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AGREEMENT AND PLAN OF MERGER
AMONG
XXXXXX.XXX, INC.,
XXXXXX.XXX AUCTIONS, INC.,
E-NICHE INCORPORATED
AND
ALL THE STOCKHOLDERS OF E-NICHE, INCORPORATED
DATED AS OF APRIL 24, 1999
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CONTENTS
ARTICLE I - THE MERGER................................................................. 1
1.1 The Merger.............................................................. 1
1.2 The Closing............................................................. 2
1.3 Effective Date and Time................................................. 2
1.4 Certificate of Incorporation of the Surviving Corporation............... 2
1.5 Bylaws of the Surviving Corporation..................................... 2
1.6 Directors and Officers.................................................. 2
1.7 Merger Consideration and Conversion of Shares........................... 3
1.7.1 Merger Consideration; Conversion of Company Preferred
Stock.......................................................... 3
1.7.2 Exchange Ratio; Escrow Shares.................................. 4
1.7.3 Post-Closing Merger Consideration.............................. 7
1.7.4 Exchange of Certificates....................................... 9
1.7.5 No Fractional Shares........................................... 11
1.7.6 No Further Transfers........................................... 11
1.8 Stockholder Representative.............................................. 11
1.9 Amendment to Provide for Alternative Merger Structures.................. 12
1.10 Tax Free Reorganization................................................. 12
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................. 13
2.1 Organization............................................................ 13
2.2 Enforceability.......................................................... 14
2.3 Capitalization.......................................................... 14
2.4 Subsidiaries and Affiliates............................................. 16
2.5 No Approvals; No Conflicts.............................................. 16
2.6 Financial Statements.................................................... 17
2.7 Absence of Certain Changes or Events.................................... 18
2.8 Taxes................................................................... 20
2.9 Property................................................................ 23
2.10 Contracts............................................................... 24
2.11 Claims and Legal Proceedings............................................ 26
2.12 Labor and Employment Matters............................................ 26
2.13 Employee Benefit Plans.................................................. 27
2.13.1 Employee Benefit Plan Listing.................................. 27
2.13.2 Documents Provided............................................. 28
2.13.3 Compliance..................................................... 28
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2.13.4 Contributions and Premium Payments............................. 29
2.13.5 Related Employers.............................................. 29
2.13.6 Multiemployer and Title IV Plans............................... 30
2.13.7 Post-Termination Welfare Benefits.............................. 30
2.13.8 Suits, Claims and Investigations............................... 30
2.13.9 Payments Resulting From Transactions........................... 30
2.14 Intellectual Property................................................... 31
2.14.1 General........................................................ 31
2.14.2 Company Technology............................................. 31
2.14.3 Third Party Technology......................................... 32
2.14.4 Trademarks..................................................... 32
2.14.5 Intellectual Property Rights................................... 33
2.14.6 Maintenance of Rights.......................................... 33
2.14.7 Third Party Infringement....................................... 33
2.14.8 Infringement by the Company.................................... 34
2.14.9 Confidentiality................................................ 34
2.14.10 Warranty Against Defects....................................... 35
2.14.11 Domain Names................................................... 35
2.14.12 Year 2000...................................................... 35
2.14.13 Indemnification................................................ 36
2.14.14 Restrictions on Intellectual Property.......................... 36
2.15 Corporate Books and Records............................................. 36
2.16 Licenses, Permits, Authorizations, etc.................................. 36
2.17 Compliance With Laws.................................................... 36
2.18 Insurance............................................................... 37
2.19 Brokers or Finders...................................................... 37
2.20 Absence of Questionable Payments........................................ 37
2.21 Bank Accounts........................................................... 38
2.22 Insider Interests....................................................... 38
2.23 Compliance With Environmental Laws...................................... 39
2.24 Full Disclosure......................................................... 39
2.25 Operating Data.......................................................... 39
ARTICLE IIA - REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS....................... 40
2A.1 Sophistication; Accreditation........................................... 40
2A.2 Ownership............................................................... 40
2A.3 Xxxxxx.xxx Prospectus................................................... 40
2A.4 Enforceability; No Conflicts............................................ 40
2A.5 Claims Against the Company.............................................. 41
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2A.6 Brokers or Agents....................................................... 41
2A.7 Xxxx-Xxxxx-Xxxxxx Filing................................................ 42
2A.8 Investment for Own Account.............................................. 42
2A.9 Residency............................................................... 42
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF XXXXXX.XXX AND THE PURCHASER........... 42
3.1 Organization............................................................ 42
3.2 Enforceability.......................................................... 43
3.3 Securities.............................................................. 44
3.4 No Approvals or Notices Required; No Conflicts With Instruments......... 44
3.5 Capitalization.......................................................... 45
3.6 SEC Documents........................................................... 45
3.7 Absence of Certain Changes.............................................. 45
3.8 Full Disclosure......................................................... 45
3.9 Stockholders Consent.................................................... 46
3.10 Brokers or Finders...................................................... 46
ARTICLE IV - CONDITIONS PRECEDENT TO OBLIGATIONS OF XXXXXX.XXX AND THE
PURCHASER...................................................................... 46
4.1 Accuracy of Representations and Warranties.............................. 46
4.2 Performance of Agreements............................................... 46
4.3 Opinion of Counsel for the Company...................................... 46
4.4 Compliance Certificate.................................................. 47
4.5 Material Adverse Change................................................. 47
4.6 Approvals and Consents.................................................. 47
4.7 Secretary's Certificate................................................. 47
4.8 Nonforeign Affidavit.................................................... 47
4.9 Compliance With Laws.................................................... 48
4.10 Stockholder Approval.................................................... 48
4.11 Legal Proceedings....................................................... 48
4.12 Employment and Noncompetition Arrangements.............................. 48
4.13 Affiliate Letters....................................................... 48
4.14 Termination of Certain Agreements....................................... 48
4.15 Exercise of Stock Purchase Rights; Conversion of Convertible
Securities.............................................................. 49
4.16 No Dissenter Rights Exercised Greater Than 5% of Stock.................. 49
4.17 Transmittal Letters..................................................... 49
4.18 Stock Vesting Agreement................................................. 49
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4.19 Nondisclosure Agreements................................................ 49
4.20 Prospectus Delivery Requirements........................................ 50
4.21 Escrow Agreement........................................................ 50
4.22 Assignment of Domain Names.............................................. 50
4.23 Post-Closing Bonus Amount Agreements.................................... 50
4.24 Amendment of Option Plan................................................ 50
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS................................................................... 50
5.1 Accuracy of Representations and Warranties.............................. 51
5.2 Performance of Agreements............................................... 51
5.3 Opinion of Counsel...................................................... 51
5.4 Compliance Certificate.................................................. 51
5.5 Legal Proceedings....................................................... 51
5.6 Material Adverse Change................................................. 52
5.7 Approvals and Consents.................................................. 52
5.8 Compliance With Laws.................................................... 52
5.9 Tax Opinion............................................................. 52
5.10 Secretary's Certificates................................................ 52
5.11 Blue Sky Laws........................................................... 53
5.12 Escrow Agreement........................................................ 53
ARTICLE VI - COVENANTS................................................................. 53
6.1 Conduct of Business by the Company Pending the Merger................... 53
6.2 Access to Information; Confidentiality.................................. 55
6.3 No Alternative Transactions............................................. 56
6.4 Notification of Certain Matters......................................... 56
6.5 Further Action; Commercially Reasonable Efforts......................... 56
6.6 Stockholder Approval.................................................... 57
6.7 Xxxxxx.xxx Common Stock................................................. 57
6.8 Securities Act Compliance............................................... 57
6.9 Dissenting Shares....................................................... 58
6.10 Publicity............................................................... 58
6.11 Option Grants........................................................... 58
6.12 Option Shares; Registration............................................. 59
6.13 Employee Matters........................................................ 59
6.14 Indemnification......................................................... 60
6.15 Blue Sky Laws........................................................... 60
6.17 Audited Financial Statements............................................ 60
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ARTICLE VIA - COVENANTS OF THE STOCKHOLDERS............................................ 60
6A.1 Restrictions on Transfer................................................ 60
6A.2 Execution of All Operative Documents.................................... 61
6A.3 Agreement to Vote Shares................................................ 61
6A.4 Limitation on Sales..................................................... 61
6A.5 Waiver of Dissenter's Rights............................................ 61
6A.6 Taxes................................................................... 62
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER........................................ 62
7.1 Termination............................................................. 62
7.2 Effect of Termination................................................... 63
7.3 Amendment............................................................... 63
7.4 Waiver.................................................................. 63
ARTICLE VIII - SURVIVAL AND INDEMNIFICATION............................................ 64
8.1 Survival................................................................ 64
8.2 Indemnification by the Stockholders..................................... 64
8.3 Indemnification by Xxxxxx.xxx........................................... 64
8.4 Threshold and Limitations; Adjustment of Merger Consideration........... 65
8.5 Procedure for Indemnification........................................... 66
8.6 Remedies; Specific Performance.......................................... 68
ARTICLE IX - GENERAL................................................................... 68
9.1 Tax Matters............................................................. 68
9.2 Expenses................................................................ 69
9.3 Notices................................................................. 69
9.4 Severability............................................................ 70
9.5 Entire Agreement........................................................ 71
9.6 Assignment.............................................................. 71
9.7 Parties in Interest..................................................... 71
9.8 Governing Law........................................................... 71
9.9 Headings................................................................ 71
9.10 Counterparts............................................................ 71
9.11 Waiver of Jury Trial.................................................... 72
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EXHIBITS
1.3 - Certificate of Merger
1.7.1 - Primary and Secondary Key Employees
1.7.2(c) - Form of Escrow Agreement
1.7.2(e) - Form of Notice of Assumption of Options
1.7.3 - List of Central Employees
1.7.4 - Letter of Transmittal
2 - Company Disclosure Memorandum
2A - Stockholder Disclosure Memorandum
4.3 - Opinion of Counsel for the Company
4.6 - List of Consents, Approvals and Notices
4.8 - Real Property Tax Affidavit
4.12 - Form of Confidentiality, Noncompetition and Invention
Assignment Agreement
4.13 - Form of Affiliate Letter
4.18(a) - Form of Stock Vesting Agreement (X. Xxxxxxx)
4.18(b) - Form of Stock Vesting Agreement (X. Xxx)
4.22 - List of Domain Names to be Assigned
5.3 - Opinion of Counsel for Xxxxxx.xxx and the Xxxxxxxxx
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AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger (this
"Agreement") is made and entered into as of April 24, 1999, by and among
Xxxxxx.xxx, Inc., a Delaware corporation ("Xxxxxx.xxx"), Xxxxxx.xxx Auctions,
Inc., a Delaware corporation and wholly owned subsidiary of Xxxxxx.xxx (the
"Purchaser"), e-Niche Incorporated, a Delaware corporation (the "Company"), and
all the stockholders of the Company (the "Stockholders").
RECITALS
A. The Company, Xxxxxx.xxx, the Stockholders and the Purchaser
believe it advisable and in their respective best interests to effect a merger
of the Company and the Purchaser pursuant to this Agreement (the "Merger").
B. The Board of Directors of the Company has approved this
Agreement and the Merger as required by applicable law.
C. The Boards of Directors of Xxxxxx.xxx and the Purchaser have
approved this Agreement and the Merger as required by applicable law.
D. It is intended that the Merger will qualify as a reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
AGREEMENT
In consideration of the terms hereof, the parties hereto agree as
follows:
ARTICLE I - THE MERGER
1.1 THE MERGER
Upon the terms and subject to the conditions hereof and in accordance
with the Delaware General Corporation law ("Delaware Law"), (a) at the Effective
Time (as defined in Section 1.3 hereof) the separate existence of the Company
shall cease and the Company shall be merged with and into the Purchaser (the
Purchaser as the surviving corporation after the Merger is sometimes referred to
herein as the "Surviving Corporation"), and (b) from and after the Effective
Time, the Merger shall have all the effects of a merger under the laws of the
State of Delaware and other applicable law.
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1.2 THE CLOSING
Subject to the satisfaction or waiver of the conditions set forth in
Articles IV and V and the termination provisions of Article VII, the closing of
the Merger pursuant to this Agreement (the "Closing") shall take place on the
later of (a) May 14, 1999 and (b) the earliest practicable business day
following the satisfaction or waiver of the conditions set forth in Articles IV
and V (the "Closing Date") at 10:00 a.m. local time at the offices of Xxxxxxx
Coie LLP, 1201 Third Avenue, 48th Floor, Seattle, Washington, or such other
date, time or location as Xxxxxx.xxx and the Company shall agree.
1.3 EFFECTIVE DATE AND TIME
On the Closing Date and subject to the terms and conditions hereof, a
certificate of merger complying with the applicable provisions of Delaware Law,
substantially in the form attached as Exhibit 1.3 (the "Certificate of Merger"),
shall be delivered for filing to the Secretary of State of the State of Delaware
(the "Delaware Secretary of State"). The Merger shall become effective on the
date (the "Effective Date") and at the time (the "Effective Time") of filing of
the Certificate of Merger with the Delaware Secretary of State or at such other
time as may be specified in the Certificate of Merger as filed. If the Delaware
Secretary of State requires any changes in the Certificate of Merger as a
condition to filing or to issuing its certificate to the effect that the Merger
is effective, Xxxxxx.xxx, the Purchaser and the Company will execute any
necessary revisions incorporating such changes, provided such changes are not
inconsistent with and do not result in any material change in the terms of this
Agreement.
1.4 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION
At the Effective Time, the Certificate of Incorporation of the Purchaser
shall continue in effect as the Certificate of Incorporation of the Surviving
Corporation. Thereafter, the Certificate of Incorporation of the Surviving
Corporation may be amended in accordance with its terms and as provided by law.
1.5 BYLAWS OF THE SURVIVING CORPORATION
At the Effective Time, the Bylaws of the Purchaser shall continue in
effect as the Bylaws of the Surviving Corporation. Thereafter, the Bylaws may be
amended or repealed in accordance with their terms and the Certificate of
Incorporation of the Surviving Corporation and as provided by law.
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1.6 DIRECTORS AND OFFICERS
At the Effective Time, the directors of the Purchaser shall continue in
office as the directors of the Surviving Corporation and the officers of the
Purchaser shall continue in office as the officers of the Surviving Corporation,
and such directors and officers shall hold office in accordance with and subject
to the Certificate of Incorporation and Bylaws of the Surviving Corporation.
1.7 MERGER CONSIDERATION AND CONVERSION OF SHARES
1.7.1 MERGER CONSIDERATION; CONVERSION OF COMPANY PREFERRED STOCK
(a) For purposes of this Agreement, the term "Merger Consideration"
shall mean (i) the Closing Date Shares plus (ii) the Post-Closing Shares (as
defined in Section 1.7.3(b) below). The term "Closing Date Shares" shall mean
the number of shares of Xxxxxx.xxx Common Stock, par value $0.01 per share
("Xxxxxx.xxx Common Stock"), determined by dividing the Base Amount (as defined
below) by the closing price of Xxxxxx.xxx Common Stock as reported on the Nasdaq
National Market on the second trading day immediately preceding the Closing Date
(the "Closing Price"). The term "Base Amount" shall mean $149,925,000 less the
aggregate amount (the "Post-Closing Bonus Amount") of all payments the Company
has, prior to the Closing Date and in connection with the transactions
contemplated hereby, committed to make to its officers and employees after the
Closing Date; provided, however, that such amount shall be reduced to
$124,925,000 less the Post-Closing Bonus Amount if, as of the Closing Date,
either (i) any of the individuals that are designated as "Primary Key Employees"
on Exhibit 1.7.1 (the "Primary Key Employees") or (ii) both of the individuals
that are designated as "Secondary Key Employees" on Exhibit 1.7.1 (the
"Secondary Key Employees") have not accepted the offer of employment as set
forth in Section 6.13; and, provided further, that such amount shall be reduced
to $99,925,000 less the Post-Closing Bonus Amount if, as of the Closing Date,
either (i) any two Primary Key Employees or (ii) any Primary Key Employee and
both Secondary Key Employees have not accepted the offer of employment as set
forth in Section 6.13. At least five business days prior to the anticipated
Closing Date, the Company shall provide to Xxxxxx.xxx a list of all payments
included in determining the Post-Closing Bonus Amount.
(b) Immediately prior to the Effective Time, each Stockholder that
then holds of record any shares of the Company's Series A Preferred Stock, par
value $.01 per share ("Company Series A Stock"), or the Company's Series C
Preferred Stock, par value $.01 per share (the "Company Series C Stock"), shall
be deemed to have
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delivered written notice to the Company, as transfer agent, pursuant to Section
4(c)(i) of the Company's Second Amended and Restated Certificate of
Incorporation (the "Company's Certificate of Incorporation") electing to convert
all of the shares of the Company Series A Stock and Company Series C Stock then
held by such Stockholder into shares of the Company's Common Stock, par value
$.01 per share (the "Company Common Stock"). Without any further action on the
part of any holder of Company Series A Stock or Company Series C Stock, each
share of Company Series A Stock and Company Series C Stock outstanding
immediately prior to the Effective Time shall be deemed to have been converted
into one share of Company Common Stock (subject to any applicable adjustments
from the date hereof through the Closing Date in accordance with the Company's
Certificate of Incorporation). The shares of Company Common Stock deemed to be
issued upon conversion of the Company Series A Stock and the Company Series C
Stock are referred to herein as the "Common Conversion Shares."
1.7.2 EXCHANGE RATIO; ESCROW SHARES
As of the Effective Time, by virtue of the Merger and without any action
on the part of the holders thereof:
(a) All shares of any class of capital stock of the Company
held by the Company as treasury shares shall be canceled.
(b) The share of Company Series B Preferred Stock, par value
$.01 per share ("Company Series B Stock"), to the extent then outstanding, shall
be cancelled and the holder of such share shall be paid the amount of $75,000 as
set forth in Section A.2.(a) of Article IV of the Company's Certificate of
Incorporation. Subject to Section 1.7.2(g), each issued and outstanding share of
Company Common Stock, including each of the Common Conversion Shares, other than
Dissenting Shares (as defined in Section 1.7.2(f)), shall be converted into the
right to receive from Xxxxxx.xxx a number of fully paid and nonassessable shares
of Xxxxxx.xxx Common Stock determined by dividing (i) the number of Closing Date
Shares by (ii) the Fully Diluted Common Stock Number. The "Fully Diluted Common
Stock Number" shall mean (x) the total number of shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time (including the
total number of Common Conversion Shares) plus (y) the total number of shares of
Company Common Stock issuable upon exercise of Options (as defined in Section
1.7.2(e) below) outstanding immediately prior to the Effective Time and
regardless of restrictions on exercise. The quotient as derived above shall be
referred to herein as the "Exchange Ratio." The number of shares of Xxxxxx.xxx
Common Stock to be issued to each Stockholder of the Company under this Section
1.7.2(b) shall be calculated by
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aggregating all shares of Company Common Stock (including Common Conversion
Shares) held, or deemed to be held pursuant to Section 1.7.1(b), by such
Stockholder, so that such number of shares of Xxxxxx.xxx Common Stock to be
issued shall be equal to the aggregate number of shares of Company Common Stock
(including Common Conversation Shares) held, or deemed to be held pursuant to
Section 1.7.1(b), by such Stockholder multiplied by the Exchange Ratio, with
cash paid in lieu of any fractional share of Xxxxxx.xxx Common Stock pursuant to
Section 1.7.5 hereof.
(c) Notwithstanding the foregoing, that number of Closing
Date Shares equal to the quotient of $15,000,000 divided by the Closing Price
(the "Escrow Shares") shall be deposited in escrow with ChaseMellon Shareholder
Services L.L.C. ("ChaseMellon" or the "Escrow Agent"), to be held and
administered in accordance with an Escrow Agreement, in substantially the form
attached hereto as Exhibit 1.7.2(c) (the "Escrow Agreement"), such Escrow Shares
to be withheld and deducted, pro rata, from the Closing Date Shares otherwise
issuable to each Stockholder. Fractional shares of Xxxxxx.xxx Common Stock shall
not be deposited in escrow. In lieu thereof, each Stockholder shall round up
such fractional share to the nearest whole number and deposit into escrow a full
share of Xxxxxx.xxx Common Stock for such fractional share. The Escrow Shares
shall be held by the Escrow Agent in book entry form. Notwithstanding the escrow
of the Escrow Shares, dividends or other distributions declared and paid on such
shares shall continue to be paid by Xxxxxx.xxx to the Stockholders and all
voting rights with respect to such shares shall inure to the benefit of and be
enjoyed by such stockholders. Any securities received by the Escrow Agent in
respect of any Escrow Shares held in escrow as a result of any stock split or
combination of shares of Xxxxxx.xxx Common Stock, payment of a stock dividend or
other stock distribution in or on shares of Xxxxxx.xxx Common Stock, or change
of Xxxxxx.xxx Common Stock into any other securities pursuant to or as a part of
a merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation of Xxxxxx.xxx, or otherwise, shall be held by the
Escrow Agent as, and shall be included within the definition of, Escrow Shares.
The Escrow Shares shall be available to satisfy any indemnification obligations
pursuant to Article VIII.
(d) Each issued and outstanding share of capital stock of
the Purchaser shall continue to remain outstanding as a share of capital stock
of the Surviving Corporation.
(e) Each outstanding option to purchase shares of Company
Common Stock issued pursuant to the Company's Amended and Restated 1998 Stock
Option and
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Grant Plan (the "Company Plan"), whether or not vested or exercisable (each an
"Option"), shall be assumed by Xxxxxx.xxx and shall constitute an option to
acquire, on the same vesting terms, and on substantially the same other terms
and conditions as were applicable under such assumed Option, that number of
shares of Xxxxxx.xxx Common Stock equal to the product of the Exchange Ratio and
the number of shares of Company Common Stock subject to such Option, at a price
per share (rounded to the nearest $0.01) equal to the aggregate exercise price
for the shares of Company Common Stock subject to such Option divided by the
number of full shares of Xxxxxx.xxx Common Stock deemed to be purchasable
pursuant to such Option; provided, however, that (i) the number of shares of
Xxxxxx.xxx Common Stock that may be purchased upon exercise of such Option shall
not include any fractional shares, and Xxxxxx.xxx shall pay to the holder
thereof as soon as practicable after the assumption thereof an amount of cash
equal to such fraction multiplied by the average of the high and low selling
price of Xxxxxx.xxx Common Stock as reported on the Nasdaq Stock Market on the
assumption date, and (ii) all Options shall be deemed to be nonqualified stock
options. Xxxxxx.xxx shall assume the obligations of the Company under the
Company Plan and shall comply with the terms of such plan as they apply to the
Options assumed as set forth above. At the Closing, Xxxxxx.xxx shall provide
notice, by delivery to the Stockholder Representative of notices in
substantially the form attached hereto as Exhibit 1.7.2(e), to each holder of an
assumed Option regarding the terms of such assumed Option.
(f) Holders of shares of Company Common Stock who have
complied with all the requirements for perfecting dissenters' rights, as
required under the Delaware Law, shall be entitled to their rights under
Delaware Law with respect to such shares (the "Dissenting Shares").
Notwithstanding the foregoing, if any holder of Dissenting Shares shall
effectively withdraw or lose (through failure to perfect or otherwise) the right
to dissent, then, as of the later of the Effective Time and the occurrence of
such event, such holder's shares shall automatically be converted into and
represent only the right to receive the shares of Xxxxxx.xxx Common Stock to
which such holder is then entitled under this Agreement and Delaware Law,
without interest thereon and upon surrender of the certificate representing such
shares. Notwithstanding any provision of this Agreement to the contrary, any
Dissenting Shares held by a Stockholder who has perfected dissenter's rights for
such shares in accordance with Delaware Law shall not be converted into
Xxxxxx.xxx Common Stock pursuant to this Section 1.7.2.
(g) If, prior to the Effective Time, Xxxxxx.xxx
recapitalizes through a split-up of its outstanding shares of capital stock into
a greater number, or a combination of its outstanding shares of capital stock
into a lesser number, reorganizes,
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reclassifies or otherwise changes its outstanding shares of capital stock into
the same or a different number of shares of other classes of capital stock, or
declares a dividend on its outstanding shares of capital stock payable in shares
or securities convertible into shares, the number of shares of Xxxxxx.xxx Common
Stock into which the shares of Company Common Stock (including Common Conversion
Shares) are to be converted, and the number of shares of Xxxxxx.xxx Common Stock
issuable upon the exercise of each assumed Option, will be adjusted
appropriately so as to maintain the proportionate interests of the holders of
the Company Capital Stock (as defined in Section 1.7.4(a)) and Options and the
holders of shares of capital stock of Xxxxxx.xxx.
1.7.3 POST-CLOSING MERGER CONSIDERATION
(a) Subject to the completion of the Merger and the obtaining of all
related authorizations or approvals required under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), within five
business days after the first anniversary of the Closing Date Xxxxxx.xxx shall,
on the terms set forth in this Section, issue additional shares of Xxxxxx.xxx
Common Stock to the Stockholders of the Company as of the Closing Date, as part
of the Merger Consideration, and make payments to certain individuals who hold
Options as of the Closing Date. The date on which such shares are issued and
such payments are made is referred to herein as the "Post-Closing Issuance
Date."
(b) The number of shares of Xxxxxx.xxx Common Stock to be issued
pursuant to this Section 1.7.3 (the "Post-Closing Shares") shall be determined
as follows:
(i) in the event that the First Anniversary Percentage (as
defined below) is greater than or equal to 66.7%, Xxxxxx.xxx shall issue
to the Stockholders an aggregate number of fully paid and nonassessable
shares of Xxxxxx.xxx Common Stock equal to the product of (A) the
Outstanding Stock Percentage (as defined below) multiplied by (B) the
quotient of (1) $50,000,000 divided by (2) the closing sale price of
Xxxxxx.xxx Common Stock as reported on the Nasdaq Stock Market on the
second trading day immediately preceding the Post-Closing Issuance Date
(the "Post-Closing Price"), and
(ii) in the event that the First Anniversary Percentage is
less than 66.7%, Xxxxxx.xxx shall issue to the Stockholders an aggregate
number of fully paid and nonassessable shares of Xxxxxx.xxx Common Stock
equal to the product of (A) the Outstanding Stock Percentage
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multiplied by (B) the quotient of (1) the product of $50,000,000
multiplied by the First Anniversary Percentage divided by (2) the
Post-Closing Price.
(c) No payments will be made to any holder of an Option (an
"Optionholder") pursuant to this Section 1.7.3 unless such Optionholder
commences employment with an Xxxxxx.xxx Entity (as defined in Section 1.7.3(d))
within the time periods specified in Section 6.13 and either (x) continues to be
employed by an Xxxxxx.xxx Entity as of the first anniversary of the Closing Date
or (y) is no longer employed by an Xxxxxx.xxx Entity as of the first anniversary
of the Closing Date as a result of the termination of such Optionholder's
employment with an Xxxxxx.xxx Entity by an Xxxxxx.xxx Entity without Cause (as
defined below) or by reason of his or her death or Disability (as defined
below). Subject the other terms of this Section 1.7.3(c), the amount of any
payment under this Section 1.7.3 to an individual who holds an Option as of the
Effective Time shall be determined as follows:
(i) in the event that the First Anniversary Percentage is
greater than or equal to 66.7%, Xxxxxx.xxx shall, subject to the other
terms of this Section, pay to the Optionholder an amount equal to the
product of the Option Percentage (as defined below) for such
Optionholder multiplied by $50,000,000.
(ii) in the event that the First Anniversary Percentage is
less than 66.7%, Xxxxxx.xxx shall, subject to the other terms of this
Section, pay to the Optionholder an amount equal to the product of the
Option Percentage for such Optionholder multiplied by $50,000,000 and by
the First Anniversary Percentage.
Notwithstanding the foregoing, to the extent any Optionholders are not entitled
to receive any payments (such forfeited payments being, collectively, the
"Forfeited Payments") pursuant to this Section 1.7.3(c), the amount of the
payments made to the Optionholders entitled to receive payments pursuant to this
Section 1.7.3(c) shall be increased, on a pro rata basis (based on the number of
shares of Company Common Stock issuable upon exercise of Options held by each
such participating Optionholder immediately prior to the Effective Time,
regardless of restrictions on exercise), by the amount of the Forfeited
Payments.
(d) The term "First Anniversary Percentage" shall mean the sum of
the percentage values assigned to each of the individuals designated as "Central
Employees" on Exhibit 1.7.3 attached hereto (the "Central Employees") opposite
the name of each such Central Employee on such Exhibit 1.7.3, who commences
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employment with Xxxxxx.xxx or a wholly owned subsidiary of Xxxxxx.xxx or a
successor of Xxxxxx.xxx (each an "Xxxxxx.xxx Entity") within the time periods
specified in Section 6.13 and either (x) continues to be employed by an
Xxxxxx.xxx Entity as of the first anniversary of the Closing Date or (y) is no
longer employed by an Xxxxxx.xxx Entity as of the first anniversary of the
Closing Date as a result of the termination of such Central Employee's
employment with an Xxxxxx.xxx Entity by an Xxxxxx.xxx Entity without Cause or by
reason of death or Disability.
As used herein, the term "Cause" shall mean (i) any act of fraud or
embezzlement by an employee; (ii) any material breach by an employee of the
Confidentiality, Noncompetition and Invention Assignment Agreement entered into
with Xxxxxx.xxx; (iii) the conviction of a felony involving an act of
dishonesty, moral turpitude, deceit or fraud; (iv) any act of dishonesty or
misconduct by an employee in connection with his or her responsibilities as an
employee or otherwise which materially impairs Xxxxxx.xxx's business, good will
or reputation or which compromises the employee's ability to represent
Xxxxxx.xxx with the public; or (v) an employee's willful and material failure to
perform his or her lawful duties as an employee of Xxxxxx.xxx as determined by
one or more senior executives of Xxxxxx.xxx in good faith and the failure to
"cure" such misconduct within a period of 30 days following the employee's
receipt of written notice of such misconduct.
The term "Disability" shall mean a certification by an independent
medical doctor (selected by the Xxxxxx.xxx's health or disability insurer) that
the employee has for either three months consecutive or four months
non-consecutive, in any twelve-month period, been physically or mentally
disabled or incapacitated in a manner which seriously interferes with his
ability to perform his or her essential job responsibilities and such health
condition has not been cured or treated in such a manner that the prognosis is
for no further disability.
The term "Outstanding Stock Percentage" shall mean a fraction, the
numerator of which shall equal the number of shares of Company Common Stock
outstanding immediately prior to the Effective Time (including all Common
Conversion Shares), and the denominator of which shall equal the Fully Diluted
Common Stock Number.
The term "Option Percentage" shall mean, with respect to each individual
that holds Options immediately prior to the Effective Time, a fraction, the
numerator of which equals the number of shares of Common Stock issuable upon the
exercise of the Options held by such individual immediately prior to the
Effective Time, regardless of restrictions on exercise, and the denominator of
which shall equal the Fully Diluted Common Stock Number.
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1.7.4 EXCHANGE OF CERTIFICATES
(a) Provided that the Stockholder has delivered to ChaseMellon, as
exchange agent (the "Exchange Agent"), a letter of transmittal in the form set
forth as Exhibit 1.7.4 hereto (the "Letter of Transmittal") together with
documents delivered as required therein, including certificates representing
shares of Company Common Stock or Company Preferred Stock (collectively,
"Company Capital Stock") for cancellation, the Exchange Agent shall, on the
Closing Date, make available at its offices in Seattle, Washington, and each
Stockholder of the Company will be entitled to receive, certificates
representing the number of shares of Xxxxxx.xxx Common Stock that such
Stockholder is entitled to receive pursuant to Section 1.7.2 hereof; provided,
however, that the certificates representing the Escrow Shares shall (i) be
retained by the Escrow Agent in accordance with the provisions of the Escrow
Agreement, (ii) not be issued in certificated form and (iii) held by the Escrow
Agent in book entry form. In the event that any certificates representing shares
of Company Capital Stock shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Stockholder claiming such certificate
to be lost, stolen or destroyed, Xxxxxx.xxx shall issue in exchange for such
lost, stolen or destroyed certificate the shares of Xxxxxx.xxx Common Stock that
such Stockholder is entitled to receive pursuant to Section 1.7.2 hereof;
provided, however, that Xxxxxx.xxx may in its discretion and as a condition
precedent to the issuance thereof, require such Stockholder to provide
Xxxxxx.xxx with an indemnity agreement against any claim that may be made
against Xxxxxx.xxx with respect to the certificate alleged to have been lost,
stolen or destroyed. The shares of Xxxxxx.xxx Common Stock that each Stockholder
of the Company shall be entitled to receive in connection with the Merger
pursuant to Section 1.7.2 and the Escrow Shares shall be deemed to have been
issued at the Effective Time. If the Merger Consideration (or any portion
thereof) is to be delivered to any person other than the person in whose name
the certificate or certificates representing shares of Company Capital Stock
surrendered in exchange therefor is registered, it shall be a condition to such
exchange that the person requesting such exchange shall pay to Xxxxxx.xxx any
transfer or other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the certificate or
certificates so surrendered, or shall establish to the satisfaction of
Xxxxxx.xxx that such tax has been paid or is not applicable. Notwithstanding
anything to the contrary, neither Xxxxxx.xxx nor any other party hereto shall be
liable to a holder of shares of Company Capital Stock for any Merger
Consideration delivered to a public official pursuant to applicable law,
including, without limitation, abandoned property, escheat and similar laws.
(b) Xxxxxx.xxx or the Exchange Agent will be entitled to deduct and
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withhold from the Merger Consideration and the payments to be made pursuant to
Section 1.7.3(c) such amounts as Xxxxxx.xxx or the Exchange Agent are required
to deduct and withhold with respect to the making of such payments under the
Code, or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld, such amounts will be treated for all purposes of this
Agreement as having been paid to the former holder of the Company Capital Stock
or, in the case of payments pursuant to Section 1.7.3(c), to the recipient
thereof, in respect of whom such deduction and withholding were made by
Xxxxxx.xxx or the Exchange Agent.
1.7.5 NO FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Xxxxxx.xxx
Common Stock shall be issued by virtue of the Merger, and no dividend, stock
split or other distribution with respect to Xxxxxx.xxx Common Stock shall relate
to any such fractional interest, and any such fractional interests shall not
entitle the owner thereof to vote or to any rights of a security holder. In lieu
thereof, Xxxxxx.xxx shall pay to the holder of shares of Company Capital Stock
who would otherwise be entitled to a fraction of a share of Xxxxxx.xxx Common
Stock, as soon as practicable after the Effective Date (and in the same timely
manner required for delivery of certificates of Xxxxxx.xxx Common Stock provided
in Section 1.7.4) or the Post-Closing Issuance Date, as the case may be, an
amount in cash equal to such fraction multiplied by (i) the Closing Price, with
respect to any fractional shares constituting Closing Date Shares, or (ii) the
Post-Closing Price, with respect to any fractional shares constituting
Post-Closing Date Shares.
1.7.6 NO FURTHER TRANSFERS
After the Effective Time, there shall be no transfers of any shares of
Company Capital Stock on the stock transfer books of the Surviving Corporation.
If, after the Effective Time, certificates formerly representing shares of
Company Capital Stock are presented to the Surviving Corporation, they shall be
forwarded to Xxxxxx.xxx and be canceled and exchanged in accordance with this
Section 1.7, subject to applicable law in the case of Dissenting Shares.
1.8 STOCKHOLDER REPRESENTATIVE
Each Stockholder hereby irrevocably authorizes and appoints Xxxx Xxxxxxx
(the "Stockholder Representative"), as such Stockholder's representative and
true and lawful attorney-in-fact and agent to act in such Stockholder's name,
place and stead as contemplated by Sections 6.10 and Articles V and VIII, and to
execute in the name and on behalf of such Stockholder the Escrow Agreement and
any other agreement,
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certificate, instrument or document to be delivered by the Stockholders in
connection with the Escrow Agreement. If the Stockholder Representative or any
successor shall resign, die, or become unable to act as the Stockholder
Representative, a replacement shall promptly be appointed by a writing signed by
Stockholders who initially received a majority of the Closing Date Shares;
provided, however, that such newly appointed Stockholder Representative shall
have been a member of the Board of Directors of the Company immediately prior to
the Closing Date. Any such successor Stockholder Representative shall have the
same powers and duties as if appointed as the original Stockholder
Representative hereunder. The Stockholder Representative or the Stockholders
shall promptly notify Xxxxxx.xxx of the appointment of a successor Stockholder
Representative. The Stockholders (other than the Stockholder Representative)
shall, jointly and severally, indemnify the Stockholder Representative for, and
hold him harmless against, any loss, liability, claim or expense, including
reasonable attorney's fees, arising out of or in connection with his duties as
Stockholder Representative under this Agreement and the Escrow Agreement,
including the costs and expenses of defending himself against any such loss,
liability, claim or expense in connection herewith, unless such loss, liability,
claim or expense shall have been determined by a court of competent jurisdiction
to be a result of the Stockholder Representative's gross negligence or
intentional misconduct.
1.9 AMENDMENT TO PROVIDE FOR ALTERNATIVE MERGER STRUCTURES
If at any time prior to the Closing Date, Xxxxxx.xxx elects to have the
Company be the Surviving Corporation by means of the merger of the Purchaser or
any other wholly owned subsidiary of Xxxxxx.xxx with and into the Company, or to
have the Company merged with and into Xxxxxx.xxx or any wholly owned subsidiary
of Xxxxxx.xxx other than the Purchaser, the parties shall promptly enter into an
amendment to this Agreement to so provide, so long as such action does not (i)
result in a breach of a representation or warranty set forth in Article II
hereof or the inability to satisfy any of the conditions set forth in Articles
IV and V hereof, or (ii) disqualify the treatment of the Merger for tax purposes
as a reorganization within the meaning of Section 368(a) of the Code. Section
1.10(b) shall be amended as necessary to reflect any such change under this
Section 1.9. To the extent Xxxxxx.xxx or a wholly owned subsidiary thereof other
than Xxxxxx.xxx Auctions, Inc. is a constituent corporation of the Merger,
Xxxxxx.xxx or such other subsidiary shall be deemed to be the "Purchaser" as
defined herein.
1.10 TAX FREE REORGANIZATION
(a) Except as otherwise required by the Internal Revenue Service (the
"IRS") pursuant to a determination (as defined in Section 1313 of the Code) or
otherwise, the
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parties shall not take a position on any tax returns inconsistent with the
treatment of the Merger for tax purposes as a reorganization within the meaning
of Section 368(a) of the Code by reason of Section 368(a)(2)(D) of the Code, in
the case of the merger of the Company with and into the Purchaser or any other
wholly owned subsidiary of Xxxxxx.xxx with the Purchaser or such other
subsidiary being the surviving corporation, by reason of Section 368(a)(2)(E) of
the Code, in the case of any merger of the Purchaser or any other wholly owned
subsidiary of Xxxxxx.xxx with and into the Company with the Company being the
surviving corporation, or by reason of Section 368(a) itself, in the case of the
merger of the Company with and into Xxxxxx.xxx.
(b) Xxxxxx.xxx represents, solely for tax purposes, now, and as of the
Closing Date, (i) that it presently intends to continue the Company's historic
business or use a significant portion of the Company's business assets in
business in a manner that satisfies the continuity of business enterprise
requirement set forth in Treasury Regulation Section 1.368-1(d), and (ii) that
it has no present plan or intention following the Merger to issue additional
shares of the Surviving Corporation that would result in Parent losing control
of the Surviving Corporation. Neither such representation nor anything else
contained herein shall constitute a representation, warranty or agreement with
respect to any Tax consequences to the Company or its stockholders arising under
this Agreement or as a result of the transactions contemplated hereby.
(c) The Company represents, solely for tax purposes, that it has not
disposed of or committed itself to dispose of, any assets on or before the
Effective Date that would prevent the Merger from meeting the requirement that
"substantially all of the assets" of the Company must be acquired in the Merger.
Neither such representation nor anything else contained herein shall constitute
a representation or warranty with respect to any Tax consequences to Xxxxxx.xxx
or the Purchaser arising under this Agreement or as a result of the transactions
contemplated hereby.
(d) Xxxxxx.xxx agrees to cooperate with the Company in providing
information and certifications reasonably requested by the Company to obtain the
legal opinion referred to in Section 5.9 of this Agreement.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as is otherwise set forth with appropriate Section references in
the Company Disclosure Memorandum attached as Exhibit 2 (the "Company Disclosure
Memorandum"), and in order to induce Xxxxxx.xxx and the Purchaser to enter into
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and perform this Agreement and the other agreements and certificates that are
required to be executed pursuant to this Agreement (collectively, the "Operative
Documents"), the Company represents and warrants to Xxxxxx.xxx and the Purchaser
as of the date of this Agreement and as of the Closing as follows in this
Article II. For purposes of this Article II, references to "knowledge" of the
Company shall mean the actual knowledge of Xxxx Xxxxxxx, Xxxx Xxxxxxx, Xxxxxxx
Xxx, Xxxxxxx Xxxxxx, Xxxxxx Xxxx, or Xxxx Xxxxx.
2.1 ORGANIZATION
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Company has all
requisite corporate power and authority to own, operate and lease its properties
and assets, to carry on its business as now conducted and as currently proposed
to be conducted, and to enter into and perform its obligations under this
Agreement and the other Operative Documents to which the Company is a party, and
to consummate the transactions contemplated hereby and thereby. The Company is
duly qualified and licensed as a foreign corporation to do business and is in
good standing in each jurisdiction in which the character of the Company's
properties occupied, owned or held under lease or the nature of the business
conducted by the Company makes such qualification or licensing necessary, except
where the failure to be so qualified or in good standing would not have a
Company Material Adverse Effect. For purposes of this Agreement, the term
"Company Material Adverse Effect" shall mean a material adverse effect on the
business, operations, assets, liabilities, condition (financial or otherwise) or
prospects of the Company.
2.2 ENFORCEABILITY
The Company has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement and each of the other
Operative Documents to which it is a party and each of the certificates,
instruments and documents executed or delivered by it pursuant to the terms of
this Agreement. Except for the consent of the Company's Stockholders, all
corporate action on the part of the Company necessary for the authorization,
execution, delivery and performance of this Agreement and the other Operative
Documents to which the Company is a party, the consummation of the Merger, and
the performance of all the Company's obligations under this Agreement and the
other Operative Documents to which the Company is a party has been taken. This
Agreement has been, and each of the other Operative Documents to which the
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Company is a party at the Closing will have been, duly executed and delivered by
the Company, and this Agreement is, and, when executed and delivered by the
Company, each of the other Operative Documents to which the Company is a party
will be at the Closing, a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as to the
effect, if any, of (a) applicable bankruptcy and other similar laws affecting
the rights of creditors generally, (b) rules of law governing specific
performance, injunctive relief and other equitable remedies, and (c) the
enforceability of provisions requiring indemnification in connection with the
offering, issuance or sale of securities.
2.3 CAPITALIZATION
(a) The authorized capital stock of the Company consists of 7,604,083
shares of Company Common Stock and 4,204,083 shares of the Company's Preferred
Stock, par value $.01 per share (the "Company Preferred Stock"), of which
2,000,000 shares are designated as Series A Preferred Stock, one share is
designated as Series B Preferred Stock and 2,204,082 shares are designated as
Series C Preferred Stock.
(b) As of the date of this Agreement, the issued and outstanding capital
stock of the Company consists solely of 2,250,000 shares of Company Common
Stock, 2,000,000 shares of Series A Preferred Stock, one share of Series B
Preferred Stock, and 2,204,082 shares of Series C Preferred Stock. All of such
shares are, and immediately prior to the Effective Time will be, held of record
and, to the knowledge of the Company, beneficially by the Stockholders of the
Company as set forth on Schedule 2.3(b) to the Company Disclosure Memorandum.
Schedule 2.3(b) also separately indicates the number of shares of Company Common
Stock into which the outstanding Company Preferred Stock is convertible. The
outstanding shares of Company Capital Stock as of the date hereof are, and
immediately prior to the Effective Time all then outstanding shares of Company
Capital Stock will be, duly authorized and validly issued, fully paid and
nonassessable, and issued in compliance with all applicable federal and state
securities laws. To the knowledge of the Company, no Person (as defined in
Section 2.5 hereof) other than the Stockholders holds any interest in any of the
outstanding shares. True and correct copies of the stock records of the Company,
showing all issuances and transfers of shares of capital stock of the Company
since inception, have been provided to Xxxxxx.xxx or its counsel.
(c) As of the date of this Agreement, other than Options to purchase up
to 645,117 shares of Company Common Stock which have been granted under the
Company Plan or other Stock Purchase Rights (as defined below) set forth on
Schedule 2.3(c) to the Disclosure Schedule, there are no outstanding rights of
first refusal or offer, co-sale rights, preemptive rights, Stock Purchase Rights
or other agreements, either directly or indirectly, for the purchase or
acquisition from
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the Company or, to the knowledge of the Company, any Stockholder of any shares
of Company Capital Stock or any securities convertible into or exchangeable for
shares of Company Capital Stock, and the Company is not committed to issue or
grant any such rights, Stock Purchase Rights or other agreements. Set forth on
Schedule 2.3(c) to the Company Disclosure Memorandum is a spreadsheet accurately
reflecting the number of such Options and other Stock Purchase Rights
outstanding, the grant or issue dates, vesting schedules and exercise or
conversion prices thereof, and, in each case, the identities of the holders and
an indication of their relationships to the Company (if any exist other than as
a security holder). The Company has delivered to Xxxxxx.xxx true and correct
copies of the Company Plan, the form of stock option agreements relating to
Options granted thereunder, all other agreements with respect to Stock Purchase
Rights, and all material deviations therefrom. Schedule 2.3(c) to the Disclosure
Memorandum also identifies all Options and Stock Purchase Rights that have been
offered in connection with any employee or consulting agreement, arrangement or
understanding but that, as of the date hereof, have not been issued or granted.
The term "Stock Purchase Rights" shall mean all rights, warrants or options,
vested or unvested, to acquire Company Capital Stock, regardless of restrictions
or exercise, and securities (including, without limitation, the Company
Preferred Stock) and notes convertible or exchangeable at any time, into Company
Capital Stock, regardless of restrictions on conversion.
(d) The Company is not a party or subject to any agreement or
understanding, and, to the knowledge of the Company, there is no agreement or
understanding between any Persons that affects or relates to the voting or
giving of written consents with respect to any securities of the Company or the
voting by any director of the Company. No Stockholder or any affiliate thereof
is indebted to the Company, and the Company is not indebted to any Stockholder
or any affiliate thereof. The Company is not under any contractual or other
obligation to register any of its presently outstanding securities or any of its
securities that may hereafter be issued.
(e) Schedule 2.3(e) to the Company Disclosure Schedule describes all
rights granted in favor of the Company to repurchase or to receive upon
forfeiture any securities of the Company.
(f) Except as described on Schedule 2.3(f) to the Company Disclosure
Schedule, all Options and Stock Purchase Rights have been granted or issued at
fair market value, as determined by the Company's Board of Directors at the date
of grant or issuance.
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2.4 SUBSIDIARIES AND AFFILIATES
Except as set forth in Schedule 2.4 to the Company Disclosure
Memorandum, (a) the Company does not own or control, and has not in the past
owned or controlled, directly or indirectly, any corporation, partnership,
limited liability company or other business entity and (b) the Company does not
own, directly or indirectly, any ownership, equity, or voting interest in, or
otherwise control, any corporation, partnership, joint venture or other entity,
and has no agreement or commitment to purchase any such interest.
2.5 NO APPROVALS; NO CONFLICTS
The execution, delivery and performance by the Company of this Agreement
and the other Operative Documents to which the Company is a party and the
consummation of the transactions contemplated hereby and thereby will not (a)
constitute a violation (with or without the giving of notice or lapse of time,
or both) of any provision of law or any judgment, decree, order, regulation or
rule of any court or other governmental authority applicable to the Company,
except for such violations which would not, both individually and in the
aggregate, have a Company Adverse Material Effect, (b) require any consent,
approval or authorization of, or declaration, filing or registration with, any
person, corporation, partnership, joint venture, association, organization,
other entity or governmental or regulatory authority (a "Person"), except (i)
compliance with applicable securities laws, (ii) the filing of all documents
necessary to consummate the Merger with the Delaware Secretary of State, (iii)
the approval by the Stockholders of the transactions contemplated hereby, as
provided under Delaware Law and the Certificate of Incorporation and Bylaws of
the Company, (iv) the notification requirements of the HSR Act, and (v) such
consents, approvals, authorizations, declarations, filings and registrations the
failure of which to obtain or effect would not, both individually and in the
aggregate, have a Company Material Adverse Effect, (c) result in a default (with
or without the giving of notice or lapse of time, or both) under, or
acceleration or termination of, or the creation in any party of the right to
accelerate, terminate, modify or cancel, any agreement, lease, note or other
restriction, encumbrance, obligation or liability to which the Company is a
party or by which it is bound or to which any assets of the Company are subject,
except for such defaults, accelerations, terminations, or creations of such
rights which would not, both individually and in the aggregate, have a Company
Material Adverse Effect, (d) result in the creation of any Encumbrance (as
defined in Section 2.9(d)) upon any material assets of the Company or, to the
knowledge of the Company, upon any outstanding shares or other securities of the
Company, (e) conflict with or result in a breach of or constitute a default
under any provision of the Certificate of Incorporation
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or Bylaws of the Company, or (f) invalidate or adversely affect any permit,
license or authorization currently material to the conduct of the business of
the Company.
2.6 FINANCIAL STATEMENTS
The Company has delivered to Xxxxxx.xxx (a) unaudited balance sheets,
statements of income and expense, statements of cash flow and statements of
stockholders' equity of the Company as of or for the fiscal years ended December
31, 1997 and 1998, (b) an unaudited statement of income and expense, statement
of cash flow and statement of stockholders' equity of the Company for the
two-month period ended February 28, 1999 and (c) an unaudited consolidated
balance sheet as of March 31, 1999. All the foregoing financial statements are
herein referred to as the "Unaudited Financial Statements"; the Unaudited
Financial Statements and the Audited Financial Statements (as defined in Section
6.17) are referred to herein, collectively, as the "Financial Statements"). The
unaudited balance sheet of the Company as of December 31, 1998 is herein
referred to as the "Company Balance Sheet." The Unaudited Financial Statements
have been, and the Audited Financial Statements will be, prepared in accordance
with generally accepted accounting principles in the United States ("GAAP")
(except, with respect to the Unaudited Financial Statements, for normal year-end
adjustments and the absence of footnotes and other disclosures required solely
for audited financial statements) on a basis consistent with prior accounting
periods and fairly present or, in the case of the Audited Financial Statements,
will present, in all material respects the financial position, results of
operations and changes in financial position of the Company as of the dates and
for the periods indicated therein. The Company has no liabilities or obligations
of any nature (absolute, contingent or otherwise) that are not fully reflected
or reserved against in the Company Balance Sheet and that would be required
under GAAP to be reflected or reserved, except (x) liabilities or obligations
incurred since the date of the Company Balance Sheet in the ordinary course of
business and consistent with past practice that are not in excess of $50,000 in
the aggregate or $20,000 individually and (y) as otherwise set forth on Schedule
2.6 to the Company Disclosure Memorandum. The Company maintains standard systems
of accounting that are adequate for its business. The Company is not a
guarantor, indemnitor, surety or other obligor of any indebtedness of any other
Person. The Company's practices with respect to capitalizing software
development costs, as reflected in the Financial Statements, are reasonable, in
accordance with industry standards and consistent with the advice of the
Company's independent accountants.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except for transactions specifically contemplated in this Agreement or
as set
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forth on Schedule 2.7 to the Company Disclosure Memorandum, since the date of
the Company Balance Sheet, neither the Company nor any of its officers or
directors in their representative capacities on behalf of the Company have:
(a) taken any action or entered into or agreed to enter into any
transaction, agreement or commitment other than in the ordinary course of
business;
(b) forgiven or canceled any indebtedness or waived any claims or
rights of material value (including, without limitation, any indebtedness owing
by any stockholder, officer, director, employee or affiliate of the Company);
(c) granted, other than in the ordinary course of business and
consistent with past practice, any increase in the compensation of directors,
officers, employees or consultants (including any such increase pursuant to any
employment agreement or bonus, pension, profit-sharing, lease payment or other
plan or commitment) or any increase in the compensation payable or to become
payable to any director, officer, employee or consultant;
(d) suffered any change having a Company Material Adverse Effect;
(e) borrowed or agreed to borrow any funds, incurred or become
subject to, whether directly or by way of assumption or guarantee or otherwise,
any obligations or liabilities (absolute, accrued, contingent or otherwise)
individually in excess of $20,000 or in excess of $50,000 in the aggregate,
except liabilities and obligations (i) that are incurred in the ordinary course
of business and consistent with past practice or (ii) that would not be required
to be reflected or reserved against in a balance sheet prepared in accordance
with GAAP, or increased, or experienced any change in any assumptions underlying
or methods of calculating, any bad debt, contingency or other reserves;
(f) paid, discharged or satisfied any material claims,
liabilities or obligations (absolute, accrued, contingent or otherwise) other
than the payment, discharge or satisfaction in the ordinary course of business
and consistent with past practice of claims, liabilities and obligations
reflected or reserved against in the Company Balance Sheet or incurred in the
ordinary course of business and consistent with past practice since the date of
the Company Balance Sheet;
(g) knowingly permitted or allowed any of its property or assets
(real, personal or mixed, tangible or intangible) to be subjected to any
material mortgage, pledge, lien, security interest, encumbrance, restriction or
charge which remains in existence on the date hereof, except in the ordinary
course of business and consistent
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with past practice;
(h) purchased or sold, transferred or otherwise disposed of any
of its material properties or assets (real, personal or mixed, tangible or
intangible) other than as contemplated by this Agreement;
(i) disposed of or permitted to lapse any rights to the use of
any trademark, trade name, patent or copyright, or disposed of or disclosed to
any Person without obtaining an appropriate confidentiality agreement from any
such Person any trade secret, formula, process or know-how not theretofore a
matter of public knowledge, except for such dispositions, lapses and disclosures
which would not, both individually and in the aggregate, have a Company Material
Adverse Effect;
(j) made any single capital expenditure or commitment in excess
of $20,000 for additions to property, plant, equipment or intangible capital
assets or made aggregate capital expenditures in excess of $50,000 for additions
to property, plant, equipment or intangible capital assets;
(k) made any change in accounting methods or practices or
internal control procedure;
(l) issued any capital stock or other securities, or declared,
paid or set aside for payment any dividend or other distribution in respect of
its capital stock, or redeemed, purchased or otherwise acquired, directly or
indirectly, any shares of capital stock or other securities of the Company, or
otherwise permitted the withdrawal by any of the holders of Company Capital
Stock of any cash or other assets (real, personal or mixed, tangible or
intangible), in compensation, indebtedness or otherwise, other than payments of
compensation in the ordinary course of business and consistent with past
practice;
(m) paid, loaned or advanced any amount to, or sold, transferred
or leased any properties or assets (real, personal or mixed, tangible or
intangible) to any of the Company's stockholders, officers, directors or
employees or any affiliate of any of the Company's stockholders, officers,
directors or employees, except normal compensation and expense allowances (for
travel and other business-related expenses) paid to officers, directors, or
employees of the Company; or
(n) agreed, whether in writing or otherwise, to take any action
described in this Section 2.7.
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2.8 TAXES
(a) (i) All Tax Returns (as defined below) required to be filed by or on
behalf of the Company have been filed on a timely basis with the appropriate
governmental authority in all jurisdictions in which such Tax Returns are
required to be filed, and all such Tax Returns were (at the time they were
filed) true, correct and complete in all material respects; (ii) all Taxes (as
defined below) of the Company (whether or not reflected on any Tax Return) have
been fully and timely paid on or before the due date for payment thereof; (iii)
no waivers of statutes of limitation have been given or requested with respect
to the Company in connection with any Tax Returns covering the Company with
respect to any Taxes payable by it; (iv) no taxing authority in a jurisdiction
where the Company does not file Tax Returns has made a written claim, assertion,
or threat to the Company that the Company is or may be subject to taxation by
such jurisdiction; (v) the Company has duly and timely withheld from employee
salaries, wages and other compensation and paid over to the appropriate
governmental authority all amounts required to be so withheld and paid over for
all periods under all applicable laws; (vi) there are no liens with respect to
Taxes on any of the Company's property or assets other than liens for current
Taxes not yet payable; (vii) there are no Tax rulings, requests for rulings, or
closing agreements relating to the Company which could affect the liability for
Taxes or the amount of taxable income of the Company for any period (or portion
of a period) after the date hereof; and (viii) any adjustment of Taxes of the
Company made by the IRS in any examination which is required to be reported to
the appropriate state, local or foreign taxing authorities has been reported,
and any additional Taxes due with respect thereto have been paid.
(b) Neither the Company nor any other Person on behalf of the Company
(i) has filed a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by the Company;
(ii) has executed or entered into a closing agreement pursuant to Section 7121
of the Code or any predecessor provision thereof or any similar provision of
state, local or foreign law; or (iii) has agreed to or is required to make any
adjustments pursuant to Section 481 (a) of the Code or any similar provision of
state, local or foreign law by reason of a change in accounting method initiated
by the Company or has notice that a governmental authority has proposed in
writing any such adjustment or change in accounting method.
(c) There is no dispute or claim concerning any Tax liability of the
Company claimed or raised by any authority in writing. Schedule 2.8 to the
Company Disclosure
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Memorandum lists all Tax Returns filed with respect to the Company for taxable
periods ended on or after the Company's inception or the inception of any
predecessor that have been audited, and indicates those Tax Returns that
currently are the subject of audit. The Company has delivered to Xxxxxx.xxx
correct and complete copies of all Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company since
the Company's inception.
(d) The Company will not pay or incur any obligation to make any
payments in connection with or as a result of the transactions contemplated
hereby and is not a party to any agreement that under certain circumstances
could obligate it to make any payments in connection with or as a result of the
transactions contemplated hereby that will not be deductible under Section 280G
of the Code (or any similar provision of state, local or foreign law).
(e) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(f) The Company is not a party to any Tax allocation or sharing
agreement. The Company (i) has not been a member of a Tax Group (as defined
below) filing a consolidated income Tax Return under Section 1501 of the Code
(or any similar provision of state, local or foreign law) and (ii) does not have
any liability for Taxes of any Person under Treasury Regulations Section
1.1502-6 (or any similar provision of state, local or foreign law) as a
transferee or successor by contract or otherwise.
(g) The unpaid Taxes of the Company (i) did not, as of December 31,
1998, exceed the reserve for Tax liability set forth on the face (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) of the Company Balance Sheet and (ii) do not exceed that
reserve as adjusted for the passage of time and operations in the ordinary
course of business through the Closing Date.
(h) The Company Disclosure Memorandum sets forth the amount of any net
operating loss, net capital loss, net-unrealized built-in loss (as defined under
Section 382 of the Code), unused investment or other credit, unused foreign tax
or excess charitable contribution allocable to the Company. There is no
limitation on utilization of any such net operating loss or tax item by the
Purchaser or Xxxxxx.xxx under Section 382 of the Code (or any comparable
provision of state, local or foreign law).
(i) All Options that the Company has treated as incentive stock options
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under Section 421 of the Code meet the requirements of Section 422 of the Code.
As used in this Agreement, the following terms shall have the following
meanings:
"Taxes" means all foreign, federal, state, county or local taxes,
charges, fees, levies, imposts, duties, and other assessments, including, but
not limited to, any income, alternative minimum or add-on tax, estimated, gross
income, gross receipts, sales, use, transfer, transactions, intangibles, ad
valorem, value-added, franchise, registration, title, license, capital, paid-up
capital, profits, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, real property, recording, personal property, federal
highway use, commercial rent, environmental (including, but not limited to,
taxes under Section 59A of the Code) or windfall profit tax, custom, duty or
other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalties or additions to tax; and "Tax"
means any of the foregoing Taxes.
"Tax Group" means any federal, state, local or foreign consolidated,
affiliated, combined, unitary or other similar group of which the Company is now
or was formerly a member.
"Tax Returns" means any return, declaration, report, claim or refund,
information return, statement, or other similar document relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
2.9 PROPERTY
(a) The Company owns no real property other than the leasehold interests
described on Schedule 2.9(a) to the Company Disclosure Memorandum, which
contains a complete and accurate list of all real property owned, leased or
currently being used by the Company (the "Real Property"). The Company has
delivered to Xxxxxx.xxx or its counsel true and complete copies of all written
leases, subleases, rental agreements, contracts of sale, tenancies or licenses
relating to the Real Property and written summaries of the terms of any oral
leases, subleases, rental agreements, contracts of sale, tenancies or licenses
to which the Real Property is subject.
(b) Schedule 2.9(b) to the Company Disclosure Memorandum contains a
complete and accurate list of each item of personal property having a net book
value in excess of $20,000 which is owned, leased, rented or used by the
Company, as of the date hereof (the "Personal Property"); provided that such
list need not describe the Technology or the IP Rights (as defined in Sections
2.14.2 and 2.14.5, respectively)
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listed on Schedule 2.14 to the Company Disclosure Memorandum. The Company has
delivered to Xxxxxx.xxx true and complete copies of all leases, subleases,
rental agreements, contracts of sale, tenancies or licenses to which the
Personal Property is subject.
(c) The Real Property and the Personal Property include all the
properties and assets (whether real, personal or mixed, tangible or intangible)
(other than, in the case of the Personal Property, property rights with an
individual value of less than $20,000 and the Technology and IP Rights)
reflected in the Company Balance Sheet (except for such properties or assets
sold since the date of the Company Balance Sheet in the ordinary course of
business and consistent with past practice) and all the properties and assets
purchased or otherwise acquired by the Company since the date of the Company
Balance Sheet (other than, in the case of the Personal Property, property rights
with an individual value of less than $20,000 and the Technology and the IP
Rights). The Real Property and the Personal Property include all material
property used in the business of the Company, other than the Technology and IP
Rights. The Company's offices and other structures and its Personal Property are
of a quality consistent with industry standards, are in good operating condition
and repair, normal wear and tear excepted, are adequate for the uses to which
they are being put, and comply in all material respects with applicable safety
and other laws and regulations.
(d) The Company's leasehold interest in each parcel of the Real Property
is free and clear of all liens, mortgages, pledges, deeds of trust, security
interests, charges, encumbrances and other adverse claims or interests of any
kind (each, an "Encumbrance"), except for Encumbrances related to Taxes not yet
due and payable. Each lease of any portion of the Real Property is valid,
binding and enforceable in accordance with its terms against the Company and, to
the Company's knowledge, against each other party thereto (except as to the
effect, if any, of (i) applicable bankruptcy and other similar laws affecting
the rights of creditors generally, (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies, and (iii) the
enforceability of provisions requiring indemnification in connection with the
offering, issuance or sale of securities), the Company has performed in all
material respects all obligations imposed upon it thereunder, and neither the
Company nor, to the Company's knowledge, any other party thereto is in material
default thereunder, nor is there any event which with notice or lapse of time,
or both, would constitute a material default thereunder by the Company or, to
the Company's knowledge, by any other party. The Company has not granted any
lease, sublease, tenancy or license of, or entered into any rental agreement or
contract of sale with respect to, any portion of the Real Property.
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(e) The Personal Property is free and clear of all Encumbrances, and,
other than leased Personal Property which is so noted on the list supplied
pursuant to Section 2.9(b) hereof, the Company owns such Personal Property. Each
lease, license, rental agreement, contract of sale or other agreement to which
the Personal Property is subject is valid, binding and enforceable in accordance
with its terms against the Company and, to the Company's knowledge, against each
other party thereto (except as to the effect, if any, of (i) applicable
bankruptcy and other similar laws affecting the rights of creditors generally,
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies, and (iii) the enforceability of provisions requiring
indemnification in connection with the offering, issuance or sale of
securities), the Company has performed in all material respects all obligations
imposed upon it thereunder, and neither the Company nor, to the Company's
knowledge, any other party thereto is in material default thereunder, nor is
there any event which with notice or lapse of time, or both, would constitute a
material default by the Company or, to the Company's knowledge, any other party
thereunder. The Company has not granted any lease, sublease, tenancy or license
of any portion of the Personal Property, except in the ordinary course of
business.
2.10 CONTRACTS
Schedule 2.10 to the Company Disclosure Memorandum contains a complete
and accurate list (other than the IP Rights listed on Schedule 2.14 to the
Company Disclosure Memorandum) of all contracts, agreements and understandings,
oral or written, to which the Company is currently a party or by which the
Company is currently bound providing for potential payments by or to the Company
in excess of $20,000, including, without limitation, security agreements,
license agreements, software development agreements, distribution agreements,
joint venture agreements, reseller agreements, credit agreements and instruments
relating to the borrowing of money. All contracts set forth on Schedule 2.10 are
valid, binding and enforceable in accordance with their terms against the
Company and, to the Company's knowledge, each other party thereto (except as to
the effect, if any, of (a) applicable bankruptcy and other similar laws
affecting the rights of creditors generally, (b) rules of law governing specific
performance, injunctive relief and other equitable remedies, and (c) the
enforceability of provisions requiring indemnification in connection with the
offering, issuance or sale of securities), and are in full force and effect. The
Company has performed in all material respects all obligations imposed on it
under the contracts set forth on Schedule 2.10 to the Company Disclosure
Memorandum, and neither the Company nor, to the Company's knowledge, any other
party thereto is in material default thereunder, nor is there any event which
with notice or lapse of time, or both, would constitute a material default by
the Company or, to the Company's knowledge,
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any other party thereunder. True and complete copies of each such written
contract (or written summaries of the terms of any such oral contract) have been
delivered to Xxxxxx.xxx by the Company. Except as set forth on Schedule 2.10,
the Company has no
(a) contracts with directors, officers, stockholders, employees,
agents, consultants, advisors, salespeople, sales representatives, distributors
or dealers that cannot be canceled by the Company within 30 days' notice without
liability, penalty or premium, any agreement or arrangement providing for the
payment of any bonus or commission based on sales or earnings, or any
compensation agreement or arrangement affecting or relating to former employees
of the Company;
(b) employment agreement, whether express or implied, or any
other agreement for services that contains severance or termination pay
liabilities or obligations;
(c) noncompetition agreement or other arrangement that would
prevent the Company from carrying on its business anywhere in the world;
(d) notice that any party to a contract listed on Schedule 2.10
intends to cancel, terminate or refuse to renew such contract (if such contract
is renewable);
(e) material dispute with any of its suppliers, customers,
distributors, licensors or licensees;
(f) product distribution agreement, development agreement, or
license agreement as licensor or licensee (except for standard nonexclusive
software licenses granted to end-user customers in the ordinary course of
business, the form of which has been provided to Xxxxxx.xxx, or standard
licenses purchased by the Company for off-the-shelf software);
(g) joint venture contract or arrangement or any other agreement
that involves a sharing of profits with other persons;
(h) instrument evidencing indebtedness for borrowed money by way
of a direct loan, sale of debt securities, purchase money obligation,
conditional sale or guarantee, or otherwise, except for trade indebtedness
incurred in the ordinary course of business, and except as disclosed in the
Financial Statements; and
(i) agreements or commitments to provide indemnification.
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2.11 CLAIMS AND LEGAL PROCEEDINGS
Except as set forth on Schedules 2.11 and 2.14 to the Company Disclosure
Memorandum, there are no claims, actions, suits, arbitrations, investigations or
proceedings pending or involving or, to the Company's knowledge, threatened
against the Company before or by any court or governmental or nongovernmental
department, commission, board, bureau, agency or instrumentality, or any other
Person. There are no outstanding or unsatisfied judgments, orders, decrees or
stipulations to which the Company is a party. Schedule 2.11 sets forth a
description of any material disputes that have been settled or resolved by
litigation or arbitration since the Company's inception.
2.12 LABOR AND EMPLOYMENT MATTERS
There are no material labor disputes, employee grievances or
disciplinary actions pending or, to the Company's knowledge, threatened against
or involving the Company or, to the Company's knowledge, any of its present or
former employees. The Company has complied in all material respects with all
provisions of law relating to employment and employment practices, terms and
conditions of employment, wages and hours. The Company is not engaged in any
unfair labor practice and has no liability for any arrears of wages or Taxes or
penalties for failure to comply with any such provisions of law. There is no
labor strike, dispute, slowdown or stoppage pending or, to the Company's
knowledge, threatened against or affecting the Company, and the Company has not
experienced any work stoppage or other labor difficulty since its incorporation.
No collective bargaining agreement is binding on the Company. The Company has no
knowledge of any organizational efforts presently being made or threatened by or
on behalf of any labor union with respect to employees of the Company. Except as
set forth in Schedule 2.12 to the Company Disclosure Memorandum, each employee
and officer of and consultant to the Company has executed an Employee Agreement
Regarding Inventions, Confidentiality and Competitive Activities in the form
attached as Exhibit 2.12 to the Company Disclosure Memorandum (a "Nondisclosure
Agreement") and, as of the Closing, each employee and officer of and each
consultant to the Company who has not executed a Nondisclosure Agreement as of
the date hereof shall have executed and delivered to the Company such an
agreement. To the Company's knowledge, each Nondisclosure Agreement is, and as
of the Closing will be, a valid, binding and enforceable obligation of the
employee, officer or consultant named therein. To the Company's knowledge, no
employee (or person performing similar functions) of the Company is in violation
of any such agreement or any employment agreement, noncompetition agreement,
patent disclosure agreement, invention assignment agreement, proprietary
information
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agreement or other contract or agreement relating to the relationship of such
employee with the Company or any other party. Schedule 2.12 to the Company
Disclosure Memorandum sets forth a true and complete list of (a) the names and
current compensation amounts of all directors and officers of the Company; (b)
the names of and wage rates for all nonsalaried and nonofficer salaried
employees of the Company by classification, and all union contracts (if any);
(c) all group insurance programs in effect for employees of the Company; and (d)
the names and current compensation packages of all independent contractors and
consultants of the Company. Except as set forth in Schedule 2.12 to the Company
Disclosure Memorandum, the Company is not in default with respect to any of its
obligations referred to in clause (b) above and has no, and will not incur any,
material obligation or liability for severance or back pay owed through or by
virtue of the Merger. Except as disclosed on Schedule 2.12, all employees of the
Company are employed on an "at will" basis.
2.13 EMPLOYEE BENEFIT PLANS
2.13.1 EMPLOYEE BENEFIT PLAN LISTING
Schedule 2.13.1 to the Company Disclosure Memorandum sets forth a true,
accurate and complete list and description of all retirement, pension, profit
sharing, deferred compensation, savings, bonus, incentive, cafeteria, flexible
benefits, medical, dental, vision, hospitalization, life insurance, group
insurance, medical expense reimbursement, dependent care assistance, tuition
reimbursement, disability, accident, sick pay, holiday, vacation, severance,
stock purchase, stock option, stock appreciation rights, fringe benefit and
other employee benefit plans, funds, policies, programs, contracts, arrangements
and payroll practices (including, but not limited to, all "employee benefit
plans," as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) and all employment, consulting and personal
service contracts and agreements, whether formal or informal, whether written or
unwritten, and whether legally binding or not, (a) sponsored, maintained or
contributed to by the Company, (b) covering or benefiting any current or former
officer, employee, agent, director or independent contractor of the Company (or
any dependent or beneficiary of any such individual), or (c) with respect to
which the Company has (or could have) any obligation or liability (such plans,
funds, policies, programs, contracts, arrangements and payroll practices are
hereinafter referred to collectively as "Employee Benefit Plans" and each
individually as an "Employee Benefit Plan"). The Company does not have any
agreement, arrangement, commitment or obligation, whether formal or informal,
whether written or unwritten and whether legally binding or not, to create (or
contribute to) any additional employee benefit plan, fund, policy, program,
contract, arrangement or payroll practice or to
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modify or amend any existing Employee Benefit Plan. There has been no amendment,
written interpretation or announcement (whether or not written) by the Company
relating to, or change in participation or coverage under, any Employee Benefit
Plan that, either alone or together with other such items or events, could
materially increase the expense of maintaining the Employee Benefit Plans above
the level of expense incurred with respect thereto for the most recent fiscal
year included in the Financial Statements.
2.13.2 DOCUMENTS PROVIDED
The Company has delivered to Xxxxxx.xxx true, correct and complete
copies (or, in the case of unwritten Employee Benefit Plans, descriptions) of
all Employee Benefit Plans (and all amendments thereto), along with, to the
extent applicable to the particular Employee Benefit Plan, the following
information: (a) copies of the last three annual reports (Form 5500 series)
filed with respect to such Employee Benefit Plan; (b) copies of the summary plan
descriptions, summaries of material modifications and all material employee
manuals or communications filed or distributed with respect to such Employee
Benefit Plan during the last three years; and (c) copies of all contracts (and
any amendments thereto) relating to such Employee Benefit Plan, including, but
not limited to, service provider agreements, administrative service agreements,
insurance contracts, annuity contracts, investment management agreements and
record-keeping agreements.
2.13.3 COMPLIANCE
With respect to each Employee Benefit Plan, (a) such Employee Benefit
Plan is, and at all times since its inception has been, maintained, administered
and operated in accordance with its terms and in compliance in all material
respects with all applicable laws, statutes, orders, rules and regulations, and
all requirements prescribed thereby, including, but not limited to, ERISA and
the Code; (b) all amendments and actions required to bring such Employee Benefit
Plan into conformity with the applicable provisions of ERISA, the Code and other
applicable laws and regulations have been made or taken within the time
prescribed by law, except to the extent that such amendments or actions are not
required by law to be made or taken until after the Closing Date; (c) the
Company and, to the Company's knowledge, each fiduciary of such Employee Benefit
Plan and all other Persons have, at all times, properly performed all
obligations, whether arising by operation of law or by contract, required to be
performed by each of them in connection with such Employee Benefit Plan; (d) all
returns, reports and other disclosures relating to such Employee Benefit Plan
required to be filed with any governmental entity or agency or furnished to any
participant or beneficiary have been properly completed or prepared and timely
filed or
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furnished in accordance with applicable law; (e) neither the Company nor any
other fiduciary of such Employee Benefit Plan has engaged in any transaction or
acted or failed to act in a manner that violates the fiduciary requirements of
ERISA or any other applicable law; and (f) no event has occurred or, to the
Company's knowledge, is threatened or about to occur that constitutes or could
constitute a nonexempt prohibited transaction under Section 406 or 407 of ERISA
or under Section 4975 of the Code. Each Employee Benefit Plan that constitutes a
"group health plan," as defined in Section 607(1) or 733(a)(1) of ERISA or
Section 4980B(g)(2) of the Code, has been maintained, administered and operated
at all times since its inception in compliance in all material respects with the
requirements of Parts 6 and 7 of Subtitle B of Title I of ERISA, Section
4980B(f) of the Code, any regulations under such ERISA and Code sections and any
other applicable federal, state, local or foreign law regarding the provision or
continuation of health insurance coverage or other welfare benefits (within the
meaning of Section 3(1) of ERISA). No event or omission has occurred, or is
reasonably expected by the Company to occur (including, but not limited to, any
of the transactions contemplated in or by this Agreement), with respect to any
Employee Benefit Plan that has or could subject, directly or indirectly, the
Company or any other Person to a tax under Chapter 43 of Subtitle D of the Code
or a penalty under Part 5 of Subtitle B of Title I of ERISA.
2.13.4 CONTRIBUTIONS AND PREMIUM PAYMENTS
All contributions, premiums and other payments due or required to be
made to each Employee Benefit Plan under the terms of such Employee Benefit
Plan, ERISA, the Code or other applicable law have been timely paid, or, if not
yet due, have been properly recorded on the books of the Company.
2.13.5 RELATED EMPLOYERS
The Company is not, and has never been, a member of (a) a controlled
group of corporations, within the meaning of Section 414(b) of the Code, (b) a
group of trades or businesses under common control, within the meaning of
Section 414(c) of the Code, (c) an affiliated service group, within the meaning
of Section 414(m) of the Code, or (d) any other group of Persons treated as a
single employer under Section 414(o) of the Code.
2.13.6 MULTIEMPLOYER AND TITLE IV PLANS
The Company does not sponsor, maintain or contribute to, and has never
sponsored, maintained or contributed to (or been obligated to contribute to),
any multiemployer plan as defined in Section 3(37) or Section 4001(a)(3) of
ERISA or
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414(f) of the Code, any multiple employer plan within the meaning of Section
4063 or 4064 of ERISA or Section 413(c) of the Code, or any employee benefit
plan, fund, program, contract or arrangement that is covered by or subject to
Section 408 or 412 of the Code, Section 302 of ERISA or Title IV of ERISA, or
any employee benefit plan, fund, program or arrangement that is intended to be
qualified under Section 401(a) of the Code.
2.13.7 POST-TERMINATION WELFARE BENEFITS
Neither the Company nor any Employee Benefit Plan provides or has any
obligation to provide (or contribute toward the cost of) health, severance or
any other welfare benefits (within the meaning of Section 3(1) of ERISA) with
respect to any current or former officer, employee, agent, director or
independent contractor of the Company or any other entity beyond such
individual's retirement or other termination of service, other than continuation
coverage mandated by Sections 601 through 608 of ERISA or Section 4980B(f) of
the Code.
2.13.8 SUITS, CLAIMS AND INVESTIGATIONS
There are no actions, suits or claims (other than routine claims for
benefits) pending or, to the Company's knowledge, threatened with respect to (or
against the assets of) any Employee Benefit Plan. No Employee Benefit Plan is
currently under investigation, audit or review, directly or indirectly, by the
IRS, the Department of Labor (the "DOL") or any other governmental entity or
agency, and, to the Company's knowledge, no such action is contemplated or under
consideration by the IRS, the DOL or any other governmental entity or agency.
2.13.9 PAYMENTS RESULTING FROM TRANSACTIONS
Neither the execution and delivery of this Agreement or any of the other
Operative Documents nor the consummation of the transactions contemplated in (or
by) this Agreement or any of the other Operative Documents will (a) entitle any
current or former officer, employee, agent, director or independent contractor
of the Company to severance pay, unemployment compensation or any other payment
from the Company or any other Person, or otherwise increase the amount of
compensation due to any such individual, or (b) result in any benefit or right
becoming established or increased, or accelerate the time of payment or vesting
of any benefit, under any Employee Benefit Plan, whether or not some other
subsequent action or event would be required to trigger any of the items
specified in (a) or (b) above.
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2.14 INTELLECTUAL PROPERTY
2.14.1 GENERAL
The Company owns or is licensed and has all rights in and to the
following as required to conduct its business as now conducted and as proposed
to be conducted in any written materials furnished by the Company to Xxxxxx.xxx,
except where the failure to own or have such rights would not have a Company
Material Adverse Effect: (a) all products, tools, computer programs,
specifications, source code, object code, graphics, devices, techniques,
algorithms, methods, processes, procedures, packaging, trade dress, formulae,
drawings, designs, improvements, discoveries, concepts, user interfaces, "look
and feel," software, development and other tools, content, inventions (whether
or not patentable or copyrightable and whether or not reduced to practice),
designs, logos, themes, know-how, concepts and other technology that are now,
during the two years prior to the date of this Agreement have been or are
currently proposed in written materials furnished by the Company to Xxxxxx.xxx
to be developed, produced, used, marketed or sold by the Company (collectively,
the "Technology-Related Assets"); and (b) all intellectual property and other
proprietary rights in the Technology-Related Assets, including, without
limitation, all trade names, trademarks, domain names, service marks, logos,
brand names and other identifiers, trade secrets, copyrights, and domestic and
foreign letters patent, and the registrations, applications, renewals,
extensions and continuations (in whole or in part) thereof, all goodwill
associated therewith, and all rights and causes of action for infringement,
misappropriation, misuse, dilution or unfair trade practices associated
therewith.
2.14.2 COMPANY TECHNOLOGY
Schedule 2.14.2 to the Company Disclosure Memorandum sets forth a list
of all products and tools developed, produced, used, marketed or sold by the
Company during the two years prior to the date of this Agreement (collectively,
the "Products"). Except for the Third Party Technologies (as defined in Section
2.14.3), the Company owns all right, title and interest in and to the following
(collectively, the "Technology"), free and clear of all Encumbrances: (a) the
Products, together with any and all codes, techniques, software tools, formats,
designs, user interfaces, content and "look and feel" related thereto; (b) any
and all updates, enhancements, corrections, modifications, improvements and new
releases related to the items set forth in clause (a) above; (c) any and all
technology and work in progress related to the items set forth in clauses (a)
and (b) above; and (d) all inventions, discoveries, processes, designs, trade
secrets, know-how and other confidential or proprietary information related to
the items set forth in clauses (a), (b) and (c) above. The Technology, excluding
the Third Party Technologies, is sometimes referred to herein as the
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"Company Technology."
2.14.3 THIRD PARTY TECHNOLOGY
Schedule 2.14.3 to the Company Disclosure Memorandum sets forth a list
that is complete in all material respects of all Technology used in the
Company's business for which the Company does not own all right, title and
interest (collectively, the "Third Party Technologies"), and all license
agreements or other contracts pursuant to which the Company has the right to use
(in the manner used by the Company, or intended or necessary for use with the
Company Technology) the Third Party Technologies other than license agreements
included in shrink-wrapped software packages for software which is readily and
generally commercially available to Xxxxxx.xxx (the "Third Party Licenses"),
indicating, with respect to each of the Third Party Technologies listed therein,
the owner thereof and the Third Party License applicable thereto. The Company
has the lawful right to use under the terms of the applicable Third Party
License (free of any material restriction not expressly set forth in the Third
Party Licenses) (a) all Third Party Technology that is incorporated in or used
in the development or production of the Company Technology, and (b) all other
Third Party Technology necessary for the conduct of the Company's business as
now conducted and as proposed to be conducted in any written materials furnished
by the Company to Xxxxxx.xxx. All Third Party Licenses are valid, binding on the
Company and in full force and effect, the Company and, to the Company's
knowledge, each other party thereto have performed in all material respects
their obligations thereunder, and neither the Company nor, to the Company's
knowledge, any other party thereto is in default thereunder, nor to the
Company's knowledge has there occurred any event or circumstance which with
notice or lapse of time or both would constitute a default or event of default
on the part of the Company or, to the Company's knowledge, any other party
thereto or give to any other party thereto the right to terminate or modify any
Third Party License. The Company has not received notice that any party to any
Third Party License intends to cancel, terminate or refuse to renew (if
renewable) such Third Party License or to exercise or decline to exercise any
option or right thereunder.
2.14.4 TRADEMARKS
Schedule 2.14.4 to the Company Disclosure Memorandum sets forth a list
of all trademarks, trade names, brand names, service marks, logos or other
identifiers for the Products or otherwise used in a material way by the Company
in its business (the "Marks"). The Company has full legal and beneficial
ownership, free and clear of any Encumbrances, of all rights conferred by use of
the Marks in connection with the Products or otherwise in the Company's business
and, as to those Marks that have been
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registered in the United States Patent and Trademark Office, by federal
registration of the Marks.
2.14.5 INTELLECTUAL PROPERTY RIGHTS
Schedule 2.14.5 to the Company Disclosure Memorandum sets forth all
patents, patent applications, copyright registrations (and applications
therefor) and trademark registrations (and applications therefor) (collectively,
the "IP Registrations") associated with the Company Technology and the Marks.
The Company owns all right, title and interest, free and clear of any
Encumbrances, in and to the IP Registrations, together with any other rights in
or to any copyrights (registered or unregistered), rights in the Marks
(registered or unregistered), trade secret rights and other intellectual
property rights (including, without limitation, rights of enforcement) contained
or embodied in the Company Technology and the Marks (collectively, the "IP
Rights").
2.14.6 MAINTENANCE OF RIGHTS
Except as set forth on Schedule 2.14.6 to the Company Disclosure
Memorandum, the Company has not conducted its business, and has not used or
enforced (or, to its knowledge, failed to use or enforce) the IP Rights, in a
manner that would result in the abandonment, cancellation or unenforceability of
any item of the IP Rights or the IP Registrations, and the Company has not taken
(or, to its knowledge, failed to take) any action that would result in the
forfeiture or relinquishment of any IP Rights or IP Registrations, in each case
where such abandonment, cancellation, unenforceability, forfeiture or
relinquishment would have a Company Material Adverse Effect. Except as set forth
in Schedule 2.14.6, the Company has not granted to any third party any rights or
permissions to use any of the Technology or the IP Rights. To the best of the
Company's knowledge, except pursuant to reasonably prudent safeguards, (a) no
third party has received any confidential information relating to the Technology
or the IP Rights, and (b) the Company is not under any contractual or other
obligation to disclose to any third party any Company Technology.
2.14.7 THIRD PARTY INFRINGEMENT
Except as set forth on Schedule 2.14.7 to the Company Disclosure
Memorandum, (a) the Company has not received any notice or claim (whether
written, oral or otherwise) challenging the Company's ownership or rights in the
Company Technology or the IP Rights or claiming that any other person or entity
has any legal or beneficial ownership with respect thereto; (b) all the IP
Rights are legally valid and enforceable without any material qualification,
limitation or restriction on their use which would have a Company Material
Adverse Effect, and the Company has not
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received any notice or claim (whether written, oral or otherwise) challenging
the validity or enforceability of any of the IP Rights; and (c) to the Company's
knowledge, no other person or entity is infringing or misappropriating any part
of the IP Rights or otherwise making any unauthorized use of the Company
Technology.
2.14.8 INFRINGEMENT BY THE COMPANY
Except as set forth on Schedule 2.14.8 to the Company Disclosure
Memorandum, (a) the use of any of the Company Technology in the Company's
business does not and will not infringe, violate or interfere with or constitute
an appropriation of any right, title or interest (including, without limitation,
any patent, copyright, trademark or trade secret right) held by any other person
or entity, and there have been no claims made with respect thereto; (b) the use
of any of the Marks and other IP Rights in the Company's business will not
infringe, violate or interfere with or constitute an appropriation of any right,
title or interest (including, without limitation, any patent, copyright,
trademark or trade secret right) held by any other person or entity, and there
have been no claims made with respect thereto; and (c) the Company has not
received any notice or claim (whether written, oral or otherwise) regarding any
infringement, misappropriation, misuse, abuse or other interference with any
third party intellectual property or proprietary rights (including, without
limitation, infringement of any patent, copyright, trademark or trade secret
right of any third party) by the Company, the Technology or the Marks or other
IP Rights or claiming that any other entity has any claim of infringement with
respect thereto.
2.14.9 CONFIDENTIALITY
Except as set forth on Schedule 2.14.9 to the Company Disclosure
Memorandum, (a) the Company has not disclosed any source code regarding the
Technology to any person or entity other than an employee of the Company and
under a written nondisclosure agreement; (b) the Company has at all times
maintained and diligently enforced commercially reasonable procedures to protect
all confidential information relating to the Technology; (c) neither the Company
nor any escrow agent is under any contractual or other obligation to disclose
the source code or any other proprietary information included in or relating to
the Technology; and (d) the Company has not deposited any source code relating
to the Technology into any source code escrows or similar arrangements. If, as
disclosed on Schedule 2.14.9, the Company has deposited any source code to the
Technology into source code escrows or similar arrangements, no event has
occurred that has or could reasonably form the basis for a release of such
source code from such escrows or arrangements.
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2.14.10 WARRANTY AGAINST DEFECTS
Except as set forth in Schedule 2.14.10 to the Company Disclosure
Memorandum, the Technology is free from known material defects and substantially
conforms to the applicable specifications and documentation for such Technology.
2.14.11 DOMAIN NAMES
Schedule 2.14.11 to the Company Disclosure Memorandum sets forth a list
of all Internet domain names used by the Company in its business (collectively,
the "Domain Names"). The Company has a valid registration and all material
rights (free of any material restriction) and freely transferable to the
Surviving Corporation) in and to the Domain Names, including, without
limitation, all rights necessary to continue to conduct the Company's business
as it is currently conducted.
2.14.12 YEAR 2000
The Company Technology (a) will accurately process date data (including,
but not limited to, calculating, comparing and sequencing) from, into and
between the twentieth and twenty-first centuries, including, without limitation,
leap year calculations, without a decrease in the functionality of the Software,
(b) is designed to be used prior to, during and after the calendar year 2000,
and (c) will operate during each such time period without error relating to date
data, specifically including any error relating to, or the product of, date data
which represents or references different centuries or more than one century
("Y2K Compliant"). The foregoing will not apply to the extent any third party
component that provides data for use by the Company Technology is not Y2K
Compliant unless and to the extent the failure of the Company Technology to
conform to the above warranty would have occurred regardless of the failure of
the third party component to be Y2K Compliant.
2.14.13 INDEMNIFICATION
The Company has not entered into any agreement or offered to indemnify
any Person against any charge of infringement by the Technology or IP Rights, or
any other intellectual property or right. The Company has not entered into any
agreement granting any Person the right to bring any infringement action with
respect to, or otherwise to enforce, any of the Technology or IP Rights.
2.14.14 RESTRICTIONS ON INTELLECTUAL PROPERTY
To the knowledge of the Company, none of the Company's officers,
employees, agents or representatives, during his or her term of employment or
engagement with
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the Company, has entered into any agreement regarding know-how, trade secrets,
assignment of rights in inventions, or prohibition or restriction of competition
or solicitation of customers, or any other similar restrictive agreement or
covenant, whether written or oral, with any Person other than the Company.
2.15 CORPORATE BOOKS AND RECORDS
The Company has furnished to Xxxxxx.xxx or its representatives for their
examination true and complete copies of (a) the Certificate of Incorporation and
Bylaws of the Company as currently in effect, including all amendments thereto,
(b) the minute books of the Company, and (c) the stock transfer books of the
Company. Such stock transfer books accurately reflect all issuances and
transfers of shares of capital stock of the Company since its inception.
2.16 LICENSES, PERMITS, AUTHORIZATIONS, ETC.
Except as identified on Schedules 2.1 and 2.5 to the Company Disclosure
Memorandum, the Company has received all currently required governmental
approvals, authorizations, consents, licenses, orders, registrations and permits
of all agencies, whether federal, state, local or foreign, the failure to obtain
of which would have a Company Material Adverse Effect. The Company has not
received any notifications of any asserted present failure by it to have
obtained any such governmental approval, authorization, consent, license, order,
registration or permit, or past and unremedied failure to obtain such items.
2.17 COMPLIANCE WITH LAWS
Except as described on Schedule 2.17 to the Company Disclosure
Memorandum, the Company is in compliance with all federal, state, local and
foreign laws, rules, regulations, ordinances, decrees and orders applicable to
it, to its employees or to the Real Property and the Personal Property,
including, without limitation, all such laws, rules, regulations, ordinances,
decrees and orders relating to intellectual property protection, antitrust
matters, consumer protection, currency exchange, environmental protection, equal
employment opportunity, health and occupational safety, pension and employee
benefit matters, securities and investor protection matters, labor and
employment matters and trading-with-the-enemy matters, except where the failure
of the Company to so comply would not have a Company Material Adverse Effect.
The Company has not received any notification of any asserted present or past
unremedied failure by the Company to comply with any of such laws, rules,
regulations, ordinances, decrees or orders.
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2.18 INSURANCE
The Company Disclosure Memorandum sets forth a true and correct list of
all insurance policies maintained by the Company. The Company maintains
commercially reasonable levels of (a) insurance on its property (including
leased premises) that insures against loss or damage by fire or other casualty
and (b) insurance against liabilities, claims and risks of a nature and in such
amounts as are normal and customary in the Company's industry for companies of
similar size and financial condition. All insurance policies of the Company are
in full force and effect, all premiums with respect thereto covering all periods
up to and including the date this representation is made have been paid, and no
notice of cancellation or termination has been received with respect to any such
policy or binder. Such policies or binders are sufficient for compliance in all
material respects with all requirements of law currently applicable to the
Company and of all agreements to which the Company is a party, will remain in
full force and effect through the respective expiration dates of such policies
or binders without the payment of additional premiums, and will not in any way
be affected by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement. The Company has not been refused any insurance
with respect to its assets or operations, nor has its coverage been limited, by
any insurance carrier to which it has applied for any such insurance or with
which it has carried insurance.
2.19 BROKERS OR FINDERS
The Company has not incurred, and will not incur, directly or
indirectly, as a result of any action taken by or on behalf of the Company, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with the Merger, this Agreement or any transaction
contemplated hereby.
2.20 ABSENCE OF QUESTIONABLE PAYMENTS
Neither the Company nor any director, officer, agent, employee or other
Person acting on behalf of the Company has used any Company funds for improper
or unlawful contributions, payments, gifts or entertainment, or made any
improper or unlawful expenditures relating to political activity to domestic or
foreign government officials or others. The Company has reasonable financial
controls to prevent such improper or unlawful contributions, payments, gifts,
entertainment or expenditures. Neither the Company nor any current director,
officer, agent, employee or other Person acting on behalf of the Company has
accepted or received any improper or unlawful contributions, payments, gifts or
expenditures. The Company has at all times complied, and is in compliance, in
all material respects with the Foreign Corrupt Practices Act and all foreign
laws and regulations relating to prevention of corrupt
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practices and similar matters.
2.21 BANK ACCOUNTS
Schedule 2.21 to the Company Disclosure Memorandum sets forth the names
and locations of all banks, trust companies, savings and loan associations and
other financial institutions at which the Company maintains safe deposit boxes
or accounts of any nature and the names of all Persons authorized to draw
thereon, make withdrawals therefrom or have access thereto.
2.22 INSIDER INTERESTS
Except as set forth on Schedule 2.22 to the Company Disclosure
Memorandum, no stockholder or officer or director of the Company has any
interest (other than as a stockholder of the Company) (a) in any Real Property,
Personal Property, Technology or IP Rights used in or pertaining to the business
of the Company, including, without limitation, inventions, patents, trademarks
or trade names, or (b) in any agreement, contract, arrangement or obligation
relating to the Company, its present or prospective business or its operations.
Except as set forth on Schedule 2.22, there are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors,
stockholders, affiliates or any affiliate thereof. The Company and its officers
and directors have no interest, either directly or indirectly, in any entity,
including, without limitation, any corporation, partnership, joint venture,
proprietorship, firm, licensee, business or association (whether as an employee,
officer, director, stockholder, agent, independent contractor, security holder,
creditor, consultant or otherwise) that presently (i) provides any services,
produces and/or sells any products or product lines, or engages in any activity
that is the same, similar to or competitive with any activity or business in
which the Company is now engaged or proposes to engage; (ii) is a supplier,
customer or creditor; or (iii) has any direct or indirect interest in any asset
or property, real or personal, tangible or intangible, of the Company or any
property, real or personal, tangible or intangible, that is necessary or
desirable for the present or currently anticipated future conduct of the
Company's business.
2.23 COMPLIANCE WITH ENVIRONMENTAL LAWS
Neither the Company nor, to the Company's knowledge, any other Person
(including, without limitation, any previous owner, lessee or sublessee) has
treated, stored or disposed of any material amounts of petroleum products,
hazardous waste, hazardous substances, pollutants or contaminants on the Real
Property, or any real property previously owned, leased, subleased or used by
the Company in the operation
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of its business, in violation of any applicable foreign, federal, state or local
statutes, regulations or ordinances, or common law, in each case as in existence
at or prior to the Closing. To the Company's knowledge, there have been no
releases of any material amounts of petroleum, petroleum products, hazardous
waste, hazardous substances, pollutants or contaminants on, at or from any
assets or properties, including, without limitation, the Real Property, owned,
leased, subleased or used by the Company in the operation of its business during
the time such assets or properties were owned, leased, subleased or used by the
Company (or, to the Company's knowledge, prior to such time), including, without
limitation, any releases of any material amounts of petroleum, petroleum
products, hazardous waste, hazardous substances, pollutants or contaminants in
violation of any law.
2.24 FULL DISCLOSURE
No information furnished by the Company to Xxxxxx.xxx or its
representatives in connection with this Agreement (including, but not limited
to, the Financial Statements and all information in the Company Disclosure
Memorandum and the other Exhibits hereto) or the other Operative Documents
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements so made or information so
delivered not misleading.
2.25 OPERATING DATA
On or prior to the date hereof, the Company has delivered to Xxxxxx.xxx
certain of its operating data and certain performance data for each of its Web
Sites (including, without limitation, the number of "hits," "conversion" rates,
if applicable, average, download times per page, average system resource usage
per page, error rates and uptime/availability) as set forth in Schedule 2.25 of
the Company Disclosure Memorandum (the "Operations and Web Site Data"). The
Operations and Web Site Data accurately and fairly present the operations of and
other data related to the Company and the performance of its Web Sites and does
not contain any material misstatements or omissions of material facts.
ARTICLE IIA - REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Except as is otherwise set forth with appropriate Section references in
the Stockholder Company Disclosure Memorandum attached hereto as Exhibit 2A (the
"Stockholder Disclosure Memorandum"), and in order to induce Xxxxxx.xxx and the
Purchaser to enter into and perform this Agreement and the other Operative
Documents to be entered into as of the Closing among Xxxxxx.xxx and the
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Stockholders, each Stockholder, individually and not jointly, represents and
warrants to Xxxxxx.xxx and the Purchaser as of the date of this Agreement and as
of the Closing as follows in this Article IIA:
2A.1 SOPHISTICATION; ACCREDITATION
Such Stockholder is (a) either alone or with the assistance of a
professional advisor, a sophisticated investor, able to fend for himself,
herself or itself in the transactions contemplated by this Agreement and the
other Operative Documents to which such Stockholder is a party and has such
knowledge and experience in financial and business matters that he, she or it is
capable of evaluating the merits and risks of the prospective investment in
Xxxxxx.xxx Common Stock, or (b) an "accredited investor" as defined in
Regulation D of the Securities Act of 1933, as amended (the "Securities Act").
Schedule 2A.1 to the Stockholder Disclosure Memorandum lists all Stockholders
who are accredited investors.
2A.2 OWNERSHIP
Such Stockholder owns beneficially and of record the Company Capital
Stock, Options and other Stock Purchase Rights set forth on Schedules 2.3(b) and
2.3(c) of the Company Disclosure Memorandum, free and clear of any Encumbrance.
2A.3 XXXXXX.XXX PROSPECTUS
Such Stockholder has received and reviewed a copy of the prospectus
dated August 18, 1998 contained in Xxxxxx.xxx's shelf registration statement on
Form S-4.
2A.4 ENFORCEABILITY; NO CONFLICTS
(a) Such Stockholder has full power or capacity (as the case may be) and
authority to execute this Agreement and the other Operative Documents to which
such Stockholder is a party, to make the representations, warranties and
covenants herein and therein contained and to perform such Stockholder's
obligations hereunder and thereunder.
(b) This Agreement has been, and each of the other Operative Documents
to which such Stockholder is a party at the Closing will have been, duly
executed and delivered by such Stockholder, and this Agreement is, and, when
executed and delivered by such Stockholder, each of the other Operative
Documents to which such Stockholder is a party at the Closing will be, the
legal, valid and binding obligations of such Stockholder, enforceable in
accordance with their terms, except as to the effect, if any, of (i) applicable
bankruptcy and other similar laws affecting the rights of creditors
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generally, (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies, and (iii) the enforceability of provisions
requiring indemnification in connection with the offering, issuance or sale of
securities.
(c) The execution, delivery and performance by such Stockholder of this
Agreement and the other Operative Documents to which he, she or it is a party,
the consummation of the transactions contemplated hereby and thereby, and the
fulfillment of the terms hereof and thereof will not (i) constitute a violation
(with or without the giving of notice or lapse of time or both) of any provision
of any law applicable to the such Stockholder; (ii) require any consent,
approval or authorization of, or notice to, any Person that has not been
obtained or made, other than under the HSR Act; (iii) result in a default under,
an acceleration or termination of, or the creation in any party of the right to
accelerate, terminate, modify or cancel, any material agreement, lease, note or
other restriction, encumbrance, obligation or liability to which such
Stockholder is a party or by which he, she or it is bound; or (iv) result in the
creation or imposition of any Encumbrance on any of such Stockholder's shares of
Company Capital Stock.
2A.5 CLAIMS AGAINST THE COMPANY
Such Stockholder does not have any claims against the Company other than
any rights or claims arising with respect to such Stockholder's ownership of
Company Capital Stock.
2A.6 BROKERS OR AGENTS
Such Stockholder has not employed any broker or agent in connection with
the transactions contemplated by this Agreement and agrees to indemnify
Xxxxxx.xxx against all losses, damages or expenses relating to or arising out of
claims for fees or commission of any broker or agent employed by such
Stockholder.
2A.7 XXXX-XXXXX-XXXXXX FILING
Except as set forth in Section 2A.7 to the Stockholder Disclosure
Memorandum, each Stockholder is not subject to, or is exempt from, the
jurisdictional elements of the HSR Act.
2A.8 INVESTMENT FOR OWN ACCOUNT
The Xxxxxx.xxx Common Stock is being acquired by such Stockholder for
investment for his, her or its respective account, not as a nominee or agent;
such Stockholder has no present intention of selling, granting any participation
in or
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otherwise distributing any of the Xxxxxx.xxx Common Stock in a manner contrary
to the Securities Act or to any applicable state securities or Blue Sky law, nor
does such Stockholder have any contract, undertaking, agreement or arrangement
with any person or entity to sell, transfer or grant a participation to such
person or entity with respect to any of the Xxxxxx.xxx Common Stock.
2A.9 RESIDENCY
For purposes of the application of state securities laws, such
Stockholder is a resident of the state as set forth on Schedule 2A.9 of the
Stockholder Disclosure Memorandum.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF XXXXXX.XXX AND THE PURCHASER
In order to induce the Company to enter into and perform this Agreement
and the other Operative Documents, Xxxxxx.xxx and the Purchaser jointly and
severally represent and warrant to the Company as follows in this Article III:
3.1 ORGANIZATION
Xxxxxx.xxx is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Each of Xxxxxx.xxx and the Purchaser has all requisite
corporate power and authority to own, operate and lease its respective
properties and assets, to carry on its respective business as now conducted, and
as proposed to be conducted and to enter into and perform its obligations under
this Agreement and the other Operative Documents to which Xxxxxx.xxx or the
Purchaser is a party, and to consummate the transactions contemplated hereby and
thereby. Each of Xxxxxx.xxx and the Purchaser is duly qualified and licensed as
a foreign corporation to do business and is in good standing in each
jurisdiction in which the character of properties occupied, owned or held under
lease by Xxxxxx.xxx or the Purchaser, as applicable, or the nature of the
business conducted by Xxxxxx.xxx or the Purchaser, as applicable, makes such
qualification or licensing necessary, except where the failure to be so
qualified or in good standing would not have a material adverse effect on the
business, operations, assets, liabilities, condition (financial or other) or
prospects of Xxxxxx.xxx (an "Xxxxxx.xxx Material Adverse Effect"). Each of
Xxxxxx.xxx and the Purchaser has full corporate power and authority to execute,
deliver and perform this Agreement and the other Operative Documents to which it
is a party, and to carry out the transactions contemplated hereby and thereby.
All the issued and outstanding
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shares of capital stock of the Purchaser are held of record and beneficially by
Xxxxxx.xxx.
3.2 ENFORCEABILITY
Xxxxxx.xxx and the Purchaser each have all requisite corporate power and
authority to execute, deliver and perform their obligations under this Agreement
and each of the other Operative Documents to which they are a party and each of
the certificates, instruments and documents executed or delivered by them
pursuant to the terms of this Agreement. All corporate action on the part of
Xxxxxx.xxx and the Purchaser and their respective officers, directors and
stockholders necessary for the authorization, execution, delivery and
performance of this Agreement and the other applicable Operative Documents to
which Xxxxxx.xxx or the Purchaser is a party, the consummation of the Merger and
the performance of all of their respective obligations under this Agreement and
the other applicable Operative Documents to which Xxxxxx.xxx or the Purchaser is
a party has been taken or will be taken prior to the Effective Time. This
Agreement has been, and each of the other Operative Documents to which
Xxxxxx.xxx is a party will have been at the Closing, duly executed and delivered
by Xxxxxx.xxx, and this Agreement is, and, when executed and delivered by
Xxxxxx.xxx, each of the other Operative Documents to which Xxxxxx.xxx is a party
will be at the Closing, a legal, valid and binding obligation of Xxxxxx.xxx,
enforceable against Xxxxxx.xxx in accordance with its terms, except as to the
effect, if any, of (a) applicable bankruptcy and other similar laws affecting
the rights of creditors generally, (b) rules of law governing specific
performance, injunctive relief and other equitable remedies, and (c) the
enforceability of provisions requiring indemnification in connection with the
offering, sale or issuance of securities. This Agreement has been, and each of
the other Operative Documents to which the Purchaser is a party will have been
at the Closing, duly executed and delivered by the Purchaser, and this Agreement
is, and each of the other Operative Documents to which the Purchaser is a party
will be at the Closing, a legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except as to the
effect, if any, of (i) applicable bankruptcy and other similar laws affecting
the rights of creditors generally, (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies, and (iii) the
enforceability of provisions requiring indemnification in connection with the
offering, sale or issuance of securities.
3.3 SECURITIES
The Xxxxxx.xxx Common Stock to be issued pursuant to this Agreement
including, without limitation, the Closing Date Shares, the Post-Closing Shares
and all
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shares issuable under Options to be assumed by Xxxxxx.xxx, has been, or will be
prior to the Effective Time, duly reserved and authorized for issuance, and such
Xxxxxx.xxx Common Stock, when issued and delivered to the Company's stockholders
pursuant to this Agreement, shall be validly issued, fully paid and
nonassessable and, assuming the accuracy of the representations and warranties
contained in Article IIA, issued in compliance with applicable federal and state
securities laws.
3.4 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICTS WITH INSTRUMENTS
The execution, delivery and performance of this Agreement and the other
Operative Documents by the Purchaser and Xxxxxx.xxx, as applicable, and the
consummation by them of the transactions contemplated hereby and thereby will
not (a) constitute a violation (with or without the giving of notice or lapse of
time, or both) of any provision of law or any judgment, decree, order,
regulation or rule of any court or other governmental authority applicable to
Xxxxxx.xxx or the Purchaser, except for such violations which would not, both
individually and in the aggregate, have an Xxxxxx.xxx Material Adverse Effect;
(b) require any consent, approval or authorization of, or declaration, filing or
registration with, any Person, except (i) compliance with applicable securities
laws, (ii) the filing of all documents necessary to consummate the Merger with
the Delaware Secretary of State, (iii) the notification requirements of the HSR
Act and (iv) such consents, approvals, authorizations, declarations, filings and
registrations the failure of which to obtain or effect would not, both
individually and in the aggregate, have an Xxxxxx.xxx Material Adverse Effect;
(c) result in a default (with or without the giving of notice or lapse of time,
or both) under, or acceleration or termination of, or the creation in any party
of the right to accelerate, terminate, modify or cancel, any agreement, lease,
note or other restriction, encumbrance, obligation or liability to which
Xxxxxx.xxx or the Purchaser is a party or by which it is bound or to which any
assets of Xxxxxx.xxx or the Purchaser are subject, except for such defaults,
accelerations, terminations or creations of such rights which would not, both
individually and in the aggregate, have an Xxxxxx.xxx Material Adverse Effect;
or (d) conflict with or result in a breach of or constitute a default under any
provision of the Certificate of Incorporation or Bylaws of Xxxxxx.xxx or of the
Purchaser.
3.5 CAPITALIZATION
The authorized capital stock of Xxxxxx.xxx consists of 300,000,000
shares of Xxxxxx.xxx Common Stock, of which 161,371,398 shares were issued and
outstanding as of March 31, 1999, and 10,000,000 shares of preferred stock, par
value $0.01 per share, none of which is issued or outstanding. Such issued and
outstanding
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shares of Xxxxxx.xxx Common Stock are validly issued, fully paid and
nonassessable.
3.6 SEC DOCUMENTS
Xxxxxx.xxx has furnished the Stockholders with true and complete copies
of its Annual Report on Form 10-K for the fiscal year ended December 31, 1998,
all Forms 8-K filed after the date of such Form 10-K, and its Proxy Statement
relating to its 1999 Annual Meeting of Stockholders (collectively, the "SEC
Documents"). As of their respective filing dates, each of the SEC Documents
complied in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
3.7 ABSENCE OF CERTAIN CHANGES
Since the December 31, 1998 financial statements included in the SEC
Documents, there has not been any change which by itself or in conjunction with
all other such changes, has had or could reasonably be expected to have an
Xxxxxx.xxx Material Adverse Effect, except as disclosed in the SEC Documents.
3.8 FULL DISCLOSURE
No information furnished by Xxxxxx.xxx or the Purchaser to the Company,
the Stockholders or their respective representatives in connection with this
Agreement or the other Operative Documents (including, without limitation, the
information contained in the SEC Documents, as the same may have been updated by
filings by Xxxxxx.xxx with the Securities and Exchange Commission after the date
hereof but prior to the Closing Date) contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements so made or information so delivered not misleading.
3.9 STOCKHOLDERS CONSENT
No consent or approval of the stockholders of Xxxxxx.xxx is required or
necessary for Xxxxxx.xxx to enter into this Agreement or the Operative Documents
to which it is a party or to consummate the transactions contemplated hereby and
thereby.
3.10 BROKERS OR FINDERS
Xxxxxx.xxx has not incurred, and will not incur, directly or indirectly,
as a result of any action taken by or on behalf of Xxxxxx.xxx, any liability for
brokerage
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or finders' fees or agents' commissions or any similar changes in connection
with the Merger, this Agreement, or any transaction contemplated hereby.
ARTICLE IV - CONDITIONS PRECEDENT TO OBLIGATIONS OF XXXXXX.XXX AND THE
PURCHASER
The obligations of Xxxxxx.xxx and the Purchaser to perform and observe
the covenants, agreements and conditions hereof to be performed and observed by
them at or before the Closing shall be subject to the satisfaction of the
following conditions, which may be expressly waived only in writing signed by
Xxxxxx.xxx:
4.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company contained herein
(including, without limitation, applicable Exhibits or Schedules to the Company
Disclosure Memorandum) and in the other Operative Documents shall have been true
and correct when made and, except (a) for changes contemplated by this Agreement
and the other Operative Documents and (b) to the extent that such
representations and warranties speak as of an earlier date, shall be true and
correct as of the Closing Date as though made on that date.
4.2 PERFORMANCE OF AGREEMENTS
The Company shall have performed in all material respects all
obligations and agreements and complied with all covenants contained in this
Agreement or any other Operative Document to be performed and complied with by
it at or prior to the Closing.
4.3 OPINION OF COUNSEL FOR THE COMPANY
Xxxxxx.xxx shall have received the opinion letter of Xxxxxxx, Procter &
Xxxx LLP, counsel for the Company, dated the Closing Date, substantially in the
form of Exhibit 4.3.
4.4 COMPLIANCE CERTIFICATE
Xxxxxx.xxx shall have received a certificate of the President and the
Chief Financial Officer of the Company, dated the Closing Date, in form and
substance satisfactory to Xxxxxx.xxx, certifying that the conditions to the
obligations of Xxxxxx.xxx and the Purchaser in Sections 4.1, 4.2, 4.5 and 4.6
have been fulfilled.
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4.5 MATERIAL ADVERSE CHANGE
Since the date of this Agreement and through the Closing, there shall
not have occurred any Company Material Adverse Effect, except for such changes
occurring as a result of the execution or announcement of this Agreement.
4.6 APPROVALS AND CONSENTS
All transfers of permits or licenses and all approvals of or notices to
public agencies, federal, state, local or foreign, the granting or delivery of
which is necessary for the consummation of the transactions contemplated hereby
and by the other Operative Documents, or for the continued operation of the
Company as now operated, shall have been obtained, and all waiting periods
specified by law shall have passed. All consents, approvals and notices set
forth on Exhibit 4.6 shall have been obtained or delivered.
4.7 SECRETARY'S CERTIFICATE
Xxxxxx.xxx shall have received a certificate of the Secretary of the
Company, in form and substance satisfactory to Xxxxxx.xxx, as to the
authenticity and effectiveness of the actions of the Board of Directors and
stockholders of the Company authorizing the Merger and the transactions
contemplated by this Agreement and the other Operative Documents. Copies of the
Company's Certificate of Incorporation, certified by the Delaware Secretary of
State, and Bylaws, certified by the Secretary of the Company, shall be attached
to such certificate.
4.8 NONFOREIGN AFFIDAVIT
Xxxxxx.xxx shall have received from the Company, pursuant to Section
1445 of the Code, a Foreign Investment in Real Property Tax Act Affidavit,
substantially in the form of Exhibit 4.8.
4.9 COMPLIANCE WITH LAWS
The consummation of the transactions contemplated by this Agreement and
the other Operative Documents shall be legally permitted by all laws and
regulations to which Xxxxxx.xxx, the Purchaser or the Company is subject.
4.10 STOCKHOLDER APPROVAL
The principal terms of this Agreement shall have been approved by the
Company's stockholders as required by the Company's Certificate of Incorporation
and
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applicable law.
4.11 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect which
enjoins, restrains, conditions or prohibits consummation of the transactions
contemplated by this Agreement or any other Operative Document, and no
litigation, investigation or administrative proceeding shall be pending or
threatened which would enjoin, restrain, condition or prevent consummation of
the transactions contemplated by this Agreement or any other Operative Document.
4.12 EMPLOYMENT AND NONCOMPETITION ARRANGEMENTS
More than 66.7% of the Central Employees (determined on the basis of the
percentage values assigned to each Central Employee as set forth in Exhibit
1.7.3) shall have accepted the offer of employment pursuant to Section 6.13 and
shall have executed Xxxxxx.xxx's standard form of Confidentiality,
Noncompetition and Invention Assignment Agreement, in the form attached hereto
as Exhibit 4.12.
4.13 AFFILIATE LETTERS
The Company shall have delivered or caused to be delivered to Xxxxxx.xxx
an Affiliate Letter substantially in the form of Exhibit 4.13 from each of those
Persons who were, on the record date for the stockholders' meeting at which the
Merger was approved or on the effective date of any stockholder consent
approving the Merger, "affiliates" of the Company within the meaning of Rule 145
of the rules and regulations promulgated under the Securities Act.
4.14 TERMINATION OF CERTAIN AGREEMENTS
Any and all rights of refusal, co-sale rights and registration rights,
if any, for the benefit of the holders of Company Capital Stock or Stock
Purchase Rights of the Company shall have been terminated or shall terminate
upon consummation of the Merger.
4.15 EXERCISE OF STOCK PURCHASE RIGHTS; CONVERSION OF CONVERTIBLE SECURITIES
Any and all Stock Purchase Rights and any and all securities and notes
convertible at any time into Company Common Stock, vested and unvested, and
regardless of restrictions on exercise or conversion, shall have been exercised
or converted (or, with respect to the Company Series A Stock and Company Series
C
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Stock, deemed to be converted pursuant to Section 1.7.1(b)), as the case may be,
for shares of Company Common Stock prior to the Effective Time, except for the
outstanding share of the Company Series B Preferred Stock, which will be
converted for cash as of the Effective Time pursuant to Section 1.7.2(b), and
for Options assumed by Xxxxxx.xxx pursuant to Section 1.7.2(e).
4.16 NO DISSENTER RIGHTS EXERCISED GREATER THAN 5% OF STOCK
No holders of Company Capital Stock shall have delivered to the Company
before the Effective Time timely written notice of such holder's intent to
demand payment for such shares in accordance with Delaware Law, unless such
holder shall have withdrawn or otherwise lost his, her or its right to such
payment as a dissenting stockholder. Holders of not more than 5% of the
outstanding shares of Company Common Stock shall have not voted in favor of the
Merger or not consented thereto in writing and shall have delivered before the
Effective Time timely written notice of such holders' intent to demand payment
as dissenting stockholders for such shares in accordance with Delaware Law.
4.17 TRANSMITTAL LETTERS
All holders of the Company Capital Stock shall have executed Letters of
Transmittal in the form attached hereto as Exhibit 1.7.4.
4.18 STOCK VESTING AGREEMENTS
(a) Xxxx Xxxxxxx and Xxxxxx.xxx shall have entered into a Stock Vesting
Agreement, substantially in the form attached hereto as Exhibit 4.18(a).
(b) Xxxxxxx Xxx and Xxxxxx.xxx shall have entered into a Stock Vesting
Agreement, substantially in the form attached hereto as Exhibit 4.18(b), and the
Company, Xxxx Xxxxxxx and Xxxxxxx Xxx shall have terminated the Stock Purchase
and Stock Restriction Agreement, dated as of June 18, 1998, as amended, among
such parties.
4.19 NONDISCLOSURE AGREEMENTS
The Company shall have delivered to Xxxxxx.xxx true and correct copies
of all Nondisclosure Agreements entered into by employees or officers of or
consultants to the Company after the date hereof, and no such Nondisclosure
Agreement shall contain any exceptions to the terms thereof, including, without
limitation, to the exclusive ownership by the Company of all Company-Related
Inventions and Developments (as defined therein).
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4.20 PROSPECTUS DELIVERY REQUIREMENTS
At least 20 business days shall have elapsed since the delivery to the
Stockholders of the Prospectus dated August 13, 1998, which constitutes part of
the Xxxxxx.xxx's Registration Statement on Form S-4, together with all materials
incorporated by reference therein prior to the date such materials were
delivered to the Stockholders. Such 20 business day-period shall expire on May
14, 1999.
4.21 ESCROW AGREEMENT
The Escrow Agreement shall have been executed and delivered by the
Stockholder Representative, on behalf of the Stockholders, and by the Escrow
Agent.
4.22 ASSIGNMENT OF DOMAIN NAMES
All rights, title and interest in and to all domain names listed on
Exhibit 4.22 attached hereto shall have been assigned to Xxxxxx.xxx.
4.23 POST-CLOSING BONUS AMOUNT AGREEMENTS
The Company shall have delivered to Xxxxxx.xxx true and correct copies
of all agreements by which payments included in the Post-Closing Bonus Amount
will be made.
4.24 CONSENT TO ASSUMPTION OF OPTIONS
All holders of Options that are outstanding immediately prior to the
Effective Time shall have consented to the assumption of the Options by
Xxxxxx.xxx on the terms and in the manner set forth in Section 1.7.
4.25 ROLL-UP
If requested by Xxxxxx.xxx reasonably in advance of the Effective Time,
the Company shall have effected a roll-up of each of its subsidiaries, resulting
in the termination, dissolution and winding-up of all such subsidiaries.
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS
The obligations of the Company and the Stockholders to perform and
observe the respective covenants, agreements and conditions hereof to be
performed and observed by them at or before the Closing shall be subject to the
satisfaction of the following conditions, which may be expressly waived only in
writing signed by the
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Company and the Stockholder Representative, on behalf of the Stockholders.
5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Xxxxxx.xxx and the Purchaser
contained herein and in the other Operative Documents shall have been true and
correct when made and, except for (a) changes contemplated by this Agreement and
the other Operative Documents and (b) to the extent that such representations
and warranties speak as of an earlier date, shall be true and correct as of the
Closing Date as though made on that date.
5.2 PERFORMANCE OF AGREEMENTS
Xxxxxx.xxx and the Purchaser shall have performed in all material
respects all obligations and agreements and complied with all covenants
contained in this Agreement or any other Operative Document to be performed and
complied with by them at or prior to the Closing.
5.3 OPINION OF COUNSEL
The Company shall have received the opinion letter of Xxxxxxx Coie LLP,
counsel for Xxxxxx.xxx and the Purchaser, dated the Closing Date, substantially
in the form of Exhibit 5.3.
5.4 COMPLIANCE CERTIFICATE
The Company shall have received a certificate of an officer of
Xxxxxx.xxx, dated the Closing Date, substantially in form and substance
satisfactory to the Company, certifying that the conditions to the obligations
of the Company in Sections 5.1, 5.2, 5.6 and 5.7 have been fulfilled.
5.5 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect which
enjoins, restrains, conditions or prohibits consummation of the transactions
contemplated by this Agreement or any other Operative Document, and no
litigation, investigation or administrative proceeding shall be pending or
threatened which would enjoin, restrain, condition or prevent consummation of
the transactions contemplated by this Agreement or any other Operative Document.
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5.6 MATERIAL ADVERSE CHANGE
Since the date of this Agreement and through the Closing, there shall
not have occurred any change or event that would have an Xxxxxx.xxx Material
Adverse Effect, except for such changes occurring as a direct result of the
execution or announcement of this Agreement. Changes in the trading prices of
Xxxxxx.xxx Common Stock shall not be deemed to have an Xxxxxx.xxx Material
Adverse Effect under this Agreement.
5.7 APPROVALS AND CONSENTS
All transfers of permits or licenses and all approvals of or notices to
public agencies, federal, state, local or foreign (including, without
limitation, all approvals required under the HSR Act), the granting or delivery
of which is necessary for the consummation of the transactions contemplated
hereby and by the other Operative Documents or for the continued operation of
the Company as now operated, shall have been obtained, and all waiting periods
specified by law shall have passed. All other consents, approvals and notices
referred to in this Agreement shall have been obtained or delivered.
5.8 COMPLIANCE WITH LAWS
The consummation of the transactions contemplated by this Agreement and
the other Operative Documents shall be legally permitted by all laws and
regulations to which Xxxxxx.xxx, the Purchaser or the Company is subject.
5.9 TAX OPINION
The Company shall have received an opinion letter of Xxxxxxx, Procter &
Xxxx, LLP, dated the Closing Date, to the effect that the Merger will be treated
as a reorganization within the meaning of Section 368(a) of the Code, which
opinion shall be based on customary representations of the Company and
Xxxxxx.xxx, dated the Closing Date.
5.10 SECRETARY'S CERTIFICATES
The Company shall have received a certificate of the Secretary of
Xxxxxx.xxx, in form and substance satisfactory to the Company, as to the
authenticity and effectiveness of the actions of the Board of Directors of
Xxxxxx.xxx authorizing the Merger and the transactions contemplated by this
Agreement and the other Operative Documents. Copies of Xxxxxx.xxx's Certificate
of Incorporation, certified by the Delaware Secretary of State, and Bylaws,
certified by the Secretary of Xxxxxx.xxx,
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shall be attached to such certificate. The Company shall have received a
certificate of the Secretary of the Purchaser, in form and substance
satisfactory to the Company, as to the authenticity and effectiveness of the
actions of the Board of Directors and stockholder of the Purchaser authorizing
the Merger and the transactions contemplated by this Agreement and the other
Operative Documents. Copies of the Purchaser's Certificate of Incorporation,
certified by the Delaware Secretary of State, and Bylaws, certified by the
Secretary of the Purchaser, shall be attached to such certificate.
5.11 BLUE SKY LAWS
Xxxxxx.xxx shall have received all state securities or blue sky permits
and other authorizations necessary to issue the Closing Date Shares pursuant to
the Merger.
5.12 ESCROW AGREEMENT
The Escrow Agreement shall have been executed and delivered by
Xxxxxx.xxx and the Escrow Agent.
5.13 CONSENT TO ASSUMPTION OF OPTIONS
All holders of Options that are outstanding immediately prior to the
Effective Time shall have consented to the assumption of the Options by
Xxxxxx.xxx on the terms and in the manner set forth in Section 1.7.
ARTICLE VI - COVENANTS
Between the date of this Agreement and the Effective Time, or such later
period as set forth in Sections 6.5, 6.7, 6.8, 6.14 and 6.16, the parties
covenant and agree as set forth in this Article VI.
6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER
Unless Xxxxxx.xxx shall otherwise agree in writing, the business of the
Company shall be conducted in and only in, and the Company shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice and in accordance with applicable law; and the Company shall
use its best efforts to preserve intact the business organization of the
Company, to keep available the services of the current officers, employees and
consultants of the Company and to preserve the current relationships of the
Company with, and the goodwill of, customers, suppliers and other Persons with
which the Company has significant business relations. By way of amplification
and not limitation, except as otherwise contemplated by this Agreement, the
Company shall not, between the date of this
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Agreement and the Effective Time, directly or indirectly do, or propose to do,
any of the following without the prior written consent of Xxxxxx.xxx:
(a) amend or otherwise change the Company's Certificate of
Incorporation or Bylaws;
(b) except for the issuance of shares of Company Capital Stock
upon the exercise or conversion of currently outstanding Stock Purchase Rights,
issue, sell, contract to issue or sell, pledge, dispose of, grant, encumber or
authorize the issuance, sale, pledge, disposition, grant or Encumbrance of (i)
any assets of the Company, except in the ordinary course of business and in a
manner consistent with past practice, (ii) any shares of capital stock of any
class of the Company, or (iii) any options, warrants, convertible securities or
other rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including, without limitation, any phantom interest)
of the Company;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock or other securities, property or otherwise,
with respect to any of its capital stock;
(d) reclassify, combine, split, subdivide, redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock or other
securities;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership,
other business organization or division thereof or any material amount of
assets; (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, any obligations of any Person, or make any loans or
advances, except in the ordinary course of business and consistent with past
practice; (iii) enter into any contract or agreement other than in the ordinary
course of business, consistent with past practice; (iv) authorize any single
capital expenditure which is in excess of $20,000 or capital expenditures which
are, in the aggregate, in excess of $50,000 for the Company taken as a whole;
(v) enter into any agreement in which the obligation of the Company exceeds
$10,000 or which shall not terminate or be subject to termination for
convenience within 30 days following execution; (vi) license any Technology or
IP Rights; or (vii) enter into or amend any contract, agreement, commitment or
arrangement with respect to any matter set forth in this subsection (e);
(f) enter into or amend any employment, consulting or agency
agreement, or increase the compensation payable or to become payable to any of
its
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officers, employees, agents or consultants, or grant any severance or
termination pay to, or enter into any employment or severance agreement with,
any director, officer or other employee of the Company, or establish, adopt,
enter into or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance, Employee Benefit Plan or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee;
(g) take any action, other than reasonable and usual actions in
the ordinary course of business and consistent with past practice, with respect
to accounting methods, policies or procedures (including, without limitation,
procedures with respect to the payment of accounts payable and collection of
accounts receivable);
(h) make any Tax election or settle or compromise any Tax
liability;
(i) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice;
(j) take any action that would or is reasonably likely to result
in any of the representations or warranties of the Company set forth in this
Agreement being untrue in any material respect, or in any covenant of the
Company set forth in this Agreement being breached, or in any of the conditions
to the Merger specified in Article IV hereof not being satisfied; or
(k) agree to do any of the foregoing.
6.2 ACCESS TO INFORMATION; CONFIDENTIALITY
Subject to the terms of the Mutual Nondisclosure Agreement between
Xxxxxx.xxx and the Company entered into as of April 12, 1999, from the date
hereof to the Effective Time, the Company shall, and shall cause the officers,
directors, employees and agents of the Company to, afford the officers,
employees and agents of Xxxxxx.xxx access at all reasonable times to the
officers, employees, agents, properties, offices, plants and other facilities,
books and records of the Company and shall furnish Xxxxxx.xxx with all
financial, operating and other data and information as Xxxxxx.xxx, through its
officers, employees or agents, may reasonably request. From the date hereof
until the Effective Time, the Company shall provide Xxxxxx.xxx with monthly and
other financial statements of the Company as they become available internally at
the Company, all of which financial statements shall
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fairly present the financial position and results of operations of the Company
as of the dates and for the periods therein specified. No investigation pursuant
to this Section 6.2 shall affect any representation or warranty in this
Agreement of any party hereto or any condition to the obligations of the parties
hereto. The parties shall continue to comply with and to perform their
respective obligations under such Mutual Nondisclosure Agreement.
6.3 NO ALTERNATIVE TRANSACTIONS
Unless this Agreement shall have been terminated in accordance with its
terms, the Company shall not, directly or indirectly, through any officer,
director, agent or otherwise, solicit, initiate or encourage the submission of
any proposal or offer from any Person relating to any acquisition or purchase of
all or any material portion of the assets of, or any equity interest in, the
Company or any business combination with the Company or participate in any
negotiations regarding, or furnish to any other Person any information with
respect to, or otherwise cooperate or negotiate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
Person to do or seek any of the foregoing. The Company shall notify Xxxxxx.xxx
promptly if any such proposal or offer, or any inquiry or contact with any
Person with respect thereto, is made and shall, in any such notice to
Xxxxxx.xxx, indicate in reasonable detail the identity of the Person making such
proposal, offer, inquiry or contact and the terms and conditions of such
proposal, offer, inquiry or contact. The Company agrees not to release any third
party from, or waive any provision of, any confidentiality or standstill
agreement (e.g. agreement not to invest in or seek change of control of the
Company) to which the Company is a party.
6.4 NOTIFICATION OF CERTAIN MATTERS
Each party shall give prompt notice to the other parties of (a) the
occurrence or nonoccurrence of any event which would be likely to cause any
representation or warranty made by such party contained in this Agreement to be
untrue or inaccurate in any material respect and (b) any material failure by
such party to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such party hereunder; provided, however, that the
delivery of any notice pursuant to this Section 6.4 shall not limit or otherwise
affect the rights or remedies available to the parties hereunder.
6.5 FURTHER ACTION; COMMERCIALLY REASONABLE EFFORTS
Upon the terms and subject to the conditions hereof, each of the parties
hereto shall use commercially reasonable efforts to take, or cause to be taken,
all appropriate
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action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated hereby, including, without limitation, using its
commercially reasonable efforts to obtain all waivers, licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and of other Persons as are necessary for the consummation of the
transactions contemplated hereby and to fulfill the conditions to the Merger. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement or the other Operative
Documents, each party to this Agreement shall use commercially reasonable
efforts to promptly take all such action. After the Closing, each party hereto,
at the request of the other parties, will take any further actions necessary or
desirable to carry out the purposes of this Agreement or any other Operative
Document, to vest in the Surviving Corporation full title to all properties,
assets and rights of the Company, and to effect the issuance of the Xxxxxx.xxx
Common Stock to the stockholders of the Company pursuant to the terms and
conditions hereof.
6.6 STOCKHOLDER APPROVAL
The Company will obtain either the approval at a special meeting of
stockholders or the written consent of the stockholders at the earliest
practicable date approving this Agreement, the other Operative Documents, the
Merger and related matters, which approval will be recommended by the Board of
Directors of the Company.
6.7 XXXXXX.XXX COMMON STOCK
Xxxxxx.xxx agrees to list on the Nasdaq National Market, on or prior to
the Closing Date, the Closing Date Shares and those required to be reserved for
issuance upon exercise of Options assumed in connection with the Merger.
Xxxxxx.xxx agrees to list on the Nasdaq National Market, on or prior to the
Post-Closing Issuance Date, the Post-Closing Shares.
6.8 SECURITIES ACT COMPLIANCE
Xxxxxx.xxx represents and warrants that the issuance of (a) the Closing
Date Shares will have been registered on or prior to the Closing under the
Securities Act, pursuant to a registration statement on Form S-4, which shall be
effective as of the Closing and (b) the Post-Closing Shares will have been
registered on or prior to the Post-Closing Issuance Date under the Securities
Act, pursuant to a registration statement which shall be effective as of the
Post-Closing Issuance Date. As a result, the shares of Xxxxxx.xxx Common Stock
issuable in the Merger will be freely
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tradable, without restriction under the Securities Act, other than those
restrictions imposed on affiliates of the Company pursuant to Rule 145(d) under
the Securities Act and those restrictions imposed on affiliates of Xxxxxx.xxx
pursuant to Rule 144 under the Securities Act. For so long as any shares of
Xxxxxx.xxx Common Stock issued in connection with the Merger remain subject to
Rule 145 of the Securities Act, Xxxxxx.xxx agrees to use commercially reasonable
efforts to timely file all required reports under the Exchange Act, and
otherwise satisfy the requirements of Rule 144(c) under the Securities Act.
6.9 DISSENTING SHARES
Prior to the Closing Date, the Company shall furnish Xxxxxx.xxx with the
name and address of each stockholder of the Company who, prior to the Closing,
has requested appraisal rights pursuant to Delaware Law and the number of
Dissenting Shares owned by such stockholder.
6.10 PUBLICITY
No party to this Agreement shall make, or cause to be made, any press
release or public announcement or otherwise communicate with any news media in
respect of this Agreement or the transactions contemplated hereby without the
prior written consent of Xxxxxx.xxx, which consent shall not be unreasonably
withheld (and Xxxxxx.xxx, the Company and the Stockholder Representative, on
behalf of the Stockholders, shall cooperate as to the timing and content of any
such press release, announcement or communication), except as such release,
announcement or communication may be required by governmental authorities, a
court of competent jurisdiction or applicable law (including, without
limitation, securities laws affecting Xxxxxx.xxx's public disclosure
obligations), in which case the party releasing the information shall use its
best efforts to provide the information contained therein to Xxxxxx.xxx, the
Company and the Stockholder Representative in advance of its disclosure.
6.11 OPTION GRANTS
Promptly following the Effective Date, Xxxxxx.xxx will act to grant
nonqualified stock options to certain employees of the Company at an exercise
price per share equal to the Xxxxxx.xxx Common Stock fair market value as
determined under the Xxxxxx.xxx 1999 Stock Option Plan (the "Xxxxxx.xxx 1999
Plan") at the first date the plan administrator of the Xxxxxx.xxx 1999 Plan acts
following the Closing Date. Unless otherwise agreed by Xxxxxx.xxx and the
Company in writing, all such stock options granted by Xxxxxx.xxx shall vest in
accordance with the
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standard vesting schedule under the Xxxxxx.xxx 1999 Plan, except that the
options granted to Xxxx Xxxxxxx shall vest 20% on the second anniversary of the
Closing Date, an additional 20% on the third anniversary of the Closing Date,
and an additional 5% at the end of each three-month period thereafter until
fully vested.
6.12 OPTION SHARES; REGISTRATION
Xxxxxx.xxx shall take all corporate action necessary to reserve for
issuance a sufficient number of Xxxxxx.xxx Common Stock for delivery upon
exercise of the Options assumed in accordance with Section 1.7.2. Xxxxxx.xxx
shall file with respect to shares of Xxxxxx.xxx Common Stock subject to such
Options held by individuals who are employees of the Company as of the time the
registration statement described below becomes effective, a registration
statement on Form S-8 (or any successor form) to be effective no later than the
later of (a) the first business day after the Closing Date and (b) the fourth
business day after the date on which the Audited Financial Statements are
delivered to the Company. Xxxxxx.xxx shall use all commercially reasonable
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Options remain outstanding.
As a result of such registration, the shares of Xxxxxx.xxx Common Stock covered
by such registration statement that are issuable upon the exercise of such
Options will be freely tradable, without restriction under the Securities Act,
other than any restrictions imposed on affiliates of the Company pursuant to
Rule 145(d) under the Securities Act and those restrictions imposed on
affiliates of Xxxxxx.xxx pursuant to Rule 144 under the Securities Act. For so
long as any such shares of Xxxxxx.xxx Common Stock remain subject to Rule 145 of
the Securities Act, Xxxxxx.xxx agrees to use commercially reasonable efforts to
timely file all required reports under the Exchange Act, and otherwise satisfy
the requirements of Rule 144(c) under the Securities Act.
6.13 EMPLOYEE MATTERS
Xxxxxx.xxx shall offer, or cause to be offered, employment with itself
or any Xxxxxx.xxx Entity to each Central Employee and, as Xxxxxx.xxx may elect
in its sole discretion, to such other employees of the Company, such employment
to commence as soon as is practically possible but in any event primarily in
Seattle, Washington within two weeks after the Closing and fully in Seattle,
Washington within six weeks after the Closing. Central Employees and any other
employees offered employment shall evidence acceptance of such employment offer
by executing Xxxxxx.xxx's standard form of Confidentiality, Noncompetition and
Inventions Agreement, in the form attached hereto as Exhibit 4.12.
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At the Effective Time, each employee of the Company who is offered and
accepts employment with an Xxxxxx.xxx Entity as set forth in this Section will
be provided with employee benefit plans, programs and arrangements by such
Xxxxxx.xxx Entity which in the aggregate are no less favorable to such employee
than those generally provided from time to time by such Xxxxxx.xxx Entity to
similarly situated employees.
6.14 INDEMNIFICATION
Xxxxxx.xxx agrees that all rights to indemnification existing in favor,
and all limitations on the personal liability, of a director or officer of the
Company provided for in the Company's Certificate of Incorporation or Bylaws, as
in effect of the date hereof with respect to matters occurring prior to the
Effective Time, shall, subject to the terms thereof, (a) survive the Merger and
(b) continue in full force and effect for a period of not less than six years
from the Closing Date; provided, however, that all rights to indemnification in
respect of any claim asserted or made within such period shall continue until
the disposition of such claim.
6.15 BLUE SKY LAWS
Xxxxxx.xxx shall take such steps as may be necessary to comply with the
securities and blue sky laws of all jurisdictions which are applicable to the
issuance of the Xxxxxx.xxx Common Stock in connection with the Merger. The
Company and the Stockholders shall use commercially reasonable efforts to assist
Xxxxxx.xxx as may be necessary to comply with the securities and blue sky laws
of all jurisdictions which are applicable in connection with the issuance of
Xxxxxx.xxx Common Stock in connection with the Merger.
6.16 XXXX-XXXXX-XXXXXX FILINGS
Xxxxxx.xxx and the Stockholders agree to make (a) all filings required
under the HSR Act in connection with the Merger (other than those filings
required with respect to the issuance of the Post-Closing Shares) within three
business days after the date hereof and (b) any filings required under the HSR
Act with respect to the issuance of the Post-Closing Shares no less than 45 days
prior to the first anniversary of the Closing Date.
6.17 AUDITED FINANCIAL STATEMENTS
At least four business days prior to the Closing Date, the Company shall
deliver to Xxxxxx.xxx an audited balance sheet, an audited statement of income
and expenses, an audited statement of cash flow and an audited statement of
stockholders
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equity of the Company as of and for the fiscal year ended December 31, 1998.
These audited financial statements shall not reflect any material adverse change
from the Unaudited Financial Statements as at and for the same periods.
6.18 REPAYMENT OF INDEBTEDNESS, RELEASES OF LIENS
Prior to the Effective Time, the Company shall use commercially
reasonable efforts to pay all amounts owing under the Loan and Security
Agreement dated October 9, 1998, as amended, between Silicon Valley Bank ("SVB")
and the Company, and under any other lending agreements or arrangements with
SVB, and to cause SVB to release, prior to the Effective Time, all Encumbrances
in SVB's favor with respect to any of the Company's assets.
6.19 OPTIONHOLDER CONSENTS
The Company shall use commercially reasonable efforts to cause the
holders of Options to provide the consents thereof specified in Sections 4.24
and 5.13 prior to April 30, 1999.
6.20 LINKSHARE AGREEMENT
The Company shall use commercially reasonable efforts to amend and
terminate the LinkShare Network Membership Agreement For Merchants, dated March
16, 1999 (the "LinkShare Agreement"), between LinkShare Corporation and the
Company, in such a manner that neither Xxxxxx.xxx nor any of its affiliates will
be subject to the provisions of Section 6.5 thereof after the termination of the
LinkShare Agreement, the consummation of the Merger or the Effective Date.
6.21 LEASE TERMINATIONS
The Company shall use commercially reasonable efforts to terminate,
prior to the Effective Time, the leases referred to on Schedule 2.9(a) to the
Company Disclosure Memorandum.
ARTICLE VIA - COVENANTS OF THE STOCKHOLDERS
6A.1 RESTRICTIONS ON TRANSFER
Each Stockholder will not sell, transfer, or otherwise dispose of, or
make any offer or agreement relating to any of the foregoing with respect to,
any shares of Xxxxxx.xxx Common Stock that the undersigned may acquire in
connection with the Merger, except: (i) in a transaction permitted pursuant to
Rule 145 under the Securities
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Act; (ii) in a transaction otherwise exempt from the registration requirements
of the Securities Act; or (iii) pursuant to a registration statement under the
Securities Act.
6A.2 EXECUTION OF ALL OPERATIVE DOCUMENTS
Each Stockholder will execute at or prior to Closing each Operative
Document to which it is a party.
6A.3 AGREEMENT TO VOTE SHARES
(a) Each Stockholder shall vote or cause to be voted, or execute a
written consent with respect to, his, her or its shares of Company Capital Stock
(i) in favor of adoption and approval of the this Agreement and all transactions
relating hereto or contemplated hereby at every meeting of the stockholders of
the Company at which such matters are considered and at every adjournment
thereof and in connection with every proposal to take action by written consent
with respect thereto, and (ii) against any proposal by a party other than
Xxxxxx.xxx or the Purchaser to merge or consolidate with the Company or any
subsidiary of the Company or to sell all or substantially all the assets of the
Company or any subsidiary of the Company at every meeting of the stockholders of
the Company at which such matters are considered and at every adjournment
thereof and in connection with every proposal to take action by written consent
with respect thereto.
(b) Each Stockholder agrees that he, she or it will not, nor will such
Stockholder permit any entity under such Stockholder's control to, deposit any
shares of Company Capital Stock in a voting trust or subject the shares to any
agreement, arrangement or understanding with respect to the voting of the shares
inconsistent with this Agreement.
6A.4 LIMITATION ON SALES
During the term of this Agreement, each Stockholder agrees not to sell,
assign, transfer, pledge, encumber or otherwise dispose of any of his, her or
its shares of Company Capital Stock.
6A.5 WAIVER OF DISSENTER'S RIGHTS
Each Stockholder hereby irrevocably and unconditionally waives, and
agrees to cause to be waived and to prevent the exercise of, any rights of
appraisal, any dissenters' rights and any similar rights relating to the Merger
that such Stockholder may have by virtue of the ownership of any shares of
Company Capital Stock.
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6A.6 TAXES
Each Stockholder shall timely pay all transfer, documentary, sales, use,
stamp, registration and other Taxes arising from or relating to the transactions
contemplated by this Agreement, to the extent they relate specifically to the
issuance of shares of Xxxxxx.xxx Common Stock to such Stockholder, and such
Stockholder shall, at his, her or its own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration, and other Taxes.
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time (notwithstanding any approval of this Agreement
by the stockholders of the Company):
(a) by mutual written consent;
(b) by either the Company or Xxxxxx.xxx, if the Merger has not
been consummated by June 15, 1999; provided, however, that the right to
terminate this Agreement under this subsection (b) shall not be available to any
party whose failure to fulfill or cause to be fulfilled any obligation under
this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date;
(c) by either the Company or Xxxxxx.xxx, if there shall be any
law or regulation that makes consummation of the Merger illegal or if any
judgment, injunction, order or decree enjoining Xxxxxx.xxx, the Purchaser or the
Company from consummating the Merger is entered and such judgment, injunction,
order or decree shall become final and nonappealable; provided, however, that
the party seeking to terminate this Agreement pursuant to this subsection (c)
shall have used all reasonable efforts to remove such judgment, injunction,
order or decree;
(d) by the Company, in the event of a material breach by
Xxxxxx.xxx of any representation, warranty or agreement contained herein which
has not been cured or is not curable by June 15, 1999;
(e) by Xxxxxx.xxx, (i) in the event of a material breach by the
Company or by the Stockholders of any representation, warranty or agreement
contained herein which has not been cured or is not curable by June 15, 1999 or
(ii) in
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the event (A) Xxxx Xxxxxxx, (B) three or more Primary Key Employees other than
Xx. Xxxxxxx or (C) two or more Primary Key Employees other than Xx. Xxxxxxx and
both Secondary Key Employees shall not have accepted the offer of employment
pursuant to Section 6.13 within 14 days of the date hereof (or if any such
acceptance is terminated by such Primary Key Employees or Secondary Key
Employees prior to the Effective Time).
7.2 EFFECT OF TERMINATION
In the event of the termination of this Agreement pursuant to Section
7.1 hereof, there shall be no further obligation on the part of any party
hereto, except that nothing herein shall relieve any party from liability for
any willful breach hereof.
7.3 AMENDMENT
This Agreement may not be amended except by an instrument in writing
signed by Xxxxxx.xxx, the Purchaser, the Company and Stockholders holding an
aggregate of at least 90% of the Company Common Stock (including Common
Conversion Shares) then outstanding; provided, however, that after approval of
this Agreement by the Stockholders, no amendment will be made which by
applicable law requires the further approval of the Company's stockholders
without obtaining such further approval.
7.4 WAIVER
At any time prior to the Effective Time, Xxxxxx.xxx may (a) extend the
time for the performance of any obligation or other act of the Company or the
Stockholders, (b) waive any inaccuracy in the representations and warranties of
the Company or the Stockholders contained herein or in any document delivered
pursuant hereto, or (c) waive compliance with any agreement of the Company or
the Stockholders or any condition to the obligations of Xxxxxx.xxx and the
Purchaser contained herein. At any time prior to the Effective Time, the Company
may (a) extend the time for the performance of any obligation or other act of
Xxxxxx.xxx or the Purchaser, (b) waive any inaccuracy in the representations and
warranties of Xxxxxx.xxx or the Purchaser contained herein or in any document
delivered pursuant hereto, or (c) waive compliance with any agreement of
Xxxxxx.xxx or the Purchaser or any condition to the obligations of the Company
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party or parties to be bound thereby.
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ARTICLE VIII - SURVIVAL AND INDEMNIFICATION
8.1 SURVIVAL
All representations and warranties contained in this Agreement or in the
other Operative Documents or in any certificate delivered pursuant hereto or
thereto shall survive the Closing for a period of one year after the Effective
Time (the "Survival Period"), and shall not be deemed waived or otherwise
affected by any investigation made or any knowledge acquired with respect
thereto, or by any notice delivered pursuant to Section 6.4 hereof; provided,
however, that any claim based on fraud shall survive the Closing indefinitely.
The covenants and agreements contained in this Agreement or in the other
Operative Documents shall survive the Closing and shall continue until all
obligations with respect thereto shall have been performed or satisfied or shall
have been terminated in accordance with their terms.
8.2 INDEMNIFICATION BY THE STOCKHOLDERS
Subject to the limitations set forth in this Article VIII, from and
after the Closing, each Stockholder shall indemnify and hold Xxxxxx.xxx, its
officers, directors and affiliates (as "affiliate" is defined in Rule 12b-2 of
the Exchange Act) (the "Xxxxxx.xxx Indemnified Parties") harmless from and
against, and shall reimburse, on a net after-tax basis (after taking into
account any Taxes imposed on the receipt of the reimbursement and any Tax
benefits actually utilized in reducing its Taxes), the Xxxxxx.xxx Indemnified
Parties for, any and all losses, damages, debts, liabilities, obligations,
judgments, orders, awards, writs, injunctions, decrees, fines, penalties, Taxes,
costs or expenses (including, but not limited to, any reasonable legal or
accounting fees or expenses and any Taxes or other costs or damages arising
under, caused by or related to Section 280G of the Code or any comparable
provision of state, local or foreign law) ("Losses") arising out of (i) any
inaccuracy or misrepresentation in, or breach of, any representation or warranty
made by the Company or such Stockholder in this Agreement or in any other
Operative Document; (ii) any failure by the Company or such Stockholder to
perform or comply, in whole or in part, with any covenant or agreement in this
Agreement or in any other Operative Document; or (iii) any liability for
withholding Taxes imposed with respect to any Merger Consideration payable to
Stockholders. If Xxxxxx.xxx cannot utilize a Tax benefit generated by any
Losses, Xxxxxx.xxx shall repay to the Stockholder Representative, on behalf of
the Stockholders, an amount equal to such Tax benefit when and in the amount
utilized, but in no event greater than the amount paid by the Stockholders under
this Section 8.2 with respect to such Losses.
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8.3 INDEMNIFICATION BY XXXXXX.XXX
Subject to the limitations set forth in this Article VIII, from and
after the Closing, Xxxxxx.xxx shall indemnify and hold the Stockholders harmless
from and against, and shall reimburse the Stockholders for, any and all Losses
arising out of (i) any inaccuracy or misrepresentation in, or breach of, any
representation or warranty made by Xxxxxx.xxx or the Purchaser in this Agreement
or in any other Operative Document; or (ii) any failure by Xxxxxx.xxx or the
Purchaser to perform or comply, in whole or in part, with any covenant or
agreement in this Agreement or in any other Operative Document.
8.4 THRESHOLD AND LIMITATIONS; ADJUSTMENT OF MERGER CONSIDERATION
(a) No Xxxxxx.xxx Indemnified Party or Stockholder shall be entitled to
receive any indemnification payment with respect to any claims for
indemnification under this Article VIII ("Claims") until the aggregate Losses
for which the Xxxxxx.xxx Indemnified Parties or the Stockholders, as the case
may be, would otherwise be entitled to receive indemnification exceed $200,000
(the "Threshold"); provided, however, that once such aggregate Losses exceed the
Threshold, the Xxxxxx.xxx Indemnified Parties or the Stockholders, as the case
may be, shall be entitled to indemnification for the aggregate amount of all
Losses without regard to the Threshold; and, provided further, that the
Xxxxxx.xxx Indemnified Parties and the Stockholders (collectively, the
"Indemnified Parties") shall be entitled to indemnification for all Losses based
upon a claim of fraud without regard to the Threshold.
(b) Except for Losses based upon a claim of fraud, the aggregate
liability of any Stockholder under this Article VIII shall be limited to such
Stockholder's Escrow Shares. For Losses based upon a claim of fraud, the
aggregate liability of any Stockholder under this Article VIII shall be limited
to a dollar amount equal to the sum of (i) the product of the Closing Price
multiplied by the number of Closing Date Shares such Stockholder receives in
connection with the Merger, plus (ii) the product of the Post-Closing Price
multiplied by the number of Post-Closing Shares such Stockholder receives in
connection with the Merger. Except for Losses based on fraud, the Xxxxxx.xxx
Indemnified Parties shall not be entitled to pursue any Claims against a
Stockholder directly or personally and the sole recourse of the Xxxxxx.xxx
Indemnified Parties shall be to make Claims against the Escrow Shares of such
Stockholder in accordance with the terms of the Escrow Agreement. In the event
of any Claim based upon fraud by a Stockholder (but not based on fraud by the
Company), the Xxxxxx.xxx Indemnified Parties shall be entitled to pursue the
Claim only against such Stockholder and any other Stockholders participating in
the fraud. In
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the event of any Claim based upon fraud by the Company, the Xxxxxx.xxx
Indemnified Parties shall be entitled to pursue the Claim against all
Stockholders.
(c) An indemnifying party shall not be obligated to defend and hold
harmless an Indemnified Party, or otherwise be liable to such party, with
respect to any claims made by the Indemnified Party after the expiration of the
applicable time period as set forth in Section 8.1 hereof. Notwithstanding the
foregoing, indemnity may be sought after the expiration of the Survival Period
pursuant to this Article VIII if a Claim Notice (as defined in Section 8.5(a)
hereof) shall have been delivered to the Stockholder Representative, on behalf
of the Stockholders, or to Xxxxxx.xxx, as the case may be, prior to the
expiration of the Survival Period.
(d) The indemnification obligations of the Stockholders under this
Article VIII (including, without limitation, with respect to any Claim based on
fraud) shall be satisfied, first, by means of the release from escrow to the
Xxxxxx.xxx Indemnified Parties of Escrow Shares in accordance with the
provisions of the Escrow Agreement. The number of Escrow Shares to be released
from escrow to the Xxxxxx.xxx Indemnified Parties in payment of any Claims shall
be determined by dividing (x) the aggregate dollar amount of such Claims by (y)
the Closing Price. The aggregate value of Claims paid by means of such release
of Escrow Shares shall be deemed to reduce the total Merger Consideration
otherwise payable to the Stockholders pursuant to Section 1.7 of this Agreement.
Any such Claims shall be deemed to reduce the Escrow Shares, pro rata with
respect to each Stockholder, as determined by reference to the number of Closing
Date Shares such Stockholder is entitled to receive in the Merger as compared to
all other Stockholders; provided, however, that any Claims paid with respect to
any Loss related to any representation, warranty, covenant or agreement of a
Stockholder or based upon fraud by a Stockholder shall not result in a pro rata
reduction of the Escrow Shares but shall reduce only the Escrow Shares of such
Stockholder.
8.5 PROCEDURE FOR INDEMNIFICATION
(a) An Indemnified Party shall give written notice (the "Claim Notice")
of any Claim for indemnification under this Article VIII to the Stockholder
Representative, on behalf of the Stockholders, or to Xxxxxx.xxx, as the case may
be, reasonably promptly after the assertion against the Indemnified Party of any
claim by a third party (a "Third Party Claim") or, if such Claim is not in
respect of a Third Party Claim, reasonably promptly after the discovery of facts
upon which the Indemnified Party intends to base a Claim for indemnification
pursuant to this Article VIII; provided, however, that the failure or delay to
so notify the Stockholder Representative or Xxxxxx.xxx, as the case may be,
shall not relieve the indemnifying party of any
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obligation or liability that the indemnifying party may have to the Indemnified
Party except to the extent that the indemnifying party demonstrates that his,
her or its ability to defend or resolve such Claim is adversely affected
thereby. Any such Claim Notice shall describe the facts and circumstances on
which the asserted Claim for indemnification is based and shall include the
amount of the indemnifiable Losses (or, if such amount is not then determined, a
good faith estimate thereof) and the basis for the determination of the amount
of such Losses.
(b) (i) (A) Subject to the rights of or duties to any insurer or
other third party having potential liability therefor, the Stockholder
Representative, on behalf of the Stockholders, shall have the right, upon
written notice given by the Stockholder Representative to the Xxxxxx.xxx
Indemnified Party within 30 days after receipt by the Stockholder Representative
of the notice from the Xxxxxx.xxx Indemnified Party of any Third Party Claim, to
assume the defense or handling of such Third Party Claim, at the Stockholders'
sole expense, in which case the provisions of Section 8.5(b)(ii) hereof shall
govern; provided, however, that, notwithstanding the foregoing, Xxxxxx.xxx may
elect to assume the defense and handle any such Third Party Claim if it
determines in good faith that the resolution of such Third Party Claim could
result in an adverse impact on the business, operations, assets, liabilities
(absolute, accrued, contingent or otherwise), condition (financial or otherwise)
or prospects of Xxxxxx.xxx, in which case the provisions of Section 8.5(c)(ii)
hereof shall govern.
(B) Subject to the rights of or duties to any insurer or
other third party having potential liability therefor, Xxxxxx.xxx shall have the
right, upon written notice given by Xxxxxx.xxx to the Stockholder Representative
within 30 days after receipt by Xxxxxx.xxx of the notice from a Stockholder of
any Third Party Claim, to assume the defense or handling of such Third Party
Claim, at Xxxxxx.xxx's sole expense, in which case the provisions of Section
8.5(b)(ii) hereof shall govern
(ii) The Stockholder Representative, on behalf of the
Stockholders, or Xxxxxx.xxx, as the case may be, shall select counsel reasonably
acceptable to the Indemnified Party in connection with conducting the defense or
handling of such Third Party Claim, and the Stockholder Representative or
Xxxxxx.xxx, as the case may be, shall defend or handle the same in consultation
with the Indemnified Party and shall keep the Indemnified Party timely apprised
of the status of such Third Party Claim. Neither the Stockholder Representative
nor Xxxxxx.xxx, as the case may be, shall, without the prior written consent of
the Indemnified Party, agree to a settlement of any Third Party Claim, unless
(A) the settlement provides an unconditional release and discharge of the
Indemnified Party and the Indemnified Party is reasonably satisfied
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with such discharge and release and (B) with respect to any Claim by an
Xxxxxx.xxx Indemnified Party, Xxxxxx.xxx shall not have reasonably objected to
any such settlement on the ground that the circumstances surrounding the
settlement could result in an adverse impact on the business, operations,
assets, liabilities (absolute, accrued, contingent or otherwise), condition
(financial or otherwise) or prospects of Xxxxxx.xxx. The Indemnified Party shall
cooperate with the Stockholder Representative or Xxxxxx.xxx, as the case may be,
and shall be entitled to participate in the defense or handling of such Third
Party Claim with its own counsel and at its own expense.
(c) (i) (A) If (x) the Stockholder Representative does not give
written notice to the Xxxxxx.xxx Indemnified Party pursuant to Section
8.5(b)(i)(A) within 30 days after receipt of the notice from the Xxxxxx.xxx
Indemnified Party of any Third Party Claim of the Stockholder Representative's
election to assume the defense or handling of such Third Party Claim or (y)
Xxxxxx.xxx elects to assume the defense and the handling of such Third Party
Claim pursuant to the proviso in Section 8.5(b)(i)(A), the provisions of Section
8.5(c)(ii) hereof shall govern.
(B) If Xxxxxx.xxx does not give written notice to the
Stockholder Representative pursuant to Section 8.5(b)(i)(B) within 30 days after
receipt of the notice from a Stockholder of any Third Party Claim of
Xxxxxx.xxx's election to assume the defense or handling of such Third Party
Claim, the provisions of Section 8.5(c)(ii) hereof shall govern.
(ii) The Indemnified Party may, at the indemnifying party's
expense , select counsel reasonably acceptable to the indemnifying party in
connection with conducting the defense or handling of such Third Party Claim and
defend or handle such Third Party Claim in such manner as the Indemnified Party
may deem appropriate and in consultation with the indemnified party; provided,
however, that the Indemnified Party shall keep the Stockholder Representative or
Xxxxxx.xxx, as the case may be, timely apprised of the status of such Third
Party Claim and shall not settle such Third Party Claim without the prior
written consent of the Stockholder Representative or Xxxxxx.xxx, as the case may
be, which consent shall not be unreasonably withheld. If the Indemnified Party
defends or handles such Third Party Claim, the indemnifying party shall
cooperate with the Indemnified Party and shall be entitled to participate in the
defense or handling of such Third Party Claim with its own counsel and at its
own expense.
8.6 REMEDIES; SPECIFIC PERFORMANCE
Except as otherwise provided, the indemnification provisions of this
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Article VIII are the sole and exclusive remedy of any party to this Agreement
for a breach of any representation, warranty or covenant contained herein.
Notwithstanding the preceding sentence, each of the parties acknowledges and
agrees that the other parties hereto would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the parties
hereto agrees that the other parties hereto shall be entitled to an injunction
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof (including the
indemnification provisions hereof) in any competent court having jurisdiction
over the parties, in addition to any other remedy to which they may be entitled
at law or in equity.
ARTICLE IX - GENERAL
9.1 TAX MATTERS
All of the parties hereto shall cooperate, as and to the extent
reasonably requested, in connection with the preparation of any Tax Return and
any audit, investigation, litigation or other action with respect to Taxes that
may be instituted after the Closing.
9.2 EXPENSES
Regardless of whether the transactions contemplated by this Agreement
are consummated, each party shall pay its own fees and expenses (including,
without limitation, legal fees and expenses and filing fees under the HSR Act)
incident to the negotiation, preparation and execution of this Agreement and the
other Operative Documents; provided, however, that all fees and expenses
incurred by or on behalf of the Company in excess of $250,000 in connection with
the transactions contemplated by this Agreement or the other Operative Documents
shall be the sole joint and several responsibility of the Stockholders; and,
provided further, that, should any action be brought hereunder, the attorneys'
fees and expenses of the prevailing party shall be paid by the other party to
such action.
9.3 NOTICES
Any notice, request or demand desired or required to be given hereunder
shall be in writing given by personal delivery, confirmed facsimile
transmission, or overnight courier service, in each case addressed as
respectively set forth below or to such other address as any party shall have
previously designated by such a notice. The effective date of any notice,
request or demand shall be the date of personal delivery,
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the date on which successful facsimile transmission is confirmed or the date
actually delivered by a reputable overnight courier service, as the case may be,
in each case properly addressed as provided herein and with all charges prepaid.
TO XXXXXX.XXX OR THE PURCHASER:
Xxxxxx.xxx, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Legal
with a copy to:
Xxxxxxx Coie LLP
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
TO THE COMPANY:
e-Niche Incorporated
000 Xxxxxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxxx
with a copy to:
Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
TO THE STOCKHOLDER REPRESENTATIVE:
Xxxx Xxxxxxx
c/o e-Niche Incorporated
000 Xxxxxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
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Fax: (000) 000-0000
with a copy to:
Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
9.4 SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the fullest extent possible.
9.5 ENTIRE AGREEMENT
This Agreement, the Mutual Nondisclosure Agreement and the other
Operative Documents constitute the entire agreement among the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and thereof.
9.6 ASSIGNMENT
This Agreement shall not be assigned prior to the Closing by operation
of law or otherwise; provided, however, that the Purchaser's rights and
obligations may be assigned to and assumed by Xxxxxx.xxx or by any other
corporation wholly owned (directly or through intermediate wholly-owned
subsidiaries) by Xxxxxx.xxx.
9.7 PARTIES IN INTEREST
This Agreement shall be binding upon and inure solely to the benefit of
the parties hereto and their respective successors, heirs, legal representatives
and permitted
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assigns, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
9.8 GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware applicable to contracts executed in and to be
performed in that state. All actions and proceedings arising out of or relating
to this Agreement shall be heard and determined in any Delaware state or federal
court.
9.9 HEADINGS
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.10 COUNTERPARTS
This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement. To expedite the process of entering into this Agreement,
the parties acknowledge that Transmitted Copies of this Agreement will be
equivalent to original documents until such time as original documents are
completely executed and delivered. "Transmitted Copies" will mean copies that
are reproduced or transmitted via photocopy, facsimile or other process of
complete and accurate reproduction and transmission.
9.11 WAIVER OF JURY TRIAL
Xxxxxx.xxx, the Company, the Purchaser and each of the Stockholders
hereby irrevocably waives all right to trial by jury in any action, proceeding
or counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to this Agreement, the transactions contemplated hereby or the actions
of such parties in the negotiation, administration, performance and enforcement
hereof.
[Remainder of this page intentionally left blank.]
-74-
82
IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement and Plan of Merger as of the date and year first above written.
XXXXXX.XXX, INC.
By /s/ Xxxxx Xxxxxxx
----------------------------------
Its Treasurer
----------------------------------
XXXXXX.XXX AUCTIONS, INC.
By /s/ Xxxxx Xxxxxxx
----------------------------------
Its Treasurer
----------------------------------
E-NICHE INCORPORATED
By /s/ Xxxx Xxxxxxx
----------------------------------
Its President & CEO
----------------------------------
STOCKHOLDERS:
/s/ Xxxx Xxxxxxx
------------------------------------
Xxxx Xxxxxxx
-S-1-
83
/s/ Xxx Xxx
--------------------------------------------------
Xxx Xxx
POLARIS VENTURE PARTNERS II, L.P.
By: Polaris Venture Management Co. II, L.L.C.
Its General Partner
By /s/ Xxxx Xxxxxx
------------------------------------------------
Its
------------------------------------------------
POLARIS VENTURE PARTNERS FOUNDERS' FUND II, L.P.
By: Polaris Venture Management Co. II, L.L.C.
Its General Partner
By /s/ Xxxx Xxxxxx
------------------------------------------------
Its
------------------------------------------------
ACCEL VI L.P.
By: Accel VI Associates L.L.C.
Its General Partner
By /s/ X. Xxxxxx Sednaoui
------------------------------------------------
Its
------------------------------------------------
-S-2-
84
ACCEL INTERNET FUND II, L.P.
By: Accel Internet Fund II Associates L.L.C.
Its General Partner
By /s/ X. Xxxxxx Sednaoui
------------------------------------------------
Its
------------------------------------------------
ACCEL KEIRETSU VI L.P.
By: Accel Keiretsu VI Associates L.L.C.
Its General Partner
By /s/ X. Xxxxxx Sednaoui
------------------------------------------------
Its
------------------------------------------------
ACCEL INVESTORS '98 L.P.
By /s/ X. Xxxxxx Sednaoui
------------------------------------------------
Its
------------------------------------------------
THE WASHINGTON POST COMPANY
By /s/ Xxxx X. Xxxxx, Xx.
------------------------------------------------
Its
------------------------------------------------
/s/ Xxxxx Xxxxxxx
--------------------------------------------------
Xxxxx Xxxxxxx
-S-3-
85
/s/ Xxxxxx Xxxxxxxx
--------------------------------------------------
Xxxxxx Xxxxxxxx
/s/ Xxxxx Xxxxx
--------------------------------------------------
Xxxxx Xxxxx
/s/ Xxxxxxx Xxxxxx
--------------------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxx Xxxxxxx
--------------------------------------------------
Xxxx Xxxxxxx
/s/ Xxxxx X'Xxxxxxx
--------------------------------------------------
Xxxxx X'Xxxxxxx
/s/ Kosmo Kallierekos
--------------------------------------------------
Kosmo Kallierekos
/s/ Xxxxxxxx X. Xxxxxxx
--------------------------------------------------
Xxxxxxxx X. Xxxxxxx
/s/ Xxx Xxxxx
--------------------------------------------------
Xxx Xxxxx
-S-4-
86
FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
This First Amendment to Agreement and Plan of Merger (this "Amendment") is
made and entered into as of May 7, 1999, by and among Xxxxxx.xxx, Inc., a
Delaware corporation ("Xxxxxx.xxx"), Xxxxxx.xxx Auctions, Inc., a Delaware
corporation and wholly owned subsidiary of Xxxxxx.xxx (the "Purchaser"), e-Niche
Incorporated, a Delaware corporation (the "Company"), and all the stockholders
of the Company (the "Stockholders").
RECITALS
A. Xxxxxx.xxx, the Purchaser, the Company and the Stockholders are all the
parties to the Agreement and Plan of Merger dated as of April 24, 1999 (the
"Agreement"), pursuant to which the parties have agreed that, on the terms and
subject to the conditions of the Agreement, the Company shall be merged with and
into the Purchaser, with the Purchaser being the surviving corporation.
B. Xxxxxx.xxx, the Purchaser, the Company and the Stockholders desire to
amend the Agreement as set forth herein.
C. Unless otherwise defined herein, capitalized terms used herein shall
have the meanings assigned thereto in the Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENT OF AGREEMENT AND PLAN OF MERGER
The parties hereby modify and amend the Agreement as follows:
(a) By deleting the name "Xxxx Xxxxxxx" in Section 1.8 of the Agreement
and by substituting in lieu thereof the name "Xxxxxxxx X. Xxxxx".
(b) By deleting the name of and the address information for the
Stockholder Representative in Section 9.3 of the Agreement and by substituting
in lieu thereof the following:
Page 1
87
"Xxxxxxxx X. Xxxxx
c/o Polaris Venture Partners
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxxxxx 00000-0000
Fax: (000) 000-0000"
(c) By adding to the end of Section 2.4 of the Agreement the following
sentence:
"If the subsidiary set forth in Schedule 2.4 to the Company
Disclosure Schedule were deemed to be the "Company" for purposes of
the representations and warranties in this Article II, such
representations and warranties would be true and correct in all
material respects with respect to such subsidiary, other than those
in Section 2.3 and in the first sentence of Section 2.1."
(d) By deleting the reference to "Xxxxxx.xxx" in Section 4.22 of the
Agreement and by substituting in lieu thereof "the Company".
(e) By deleting Section 8.4(d) of the Agreement in its entirety and by
substituting in lieu thereof the following Section 8.4(d):
" (d) The indemnification obligations of the Stockholders under this
Article VIII (including, without limitation, with respect to any
Claim based on fraud) shall be satisfied, first, by means of the
release from escrow to Xxxxxx.xxx, on behalf of the Xxxxxx.xxx
Indemnified Parties, of Escrow Shares in accordance with the
provisions of the Escrow Agreement. The number of Escrow Shares to
be released from escrow to Xxxxxx.xxx in payment of any Claims shall
be determined by dividing (x) the aggregate dollar amount of such
Claims by (y) the Closing Price. The aggregate value of Claims paid
by means of such release of Escrow Shares shall be deemed to reduce
the total Merger Consideration otherwise payable to the Stockholders
pursuant to Section 1.7 of this Agreement. Any such Claims shall be
deemed to reduce the Escrow Shares, pro rata with respect to each
Stockholder, as determined by reference to the number of Closing
Date Shares such Stockholder is entitled to receive in the Merger as
compared to all other Stockholders; provided, however, that any
Claims paid with respect to any Loss related to any representation,
warranty, covenant or agreement of a Stockholder or based upon fraud
by a Stockholder shall not result in a pro rata
Page 2
88
reduction of the Escrow Shares but shall reduce only the Escrow
Shares of such Stockholder."
(f) By deleting Sections 8.5(a), (b) and (c) of the Agreement in their
entirety and by substituting in lieu thereof the following Sections 8.5(a), (b)
and (c):
" (a) Xxxxxx.xxx, on behalf of the Xxxxxx.xxx Indemnified Parties,
and the Stockholder Representative, on behalf of the Stockholders,
shall give written notice (the "Claim Notice") of any Claim for
indemnification under this Article VIII to the Stockholder
Representative or to Xxxxxx.xxx, as the case may be, as well as to
the Escrow Agent reasonably promptly after the assertion against an
Indemnified Party of any claim by a third party (a "Third Party
Claim") or, if such Claim is not in respect of a Third Party Claim,
reasonably promptly after the discovery of facts upon which the
Indemnified Party intends to base a Claim for indemnification
pursuant to this Article VIII; provided, however, that the failure
or delay to so notify the Stockholder Representative or Xxxxxx.xxx,
as the case may be, or the Escrow Agent shall not relieve the
indemnifying party of any obligation or liability that the
indemnifying party may have to the Indemnified Party except to the
extent that the indemnifying party demonstrates that his, her or its
ability to defend or resolve such Claim is adversely affected
thereby. Any such Claim Notice shall describe the facts and
circumstances on which the asserted Claim for indemnification is
based and shall include the amount of the indemnifiable Losses (or,
if such amount is not then determined, a good faith estimate
thereof), the basis for the determination of the amount of such
Losses and, if the Claim is asserted against less than all of the
Stockholders, the identity of such Stockholders against whom the
Claim is asserted.
(b) (i) (A) Subject to the rights of or duties to any insurer
or other third party having potential liability therefor, the
Stockholder Representative, on behalf of the Stockholders, shall
have the right, upon written notice given by the Stockholder
Representative to Xxxxxx.xxx, on behalf of the Xxxxxx.xxx
Indemnified Party, within 30 days after receipt by the Stockholder
Representative of the notice from Xxxxxx.xxx of any Third Party
Claim, to assume the defense or handling of such Third Party Claim,
at the Stockholders' sole expense, in which case the provisions of
Section 8.5(b)(ii) hereof shall govern; provided,
Page 3
89
however, that, notwithstanding the foregoing, Xxxxxx.xxx may elect
to assume the defense and handle any such Third Party Claim if it
determines in good faith that the resolution of such Third Party
Claim could result in an adverse impact on the business, operations,
assets, liabilities (absolute, accrued, contingent or otherwise),
condition (financial or otherwise) or prospects of Xxxxxx.xxx, in
which case the provisions of Section 8.5(c)(ii) hereof shall govern.
(B) Subject to the rights of or duties to any
insurer or other third party having potential liability therefor,
Xxxxxx.xxx shall have the right, upon written notice given by
Xxxxxx.xxx to the Stockholder Representative within 30 days after
receipt by Xxxxxx.xxx of the notice from a Stockholder of any Third
Party Claim, to assume the defense or handling of such Third Party
Claim, at Xxxxxx.xxx's sole expense, in which case the provisions of
Section 8.5(b)(ii) hereof shall govern.
(ii) The Stockholder Representative, on behalf of the
Stockholders, or Xxxxxx.xxx, as the case may be, shall select
counsel reasonably acceptable to the Indemnified Party in connection
with conducting the defense or handling of such Third Party Claim,
and the Stockholder Representative or Xxxxxx.xxx, as the case may
be, shall defend or handle the same in consultation with the
Indemnified Party and shall keep the Indemnified Party timely
apprised of the status of such Third Party Claim. Neither the
Stockholder Representative nor Xxxxxx.xxx, as the case may be,
shall, without the prior written consent of the Indemnified Party,
agree to a settlement of any Third Party Claim, unless (A) the
settlement provides an unconditional release and discharge of the
Indemnified Party and the Indemnified Party is reasonably satisfied
with such discharge and release and (B) with respect to any Claim by
or on behalf of an Xxxxxx.xxx Indemnified Party, Xxxxxx.xxx shall
not have reasonably objected to any such settlement on the ground
that the circumstances surrounding the settlement could result in an
adverse impact on the business, operations, assets, liabilities
(absolute, accrued, contingent or otherwise), condition (financial
or otherwise) or prospects of Xxxxxx.xxx. The Indemnified Party
shall cooperate with the Stockholder Representative or Xxxxxx.xxx,
as the case may be, and shall be entitled to
Page 4
90
participate in the defense or handling of such Third Party Claim
with its own counsel and at its own expense.
(c) (i) (A) If (x) the Stockholder Representative does not
give written notice to Xxxxxx.xxx pursuant to Section 8.5(b)(i)(A)
within 30 days after receipt of the notice from Xxxxxx.xxx of any
Third Party Claim of the Stockholder Representative's election to
assume the defense or handling of such Third Party Claim or (y)
Xxxxxx.xxx elects to assume the defense and the handling of such
Third Party Claim pursuant to the proviso in Section 8.5(b)(i)(A),
the provisions of Section 8.5(c)(ii) hereof shall govern.
(B) If Xxxxxx.xxx does not give written notice to
the Stockholder Representative pursuant to Section 8.5(b)(i)(B)
within 30 days after receipt of the notice from a Stockholder of any
Third Party Claim of Xxxxxx.xxx's election to assume the defense or
handling of such Third Party Claim, the provisions of Section
8.5(c)(ii) hereof shall govern.
(ii) The Indemnified Party may, at the indemnifying
party's expense , select counsel reasonably acceptable to the
indemnifying party in connection with conducting the defense or
handling of such Third Party Claim and defend or handle such Third
Party Claim in such manner as the Indemnified Party may deem
appropriate and in consultation with the indemnified party;
provided, however, that the Indemnified Party shall keep the
Stockholder Representative or Xxxxxx.xxx, as the case may be, timely
apprised of the status of such Third Party Claim and shall not
settle such Third Party Claim without the prior written consent of
the Stockholder Representative or Xxxxxx.xxx, as the case may be,
which consent shall not be unreasonably withheld. If the Indemnified
Party defends or handles such Third Party Claim, the indemnifying
party shall cooperate with the Indemnified Party and shall be
entitled to participate in the defense or handling of such Third
Party Claim with its own counsel and at its own expense."
(g) By replacing Schedule 2.8(i) to the Company Disclosure Schedule with
the revised Schedule 2.8(i) attached hereto.
(h) By replacing Exhibit 1.7.2(c) to the Agreement with the revised
Exhibit 1.7.2(c) attached hereto.
Page 5
91
2. EFFECT ON AGREEMENT AND PLAN OF MERGER
Except as specifically amended and modified by this Amendment, the terms
and provisions of the Agreement remain unchanged and in full force and effect.
All references in the Agreement or the other Operative Documents or otherwise to
the Agreement shall hereinafter refer to the Agreement as amended by this
Amendment.
3. MISCELLANEOUS
(a) This Amendment shall be governed by, and construed in accordance with,
the laws of the State of Delaware applicable to contracts executed in and to be
performed in that state. All actions and proceedings arising out of or relating
to this Amendment shall be heard and determined in any Delaware state or federal
court.
(b) The descriptive headings contained in this Amendment are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Amendment.
(c) This Amendment may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement. To expedite the process of entering into this Amendment,
the parties acknowledge that Transmitted Copies of this Amendment will be
equivalent to original documents until such time as original documents are
completely executed and delivered.
[Remainder of this page intentionally left blank.]
Page 6
92
IN WITNESS WHEREOF, the parties hereto have entered into and signed this
First Amendment to Agreement and Plan of Merger as of the date and year first
above written.
XXXXXX.XXX, INC.
By /s/ Xxxxx Xxxxxxx
-----------------------------------
Its: Vice President and Treasurer
XXXXXX.XXX AUCTIONS, INC.
By /s/ Xxxxx Xxxxxxx
-----------------------------------
Its: Treasurer
E-NICHE INCORPORATED
By /s/ Xxxx Xxxxxxx
-----------------------------------
Its: CEO
STOCKHOLDERS:
/s/ Xxxx Xxxxxxx
----------------------------------------
Xxxx Xxxxxxx
/s/ Xxx Xxx
----------------------------------------
Xxx Xxx
Page X-0
00
XXXXXXX VENTURE PARTNERS II, L.P.
By: Polaris Venture Management Co. II,
L.L.C.
Its General Partner
By /s/ Xxxx Xxxxxx
-----------------------------------
Its
-----------------------------------
POLARIS VENTURE PARTNERS FOUNDERS'
FUND II, L.P.
By: Polaris Venture Management Co. II,
L.L.C.
Its General Partner
By /s/ Xxxx Xxxxxx
-----------------------------------
Its
-----------------------------------
ACCEL VI L.P.
By: Accel VI Associates L.L.C.
Its General Partner
By /s/ X. Xxxxxx Sednaoui
-----------------------------------
Its
-----------------------------------
Page S-2
94
ACCEL INTERNET FUND II, L.P.
By: Accel Internet Fund II Associates
L.L.C.
Its General Partner
By /s/ X. Xxxxxx Sednaoui
-----------------------------------
Its
-----------------------------------
ACCEL KEIRETSU VI L.P.
By: Accel Keiretsu VI Associates L.L.C.
Its General Partner
By /s/ X. Xxxxxx Sednaoui
-----------------------------------
Its
-----------------------------------
ACCEL INVESTORS '98 L.P.
By /s/ X. Xxxxxx Sednaoui
-----------------------------------
Its
-----------------------------------
THE WASHINGTON POST COMPANY
By /s/ Xxxx X. Xxxxx, Xx.
-----------------------------------
Its
-----------------------------------
/s/ Xxxxx Xxxxxxx
----------------------------------------
Xxxxx Xxxxxxx
Page S-3
95
/s/ Xxxxxx Xxxxxxxx
----------------------------------------
Xxxxxx Xxxxxxxx
/s/ Xxxxx Xxxxx
----------------------------------------
Xxxxx Xxxxx
/s/ Xxxxxxx Xxxxxx
----------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxx Xxxxxxx
----------------------------------------
Xxxx Xxxxxxx
/s/ Xxxxx X'Xxxxxxx
----------------------------------------
Xxxxx X'Xxxxxxx
/s/ Kosmo Kallierekos
----------------------------------------
Kosmo Kallierekos
/s/ Xxxxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxxxx X. Xxxxxxx
/s/ Xxx Xxxxx
----------------------------------------
Xxx Xxxxx
Page S-4
96
SECOND AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
This Second Amendment to Agreement and Plan of Merger (this "Amendment")
is made and entered into as of May 12, 1999, by and among Xxxxxx.xxx, Inc., a
Delaware corporation ("Xxxxxx.xxx"), Xxxxxx.xxx Auctions, Inc., a Delaware
corporation and wholly owned subsidiary of Xxxxxx.xxx (the "Purchaser"), e-Niche
Incorporated, a Delaware corporation (the "Company"), and all the stockholders
of the Company (the "Stockholders").
RECITALS
A. Xxxxxx.xxx, the Purchaser, the Company and the Stockholders are all the
parties to the Agreement and Plan of Merger dated as of April 24, 1999 (as
amended pursuant to the First Amendment to Agreement and Plan of Merger dated as
of May 7, 1999, the "Agreement"), pursuant to which the parties have agreed
that, on the terms and subject to the conditions of the Agreement, the Company
shall be merged with and into the Purchaser, with the Purchaser being the
surviving corporation.
B. Xxxxxx.xxx, the Purchaser, the Company and the Stockholders desire to
further amend the Agreement as set forth herein.
C. Unless otherwise defined herein, capitalized terms used herein shall
have the meanings assigned thereto in the Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENT OF AGREEMENT AND PLAN OF MERGER
The parties hereby further modify and amend the Agreement by adding to the
end of the introductory paragraph of Article II of the Agreement the following
sentence:
"For purposes of Sections 2.1 (other than the first sentence
thereof), 2.5, 2.7, 2.9, 2.10, 2.11, 2.12, 2.13, 2.14, 2.16 and 2.17
Page 1
97
of this Article II, references to the "Company" shall refer to the
Company and its subsidiary set forth in Schedule 2.4 to the Company
Disclosure Schedule."
2. EFFECT ON AGREEMENT AND PLAN OF MERGER
Except as specifically amended and modified by this Amendment, the terms
and provisions of the Agreement remain unchanged and in full force and effect.
All references in the Agreement or the other Operative Documents or otherwise to
the Agreement shall hereinafter refer to the Agreement as further amended by
this Amendment.
3. MISCELLANEOUS
(a) This Amendment shall be governed by, and construed in accordance with,
the laws of the State of Delaware applicable to contracts executed in and to be
performed in that state. All actions and proceedings arising out of or relating
to this Amendment shall be heard and determined in any Delaware state or federal
court.
(b) The descriptive headings contained in this Amendment are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Amendment.
(c) This Amendment may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement. To expedite the process of entering into this Amendment,
the parties acknowledge that Transmitted Copies of this Amendment will be
equivalent to original documents until such time as original documents are
completely executed and delivered.
[Remainder of this page intentionally left blank.]
Page 2
98
IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Second Amendment to Agreement and Plan of Merger as of the date and year first
above written.
XXXXXX.XXX, INC.
By /s/ Xxxxx Xxxxxxx
-----------------------------------
Its: Vice President and Treasurer
XXXXXX.XXX AUCTIONS, INC.
By /s/ Xxxxx Xxxxxxx
-----------------------------------
Its: Treasurer
E-NICHE INCORPORATED
By /s/ Xxxx Xxxxxxx
-----------------------------------
Its CEO
-----------------------------------
STOCKHOLDERS:
/s/ Xxxx Xxxxxxx
----------------------------------------
Xxxx Xxxxxxx
/s/ Xxx Xxx
----------------------------------------
Xxx Xxx
99
POLARIS VENTURE PARTNERS II, L.P.
By: Polaris Venture Management Co. II,
L.L.C.
Its General Partner
By /s/ Xxxx Xxxxxx
-----------------------------------
Its
-----------------------------------
POLARIS VENTURE PARTNERS FOUNDERS'
FUND II, L.P.
By: Polaris Venture Management Co. II,
L.L.C.
Its General Partner
By /s/ Xxxx Xxxxxx
-----------------------------------
Its
-----------------------------------
ACCEL VI L.P.
By: Accel VI Associates L.L.C.
Its General Partner
By /s/ X. Xxxxxx Sednaoui
-----------------------------------
Its
-----------------------------------
100
ACCEL INTERNET FUND II, L.P.
By: Accel Internet Fund II Associates
L.L.C.
Its General Partner
By /s/ X. Xxxxxx Sednaoui
-----------------------------------
Its
-----------------------------------
ACCEL KEIRETSU VI L.P.
By: Accel Keiretsu VI Associates L.L.C.
Its General Partner
By /s/ X. Xxxxxx Sednaoui
-----------------------------------
Its
-----------------------------------
ACCEL INVESTORS '98 L.P.
By /s/ X. Xxxxxx Sednaoui
-----------------------------------
Its
-----------------------------------
THE WASHINGTON POST COMPANY
By /s/ Xxxx X. Xxxxx, Xx.
-----------------------------------
Its
-----------------------------------
/s/ Xxxxx Xxxxxxx
----------------------------------------
Xxxxx Xxxxxxx
101
/s/ Xxxxxx Xxxxxxxx
----------------------------------------
Xxxxxx Xxxxxxxx
/s/ Xxxxx Xxxxx
----------------------------------------
Xxxxx Xxxxx
/s/ Xxxxxxx Xxxxxx
----------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxx Xxxxxxx
----------------------------------------
Xxxx Xxxxxxx
/s/ Xxxxx X'Xxxxxxx
----------------------------------------
Xxxxx X'Xxxxxxx
/s/ Kosmo Kallierekos
----------------------------------------
Kosmo Kallierekos
/s/ Xxxxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxxxx X. Xxxxxxx
/s/ Xxx Xxxxx
----------------------------------------
Xxx Xxxxx
