occurrence of such event, such holder's Dissenting Shares shall cease to
be Dissenting Shares and shall be converted into and represent the right to
receive the shares of Buyer Common Stock issuable in respect of such Adsmart
Common Shares pursuant to Section 1.5, and (ii) promptly following the
occurrence of such event, the Buyer shall deliver to the holder thereof a
certificate representing shares of Buyer Common Stock to which such holder is
entitled pursuant to Section 1.5.
(b) Adsmart shall give the Buyer (i) prompt notice of any written
demands for appraisal of any Adsmart Common Shares, withdrawals of such demands,
and any other instruments that relate to such demands received by Adsmart and
(ii) the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the Delaware General Corporation Law. Adsmart shall
not, except with the prior written consent of the Buyer, make any payment with
respect to any demands for appraisal of Adsmart Common Shares or offer to settle
or settle any such demands.
1.7 FRACTIONAL SHARES. No certificates or scrip representing fractional
shares shall be issued to former Adsmart Stockholders upon the surrender for
exchange of certificates, and such former Adsmart Stockholders shall not be
entitled to any voting rights, rights to receive any dividends or distributions
or other rights as a stockholder of the Buyer with respect to any fractional
shares that would have otherwise been issued to such former Adsmart
Stockholders. In lieu of any fractional shares that would have otherwise been
issued, each former Adsmart Stockholder that would have been entitled to receive
a fractional share shall, upon proper surrender of such person's certificates,
receive a cash payment equal to the closing price per share of the Buyer Common
Stock on the Nasdaq National Market, as reported by Nasdaq, on the business day
immediately preceding the Closing Date, multiplied by the fraction of a share
that such Adsmart Stockholder would otherwise be entitled to receive.
1.8 OPTIONS.
(a) As of the Effective Time, all options to purchase Adsmart Common
Shares issued by Adsmart pursuant to its stock option plans or otherwise
("Adsmart Options"), whether vested or unvested, shall be assumed by the Buyer.
Immediately after the Effective Time, each Adsmart Option outstanding
immediately prior to the Effective Time shall be deemed to constitute an option
to acquire, on the same terms and conditions as were applicable under such
Adsmart Option at the Effective Time, such number of shares of Buyer Common
Stock as is equal to the number of Adsmart Common Shares subject to the
unexercised portion of such Adsmart Option multiplied by the Conversion Ratio
(with any fraction resulting from such multiplication to be rounded down to the
nearest whole number). The exercise price per share of each such assumed Adsmart
Option shall be equal to the exercise price of such Adsmart Option immediately
prior to the Effective Time, divided by the Conversion Ratio (rounded up to the
nearest whole cent). The term, exercisability, vesting schedule, status as an
"incentive stock
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option" under Section 422 of the Internal Revenue Code of 1986 (as amended, the
"Code"), if applicable, and all of the other terms of Adsmart Options shall
otherwise remain unchanged.
(b) As soon as practicable after the Effective Time, the Buyer or the
Surviving Corporation shall deliver to the holders of Adsmart Options
appropriate notices setting forth such holders' rights pursuant to such Adsmart
Options, as amended by this Section 1.8, and the agreements evidencing such
Adsmart Options shall continue in effect on the same terms and conditions
(subject to the amendments provided for in this Section 1.8 and such notice).
(c) The Buyer shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Buyer Common Stock for delivery upon
exercise of Adsmart Options assumed in accordance with this Section 1.8. As soon
as practicable after the Effective Time (subject to the availability of all
required financial statements), the Buyer shall file a Registration Statement on
Form S-8 (or any successor form) under the Securities Act of 1933 (as amended,
the "Securities Act") with respect to all shares of Buyer Common Stock subject
to such Adsmart Options that may be registered on a Form S-8, and shall use
reasonable efforts to maintain the effectiveness of such Registration Statement
for so long as such Adsmart Options remain outstanding.
1.9 CONVERSION OF NOTES HELD BY CMGI. Prior to the Effective Time, CMGI
shall convert all of the convertible promissory notes of Adsmart held by it into
shares of Series B Convertible Preferred Stock, $.01 par value per share (the
"Adsmart Series B Preferred Stock"), of Adsmart.
1.10 CONVERSION OF PREFERRED STOCK. Prior to the Effective Time, CMGI shall
convert all of its shares of Series A Convertible Preferred Stock, $.01 par
value per share (the "Adsmart Series A Preferred Stock"), and the Adsmart Series
B Preferred Stock (collectively, the "Adsmart Preferred Shares") into Adsmart
Common Shares.
1.11 [Reserved]
1.12 CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) The Certificate of Incorporation of the Surviving Corporation
immediately following the Effective Time shall be the same as the Certificate of
Incorporation of the Transitory Subsidiary immediately prior to the Effective
Time, except that (1) the name of the corporation set forth therein shall be
changed to the name of Adsmart and (2) the identity of the incorporator shall be
deleted.
(b) The By-laws of the Surviving Corporation immediately following the
Effective Time shall be the same as the By-laws of the Transitory Subsidiary
immediately prior to the Effective Time, except that the name of the corporation
set forth therein shall be changed to the name of Adsmart.
1.13 NO FURTHER RIGHTS. From and after the Effective Time, no Adsmart
Common Shares shall be deemed to be outstanding, and holders of certificates
therefor shall cease to have any rights with respect thereto, except as provided
herein or by law.
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1.14 CLOSING OF TRANSFER BOOKS. At the Effective Time, the stock transfer
books of Adsmart shall be closed and no transfer of Adsmart Common Shares shall
thereafter be made.
ARTICLE II
THE CONTRIBUTION
2.1 THE CONTRIBUTION. Upon and subject to the terms and conditions of this
Agreement, CMGI shall contribute to the Buyer all of the outstanding shares of
common stock, $.01 par value, of Flycast ("Flycast Common Stock") in exchange
for shares of Buyer Common Stock, at the Contribution Closing (as defined below)
(the "Contribution"). The Contribution is intended to qualify as a transaction
under Section 351 of the Code.
2.2 THE CONTRIBUTION CLOSING. The closing of the Contribution (the
"Contribution Closing") shall take place concurrently with and is conditioned
upon the Merger Closing. The Contribution Closing and Merger Closing are
referred to collectively as the "Closing."
2.3 ACTIONS AT THE CONTRIBUTION CLOSING. At the Contribution Closing:
(a) CMGI shall deliver to Buyer a stock certificate for all of the then
outstanding shares of Flycast Common Stock; and
(b) Buyer shall deliver a certificate for the Contribution Shares (as
defined below) to CMGI (or any designated subsidiary thereof).
2.4 CONVERSION OF SHARES. At the Contribution Closing, Buyer shall issue to
CMGI 26,886,965 shares of Buyer Common Stock (the "Contribution Shares"). The
number of Contribution Shares shall be subject to equitable adjustment in the
event of any stock split, stock dividend, reverse stock split or similar event
affecting the Buyer Common Stock between the date of this Agreement and the date
of the Contribution Closing.
2.5 OPTIONS. If (i) prior to the Closing any of the employees and
consultants of Flycast holding options to purchase shares of CMGI Common Stock
("Flycast-CMGI Options") elect to exchange, with the consent of CMGI and Buyer,
such options for options to purchase Buyer Common Stock upon terms mutually
acceptable to CMGI and the Buyer or (ii) following the date of this Agreement
any such Flycast-CMGI Options expire unexercised, in whole or in part, CMGI
shall be obligated to deliver to the Buyer a number of shares of Buyer Common
Stock equal to the number of shares of CMGI Common Stock subject to the
exchanged or expired option multiplied by 1.441 (subject to equitable adjustment
for any stock splits or other recapitalizations or exchanges affecting shares of
CMGI Common Stock or Buyer Common Stock), rounded down to the nearest share. In
addition, upon any exercise of a Flycast-CMGI Option that has not been exchanged
for an option to purchase shares of Buyer Common Stock, CMGI shall deliver to
Buyer the amount of the exercise price received by CMGI upon such exercise. If
such exercise price is paid in cash, CMGI shall deliver the amount of such
exercise price to Buyer in cash. If the amount of such exercise price is paid to
CMGI through surrender of shares of CMGI Common Stock or any other method, CMGI
shall deliver the amount of such exercise price in the form of shares of Buyer
Common Stock valued at $77.96 per share (subject to equitable adjustment for any
stock splits, stock dividends or other recapitalizations or
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exchanges affecting such shares). Commencing on the last day of the first fiscal
quarter of CMGI ending after the Closing Date and on the last day of each fiscal
quarter of CMGI thereafter, CMGI shall deliver to the Buyer the shares of Buyer
Common Stock and any exercise price required to be delivered to the Buyer
pursuant to this Section 2.5 for transactions occurring in that quarter. If CMGI
is required to deliver any shares of Buyer Common Stock to Buyer hereunder, it
shall concurrently deliver to Buyer any dividends or distributions received by
it with respect to such shares or any securities into which such shares have
been changed, recapitalized or reclassified. Notwithstanding the foregoing, if
any Flycast-CMGI Option is exercised for shares of CMGI Common Stock after any
merger, consolidation, sale of assets or other similar transaction in which more
than 50% of the outstanding shares of Buyer Common Stock are exchanged for
stock, cash or other property of an acquiring or successor entity (an "Engage
Sale"), then upon such exercise, CMGI shall cause to be delivered to Buyer (or
its successor), in lieu of shares of Buyer Common Stock, the stock, cash or
other property issued in such Engage Sale with respect to the number of shares
of Buyer Common Stock otherwise deliverable by CMGI under this Section 2.5.
2.6 INTERSTEP ESCROW. To the extent that after the Closing, any shares of
CMGI Common Stock held in escrow under the Escrow Agreement dated as of August
30, 1999 by and between Flycast, the representatives of certain shareholders of
InterStep, Inc. ("InterStep") and others are released to Flycast from such
escrow, Flycast shall deliver and transfer all of such shares to CMGI in
exchange for the transfer and delivery by CMGI to Buyer of a number of shares of
Buyer Common Stock equal to the number of shares of CMGI Common Stock so
transferred, multiplied by 1.441 (subject to equitable adjustment for any stock
splits or other recapitalizations or exchanges affecting shares of CMGI Common
Stock or Buyer Common Stock).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CMGI
CMGI represents and warrants to the Buyer that the statements contained in
this Article III are true and correct.
3.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. CMGI is a corporation
duly organized, validly existing and in corporate and tax good standing under
the laws of the State of Delaware. CMGI is duly qualified to conduct business
and is in corporate and tax good standing under the laws of the Commonwealth of
Massachusetts. CMGI has all requisite corporate power and authority to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it.
3.2 AUTHORIZATION. CMGI has all requisite power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery by CMGI of this Agreement and the consummation by CMGI of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of CMGI. This Agreement has been duly
and validly executed and delivered by CMGI and constitutes a valid and binding
obligation of CMGI, enforceable against CMGI in accordance with its terms.
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3.3 NONCONTRAVENTION. Subject to the filing of the Certificate of Merger as
required by the Delaware General Corporation Law, neither the execution and
delivery by CMGI of this Agreement, nor the consummation by CMGI of the
transactions contemplated hereby, will (a) conflict with or violate any
provision of the Certificate of Incorporation or By-laws of CMGI, (b) require on
the part of CMGI any filing with, or any permit, authorization, consent or
approval of, any court, arbitrational tribunal, administrative agency or
commission or other governmental or regulatory authority or agency (a
"Governmental Entity"), (c) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of obligations under, create in any party the right to
terminate, modify or cancel, or require any notice, consent or waiver under, any
contract or instrument to which CMGI is a party or by which CMGI is bound or to
which any of its assets is subject, except for (i) any conflict, breach,
default, acceleration, termination, modification or cancellation which would not
have a CMGI Material Adverse Effect (as defined below) and would not adversely
affect the consummation of the transactions contemplated hereby or (ii) any
notice, consent or waiver the absence of which would not have a CMGI Material
Adverse Effect and would not adversely affect the consummation of the
transactions contemplated hereby, or (d) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to CMGI or any of its properties
or assets. For purposes of this Agreement, "CMGI Material Adverse Effect" means
a material adverse effect on the assets, business, condition (financial or
otherwise), or results of operations of CMGI and its subsidiaries, taken as
whole.
3.4 NO BROKER. None of CMGI, Adsmart or Flycast has entered into any
contract, arrangement or understanding with any person or firm which may result
in the obligation of Adsmart, Flycast or Buyer to pay any fee or commission to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement.
3.5 INVESTMENT. CMGI is acquiring shares of Buyer Common Stock pursuant to
Merger and Contribution for investment and not with a view to the distribution
thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CMGI
AND ADSMART AS TO ADSMART
CMGI and Adsmart represent and warrant to the Buyer that the statements
contained in this Article IV are true and correct, except as set forth in the
disclosure schedule provided by CMGI and Adsmart to the Buyer on the date hereof
and accepted in writing by the Buyer (the "Disclosure Schedule"). The Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article IV, and the disclosures in any
paragraph of the Disclosure Schedule shall qualify other paragraphs in this
Article IV only to the extent it is clear from a reading of the disclosure that
such disclosure is applicable to such other paragraphs. For purposes of this
Article IV, the phrase "to the knowledge of Adsmart" or any phrase of similar
import shall be deemed to refer to matters which the executive officers of
Adsmart actually know.
4.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. Adsmart is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of
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Delaware. Adsmart is duly qualified to conduct business and is in corporate and
tax good standing under the laws of each jurisdiction in which the nature of its
businesses or the ownership or leasing of its properties requires such
qualification, except where the failure to be so qualified or in good standing,
individually or in the aggregate, has not had and would not reasonably be
expected to have an Adsmart Material Adverse Effect (as defined below). Adsmart
has all requisite corporate power and authority to carry on the businesses in
which it is engaged and to own and use the properties owned and used by it.
Adsmart has furnished to the Buyer complete and accurate copies of its Restated
Certificate of Incorporation and Amended and Restated By-laws. For purposes of
this Agreement, "Adsmart Material Adverse Effect" means a material adverse
effect on the assets, business, condition (financial or otherwise) or results of
operations of Adsmart and its Subsidiaries (as defined below), taken as a whole,
excluding any material adverse effect (a) demonstrably shown to have been
proximately caused by the public announcement of this Agreement or any of the
transactions contemplated thereby, or (b) arising or resulting from general
industry, economic or stock market conditions that affect Adsmart (or the
markets in which Adsmart competes) in a manner not disproportionate to the
manner in which such conditions affect other companies in the industries or
markets in which Adsmart competes.
4.2 CAPITALIZATION. The authorized capital stock of Adsmart consists of (a)
160,000,000 Adsmart Common Shares, of which, as of the date of this Agreement,
749,910 shares were issued and outstanding and no shares were held in the
treasury of Adsmart and (b) 15,000,000 Adsmart Preferred Shares, of which (i)
800,000 shares have been designated as Adsmart Series A Preferred Stock, of
which, as of the date of this Agreement, all shares were issued and outstanding
and (ii) 14,200,000 shares have been designated as Adsmart Series B Preferred
Stock, of which, as of the date of this Agreement, none of which shares were
issued and outstanding. Section 4.2 of the Disclosure Schedule sets forth a
complete and accurate list of (i) all stockholders of Adsmart, indicating the
number and class or series of shares held by each stockholder and (for shares
other than Adsmart Common Shares) the number of Adsmart Common Shares (if any)
into which such shares are convertible, (ii) all outstanding Adsmart Options,
indicating (A) the holder thereof, (B) the number and class or series of Adsmart
Shares subject to each Adsmart Option and (for Adsmart Common Shares other than
Common Shares) the number of Adsmart Common Shares (if any) into which such
Adsmart Company Shares are convertible, (C) the exercise price, date of grant,
vesting schedule and expiration date for each Adsmart Option, and (D) any terms
regarding the acceleration of vesting, and (iii) all stock option plans and
other stock or equity-related plans of Adsmart. All of the issued and
outstanding Adsmart Common Shares are, and all Adsmart Common Shares that may be
issued upon exercise of Adsmart Options or Adsmart Warrants will be (upon
issuance in accordance with their terms), duly authorized, validly issued, fully
paid, nonassessable and free of all preemptive rights. Other than Adsmart
Options listed in Section 4.2 of the Disclosure Schedule, there are no
outstanding or authorized options, warrants, rights, agreements or commitments
to which Adsmart is a party or which are binding upon Adsmart providing for the
issuance or redemption of any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect to
Adsmart. There are no agreements to which Adsmart is a party or by which it is
bound with respect to the voting (including without limitation voting trusts or
proxies), registration under the Securities Act, or sale or transfer (including
without limitation agreements relating to pre-emptive rights, rights of first
refusal, co-
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sale rights or "drag-along" rights) of any securities of Adsmart. To the
knowledge of Adsmart, there are no agreements among other parties, to which
Adsmart is not a party and by which it is not bound, with respect to the voting
(including without limitation voting trusts or proxies) or sale or transfer
(including without limitation agreements relating to rights of first refusal,
co-sale rights or "drag-along" rights) of any securities of Adsmart.
4.3 AUTHORIZATION OF TRANSACTION. Adsmart has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by Adsmart of this Agreement and, subject
to the adoption of this Agreement and approval of the Merger by a majority of
the votes represented by the outstanding Adsmart Common Shares entitled to vote
on this Agreement and the Merger ("Adsmart Stockholder Approval"), the
consummation by Adsmart of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of Adsmart.
This Agreement has been duly and validly executed and delivered by Adsmart and
constitutes a valid and binding obligation of Adsmart, enforceable against
Adsmart in accordance with its terms.
4.4 NONCONTRAVENTION. Subject to the filing of the Certificate of Merger as
required by the Delaware General Corporation Law, neither the execution and
delivery by Adsmart of this Agreement, nor the consummation by Adsmart of the
transactions contemplated hereby, will (a) conflict with or violate any
provision of the Restated Certificate of Incorporation or Amended and Restated
By-laws of Adsmart or the charter, By-laws or other organizational document of
any Subsidiary (as defined below), (b) require on the part of Adsmart or any
Subsidiary any filing with, or any permit, authorization, consent or approval
of, any Governmental Entity, (c) conflict with, result in a breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of obligations under, create in any party the
right to terminate, modify or cancel, or require any notice, consent or waiver
under, any contract or instrument to which Adsmart or any Subsidiary is a party
or by which Adsmart or any Subsidiary is bound or to which any of their assets
is subject, except for (i) any conflict, breach, default, acceleration,
termination, modification or cancellation which would not have an Adsmart
Material Adverse Effect and would not adversely affect the consummation of the
transactions contemplated hereby or (ii) any notice, consent or waiver the
absence of which would not have an Adsmart Material Adverse Effect and would not
adversely affect the consummation of the transactions contemplated hereby, (d)
result in the imposition of any Security Interest (as defined below) upon any
assets of Adsmart or any Subsidiary or (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Adsmart, any Subsidiary or any
of their properties or assets. For purposes of this Agreement: "Security
Interest" means any mortgage, pledge, security interest, encumbrance, charge or
other lien (whether arising by contract or by operation of law), other than (i)
mechanic's, materialmen's, and similar liens, (ii) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation, and (iii) liens on goods in transit incurred pursuant to
documentary letters of credit, in each case arising in the Ordinary Course of
Business (as defined below) of Adsmart and not material to Adsmart; and
"Ordinary Course of Business" means the ordinary course of Adsmart's business,
consistent with past custom and practice.
4.5 SUBSIDIARIES.
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(a) Section 4.5 of the Disclosure Schedule sets forth: (i) the name of
each corporation, partnership, joint venture or other entity in which Adsmart
has, directly or indirectly, an equity interest representing 50% or more of the
capital stock thereof or other equity interests therein (individually, a
"Subsidiary" and, collectively, the "Subsidiaries"); (ii) the number and type of
outstanding equity securities of each Subsidiary and a list of the holders
thereof; (iii) the jurisdiction of organization of each Subsidiary; (iv) the
names of the officers and directors of each Subsidiary; and (v) the
jurisdictions in which each Subsidiary is qualified or holds licenses to do
business as a foreign corporation.
(b) Each Subsidiary is a corporation duly organized, validly existing
and in corporate and tax good standing under the laws of the jurisdiction of its
incorporation. Each Subsidiary is duly qualified to conduct business and is in
corporate and tax good standing under the laws of each jurisdiction in which the
nature of its businesses or the ownership or leasing of its properties requires
such qualification, except where the failure to be so qualified or in good
standing, individually or in the aggregate, has not had and would not reasonably
be expected to have an Adsmart Material Adverse Effect. Each Subsidiary has all
requisite power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. Adsmart has delivered to
the Buyer complete and accurate copies of the charter, By-laws or other
organizational documents of each Subsidiary. No Subsidiary is in default under
or in violation of any provision of its charter, By-laws or other organizational
documents. All of the issued and outstanding shares of capital stock of each
Subsidiary are duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. All shares of each Subsidiary that are held of record
or owned beneficially by either Adsmart or any Subsidiary are held or owned free
and clear of any restrictions on transfer (other than restrictions under the
Securities Act and state securities laws), claims, Security Interests, options,
warrants, rights, contracts, calls, commitments, equities and demands. There are
no outstanding or authorized options, warrants, rights, agreements or
commitments to which Adsmart or any Subsidiary is a party or which are binding
on any of them providing for the issuance, disposition or acquisition of any
capital stock of any Subsidiary. There are no outstanding stock appreciation,
phantom stock or similar rights with respect to any Subsidiary. There are no
voting trusts, proxies or other agreements or understandings with respect to the
voting of any capital stock of any Subsidiary.
(c) Adsmart does not control directly or indirectly or have any direct
or indirect equity participation or similar interest in any corporation,
partnership, limited liability company, joint venture, trust or other business
association which is not a Subsidiary.
4.6 FINANCIAL STATEMENTS. Adsmart has provided to the Buyer (a) the
unaudited consolidated balance sheets and statements of income, changes in
stockholders' equity and cash flows of Adsmart as of and for each of the last
two fiscal years; and (b) the unaudited consolidated balance sheet and
statements of income, changes in stockholders' equity and cash flows as of and
for the three months ended as of October 31, 1999 (the "Most Recent Balance
Sheet Date") (collectively, the "Adsmart Financial Statements"). Prior to the
Closing, Adsmart shall provide to the Buyer the audited financial statements
shown on Section 4.6 of the Disclosure Schedule (the "Adsmart Audited Financial
Statements"), which shall include an audited balance sheet of Adsmart as of
October 31, 1999 (the "Most Recent Audited Balance Sheet"). Any Adsmart Audited
Financial Statements (i) shall be prepared in accordance with
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generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the period presented (except with respect to the notes to such
financial statements) and (ii) shall fairly present the consolidated financial
position of Adsmart and its Subsidiaries as of such dates and the consolidated
results of its operations and cash flows for the periods indicated, except for
the interim financial statements shall be subject to the normal and recurring
year and adjustments which are not expected to be material in amount.
4.7 ABSENCE OF CERTAIN CHANGES. Since the Most Recent Balance Sheet Date,
(a) there has occurred no event or development which has had, or could
reasonably be expected to have in the future, an Adsmart Material Adverse
Effect, and (b) neither Adsmart nor any Subsidiary has taken any of the actions
set forth in paragraphs (a) through (l) of Section 7.3.
4.8 UNDISCLOSED LIABILITIES. None of Adsmart and its Subsidiaries has any
liability (whether known or unknown, whether absolute or contingent, whether
liquidated or unliquidated and whether due or to become due), except for (a)
liabilities shown on the Most Recent Audited Balance Sheet, (b) liabilities
which have arisen since the date of the Most Recent Audited Balance Sheet (the
"Most Recent Audited Balance Sheet Date") in the Ordinary Course of Business and
(c) contractual and other liabilities incurred in the Ordinary Course of
Business which are not required by GAAP to be reflected on a balance sheet.
4.9 TAX MATTERS.
(a) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "Taxes" means all taxes, charges, fees, levies or other
similar assessments or liabilities, including without limitation income, gross
receipts, ad valorem, premium, value-added, excise, real property, personal
property, sales, use, transfer, withholding, employment, unemployment insurance,
social security, business license, business organization, environmental, workers
compensation, payroll, profits, license, lease, service, service use, severance,
stamp, occupation, windfall profits, customs, duties, franchise and other taxes
imposed by the United States of America or any state, local or foreign
government, or any agency thereof, or other political subdivision of the United
States or any such government, and any interest, fines, penalties, assessments
or additions to tax resulting from, attributable to or incurred in connection
with any tax or any contest or dispute thereof.
(ii) "Tax Returns" means all reports, returns, declarations,
statements or other information required to be supplied to a taxing authority in
connection with Taxes.
(b) Each of Adsmart and the Subsidiaries has filed on a timely basis
all Tax Returns that it was required to file, and all such Tax Returns were
correct and accurate, except for any errors and omissions that would not,
individually or in the aggregate, have an Adsmart Material Adverse Effect. Each
of Adsmart and the Subsidiaries has paid on a timely basis all Taxes that were
due and payable. The unpaid Taxes of Adsmart and the Subsidiaries for tax
periods through the Most Recent Balance Sheet Date do not exceed in any material
respect the accruals and reserves for Taxes (excluding accruals and reserves for
deferred Taxes established
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to reflect timing differences between book and Tax income) set forth on the Most
Recent Balance Sheet. All Taxes that Adsmart or any Subsidiary is or was
required by law to withhold or collect have been duly withheld or collected and,
to the extent required, have been paid to the proper Governmental Entity.
(c) No examination or audit of any Tax Return of Adsmart or any
Subsidiary by any Governmental Entity is currently in progress or, to the
knowledge of Adsmart, threatened or contemplated. Neither Adsmart nor any
Subsidiary has waived any statute of limitations with respect to Taxes or agreed
to an extension of time with respect to a Tax assessment or deficiency.
4.10 ASSETS. Each of Adsmart and the Subsidiaries owns or leases all
tangible assets necessary for the conduct of its businesses as presently
conducted and as presently proposed to be conducted. Each such tangible asset is
free from material defects, has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear) and is suitable for the purposes for which it presently is used.
No asset of Adsmart or any Subsidiary (tangible or intangible) is subject to any
Security Interest.
4.11 OWNED REAL PROPERTY. Neither Adsmart nor or any Subsidiary currently
owns or, to the knowledge of Adsmart, has ever owned any real property.
4.12 REAL PROPERTY LEASES. Section 4.12 of the Disclosure Schedule lists
all real property leased or subleased to or by Adsmart or any Subsidiary. With
respect to each lease and sublease listed in Section 4.12 of the Disclosure
Schedule:
(a) the lease or sublease is legal, valid, binding, enforceable and in
full force and effect;
(b) the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect immediately prior to the Closing;
and
(c) neither Adsmart nor any Subsidiary nor, to the knowledge of
Adsmart, any other party, is in breach or violation of, or default under, any
such lease or sublease, and no event has occurred, is pending or, to the
knowledge of Adsmart, is threatened, which, after the giving of notice, with
lapse of time, or otherwise, would constitute a material breach or default by
Adsmart or any Subsidiary or, to the knowledge of Adsmart, any other party under
such lease or sublease.
4.13 INTELLECTUAL PROPERTY.
(a) Adsmart and its Subsidiaries own, or are licensed or otherwise
posses legally enforceable rights to use, without any obligation to make any
fixed or contingent payments, including any royalty payments, all patents,
trademarks, trade names, domain names, service marks and copyrights, any
applications for and registrations of such patents, trademarks, trade names,
domain names, service marks and copyrights, and all processes, formulae,
methods, schematics, technology, know-how, computer software programs or
applications and tangible or
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intangible proprietary information or material that are used or necessary to
conduct the business of Adsmart and its Subsidiaries as currently conducted or
as presently proposed to be conducted, except any whose absence would not have
an Adsmart Material Adverse Effect (the "Adsmart Intellectual Property Rights").
(b) The execution and delivery of this Agreement and consummation of
the Merger and the other transactions contemplated hereby will not result in the
breach of, or create on behalf of any third party the right to terminate, modify
or enter into any material license, sublicense or other agreement relating to
the Adsmart Intellectual Property Rights, or any license, sublicense and other
agreement as to which Adsmart or any of its Subsidiaries is a party and pursuant
to which Adsmart or any of its Subsidiaries is authorized to use any third party
patents, trademarks, copyrights or trade secrets, including software that is
used in the manufacture of, incorporated in, or forms a part of any product or
service sold by or expected to be sold by Adsmart or any of its Subsidiaries.
(c) All patents, registered trademarks, service marks and copyrights
which are held by Adsmart or any of its Subsidiaries and which are material to
the business of Adsmart and its Subsidiaries, taken as a whole, are valid and
subsisting. Adsmart and its Subsidiaries have taken reasonable measures to
protect the proprietary nature of the Adsmart Intellectual Property Rights that
are material to the business of Adsmart and its Subsidiaries, taken as a whole,
and to maintain in confidence all trade secrets and confidential information
owned or used by Adsmart or any of its Subsidiaries and that are material to the
business of Adsmart and its Subsidiaries, taken as a whole. To the knowledge of
Adsmart, no other person or entity is infringing, violating or misappropriating
any of Adsmart Intellectual Property Rights and none of the activities or
business previously or currently conducted by Adsmart or any of the Subsidiaries
infringes, violates or constitutes a misappropriation of, any patents,
trademarks, trade names, service marks and copyrights or any processes,
formulae, methods, schematics, technology, know-how, computer software programs
or applications and tangible or intangible proprietary information or material
of any other person or entity, except for any infringement, violation or
misappropriation that would not have an Adsmart Material Adverse Effect. Neither
Adsmart nor any of its Subsidiaries has received any written complaint, claim or
notice alleging any such infringement, violation or misappropriation.
4.14 CONTRACTS.
(a) Section 4.14 of the Disclosure Schedule lists the following
agreements (written or oral) to which Adsmart or any Subsidiary is a party as of
the date of this Agreement:
(i) any agreement (or group of related agreements) for the lease of
personal property from or to third parties providing for lease payments in
excess of $250,000 per annum or having a remaining term longer than twelve (12)
months;
(ii) any agreement (or group of related agreements) for the
purchase or sale of products or for the furnishing or receipt of services (A)
which calls for performance over a period of more than one year or (B) which
involves more than the sum of $250,000 (other than (x) campaign insertion orders
with customers of Adsmart entered into in the ordinary course of
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business and (y) standard representation agreements, which agreements have been
made available to Buyer and the standard form of which is provided in Section
4.14 of the Disclosure Schedule);
(iii) any agreement establishing a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it
has created, incurred, assumed or guaranteed (or may create, incur, assume or
guarantee) indebtedness (including capitalized lease obligations) involving more
than $250,000 or under which it has imposed (or may impose) a Security Interest
on any of its assets, tangible or intangible;
(v) any agreement concerning noncompetition or containing terms
that stipulate Adsmart must sell its products and services to such other person
on the most advantageous terms that Adsmart sells products or services to any
other person;
(vi) any employment or consulting agreement;
(vii) any agreement involving any officer or director of Adsmart;
(viii) any agreement under which the consequences of a default or
termination would reasonably be expected to have an Adsmart Material Adverse
Effect;
(b) Except for the agreements listed in Section 4.13 or Section 4.14 of
the Disclosure Schedule, neither Adsmart nor any of its Subsidiaries is a party
to or bound by any other agreement which would have to be disclosed in an annual
report on Form 10-K pursuant to Item 601 of SEC Regulation S-K if Adsmart were
subject to the reporting requirements under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
(c) Section 4.14 of the Disclosure Schedule sets forth (i) a complete
list of each contract or agreement to which Adsmart or any of its Subsidiaries
is a party or bound with CMGI or any majority-owned subsidiary of CMGI (other
than any subsidiary which is a direct, wholly-owned Subsidiary of Adsmart) which
resulted in revenue or expenses of Adsmart of more than $100,000 for the year
ended July 31, 1999, and (ii) the revenue recognized by Adsmart on a
consolidated basis for the year ended July 31, 1999 and the three months ended
October 31, 1999 as a result of such contract or agreement. Except as disclosed
in Section 4.14 of the Disclosure Schedule, neither Adsmart nor any of its
Subsidiaries has entered into any transaction with any officer, director or
other affiliate (other than any Subsidiary which is a direct, wholly-owned
Subsidiary of Adsmart) that would be subject to proxy statement disclosure
pursuant to Item 404 of SEC Regulation S-K if Adsmart were subject to the
reporting requirements under the Exchange Act.
(d) Adsmart has made available to the Buyer a complete and accurate
copy of each agreement listed in Section 4.13 or Section 4.14 of the Disclosure
Schedule. With respect to each agreement so listed: (i) the agreement is legal,
valid, binding and enforceable and in full force and effect; (ii) the agreement
will continue to be legal, valid, binding and enforceable and in full force and
effect immediately following the Closing in accordance with the terms thereof
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as in effect immediately prior to the Closing; and (iii) neither Adsmart nor any
Subsidiary nor, to the knowledge of Adsmart, any other party, is in material
breach or violation of, or material default under, any such agreement, and no
event has occurred, is pending or, to the knowledge of Adsmart, is threatened,
which, after the giving of notice, with lapse of time, or otherwise, would
constitute a material breach or default by Adsmart or any Subsidiary or, to the
knowledge of Adsmart, any other party under such contract.
4.15 INSURANCE. Section 4.15 of the Disclosure Schedule lists each
insurance policy (including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product liability and
automobile insurance policies and bond and surety arrangements) to which Adsmart
or any Subsidiary is a party. Such insurance policies are of the type and in
amounts customarily carried by organizations conducting businesses or owning
assets similar to those of Adsmart and the Subsidiaries. There is no material
claim pending under any such policy as to which coverage has been questioned,
denied or disputed by the underwriter of such policy.
4.16 LITIGATION. As of the date of this Agreement, there is no action,
suit, proceeding, claim, arbitration or investigation before any Governmental
Entity or before any arbitrator (a "Legal Proceeding") which is pending or, to
the knowledge of Adsmart, threatened in writing against Adsmart or any
Subsidiary which (a) could reasonably be expected to have an Adsmart Material
Adverse Effect or (b) in any manner challenges or seeks to prevent, enjoin,
alter or delay the transactions contemplated by this Agreement. There are no
judgments, orders or decrees outstanding against Adsmart or any of its
Subsidiaries.
4.17 EMPLOYEES.
(a) Section 4.17 of the Disclosure Schedule contains a list of all
employees of Adsmart and each Subsidiary whose annual rate of compensation
exceeds $75,000 per year, along with the position and the annual rate of
compensation of each such person. Each such employee has entered into a
confidentiality/assignment of inventions agreement with Adsmart or a Subsidiary,
a copy of which has previously been delivered to the Buyer. To the knowledge of
Adsmart, no officer or other key employee or group of employees has any plans to
terminate employment with Adsmart or any Subsidiary.
(b) Neither Adsmart nor any Subsidiary is a party to or bound by any
collective bargaining agreement, nor has any of them experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes. Adsmart has no knowledge of any organizational effort made or
threatened, either currently or within the past two years, by or on behalf of
any labor union with respect to employees of Adsmart or any Subsidiary.
4.18 EMPLOYEE BENEFITS.
(a) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "Employee Benefit Plan" means any "employee pension benefit
plan" (as defined in Section 3(2) of ERISA), any "employee welfare benefit plan"
(as defined in
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Section 3(1) of ERISA), and any other written or oral plan, agreement or
arrangement involving direct or indirect compensation, including without
limitation insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation.
(ii) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(iii) "ERISA Affiliate" means any entity which is, or at any
applicable time was, a member of (1) a controlled group of corporations (as
defined in Section 414(b) of the Code), (2) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or (3) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes or included
Adsmart or a Subsidiary.
(b) Section 4.18(b) of the Disclosure Schedule contains a complete and
accurate list of all Employee Benefit Plans maintained, or contributed to, by
Adsmart, any Subsidiary or any ERISA Affiliate. Each Employee Benefit Plan has
been administered in all material respects in accordance with its terms and each
of Adsmart, the Subsidiaries and the ERISA Affiliates has in all material
respects met its obligations with respect to such Employee Benefit Plan and has
made all required contributions thereto. Adsmart, each Subsidiary, each ERISA
Affiliate and each Employee Benefit Plan are in compliance in all material
respects with the currently applicable provisions of ERISA and the Code and the
regulations thereunder.
(c) There are no Legal Proceedings (except claims for benefits payable
in the normal operation of the Employee Benefit Plans and proceedings with
respect to qualified domestic relations orders) against or involving any
Employee Benefit Plan or asserting any rights or claims to benefits under any
Employee Benefit Plan that could give rise to any material liability.
(d) There are no unfunded obligations under any Employee Benefit Plan
providing benefits after termination of employment to any employee of Adsmart or
any Subsidiary (or to any beneficiary of any such employee), including but not
limited to retiree health coverage and deferred compensation, but excluding
continuation of health coverage required to be continued under Section 4980B of
the Code or other applicable law and insurance conversion privileges under state
law. The assets of each Employee Benefit Plan which is funded are reported at
their fair market value on the books and records of such Employee Benefit Plan.
(e) No act or omission has occurred and no condition exists with
respect to any Employee Benefit Plan maintained by Adsmart, any Subsidiary or
any ERISA Affiliate that would subject Adsmart, any Subsidiary or any ERISA
Affiliate to any material fine, penalty, tax or liability of any kind imposed
under ERISA or the Code.
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(f) Section 4.18(f) of the Disclosure Schedule discloses each: (i)
agreement with any stockholder, director, executive officer or other key
employee of Adsmart or any Subsidiary (A) the benefits of which are contingent,
or the terms of which are materially altered, upon the occurrence of a
transaction involving Adsmart or any Subsidiary of the nature of any of the
transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such director, executive
officer or key employee; (ii) agreement, plan or arrangement under which any
person may receive payments from Adsmart or any Subsidiary that may be subject
to the tax imposed by Section 4999 of the Code or included in the determination
of such person's "parachute payment" under Section 280G of the Code; and (iii)
agreement or plan binding Adsmart or any Subsidiary, including without
limitation any stock option plan, stock appreciation right plan, restricted
stock plan, stock purchase plan, severance benefit plan or Employee Benefit
Plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
(g) All of the Employee Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Employee Benefit Plans are
qualified and the plans and trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended or operated since
the date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would adversely affect its
qualification or materially increase its cost.
4.19 ENVIRONMENTAL MATTERS.
(a) To the knowledge of Adsmart, each of Adsmart and the Subsidiaries
has complied with all applicable Environmental Laws (as defined below), except
for violations of Environmental Laws that, individually or in the aggregate,
have not had and would not reasonably be expected to have an Adsmart Material
Adverse Effect. There is no pending or, to the knowledge of Adsmart, threatened
civil or criminal litigation, written notice of violation, formal administrative
proceeding, or investigation, inquiry or information request by any Governmental
Entity, relating to any Environmental Law involving Adsmart or any Subsidiary.
For purposes of this Agreement, "Environmental Law" means any federal, state or
local law, statute, rule or regulation or the common law relating to the
environment, including without limitation any statute, regulation,
administrative decision or order pertaining to (i) treatment, storage, disposal,
generation and transportation of industrial, toxic or hazardous materials or
substances or solid or hazardous waste; (ii) air, water and noise pollution;
(iii) groundwater and soil contamination; (iv) the release or threatened release
into the environment of industrial, toxic or hazardous materials or substances,
or solid or hazardous waste, including without limitation emissions, discharges,
injections, spills, escapes or dumping of pollutants, contaminants or chemicals;
(v) the protection of wild life, marine life and wetlands, including without
limitation all endangered and threatened species; (vi) storage tanks, vessels,
containers, abandoned or
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discarded barrels, and other closed receptacles; and (vii) manufacturing,
processing, using, distributing, treating, storing, disposing, transporting or
handling of materials regulated under any law as pollutants, contaminants, toxic
or hazardous materials or substances or oil or petroleum products or solid or
hazardous waste. As used above, the terms "release" and "environment" shall have
the meaning set forth in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA").
(b) To the knowledge of Adsmart, there have been no releases of any
Materials of Environmental Concern (as defined below) into the environment at
any parcel of real property or any facility formerly or currently owned,
operated or controlled by Adsmart or a Subsidiary. For purposes of this
Agreement, "Materials of Environmental Concern" means any chemicals, pollutants
or contaminants, hazardous substances (as such term is defined under CERCLA),
solid wastes and hazardous wastes (as such terms are defined under the Resource
Conservation and Recovery Act), toxic materials, oil or petroleum and petroleum
products or any other material subject to regulation under any Environmental
Law.
4.20 LEGAL COMPLIANCE. Each of Adsmart and the Subsidiaries, and the
conduct and operations of their respective businesses, are in compliance with
each applicable law (including rules and regulations thereunder) of any federal,
state, local or foreign government, or any Governmental Entity, except for any
violations or defaults that, individually or in the aggregate, have not had and
would not reasonably be expected to have an Adsmart Material Adverse Effect.
4.21 PERMITS. Section 4.21 of the Disclosure Schedule sets forth a list of
all permits, licenses, registrations, certificates, orders or approvals from any
Governmental Entity (including without limitation those issued or required under
Environmental Laws and those relating to the occupancy or use of owned or leased
real property) ("Permits") issued to or held by Adsmart or any Subsidiary. Such
listed Permits are the only Permits that are required for Adsmart and the
Subsidiaries to conduct their respective businesses as presently conducted or as
proposed to be conducted, except for those the absence of which, individually or
in the aggregate, have not had and would not reasonably be expected to have an
Adsmart Material Adverse Effect. Each such Permit is in full force and effect
and, to the knowledge of Adsmart, no suspension or cancellation of such Permit
is threatened and there is no basis for believing that such Permit will not be
renewable upon expiration. Each such Permit will continue in full force and
effect immediately following the Closing.
4.22 BUSINESS ACTIVITY RESTRICTIONS. There is no non-competition or other
similar agreement, commitment, judgement, injunction or order to which Adsmart
or any Subsidiary of Adsmart is a party or subject to that has or could
reasonably be expected to have the effect of prohibiting or impairing the
conduct of the business by Adsmart in any material respect. Adsmart has not
entered into any agreement under which it is restricted in any material respect
from selling, licensing or otherwise distributing any of its technology or
products, or providing services to customers or potential customers or any class
of customers, in any geographic area, during any period of time or any segment
of the market or line of business.
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4.23 YEAR 2000 COMPLIANCE.
(a) Adsmart has conducted "year 2000" audits with respect to (i) all of
the internal systems of Adsmart and each of its Subsidiaries used in the
business or operations of Adsmart or any of its Subsidiaries, including, without
limitation, computer hardware systems, software applications, firmware,
equipment firmware and other embedded systems, and (ii) the software, hardware,
firmware and other technology which constitute part of the products and services
marketed or sold by Adsmart or any of its Subsidiaries or licensed by Adsmart or
any of its Subsidiaries to third parties. Adsmart has obtained "year 2000"
certificates with respect to all material third-party systems used in connection
with the business or operations of Adsmart and its Subsidiaries.
(b) All of (i) the material internal systems of Adsmart and each of its
Subsidiaries used in the business or operations of Adsmart or any of its
Subsidiaries, as the case may be, including, without limitation, computer
hardware systems, software applications, firmware, equipment containing embedded
microchips and other embedded systems, and (ii) the software, hardware, firmware
and other technology which constitute part of the products and services marketed
or sold by Adsmart or any of its Subsidiaries or licensed by Adsmart or any of
its Subsidiaries to third parties are Year 2000 Compliant.
(c) Adsmart has no knowledge of any failure to be Year 2000 Compliant
of any material third-party system used in connection with the business or
operations of Adsmart and its Subsidiaries.
(d) For purposes of this Agreement, "Year 2000 Compliant" means that
the applicable system or item:
(i) accurately receives, records, stores, provides, recognizes and
processes all date and time data from, during, into and between the twentieth
and twenty-first centuries, the years 1999 and 2000 and all leap years;
(ii) accurately performs all date-dependent calculations and
operations (including, without limitation, mathematical operations, sorting,
comparing and reporting) from, during, into and between the twentieth and
twenty-first centuries, the years 1999 and 2000 and all leap years; and
(iii) does not malfunction, cease to function or provide invalid or
incorrect results as a result of (x) the change of years from 1999 to 2000 or
from 2000 to 2001, (y) date data, including date data which represents or
references different centuries, different dates during 1999 and 2000, or more
than one century or (z) the occurrence of any particular date;
in each case without human intervention, other than original data entry;
provided, in each case, that all applications, hardware and other systems used
in conjunction with such system or item which are not owned or licensed by
Adsmart or any of its Subsidiaries correctly exchange date data with or provide
data to such system or item.
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(e) Neither Adsmart nor any of its Subsidiaries has provided any
guarantee or warranty for any product sold or licensed, or service provided, by
Adsmart or any Subsidiary to the effect that such product or service (i)
complies with or accounts for the fact of the arrival of the year 2000, (ii)
will not be adversely affected with respect to functionality, interoperability,
performance or volume capacity (including, without limitation, the processing
and reporting of data) by virtue of the arrival of the year 2000 or (iii) is
otherwise Year 2000 Compliant.
4.24 CUSTOMERS. Section 4.24 of the Disclosure Schedule lists the ten (10)
customers from which Adsmart derived the greatest amount of revenue on a
consolidated basis during the year ended July 31, 1999, and during the three
months ended October 31 1999 and the amount of revenue attributable to each. No
customer of Adsmart or any of its Subsidiaries that represented 5% or more of
Adsmart's consolidated revenues in the year ended July 31, 1999 or the three
months ended October 31, 1999 has indicated to Adsmart or any of its
Subsidiaries that it will stop, or decrease the rate of, buying products or
services for Adsmart or any of its Subsidiaries.
4.25 ABSENCE OF IMPROPER PAYMENTS. Neither Adsmart nor any of its
Subsidiaries (a) has made any contributions, payments or gifts of its property
to or for the private use of any governmental official, employee or agent where
either the payment or the purpose of such contribution, payments or gift is
illegal under the laws of the United States, any state thereof or any other
jurisdiction (foreign or domestic); (b) has established or maintained any
unrecorded fund or asset for any purpose, or has any purpose, or has made any
false or artificial entries on its books or records for any reason; (c) has made
any payments to any person with the intention or understanding that any part of
such payment was to be used for any other purpose other than that described in
the documents supporting the payment; or (d) has made any contribution, or has
reimbursed any political gift or contribution made by any other person, to
candidates for public office, whether Federal, state or local, where such
contribution would be in violation of applicable law.
4.26 BROKERS' FEES. Neither Adsmart nor any Subsidiary has any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
4.27 PROXY STATEMENT. The information to be supplied by CMGI and Adsmart
for inclusion in the Proxy Statement (as defined in Section 7.2(b)) shall not at
the time the Proxy Statement is first mailed to stockholders of Buyer and at the
time of the meeting of Buyer's stockholders to vote upon the transactions
contemplated hereby contain any untrue statement of a material fact or omit to
state any material fact required to be stated in the Proxy Statement or
necessary in order to make the statements in the Proxy Statement not misleading.
If at any time prior to the Closing any event relating to CMGI or Adsmart should
be discovered by CMGI or Adsmart which should be set forth in a supplement to
the Proxy Statement, CMGI shall promptly so inform the Buyer.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CMGI AND FLYCAST
AS TO FLYCAST
CMGI and Flycast represent and warrant to the Buyer as follows:
5.1 FLYCAST MERGER AGREEMENT. CMGI has provided to Buyer true and complete
copies of (i) the Agreement and Plan of Merger by and among CMGI, Freemont
Corporation and Flycast, dated as of September 29, 1999 (the "Flycast Merger
Agreement"), (ii) the Disclosure Schedules pertaining to the Flycast Merger
Agreement and any amendment or supplement thereto, and (iii) the officers'
certificate delivered pursuant to Section 7.2(a) of the Flycast Merger
Agreement. For purposes of this Article V, the phrase "to the knowledge of
Flycast" or any phrase of similar import shall be deemed to refer to matters
which the executive officers of Flycast actually know. The Merger Agreement is
in full force and effect, and CMGI has not waived any breaches or defaults by
Flycast thereunder. To the knowledge of Flycast, all of the representations and
warranties made by Flycast in Article III of the Flycast Merger Agreement are
true and correct (except as set forth in the Disclosure Schedule delivered by
Flycast to CMGI, a copy of which has been provided to Buyer).
5.2 CAPITALIZATION. At the Contribution Closing, CMGI will have good and
marketable title to all of the outstanding shares of Flycast Common Stock and
will have the full right, power and authority to sell, transfer, convey, assign
and deliver to Buyer at the Contribution Closing all of such outstanding shares
of Flycast Common Stock. At the Contribution Closing, Buyer will acquire from
CMGI good and marketable title to all of such shares of Flycast Common Stock,
free and clear of all Security Interests other than those created or arising by
reason of any action of the Buyer. At the Contribution Closing, there will be no
outstanding options, warrants, rights, agreements, obligations or commitments
providing for the issuance, disposition or acquisition of any shares of capital
stock of Flycast, or any securities exercisable for, or convertible into, shares
of capital stock of Flycast. At the Contribution Closing, there will be no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to Flycast, and there will be no agreements, voting trusts, proxies
or understandings with respect to the voting, or registration under the
Securities Act, of any capital stock of Flycast.
5.3 FLYCAST-CMGI OPTIONS. As of January 13, 2000, there are outstanding
Flycast-CMGI Options, held by the individuals and in the amounts shown on
Section 5.3 of the Disclosure Schedule.
5.4 NON-COMPETITION AGREEMENTS. CMGI has delivered to Buyer true and
complete copies of those certain non-competition agreements between current and
former employees of Flycast and CMGI executed in connection with Flycast Merger
Agreement (the "Flycast Non-competition Agreements").
5.5 INTERCOMPANY BALANCE. From the closing under the Flycast Merger
Agreement to the date hereof, CMGI has not withdrawn any cash from the accounts
of Flycast. As of the Closing Date, the aggregate amount of the cash and cash
equivalents of Flycast and the
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intercompany payable from CMGI to Flycast shall not be less than the amount of
cash and cash equivalents of Flycast as of the date of this Agreement, less any
amounts expended by Flycast in the ordinary course of business.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF
THE BUYER AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary represents and warrants to
CMGI and Adsmart as follows:
6.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. Each of the Buyer and
the Transitory Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation. The Buyer is
duly qualified to conduct business and is in corporate and tax good standing
under the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except where
the failure to be so qualified or in good standing would not have a Buyer
Material Adverse Effect (as defined below). The Buyer has all requisite
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. For purposes of this
Agreement, "Buyer Material Adverse Effect" means a material adverse effect on
the assets, business, condition (financial or otherwise) or results of
operations prospects of the Buyer and its subsidiaries, taken as a whole,
excluding any material adverse effect (a) demonstrably shown to have been
proximately caused by the public announcement of this Agreement or any of the
transactions contemplated thereby, (b) attributable to any legal proceeding
brought by or on behalf of stockholders of Buyer alleging that the Board of
Directors of Buyer breached its fiduciary duties in connection with its approval
of this Agreement and the transaction contemplated hereby, or (c) arising or
resulting from general industry, economic or stock market conditions that affect
Buyer (or the markets in which the Buyer competes) in a manner not
disproportionate to the manner in which such conditions affect other companies
in the industries or markets in which Buyer competes.
6.2 CAPITALIZATION. The authorized capital stock of the Buyer consists of
(a) 150,000,000 shares of Buyer Common Stock, of which 48,762,837 shares were
issued and outstanding as of November 30, 1999, and (b) 5,000,000 shares of
Preferred Stock, $.01 par value per share, of which no shares are issued or
outstanding. All of the issued and outstanding shares of Buyer Common Stock are
duly authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights. All of the Merger Shares and Contribution Shares
(collectively, the "Transaction Shares") will be, when issued in accordance with
this Agreement, duly authorized, validly issued, fully paid, nonassessable and
free of all preemptive rights.
6.3 AUTHORIZATION OF TRANSACTION. Each of the Buyer and the Transitory
Subsidiary has all requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and thereunder. The execution
and delivery by the Buyer and the Transitory Subsidiary of this Agreement and,
subject to the adoption of this Agreement and the approval of the Merger by the
stockholders of Buyer in accordance with the requirements of the Nasdaq National
Market (the "Engage Stockholder Approval"), the consummation by the Buyer
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and the Transitory Subsidiary of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of the
Buyer and Transitory Subsidiary, respectively. This Agreement has been duly and
validly executed and delivered by the Buyer and the Transitory Subsidiary and
constitutes a valid and binding obligation of the Buyer and the Transitory
Subsidiary, enforceable against them in accordance with its terms.
6.4 NONCONTRAVENTION. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Exchange Act and the filing of the Certificate of Merger as required by the
Delaware General Corporation Law, neither the execution and delivery by the
Buyer or the Transitory Subsidiary of this Agreement, nor the consummation by
the Buyer or the Transitory Subsidiary of the transactions contemplated hereby
or thereby, will (a) conflict with or violate any provision of the charter or
By-laws of the Buyer or the Transitory Subsidiary, (b) require on the part of
the Buyer or the Transitory Subsidiary any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, (c) conflict
with, result in breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of obligations under,
create in any party any right to terminate, modify or cancel, or require any
notice, consent or waiver under, any contract or instrument to which the Buyer
or the Transitory Subsidiary is a party or by which either is bound or to which
any of their assets are subject, except for (i) any conflict, breach, default,
acceleration, termination, modification or cancellation which would not have a
Buyer Material Adverse Effect or adversely affect the consummation of the
transactions contemplated hereby or (ii) any notice, consent or waiver the
absence of which would not have a Buyer Material Adverse Effect or adversely
affect the consummation of the transactions contemplated hereby, or (d) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Buyer or the Transitory Subsidiary or any of their properties or assets.
6.5 REPORTS AND FINANCIAL STATEMENTS. The Buyer has previously furnished or
made available to CMGI and Adsmart complete and accurate copies, as amended or
supplemented, and all reports filed by the Buyer under Section 13 or subsections
(a) or (c) of Section 14 of the Exchange Act with the Securities Exchange
Commission (collectively, the "Buyer Reports"). The Buyer Reports constitute all
of the documents required to be filed by the Buyer under Section 13 or
subsections (a) or (c) of Section 14 of the Exchange Act with the SEC through
the date of this Agreement. The Buyer Reports complied as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder when filed. As of their respective dates, the Buyer
Reports 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 financial statements (if any) and unaudited interim
financial statements of the Buyer included in the Buyer Reports (i) complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto when filed, (ii)
were prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby (except as may be indicated therein or in the notes
thereto, and in the case of quarterly financial statements, as permitted by Form
10-Q under the Exchange Act), (iii) fairly present the consolidated financial
condition, results of operations and cash flows of the Buyer as of the
respective dates thereof and for the periods referred to therein, and (iv) are
consistent with the books and records of the Buyer.
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6.6 ABSENCE OF MATERIAL ADVERSE CHANGE. Since October 31, 1999, there has
occurred no event or development which has had, or could reasonably be expected
to have in the future, a Buyer Material Adverse Effect.
6.7 LITIGATION. Except as disclosed in the Buyer Reports there is no Legal
Proceeding which is pending or has been, to the knowledge of Buyer, threatened
against the Buyer or any subsidiary of the Buyer which (a) could reasonably be
expected to have a Buyer Material Adverse Effect or (b) in any manner challenges
or seeks to prevent, enjoin, alter or delay the transactions contemplated by
this Agreement.
6.8 INTERIM OPERATIONS OF THE TRANSITORY SUBSIDIARY. The Transitory
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has engaged in no business activities other
than as contemplated by this Agreement.
6.9 BROKERS' FEES. Neither the Buyer nor the Transitory Subsidiary has any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
6.10 PROXY STATEMENT. The information in the Proxy Statement (as defined in
Section 7.2(b)) (except for information supplied by CMGI, Adsmart or Flycast for
inclusion in the Proxy Statement, as to which the Buyer makes no representation)
shall not at the time the Proxy Statement is first mailed to stockholders of
Buyer and at the time of the meeting of Buyer's stockholders to vote upon the
transactions contemplated hereby contain any untrue statement of a material fact
or omit to state any material fact required to be stated in the Proxy Statement
or necessary in order to make the statements in the Proxy Statement not
misleading. If at any time prior to the Closing any event relating to the Buyer
should be discovered by the Buyer which should be set forth in a supplement to
the Proxy Statement, the Buyer shall promptly so inform CMGI.
ARTICLE VII
COVENANTS
7.1 CLOSING EFFORTS. Each of the Parties shall use its best efforts, to the
extent commercially reasonable ("Reasonable Best Efforts"), to take all actions
and to do all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement.
7.2 GOVERNMENTAL AND THIRD-PARTY NOTICES AND CONSENTS.
(a) Each Party shall use its Reasonable Best Efforts to obtain, at its
expense, all waivers, permits, consents, approvals or other authorizations from
Governmental Entities, and to effect all registrations, filings and notices with
or to Governmental Entities, as may be required for such Party to consummate the
transactions contemplated by this Agreement and to otherwise comply with all
applicable laws and regulations in connection with the consummation of the
transactions contemplated by this Agreement.
(b) The Buyer shall use its Reasonable Best Efforts to obtain, as
promptly as practicable, the Engage Stockholder Approval at a special meeting of
stockholders. In
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connection with such special meeting of stockholders, the Buyer shall provide to
its stockholders a written proxy or information statement (the "Proxy
Statement") which complies with the requirements of the Exchange Act.
(c) The Board of Directors of the Buyer shall recommend that the
stockholders of the Buyer vote in favor of the issuance of its shares to CMGI
pursuant to the Merger and Contribution, which recommendation shall be supported
by the special committee of the directors of the Buyer who are not directors or
executive officers of or otherwise affiliated with CMGI (the "Special
Committee").
(d) With respect to the stockholder approval of the issuance of Buyer
shares to CMGI pursuant to the Merger and Contribution, CMGI agrees as follows:
(i) Until the termination of this Agreement in accordance with the
terms hereof, at any meeting of the stockholders of the Buyer, however called,
and in any action by written consent of the stockholders of the Buyer, CMGI
shall vote, or cause to be voted, all shares of Buyer stock beneficially owned
by CMGI (the "CMGI Buyer Shares") in favor of the issuance of Buyer shares to
CMGI pursuant to the Merger and Contribution. CMGI shall be present, in person
or by proxy, at any such meeting so that all CMGI Buyer Shares may be counted
for the purpose of determining the presence of a quorum at such meeting.
(ii) Until the termination of this Agreement in accordance with the
terms hereof, CMGI will not directly or indirectly, (1) sell, assign, transfer
(including by merger or otherwise by operation of law), pledge, encumber or
otherwise dispose of any of CMGI Buyer Shares owned by CMGI, or (2) deposit any
of such shares into a voting trust or enter into a voting agreement or
arrangement with respect to such shares or grant any proxy or power of attorney
with respect thereto which is inconsistent with this Agreement, unless in each
case the transferee first executes an instrument, in form and substance
reasonably acceptable to the Buyer, whereby such transferee agrees to be bound
by the terms of this subsection (d).
(e) With respect to Adsmart Stockholder Approval:
(i) Adsmart shall use its Reasonable Best Efforts to obtain, as
promptly as possible, the Adsmart Stockholder Approval at a special meeting of
stockholders or in an action by written consent of stockholders.
(ii) Until the termination of this Agreement in accordance with the
terms hereof, CMGI will not directly or indirectly, (1) except as set forth on
Schedule 7.2(e)(ii) of the Disclosure Schedule, sell, assign, transfer
(including by merger or otherwise by operation of law), pledge, encumber or
otherwise dispose of any of Adsmart Common Shares owned by CMGI, or (2) deposit
any of such shares into a voting trust or enter into a voting agreement or
arrangement with respect to such shares or grant any proxy or power of attorney
with respect thereto which is inconsistent with this Agreement, unless in each
case the transferee first executes an instrument, in form and substance
reasonably acceptable to the Buyer, whereby such transferee agrees to be bound
by the terms of this subsection (e).
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(iii) Until the termination of this Agreement in accordance with
the terms hereof, if required by law or requested by the Buyer, at any meeting
of the stockholders of Adsmart, however called, or in any action by written
consent of the stockholders of Adsmart, CMGI shall vote, or cause to be voted,
all shares of Adsmart common stock beneficially owned by CMGI (the "CMGI Adsmart
Shares") in favor of the adoption and approval of this Agreement and the Merger.
CMGI shall be present, in person or by proxy, at any such meeting of Adsmart
stockholders so that all CMGI Adsmart Shares may be counted for the purpose of
determining the presence of a quorum at such meeting.
7.3 OPERATION OF ADSMART AND FLYCAST BUSINESSES. Except as expressly
contemplated by this Agreement, during the period from the date of this
Agreement to the Closing, each of Adsmart and Flycast shall (and shall cause
each of its Subsidiaries to) conduct its operations in the Ordinary Course of
Business and in compliance with all applicable laws and regulations and, to the
extent consistent therewith, use its Reasonable Best Efforts to preserve intact
its current business organization, keep its physical assets in good working
condition, keep available the services of its current officers and employees and
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall not be
impaired in any material respect. With respect to Flycast, "Ordinary Course of
Business" shall mean the ordinary course of Flycast's business, consistent with
past custom and practice. Without limiting the generality of the foregoing,
prior to the Effective Time, each of Adsmart and Flycast shall not (and shall
cause each of its Subsidiaries not to), without the written consent of the
Buyer, which shall not be unreasonably withheld:
(a) except as set forth on Section 7.3 of the Disclosure Schedule,
issue or sell, or redeem or repurchase, any of its stock or other securities or
any rights, warrants or options to acquire any such stock or other securities
(except pursuant to the conversion or exercise of convertible securities or
Adsmart Options outstanding on the date hereof), or amend any of the terms of
(including without limitation the vesting of) any such convertible securities or
Adsmart Options;
(b) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock;
(c) create, incur or assume any indebtedness for borrowed money
(including obligations in respect of capital leases), other than indebtedness
which either does not exceed $100,000 in the aggregate or is converted into
Adsmart Common Shares prior to the Effective Time; assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity; or make any loans,
advances or capital contributions to, or investments in, any other person or
entity;
(d) acquire, sell, lease, license or dispose of any assets or property
(including without limitation any shares or other equity interests in or
securities of any Subsidiary or any corporation, partnership, association or
other business organization or division thereof), other than purchases and sales
of assets in the Ordinary Course of Business;
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(e) mortgage or pledge any of its property or assets;
(f) amend its charter, by-laws or other organizational documents;
(g) change in any material respect its accounting methods, principles
or practices, except insofar as may be required by a generally applicable change
in GAAP;
(h) make or commit to make any capital expenditure in excess of
$250,000 per item or $4,000,000 in the aggregate;
(i) institute, compromise or settle any Legal Proceeding;
(j) enter into an agreement with respect to any merger, consolidation,
liquidation or business combination, or any acquisition or disposition of all or
substantially all of its assets or securities or any of its Subsidiaries;
(k) issue or sell any of its (or its Subsidiaries') debt securities or
warrants or other rights to acquire any debt securities, guarantee any debt
securities of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing;
(l) (A) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the Ordinary
Course of Business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, its
most recent consolidated financial statements (or the notes thereto)(to the
extent so reflected or reserved against) or incurred thereafter in the Ordinary
Course of Business, or (B) waive any material benefits of any confidentiality,
standstill or similar agreements to which it or any of its Subsidiaries is a
party;
(m) modify, amend or terminate any material contract or agreement to
which it or any of its Subsidiaries is party, or knowingly waive, release or
assign any material rights or claims (including any write-off or other
compromise of any of its (or its Subsidiaries') accounts receivable);
(n) except in the Ordinary Course of Business, (A) enter into any
material contract or agreement or (B) license any material intellectual property
rights to or from any third party;
(o) except as required to comply with applicable law or agreements,
plans or arrangements existing on the date hereof, (A) adopt, enter into,
terminate or amend any employment, severance or similar agreement or benefit
plan described in Section 4.18 of this Agreement or Section 3.13 of the Flycast
Merger Agreement, as the case maybe, for the benefit or welfare of any current
or former director, officer or employee or any collective bargaining agreement,
(B) increase in any respect the compensation or fringe benefits of, or pay any
bonus to, any director, officer or key employee, (C) accelerate the payment,
right to payment or vesting of any compensation or benefits, including any
outstanding options or restricted stock awards,
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(D) pay any benefit not provided for as of the date of this Agreement under any
benefit plan, (E) grant any awards under any bonus, incentive, performance or
other compensation plan or arrangement or benefit plan (including the grant of
stock options, stock appreciation rights, stock based or stock related wards,
performance units or restricted stock, or the removal of existing restrictions
in any benefit plans or agreements or awards made thereunder), or (F) take any
action other than in the Ordinary Course of Business to fund or in any other way
secure the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or benefit plan;
(p) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in (i) any of the representations and warranties of Adsmart set forth in
this Agreement becoming untrue or (ii) any of the conditions to the Merger set
forth in Article 8.2 not being satisfied; or
(q) agree in writing or otherwise to take any of the foregoing actions.
7.4 EXPENSES. Each of the Parties shall bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
7.5 INDEMNIFICATION.
(a) The Buyer shall comply fully with the provisions of Section 6.13 of
the Flycast Merger Agreement relating to the indemnification of former directors
of Flycast.
(b) From and after the Effective Time, Buyer agrees that it will, and
will cause the Surviving Corporation to, indemnify and hold harmless each
present and former director and officer of Adsmart (the "Adsmart Indemnified
Parties"), against any costs or expenses (including attorneys' fees), judgments,
fines, losses, claims, damages, liabilities or amounts paid in settlement
incurred in connection with any claim, action, suit, proceedings or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent permitted under Delaware law (and Buyer and the
Surviving Corporation shall also advance expenses as incurred to the fullest
extent permitted under applicable law, provided the Adsmart Indemnified Party to
whom expenses are advanced provides an undertaking to repay such advances if it
is ultimately determined that such Adsmart Indemnified Party is not entitled to
indemnification). The provisions of this Section 7.5(b) are intended to be an
addition to the rights otherwise available to the current officers and directors
of Adsmart by law, charter, statute, bylaw or agreement, and shall operate for
the benefit of, and shall be enforceable by, each of the Adsmart Indemnified
Parties, their heirs and their representatives.
7.6 LISTING OF MERGER SHARES. The Buyer shall use its best efforts to list
the Merger Shares and the Contribution Shares on the Nasdaq National Market.
7.7 RIGHTS ARISING FROM PRIOR ACQUISITIONS.
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(a) Effective as of the Effective Time, CMGI hereby releases any and
all claims that it or any of its Subsidiaries may have against Flycast arising
out of the Flycast Merger Agreement and the transactions contemplated thereby.
Effective as of the Effective Time, CMGI hereby assigns to the Buyer, to the
extent assignable, any and all claims that it or any of its Subsidiaries may
have against any party other than Flycast arising out of the Flycast Merger
Agreement and the transactions contemplated thereby.
(b) Effective as of the Effective Time, CMGI hereby assigns to the
Buyer, to the extent assignable, any and all claims that it or any of its
Subsidiaries may have against 2Can or any other party arising out of the
Agreement and Plan of Merger, dated as of February 10, 1999, among CMGI, 2Can
Acquisition Corporation, 2Can Media, Inc. and certain stockholders of 2Can Media
(the "2Can Merger Agreement"), including without limitation, to the extent
assignable, CMGI's claims to indemnification under the 2Can Merger Agreement.
7.8 BUYER MANAGEMENT AGREEMENT. CMGI and the Buyer shall amend that certain
Management Agreement between them such that effective as of the Effective Time
Adsmart, Flycast and their respective subsidiaries shall receive from CMGI the
same management services that CMGI provides to the Buyer, which services shall
be provide on the same terms that apply to the Buyer as of the date of this
Agreement.
7.9 NON-SOLICITATION. For a period of eighteen (18) months after the date
of this Agreement, CMGI shall not, and shall use reasonable efforts to cause its
majority-owned Subsidiaries not to, solicit the employment of any employee of
Adsmart or Flycast, other than as a result of a general solicitation not
directed specifically to employees of Adsmart or Flycast.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 CONDITION TO EACH PARTY'S OBLIGATIONS. The respective obligations of
each Party to consummate the Transactions are subject to the satisfaction of the
following conditions:
(a) the Engage Stockholder Approval shall have been obtained;
(b) the Adsmart Stockholder Approval shall remain in full force and
effect;
(c) the Merger Shares and Contribution Shares shall have been
authorized for listing on the Nasdaq National Market upon official notice of
issuance; and
(d) No Government Entity of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any order, executive order, stay,
decree judgment or injunction (each an "Order") or statute, rule or regulation
which is in effect and which has the effect of making the Merger or the
Contribution illegal or otherwise prohibiting consummation of the Merger or the
Contribution.
8.2 CONDITIONS TO OBLIGATIONS OF THE BUYER AND THE TRANSITORY SUBSIDIARY.
The obligation of each of the Buyer and the Transitory Subsidiary to consummate
the Transactions is subject to the satisfaction (or waiver by the Buyer) of the
following additional conditions:
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(a) all outstanding convertible promissory notes of Adsmart held by
CMGI shall have been converted into Adsmart Series B Preferred Stock;
(b) all outstanding Adsmart Preferred Shares shall have converted into
Adsmart Common Shares;
(c) the number of Dissenting Shares shall not exceed 3% of the number
of outstanding Adsmart Common Shares as of the Effective Time;
(d) Adsmart and the Subsidiaries shall have obtained (and shall have
provided copies thereof to the Buyer) all of the waivers, permits, consents,
approvals or other authorizations, and effected all of the registrations,
filings and notices, referred to in Section 4.4 which are required on the part
of Adsmart or the Subsidiaries, except for any the failure of which to obtain or
effect would not have an Adsmart Company Material Adverse Effect or a material
adverse effect on the ability of the Parties to consummate the transactions
contemplated by this Agreement;
(e) the representations and warranties set forth in Articles III, IV
and V of this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing as though made as of the Closing, except to the
extent that such representations and warranties are specifically made as of a
particular date (in which case such representations and warranties should be
true and correct as of such date) and except for any failures to be true and
correct (without regard to any materiality, material adverse effect or knowledge
qualification contained therein) that would not have a material adverse effect
on the ability of the Parties to consummate the transactions contemplated by
this Agreement, an Adsmart Material Adverse Effect or a "Company Material
Adverse Effect" (as defined in the Flycast Merger Agreement) and the Buyer shall
have received a certificate signed on behalf of the Company, Adsmart and Flycast
by an executive officer of CMGI, Adsmart and Flycast, respectively, to such
effect;
(f) each of CMGI, Adsmart and Flycast shall have performed or complied
with in all material respects its agreements and covenants required to be
performed or complied with under this Agreement as of or prior to the Closing;
(g) The Adsmart Audited Financial Statements shall have been delivered
to the Buyer and the revenue, net income (loss) and stockholders' equity
reflected in the Adsmart Audited Financial Statements shall not differ from the
same line items reflected in the Adsmart Financial Statements as of the same
dates and for the same periods in a manner that would have an Adsmart Material
Adverse Effect; and
(h) there shall have been no Company Material Adverse Effect (as
defined above) from the date of the Flycast Closing to the date of the
Contribution Closing.
8.3 CONDITIONS TO OBLIGATIONS OF CMGI AND ADSMART. The obligations of CMGI
and Adsmart to consummate the Transactions is subject to the satisfaction of the
following additional conditions:
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(a) the representations and warranties of the Buyer and the Transitory
Subsidiary set forth in this Agreement shall be true and correct, as of the date
of this Agreement and as of the Closing as though made as of the Closing, except
to the extent such representations and warranties are specifically made as of a
particular date (in which case such representations and warranties shall be true
and correct as of such date) and except for failures to be true and correct
(without regard to any materiality, material adverse effect or knowledge
qualification contained therein) that would not have a material adverse effect
on the ability of the Parties to consummate the transactions contemplated by
this Agreement or a Buyer Material Adverse Effect and CMGI shall have received a
certificate signed on behalf of the Buyer by an executive officer of the Buyer
to such effect ; and
(b) each of the Buyer and the Transitory Subsidiary shall have
performed or complied with in all material respects its agreements and covenants
required to be performed or complied with under this Agreement as of or prior to
the Closing.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY CMGI. CMGI shall indemnify the Buyer in respect of,
and hold it harmless against, any and all debts, obligations and other
liabilities (whether absolute, accrued, contingent, fixed or otherwise, or
whether known or unknown, or due or to become due or otherwise), monetary
damages, fines, fees, penalties, interest obligations, deficiencies, losses and
expenses (including without limitation amounts paid in settlement, interest,
court costs, costs of investigators, reasonable fees and expenses of attorneys,
accountants, financial advisors and other experts, and other reasonable expenses
of litigation) ("Damages") incurred by the Surviving Corporation or the Buyer
resulting from, relating to or constituting any breach by CMGI or Adsmart of any
representation, warranty or covenant set forth in Articles III or IV or, solely
as to Adsmart, Article VII of this Agreement, net of any insurance proceeds
collectible by the Surviving Corporation or the Buyer with respect thereto.
9.2 INDEMNIFICATION CLAIMS.
(a) A party entitled, or seeking to assert rights, to indemnification
under this Article IX (an "Indemnified Party") shall give written notification
to the party from whom indemnification is sought (an "Indemnifying Party") of
the commencement of any suit or proceeding relating to a third party claim for
which indemnification pursuant to this Article IX may be sought. Such
notification shall be given within 20 business days after receipt by the
Indemnified Party of notice of such suit or proceeding, and shall describe in
reasonable detail (to the extent known by the Indemnified Party) the facts
constituting the basis for such suit or proceeding and the amount of the claimed
damages; provided, however, that no delay on the part of the Indemnified Party
in notifying the Indemnifying Party shall relieve the Indemnifying Party of any
liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within 20 days after
delivery of such notification, the Indemnifying Party may, upon written notice
thereof to the Indemnified Party, assume control of the defense of such suit or
proceeding with counsel reasonably satisfactory to the Indemnified Party
provided that the Indemnifying Party in such notice acknowledges that any Damage
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resulting therefrom is subject to the provisions of this Article IX. If the
Indemnifying Party does not so assume control of such defense, the Indemnified
Party shall control such defense. The party not controlling such defense (the
"Non-controlling Party") may participate therein at its own expense. The party
controlling such defense (the "Controlling Party") shall keep the
Non-controlling Party advised of the status of such suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
Non-controlling Party with respect thereto. The Non-controlling Party shall
furnish the Controlling Party with such information as it may have with respect
to such suit or proceeding (including copies of any summons, complaint or other
pleading which may have been served on such party and any written claim, demand,
invoice, billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Controlling Party in the defense of such
suit or proceeding. The Indemnifying Party shall not agree to any settlement of,
or the entry of any judgment arising from, any such suit or proceeding without
the prior written consent of the Indemnified Party, which shall not be
unreasonably withheld or delayed; provided that the consent of the Indemnified
Party shall not be required if the Indemnifying Party agrees in writing to pay
any amounts payable pursuant to such settlement or judgment and such settlement
or judgment includes a complete release of the Indemnified Party from further
liability and has no other adverse effect on the Indemnified Party. The
Indemnified Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such suit or proceeding without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld or
delayed.
(b) In order to seek indemnification under this Article IX, an
Indemnified Party shall give written notification (a "Claim Notice") to the
Indemnifying Party which contains (i) a description and the amount (the "Claimed
Amount") of any Damages incurred or reasonably expected to be incurred by the
Indemnified Party, (ii) a statement that the Indemnified Party is entitled to
indemnification under this Article IX for such Damages and a reasonable
explanation of the basis therefor, and (iii) a demand for payment (in the manner
provided in paragraph (c) below) in the amount of such Damages.
(c) Within 20 days after delivery of a Claim Notice, the Indemnifying
Party shall deliver to the Indemnified Party a written response (the "Response")
in which the Indemnifying Party shall: (i) agree that the Indemnified Party is
entitled to receive all of the Claimed Amount (in which case the Response shall
be accompanied by a payment by the Indemnifying Party to the Indemnified Party
of the Claimed Amount, by check or by wire transfer, (ii) agree that the
Indemnified Party is entitled to receive part, but not all, of the Claimed
Amount (the "Agreed Amount") (in which case the Response shall be accompanied by
a payment by the Indemnifying Party to the Indemnified Party of the Agreed
Amount, by check or by wire transfer, or (iii) dispute that the Indemnified
Party is entitled to receive any of the Claimed Amount. If the Indemnifying
Party in the Response disputes its liability for all or part of the Claimed
Amount, the Indemnifying Party and the Indemnified Party shall follow the
procedures set forth in Section 9.2(d) for the resolution of such dispute (a
"Dispute").
(d) During the 60-day period following the delivery of a Response that
reflects a Dispute, the Indemnifying Party and the Indemnified Party shall use
good faith efforts to resolve the Dispute. If the Dispute is not resolved within
such 60-day period, the Indemnifying Party and the Indemnified Party shall
discuss in good faith the submission of the
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Dispute to a mutually acceptable alternative dispute resolution procedure (which
may be non-binding or binding upon the parties, as they agree in advance) (the
"ADR Procedure"). In the event the Indemnifying Party and the Indemnified Party
agree upon an ADR Procedure, such parties shall, in consultation with the chosen
dispute resolution service (the "ADR Service"), promptly agree upon a format and
timetable for the ADR Procedure, agree upon the rules applicable to the ADR
Procedure, and promptly undertake the ADR Procedure. The provisions of this
Section 9.2(d) shall not obligate the Indemnifying Party and the Indemnified
Party to pursue an ADR Procedure or prevent either such party from pursuing the
Dispute in a court of competent jurisdiction; provided that, if the Indemnifying
Party and the Indemnified Party agree to pursue an ADR Procedure, neither the
Indemnifying Party nor the Indemnified Party may commence litigation or seek
other remedies with respect to the Dispute prior to the completion of such ADR
Procedure. Any ADR Procedure undertaken by the Indemnifying Party and the
Indemnified Party shall be considered a compromise negotiation for purposes of
federal and state rules of evidence, and all statements, offers, opinions and
disclosures (whether written or oral) made in the course of the ADR Procedure by
or on behalf of the Indemnifying Party, the Indemnified Party or the ADR Service
shall be treated as confidential and, where appropriate, as privileged work
product. Such statements, offers, opinions and disclosures shall not be
discoverable or admissible for any purposes in any litigation or other
proceeding relating to the Dispute (provided that this sentence shall not be
construed to exclude from discovery or admission any matter that is otherwise
discoverable or admissible). The fees and expenses of any ADR Service used by
the Indemnifying Party and the Indemnified Party shall be shared equally by the
Indemnifying Party and the Indemnified Party.
9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties in Articles III and IV of this Agreement shall survive the Closing
and shall expire on the date one year following the Closing Date. All other
representations and warranties in this Agreement shall expire upon the Closing,
except that the representation and warranty in Section 5.2 shall survive
indefinitely. If an Indemnified Party delivers to an Indemnifying Party, before
expiration of a representation or warranty, either a Claim Notice based upon a
breach of such representation or warranty, or a notice that, as a result a legal
proceeding instituted by or written claim made by a third party, the Indemnified
Party reasonably expects to incur Damages as a result of a breach of such
representation or warranty (an "Expected Claim Notice"), then such
representation or warranty shall survive until, but only for purposes of, the
resolution of the matter covered by such notice.
9.4 LIMITATIONS.
(a) Notwithstanding anything to the contrary herein, the aggregate
liability of CMGI, for Damages under this Article IX shall not exceed
$437,500,000, and CMGI shall not be liable under this Article IX unless and to
the extent that the aggregate Damages for which it would otherwise be liable
exceed $10,000,000. In no event shall CMGI have any liability for any incidental
or consequential damages claimed by Buyer or any third party. If the Damages
indemnified against under this Article IX do not involve the payment of cash by
the Indemnified Party to a third party, the Indemnifying Party may elect to
satisfy any indemnification claim with respect to such Damages by transferring
to the Indemnified Party shares of Buyer Common
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Stock (valued at $77.96 per share, subject to equitable adjustment for stock
splits, stock dividends, recapitalizations and other similar events affecting
such shares).
(b) Notwithstanding anything to the contrary in this Agreement, if any
facts or circumstances giving rise to a claim for indemnification under this
Agreement also serve as a basis for a claim by the Surviving Corporation
pursuant to the indemnification provisions of the 2Can Merger Agreement, the
Surviving Corporation shall take reasonable steps to exhaust its remedies under
the 2Can Merger Agreement before seeking to recover any amounts under this
Article IX, and any amounts collected pursuant to the 2Can Merger Agreement
shall be offset against any Damages otherwise indemnified against hereunder.
(c) Except with respect to claims based on fraud, after the Closing,
the rights of the Buyer under this Article IX shall be the exclusive remedy of
the Buyer with respect to claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement contained in this Agreement.
(d) CMGI shall not have any right of contribution against Adsmart or
the Surviving Corporation with respect to any breach by Adsmart of any of its
representations, warranties, covenants or agreements in this Agreement.
ARTICLE X
TERMINATION
10.1 TERMINATION OF AGREEMENT. The Parties may terminate this Agreement
prior to the Closing (whether before or after the Engage Stockholder Approval),
as provided below:
(a) the Parties may terminate this Agreement by mutual written consent;
(b) the Buyer may terminate this Agreement by giving written notice to
CMGI in the event CMGI, Adsmart or Flycast is in breach of any representation,
warranty or covenant contained in this Agreement, and such breach, individually
or in combination with any other such breach, (i) would cause the conditions set
forth in clauses (e) or (f) of Section 8.2 not to be satisfied and (ii) is not
cured within 20 days following delivery by the Buyer to CMGI of written notice
of such breach;
(c) CMGI may terminate this Agreement by giving written notice to the
Buyer in the event the Buyer or the Transitory Subsidiary is in breach of any
representation, warranty or covenant contained in this Agreement, and such
breach, individually or in combination with any other such breach, (i) would
cause the conditions set forth in clauses (a) or (b) of Section 8.3 not to be
satisfied and (ii) is not cured within 20 days following delivery by CMGI to the
Buyer of written notice of such breach;
(d) any Party may terminate this Agreement by giving written notice to
the other Parties at any time after the Buyer stockholders have voted on whether
to approve the Merger and the Contribution in the event the Merger and the
Contribution failed to receive the Engage Stockholder Approval;
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(e) any Party may terminate this Agreement if a Governmental Entity of
competent jurisdiction shall have issued a nonappealable final order, decree or
ruling or taken any other nonappealable final action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the Merger
or the Contribution;
(f) the Buyer may terminate this Agreement by giving written notice to
Adsmart if the Closing shall not have occurred on or before August 30, 2000 by
reason of the failure of any condition precedent under Section 8.1 or 8.2 hereof
(unless the failure results primarily from a breach by the Buyer or the
Transitory Subsidiary of any representation, warranty or covenant contained in
this Agreement); or
(g) CMGI may terminate this Agreement by giving written notice to the
Buyer and the Transitory Subsidiary if the Closing shall not have occurred on or
before August 30, 2000 by reason of the failure of any condition precedent under
Section 8.1 or 8.3 hereof (unless the failure results primarily from a breach by
CMGI, Adsmart or Flycast of any representation, warranty or covenant contained
in this Agreement).
10.2 EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant
to Section 10.1, all obligations of the Parties hereunder shall terminate
without any liability of any Party to any other Party (except for any liability
of any Party for willful breaches of this Agreement).
ARTICLE XI
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is defined
in the Section of this Agreement indicated below.
DEFINED TERM SECTION
------------ -------
2Can Merger Agreement 1.11(b)
ADR Procedure 9.2(d)
ADR Service 9.2(d)
Adsmart Introduction
Adsmart Audited Financial Statements 4.6
Adsmart Common Shares 1.5(a)
Adsmart Financial Statements 4.6
Adsmart Indemnified Parties 7.5(b)
Adsmart Intellectual Property 4.13(a)
Adsmart Material Adverse Effect 4.1
Adsmart Notes 1.11(a)
Adsmart Options 1.8(a)
Adsmart Preferred Shares 1.10
Adsmart Series A Preferred Stock 1.10
Adsmart Series B Preferred Stock 1.19
Adsmart Stockholder Approval 4.3
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Adsmart Stockholders 1.3(b)
Agreed Amount 9.2(c)
Buyer Introduction
Buyer Common Stock 1.5(a)
Buyer Material Adverse Effect 6.1
Buyer Reports 6.5
CERCLA 4.19(a)
Certificate of Merger 1.1
Claim Notice 9.2(b)
Claimed Amount 9.2(b)
Closing 2.2
Closing Date 1.2
CMGI Introduction
CMGI Adsmart Shares 7.2(e)
CMGI Buyer Shares 7.2(d)(i)
CMGI Material Adverse Effect 3.3
Code 1.8(a)
Company Material Adverse Effect 8.2(e)
Contribution 2.1
Contribution Closing 2.2
Contribution Shares 2.4
Controlling Party 9.2(a)
Conversion Ratio 1.5(a)
Damages 9.1
Disclosure Schedule Article IV
Dispute 9.2(c)
Dissenting Shares 1.6(a)
Effective Time 1.1
Employee Benefit Plan 4.18(a)(i)
Engage Sale 2.5
Engage Stockholder Approval 6.3
Environmental Law 4.19(a)
ERISA 4.18(a)(ii)
ERISA Affiliate 4.18(a)(iii)
Exchange Act 4.14(b)
Expected Claim Notice 9.3
Flycast Introduction
Flycast-CMGI Options 2.5
Flycast Common Stock 2.1
Flycast Merger Agreement 5.1
Flycast Noncompetition Agreements 5.4
Financial Statements 4.6
GAAP 4.6
Governmental Entity 3.3
Indemnified Party 9.2(a)
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Indemnifying Party 9.2(a)
InterStep 2.6
Legal Proceeding 4.16
Materials of Environmental Concern 4.19(a)
Merger 1.1
Merger Closing 1.2
Merger Shares 1.5(a)
Most Recent Audited Balance Sheet 4.6
Most Recent Audited Balance Sheet Date 4.8
Most Recent Balance Sheet Date 4.6
Non-controlling Party 9.2(a)
Order 8.1(d)
Ordinary Course of Business 4.4
Parties Introduction
Permits 4.21
Proxy Statement 7.2(b)
Reasonable Best Efforts 7.1
Response 9.2(c)
Securities Act 1.8(c)
Security Interest 4.4
Special Committee 7.2(c)
Subsidiary 4.5(a)
Substitute Options 2.5(a)
Surviving Corporation 1.1
Taxes 4.9(a)(i)
Tax Returns 4.9(a)(ii)
Transaction Shares 6.2
Transitory Subsidiary Introduction
Year 2000 Compliant 4.23(d)
ARTICLE XII
MISCELLANEOUS
12.1 PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Parties; PROVIDED, HOWEVER, that
any Party may make any public disclosure it believes in good faith is required
by applicable law, regulation or stock market rule.
12.2 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
12.3 ENTIRE AGREEMENT. This Agreement (including the Disclosure Schedule
and other documents referred to herein) constitutes the entire agreement among
the Parties and supersedes
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any prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof.
12.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties; provided that the Transitory Subsidiary may assign its
rights, interests and obligations hereunder to an Affiliate of the Buyer.
12.5 COUNTERPARTS FACSIMILE SIGNATURE. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. This Agreement may
be executed by facsimile signature.
12.6 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.7 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered four business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent for next-day delivery via
a reputable nationwide overnight courier service, in each case to the intended
recipient as set forth below:
IF TO CMGI: COPY TO:
----------- --------
CMGI, Inc. Xxxx and Xxxx XXX
000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx 00 Xxxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxxxx, XX 00000
Attn: General Counsel Attn: Xxxx X. Xxxxxx, Esq.
IF TO ADSMART: COPY TO:
-------------- --------
Adsmart, Inc. Xxxx and Xxxx LLP
000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx 00 Xxxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxxxx, XX 00000
Attn: President Attn: Xxxxx X. Xxxxxx, Esq.
IF TO THE BUYER OR
THE TRANSITORY SUBSIDIARY: COPY TO:
-------------------------- --------
Engage Technologies, Inc. Xxxxxx, XxXxxxxxx & Fish, LLP
000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxxx, XX 00000 Xxxxxx, XX 00000
Attn: General Counsel Attn: Xxxxxxxxxxx Xxxxxxxxx, Esq.
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Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
12.8 GOVERNING LAW. Except to the extent expressly governed by the Delaware
General Corporation Law, this Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Massachusetts without
giving effect to any choice or conflict of law provision or rule (whether of the
Commonwealth of Massachusetts or any other jurisdiction) that would cause the
application of laws of any jurisdictions other than those of the Commonwealth of
Massachusetts.
12.9 AMENDMENTS AND WAIVERS. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time; PROVIDED, HOWEVER,
that any amendment effected subsequent to Engage Stockholder Approval or Adsmart
Stockholder Approval shall be subject to any restrictions contained in the
Delaware General Corporation Law. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by all
of the Parties. No waiver of any right or remedy hereunder shall be valid unless
the same shall be in writing and signed by the Party giving such waiver. No
waiver by any Party with respect to any default, misrepresentation or breach of
warranty or covenant hereunder shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
12.10 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
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12.11 CONSTRUCTION.
(a) The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of
strict construction shall be applied against any Party.
(b) Any reference to any federal, state, local or foreign statute or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
ENGAGE TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxxxx
Title: CEO
FCET CORP.
By: /s/ Xxxx Xxxxxx
Title: CEO
CMGI, INC.
By: /s/ Xxxxxx Xxxxxxxx
Title: CFO
ADSMART CORPORATION
By: /s/ Xxxx Xxxxxxxx
Title: CEO
FLYCAST COMMUNICATIONS CORPORATION
By: Xxxxxx Xxxxxxxx
Title: CFO
