EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF
APRIL 5, 1999
BY AND AMONG
XXXXXXXX.XXX, INC.,
BUCKY ACQUISITION CORP.,
ATTITUDE NETWORK LTD.
AND
CERTAIN STOCKHOLDERS THEREOF
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 5, 1999 (this
"Agreement"), by and among xxxxxxxx.xxx, inc., a Delaware corporation
("theglobe"), Bucky Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of theglobe ("Merger Sub"), Attitude Network Ltd.,
a Delaware corporation (the "Company"), and those stockholders of the
Company that are executing and delivering counterparts hereto
(collectively, the "Sellers"). theglobe, Merger Sub, the Company and the
Sellers are sometimes referred to herein, individually, as a "Party," and
collectively, as the "Parties."
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of theglobe, Merger
Sub and the Company have each determined that the merger of Merger Sub with
and into the Company (the "Merger") upon the terms and subject to the
conditions set forth in this Agreement is fair to and in the best interests
of their respective corporations and stockholders and have approved the
Merger and this Agreement;
WHEREAS, the Boards of Directors of the Company and Merger Sub
have each recommended the adoption of this Agreement and the Merger to
their respective stockholders in accordance with the Delaware General
Corporation Law, as amended (the "DGCL");
WHEREAS, in accordance with the terms of this Agreement, holders
of the common stock, par value $0.001 per share of the Company (the
"Company Common Stock" or "Company Shares") will receive common stock, par
value $0.001 per share of theglobe ("theglobe Common Stock" or "theglobe
Shares"); and
WHEREAS, it is intended that, for federal income tax purposes,
the Merger will qualify as a reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations promulgated thereunder, and it is further intended that
theglobe Common Stock to be issued in the Merger will be issued in a
transaction exempt from registration under the Securities Act of 1933 (the
"Securities Act") and the qualification requirements of any state "blue
sky" laws.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the Parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time (as defined in Section
1.2(b)) and subject to and upon the terms and conditions of this Agreement
and in accordance with the DGCL, Merger Sub shall be merged with and into
the Company and the separate corporate existence of Merger Sub shall cease.
The Company shall continue as the surviving corporation (sometimes referred
to herein as the "Surviving Corporation") in the Merger, and as of the
Effective Time shall be a wholly-owned subsidiary of theglobe and shall
continue to be governed by the laws of the State of Delaware. The Merger
shall have the effects specified in the DGCL.
Section 1.2 The Closing; Effective Time. (a) The closing of the Merger
(the "Closing") shall take place (i) at the offices of Fried, Frank,
Harris, Xxxxxxx & Xxxxxxxx, Xxx Xxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000,
at 10:00 A.M. local time, on the second business day following the date on
which the last to be satisfied or waived of the conditions set forth in
Article VI (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or, where
permitted, waiver of those conditions) shall be satisfied or waived in
accordance with this Agreement or (ii) at such other place, time and/or
date as theglobe and the Company shall agree (the date of the Closing, the
"Closing Date"); provided, however, that the Parties shall use their
reasonable best efforts to cause the Closing Date to occur on or before
April 6, 1999.
(b) On the Closing Date, theglobe, the Company and Merger
Sub shall cause a certificate of merger (the "Certificate of Merger") in
respect of the Merger to be properly executed and filed with the Secretary
of State of the State of Delaware. The Merger shall become effective at
such time at which the Certificate of Merger shall have been duly filed
with the Secretary of State of the State of Delaware or at such later time
reflected in the Certificate of Merger as shall have been agreed by
theglobe and the Company in accordance with the DGCL (the time that the
Merger becomes effective, the "Effective Time").
Section 1.3 Subsequent Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or
things are necessary or desirable to continue, vest, perfect or confirm of
record the Surviving Corporation's right, title or interest in, to or under
any of the rights, properties, privileges, franchises or assets of either
of the constituent corporations of the Merger, or otherwise to carry out
the intent of this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of either of the constituent corporations of the Merger, all such
deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each such constituent corporation or otherwise, all
such other actions and things as may be necessary or desirable to continue,
vest, perfect or confirm of record any and all right, title and interest
in, to and under such rights, properties, privileges, franchises or assets
in the Surviving Corporation or otherwise to carry out the intent of this
Agreement.
Section 1.4 Certificate of Incorporation; Bylaws; Directors and
Officers of the Surviving Corporation. Unless otherwise agreed by theglobe
and the Company prior to the Closing, at the Effective Time:
(a) The certificate of incorporation of the Surviving
Corporation shall be amended to read in its entirety as set forth in
Exhibit 1.4(a);
(b) The bylaws of Merger Sub as in effect immediately prior
to the Effective Time shall be the bylaws of the Surviving Corporation
until thereafter amended in accordance with applicable Law (as defined in
Section 3.6(a)) and the certificate of incorporation of the Surviving
Corporation;
(c) The officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation until
their successors are elected or appointed and qualified or until their
resignation or removal; and
(d) The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until
their successors are elected or appointed and qualified or until their
resignation or removal.
ARTICLE II
MERGER CONSIDERATION
Section 2.1 Treatment of Capital Stock. The manner and basis of
converting the shares of Company Common Stock and shares of common stock of
Merger Sub, by virtue of the Merger and without any action on the part of
any Person thereof, shall be as set forth in this Article II.
Section 2.2 Conversion of Company Common Stock. (a) At the Effective
Time, by virtue of the Merger and without any action on the part of any
Person, each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (collectively, the "Outstanding
Shares") other than those held in the treasury of the Company ("Excluded
Shares") and any Dissenting Shares (as defined in Section 2.7) and all
rights in respect thereof, shall forthwith cease to exist and be converted
into the right to receive the Merger Consideration Per Share (as defined in
Section 2.5(a)), subject to the provisions of Section 8.4.
(b) Except as otherwise provided in this Agreement,
commencing immediately after the Effective Time, each certificate which,
immediately prior to the Effective Time, represented issued and outstanding
shares of Company Common Stock shall evidence the right to receive shares
of theglobe Common Stock on the basis set forth in this Agreement.
Section 2.3 Cancellation of Excluded Shares. At the Effective Time,
each Excluded Share, by virtue of the Merger and without any action on the
part of any Person, shall be canceled and retired, and no shares of stock
or other securities of theglobe or the Surviving Corporation shall be
issuable, and no payment or other consideration shall be made or paid in
respect of such Excluded Shares.
Section 2.4 Conversion of Common Stock of Merger Sub. At the Effective
Time, by virtue of the Merger and without any action on the part of any
Person, each share of common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time, and all rights in respect thereof,
shall forthwith cease to exist and be converted into one validly issued,
fully paid and nonassessable share of common stock of the Surviving
Corporation.
Section 2.5 Merger Consideration. (a) The "Merger Consideration Per
Share" shall be the fraction of one share of theglobe Common Stock equal to
the quotient of (x) the Aggregate Consideration divided by (y) the Fully
Diluted Company Shares (each as defined in Section 2.5(b)).
(b) For purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Aggregate Consideration" shall mean the number of
shares of theglobe Common Stock equal to the quotient of (x) divided
by (y), where (x) equals (A) the sum of (1) $43,000,000 plus (2) the
Aggregate Exercise Price less (B) the sum of (1) the Non-Permitted
Indebtedness Amount plus (2) the Invoiced Transaction Costs plus (3)
the Bonus Amounts (such amount calculated pursuant to this clause (x),
the "Aggregate Dollar Consideration"), and (y) equals the Reference
Share Price.
(ii) "Aggregate Exercise Price" shall mean the
aggregate exercise price of all Options (as defined in Section
2.8(a)), Warrants (as defined in Section 2.8(b)) and other securities
convertible into or exchangeable for Company Common Stock (including
the Demand Notes (as defined in Section 2.5(b)(v))) (collectively,
"Convertible Securities") outstanding immediately prior to the
Effective Time (which shall not include Convertible Securities being
exercised in connection with the Merger) other than any such
Convertible Securities with a per share exercise price that is greater
than the Reference Share Price. For purposes of calculating the
exercise price of the Demand Notes, the Demand Notes shall be deemed
to have an exercise price of $0.
(iii) "Bonus Amounts" shall mean the aggregate amount
of all obligations of the Company and the Subsidiary (as defined in
Section 3.4(a)) incurred in connection with bonuses and other
compensation arrangements arising out of the transactions contemplated
by this Agreement (other than amounts arising out of the employment
agreements referenced in Section 6.1(h) or any acceleration of the
vesting of any Options).
(iv) "Fully Diluted Company Shares" shall mean the sum
of (1) the number of shares of Company Common Stock outstanding
immediately prior to the Effective Time (which shall include for this
purpose any shares issued upon exercise of any Convertible Securities
in connection with the Merger) plus (2) the number of shares of
Company Common Stock issuable upon the exercise of any Convertible
Securities with a per share exercise price less than the Reference
Share Price outstanding immediately prior to the Effective Time and
not being exercised in connection with the Merger. For purposes of
calculating the Fully Diluted Company Shares, the Demand Notes shall
be deemed to be convertible into a number of shares of Company Common
Stock based on the proportion that the total amount of Indebtedness
under the Demand Notes outstanding immediately prior to the Effective
Time bears to the Aggregate Dollar Consideration (such number of
shares, the "Demand Note Company Shares").
(v) "Indebtedness" shall mean, without duplication, the
outstanding principal amount of, and all interest, penalties, premiums
and other amounts accrued in respect of, (1) all indebtedness for
borrowed money of the Company or the Subsidiary, whether or not
recourse to the Company or the Subsidiary, (2) every obligation of the
Company or the Subsidiary evidenced by bonds, debentures, notes or
other similar instruments, including, without limitation, the Demand
Promissory Notes listed on Exhibit 2.5(b)(v) hereto (the "Demand
Notes") and amounts owing pursuant to the Conveyance Agreement (as
defined in Section 2.5(b)(viii)), (3) every reimbursement obligation
of the Company or the Subsidiary with respect to letters of credit
(including standby letters of credit only to the extent drawn upon),
bankers' acceptances or similar facilities issued for the account of
the Company or the Subsidiary, (4) every obligation of the Company or
the Subsidiary issued or assumed as the deferred purchase price of
property or services (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business), (5) every
capital lease obligation of the Company or the Subsidiary, and (6)
every obligation of the type referred to in clauses (1) through (5) of
another Person and all dividends of another Person the payment of
which, in either case, the Company or the Subsidiary has guaranteed or
for which the Company or the Subsidiary is responsible or liable,
directly or indirectly, jointly or severally, as obligor, guarantor or
otherwise.
(vi) "Non-Permitted Indebtedness Amount" shall mean the
aggregate amount of Indebtedness as of the close of business on the
day immediately preceding the Closing Date, excluding all amounts
owing pursuant to the Conveyance Agreement, dated as of August 1,
1996, between Accursed Toys, Inc. and the Company (the "Conveyance
Agreement") to the extent the unpaid amounts under such Conveyance
Agreement are less than or equal to $5,079,737.90, and excluding all
amounts owing pursuant to the Demand Notes.
(vii) "Reference Share Price" shall mean the average
closing price of theglobe Common Stock on the NASDAQ National Market
for the fifteen trading days immediately preceding the date of this
Agreement.
(viii) "Transaction Costs" shall mean all fees and
expenses of financial, legal, accounting and other advisors retained
by the Company or the Subsidiary and all other out-of-pocket costs of
the Company or the Subsidiary incurred prior to or at the Effective
Time in connection with the transactions contemplated hereby; and
"Invoiced Transaction Costs" shall mean any Transaction Costs with
respect to which the Company or the Subsidiary has received a written
invoice prior to the Closing Date. The Sellers and the Company agree
that the Invoiced Transaction Costs shall not exceed $250,000 in the
aggregate.
(c) theglobe shall issue to each holder (a "Stockholder") of
a stock certificate which immediately prior to the Effective Time
represented Outstanding Shares other than Excluded Shares or Dissenting
Shares (a "Certificate"), the number of shares of theglobe Common Stock
equal to the number of shares of Company Common Stock represented by such
Certificate multiplied by the Merger Consideration Per Share upon receipt
by theglobe of the Certificate and a completed and duly executed letter of
transmittal in the form of Exhibit 2.5(c)(i) (a "Letter of Transmittal");
provided, that the number of shares issued and delivered to a Seller shall
be reduced by the number of Escrowed Shares allocable to such Seller.
Within 15 days following the Closing Date, the Company shall mail a Letter
of Transmittal to all holders of certificates representing Company Common
Stock together with the notice of action of Stockholders by written consent
in accordance with Section 228 of the DGCL. Each Seller has delivered an
executed Accredited Investor Questionnaire in the form of Exhibit
2.5(c)(ii) on or prior to the date hereof.
(d) The Company and the Sellers shall deliver to theglobe no
later than the close of business on the business day immediately preceding
the Closing Date a certificate (the "Closing Certificate") setting forth
(i) the Aggregate Consideration, (ii) the Merger Consideration Per Share,
(iii) the number of Outstanding Shares, (iv) the total number of shares of
Company Common Stock issuable upon the exercise of any Convertible
Securities and the per share exercise price of each such Convertible
Security, (v) the Aggregate Exercise Price, (vi) the Non-Permitted
Indebtedness Amount, (vii) the Bonus Amounts, (viii) the number of Demand
Note Company Shares and (ix) the Invoiced Transaction Costs, in each case
together with reasonable backup thereto.
Section 2.6 Cash in Lieu of Fractional Shares. Notwithstanding
anything in this Agreement to the contrary, no certificates or scrip
evidencing fractional shares of theglobe Common Stock shall be issued upon
the surrender for exchange of Certificates, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
stockholder of theglobe. In lieu of any such fractional shares, each holder
of Company Shares upon surrender of a Certificate for exchange pursuant to
this Article II shall be paid an amount in cash (without interest), rounded
to the nearest cent, determined by multiplying (x) the Reference Share
Price by (y) the fractional interest to which such holder would otherwise
be entitled (after taking into account all Certificates held by such
holder). Any payment received by a holder of Company Shares with respect to
fractional share interests is merely intended to provide a mechanical
rounding off of, and is not separately bargained for, consideration.
Section 2.7 Dissenter's Rights. Notwithstanding any provision of this
Agreement to the contrary, any shares of Company Common Stock that are
issued and outstanding immediately prior to the Effective Time and which
are held by a holder who has not voted such shares in favor of the Merger
nor consented thereto in writing and who shall have delivered a written
demand for appraisal of such shares in the manner provided by the DGCL and
who, as of the Effective Time, shall not have effectively withdrawn or lost
such right to appraisal ("Dissenting Shares") shall be entitled to such
rights (but only such rights) as are granted by Section 262 of the DGCL.
Each holder of Dissenting Shares who becomes entitled to payment for such
Dissenting Shares pursuant to Section 262 of the DGCL shall receive payment
therefor from the Surviving Corporation in accordance with the DGCL;
provided, however, that (i) if any such holder of Dissenting Shares shall
have failed to establish his entitlement to appraisal rights as provided in
Section 262 of the DGCL, (ii) if any such holder of Dissenting Shares shall
have effectively withdrawn his demand for appraisal of such shares or lost
his right to appraisal and payment for his Shares under Section 262 of DGCL
or (iii) if neither any holder of Dissenting Shares nor the Surviving
Corporation shall have filed a petition demanding a determination of the
value of all Dissenting Shares within the time provided in Section 262 of
the DGCL, such holder shall forfeit the right to appraisal of such
Dissenting Shares and each such Dissenting Share shall be converted and
exchanged in accordance with Section 2.2. The Company shall give theglobe
(i) prompt notice of any written demands for appraisal of any shares of
Company Common Stock, withdrawals of such demands, and any other
instruments served pursuant to the DGCL and received by the Company which
relate to any such demand for appraisal; and (ii) the opportunity to
participate in all negotiations and proceedings which take place prior to
the Effective Time with respect to any demands for appraisal. The Company
shall not, except with the prior written consent of theglobe, voluntarily
make any payment with respect to any demands for appraisal of Company
Common Stock or offer to settle or settle any such demands.
Section 2.8 Option and Warrant Rollovers. (a) Each option, whether
vested or not vested, exercisable for shares of Company Common Stock (an
"Option") outstanding at the Effective Time shall, at the Effective Time,
be assumed by theglobe and shall thereafter constitute an option to
acquire, on the same terms and conditions as were applicable under such
assumed Option immediately prior to the Effective Time, a number of shares
of theglobe Common Stock equal to the product of the Merger Consideration
Per Share multiplied by the number of shares of Company Common Stock
subject to such Option immediately prior to the Effective Time, with an
exercise price per share of theglobe Common Stock (rounded up to the
nearest $.001) equal to the aggregate exercise price for the shares of
Company Common Stock subject to such Option immediately prior to the
Effective Time divided by the number of full shares of theglobe Common
Stock purchasable pursuant to such Option immediately following the
Effective Time; provided, however, that the number of shares of theglobe
Common Stock that may be purchased upon exercise of such Option shall not
include any fractional shares and, upon the last such exercise of such
Option, theglobe shall pay to the holder thereof an amount of cash equal to
such fraction multiplied by the Reference Share Price. theglobe shall
assume the obligations of the Company under the Company's 1996 Stock Option
Plan and shall comply with the terms thereof.
(b) Each warrant, whether vested or not vested, exercisable
for shares of Company Common Stock (a "Warrant") outstanding at the
Effective Time shall, at the Effective Time, be assumed by theglobe and
shall thereafter constitute a warrant to acquire, on the same terms and
conditions as were applicable under such assumed Warrant immediately prior
to the Effective Time, a number of shares of theglobe Common Stock equal to
the product of the Merger Consideration Per Share multiplied by the number
of shares of Company Common Stock subject to such Warrant immediately prior
to the Effective Time, with an exercise price per share (rounded up to the
nearest $.001) equal to the aggregate exercise price for the shares of
Company Common Stock subject to such Warrant immediately prior to the
Effective Time divided by the number of full shares of theglobe Common
Stock purchasable pursuant to such Warrant immediately following the
Effective Time; provided, however, that the number of shares of theglobe
Common Stock that may be purchased upon exercise of such Warrant shall not
include any fractional shares and, upon the last such exercise of such
Warrant, theglobe shall pay to the holder thereof an amount of cash equal
to such fraction multiplied by the Reference Share Price.
Section 2.9 Closing of Transfer Books. From and after the Effective
Time, the stock transfer books of the Company shall be closed and no
transfer of Company Common Stock shall thereafter be made.
Section 2.10 Restructuring. Notwithstanding anything in this Agreement
to the contrary, theglobe may, in its sole discretion, restructure the
Merger so as to substitute theglobe or any wholly-owned subsidiary of
theglobe for Merger Sub as one of the constituent corporations in the
Merger and so that the Company shall merge with theglobe or such other
wholly-owned subsidiary, with theglobe, the Company or such other
wholly-owned subsidiary continuing as the surviving corporation in the
Merger; provided, however, that no such change shall change the amount or
kind of consideration to be issued to holders of shares of Company Common
Stock as provided for in this Agreement. In the event of such
restructuring, the Parties shall promptly enter into any amendment to this
Agreement necessary or desirable to provide for such restructuring and in
connection therewith the Company and the Sellers shall reasonably cooperate
with theglobe by providing such customary representations as shall be
requested by theglobe supporting the qualification of such restructuring as
a reorganization under Section 368 of the Code.
Section 2.11 Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to theglobe Common Stock with a record date after
the Effective Time will be paid to the holder of any unsurrendered
Certificate with respect to the shares of theglobe Common Stock represented
thereby until the holder of record of such Certificate shall surrender such
Certificate. Subject to applicable Law, following surrender of any such
Certificate, there shall be paid to the record holder of the Certificates
representing whole shares of theglobe Common Stock issued in exchange
therefor, without interest, at the time of such surrender, the amount of
any such dividends or other distributions with a record date after the
Effective Time payable with respect to such whole shares of theglobe Common
Stock.
Section 2.12 Transfers of Ownership. If any certificate for shares of
theglobe Common Stock is to be issued in a name other than that in which
the Certificate surrendered in exchange therefor is registered, it will be
a condition of the issuance thereof that the Certificate so surrendered
will be properly endorsed and otherwise in proper form for transfer and
that the Person (as defined in Section 9.3(a)) requesting such exchange
will have paid to theglobe or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares
of theglobe Common Stock in any name other than that of the registered
holder of the Certificate surrendered or established to the satisfaction of
theglobe or any agent designated by it that such tax has been paid or is
not payable.
Section 2.13 No Liability. Notwithstanding anything to the contrary in
this Agreement, none of theglobe, the Surviving Corporation or any other
Party shall be liable to a holder of shares of theglobe Common Stock or
Company Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Section 2.14 Lost, Stolen or Destroyed Certificates. In the event any
Certificates evidencing shares of Company Common Stock shall have been
lost, stolen or destroyed, theglobe shall issue in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that
fact by the holder thereof, the appropriate number of shares of theglobe
Common Stock and the appropriate amount of cash in lieu of fractional
shares, if any, as may be required pursuant to Section 2.6; provided, that
theglobe may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to indemnify theglobe (including through the posting of a
bond) against any loss or cost incurred by or claim that may be made
against theglobe or the Surviving Corporation with respect to the
Certificates alleged to have been lost, stolen or destroyed.
Section 2.15 Restricted Securities. The shares of theglobe Common
Stock issued in connection with the Merger will be "restricted securities"
under the Securities Act and Rule 144 promulgated thereunder and may only
be sold or otherwise transferred pursuant to an effective registration
statement under the Securities Act or an exemption from the registration
requirements of the Securities Act. It is understood that the certificates
evidencing the shares of theglobe Common Stock issued in connection with
the Merger will bear one or both of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in
effect with respect to the securities under such Act or an opinion of
counsel satisfactory to the Company that such registration is not required
or unless sold pursuant to Rule 144 of such Act."
(b) Any legend required by applicable state Law.
(c) Any legend required by Regulation S promulgated under
the Securities Act ("Regulation S").
Section 2.16 Registration Rights. Holders of theglobe Common Stock
issued pursuant to this Agreement (including Persons to whom shares of
theglobe Common Stock may be issuable pursuant to Section 2.8(b) upon the
exercise of Warrants and pursuant to Section 5.17 upon conversion of the
Demand Notes) shall, as of the Effective Time, be entitled to certain
registration rights with respect to such shares as provided in the
Registration Rights Agreement to be executed and delivered by theglobe at
the Closing (the "Registration Rights Agreement") the form of which is set
forth in Exhibit 2.16 hereto, upon execution of the Registration Rights
Agreement by such holders.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SELLERS
The Company and each of the Sellers each hereby jointly and
severally represents and warrants to theglobe and Merger Sub as of the date
of this Agreement and as of the Closing Date as follows:
Section 3.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to carry on
its business as it is now being conducted. The Company is duly qualified
and licensed as a foreign corporation to do business, and is in good
standing (and has paid all relevant franchise or analogous taxes), in each
jurisdiction where the character of its assets owned or held under lease or
the nature of its business makes such qualification necessary, except where
the failure to be so qualified and in good standing would not, individually
or in the aggregate, be material. The minute books (containing the records
of meetings of stockholders, the Board of Directors, and any committees of
the Board of Directors), the stock record and certificate books of the
Company contain true, complete and accurate records of all corporate
actions taken at any such meetings and other corporate governance matters,
the stock ownership of the Company and the transfer of the shares of its
capital stock since the date of inception of the Company. Schedule 3.1
lists each of the directors and officers of the Company.
Section 3.2 Authority. Each of the Sellers and the Company has the
requisite right, power and authority (and, in the case of the Sellers that
are natural persons, legal capacity) to enter into this Agreement and any
Ancillary Documents to which it is a party and to carry out its obligations
hereunder and thereunder. This Agreement has been, and each of the
Ancillary Documents to which it is a party has been or will be, duly and
validly executed and delivered by each of the Sellers and the Company and
constitutes, and each of the Ancillary Documents to which it is a party
constitutes, or will upon execution and delivery constitute, a valid and
binding obligation of such Person, enforceable against such Person in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws
affecting creditors rights generally or by general principles of equity.
All proceedings or other actions on the part of the Company and each Seller
necessary to authorize this Agreement or any of the Ancillary Documents to
which it is a party and the transactions contemplated hereby or thereby
have been taken. Each Seller is an "accredited" investor as defined in Rule
501 of the rules and regulations promulgated under the Securities Act.
Section 3.3 Capitalization; Title to Shares. The authorized capital
stock of the Company consists of 20,000,000 shares of Company Common Stock,
of which 13,114,457 shares are issued and outstanding, and 5,000 shares of
Preferred Stock, of which no shares are issued and outstanding. The full
name and address of each Stockholder, and the number of shares of Company
Common Stock owned by such Stockholder, is set forth on Schedule 3.3. All
the issued and outstanding shares of Company Common Stock are validly
issued, fully paid and nonassessable and those shares of Company Common
Stock held by the Sellers are owned free and clear of any lien, pledge,
charge, assessment, security interest, mortgage, claim, option, easement,
imperfection of title, tenancy or other legal or equitable right of others,
or other encumbrance of any character whatsoever (including, without
limitation, right of first refusal) (each an "Encumbrance"). Except as set
forth on Schedule 3.3, there are no shares of capital stock of the Company
authorized, issued or outstanding, and there are no outstanding Options,
Warrants, or other Convertible Securities, subscriptions, rights
(including, without limitation, preemptive rights), stock-based or
stock-related awards or other contracts, agreements or arrangements (or
Commitments (as defined in Section 3.8(a)) with respect to issuance or
grant of any of the foregoing) to which the Company or any of the Sellers
is a party or by which the Company or any of the Sellers may be bound of
any character relating, or obligating the Company or the Sellers, to issue,
grant, award, transfer or sell, or based on the value of, any issued or
unissued shares of Company's capital stock or other securities of the
Company. Except as set forth on Schedule 3.3, there are no voting trusts,
proxies or other agreements or understandings to which the Company or any
of the Sellers is a party with respect to the voting of capital stock of
the Company. Each Stockholder that is an officer or director of the Company
or of the Subsidiary, and each Stockholder that holds 10% or more of the
issued and outstanding shares of Company Common Stock as of the date hereof
or as of the Closing Date, is a Seller.
Section 3.4 Subsidiaries. (a) The Company does not own, directly or
indirectly, any equity or other ownership interest in any Person other than
Kaleidoscope Networks Limited, a company registered in England and Wales
#30573775 (the "Subsidiary"). Except as set forth on Schedule 3.4(a),
neither the Company nor the Subsidiary is a party to any Commitment to
purchase or provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any Person.
(b) The authorized capital stock of the Subsidiary consists
of 1,000 shares of common stock, one pound sterling per share, of the
Subsidiary, of which 200 shares are issued and outstanding. All such issued
and outstanding shares are owned by the Company and are duly authorized and
validly issued and are fully paid or credited as fully paid, free and clear
of all Encumbrances. There are no outstanding options, warrants, or other
convertible or exchangeable securities, subscriptions, rights (including,
without limitation, preemptive rights), stock-based or stock-related awards
or other contracts, agreements or arrangements (or Commitments with respect
to issuance of any of the foregoing) to which the Subsidiary is a party or
by which the Subsidiary may be bound of any character relating, or
obligating the Subsidiary, to issue, grant, award, transfer or sell, or
based on the value of, any issued or unissued shares of the Subsidiary's
capital stock.
(c) The Subsidiary is duly organized, validly existing and
in good standing under the laws of England and Wales and has the requisite
corporate power and authority to carry on its business as it is now being
conducted. The Subsidiary is duly qualified and licensed as a foreign
corporation to do business, and is in good standing (and has paid all
relevant franchise or analogous taxes), in each jurisdiction where the
character of its assets owned or held under lease or the nature of its
business makes such qualification necessary, except where the failure to be
so qualified and in good standing would not, individually or in the
aggregate, be material.
Section 3.5 Financial Statements. (a) Schedule 3.5 sets forth (1) the
unaudited consolidated balance sheet of the Company and the Subsidiary as
of December 31, 1998 (the "1998 Balance Sheet"), and the related
consolidated statement of operations, of changes in stockholders' equity
(deficit) and of cash flows for the 12-month period then ended, including
the notes thereto, and (2) the audited consolidated balance sheets of the
Company and the Subsidiary as of December 31, 1997 and December 31, 1996
and the related consolidated statements of operations, of changes in
stockholders' equity (deficit) and of cash flows for the 12-month periods
then ended, including the notes thereto (the financial statements referred
to in clauses (1) and (2) collectively, the "Financial Statements"). The
Financial Statements as of and for the period ended December 31, 1998 are
referred to herein as the "1998 Financial Statements." The Financial
Statements (i) are in accordance with the books and records of the Company
and the Subsidiary, (ii) fairly present the financial position, results of
operations and cash flows of the Company and the Subsidiary taken as a
whole in all material respects as of the respective dates and for the
respective periods referred to therein and (iii) were prepared in
accordance with generally accepted United States accounting principles
("GAAP"), in effect on the date hereof, applied on a basis consistent with
that of prior years or periods. The books of account and other financial
and corporate records of the Company and the Subsidiary are complete and
correct in all material respects.
(b) All of the Company's and the Subsidiary's inventory
reflected on the 1998 Balance Sheet (the "Inventory") is (or was prior to
the sale thereof) substantially suitable, usable, or (in the case of work
in process and finished goods) salable at market prices in the ordinary
course of business and have been valued at the lower of cost (on a FIFO
basis) or market, in accordance with GAAP. The quantity of the Company's
and the Subsidiary's Inventory on hand at the Closing Date will be at
levels substantially consistent with the requirements of then outstanding
sales Commitments or current sales projections of the Company and the
Subsidiary.
(c) All accounts and notes receivable reflected on the 1998
Balance Sheet and those accounts and notes receivable of the Company and
the Subsidiary acquired or created after the date of the 1998 Balance Sheet
through the Closing Date (collectively, the "Receivables"), (i) were, are
and shall be bona fide accounts receivable created in the ordinary and
usual course of business in connection with bona fide transactions and
consistent with past practice and (ii) have been collected in full or will
be collectible at their face amounts, except to the extent of the allowance
for doubtful accounts reflected on the 1998 Balance Sheet.
Section 3.6 Compliance with Laws; Permits. (a) Except as set forth on
Schedule 3.6(a), each of the Company and the Subsidiary has complied at all
times since inception and presently is in compliance with all foreign and
domestic (federal, state and local) laws, statutes, ordinances, rules,
regulations and bodies of law, including, without limitation, Environmental
Laws (as defined in Section 3.6(b)(ii)) (collectively, "Laws") and Orders
(as defined in Section 3.7(a)) in all material respects. Except as set
forth on Schedule 3.6(a), since the earlier of the Company's inception and
the Subsidiary's inception, none of the Company, the Subsidiary nor any
Seller is aware of, nor have any of them received, any notice of any
alleged material failure to comply with any Law. A complete and correct
list of each material license, permit, consent, registration, certificate,
franchise, approval, order or other authorization of any Governmental
Entity (as defined in Section 3.7 (a)) (each, a "Permit") held by the
Company or the Subsidiary is set forth on Schedule 3.6(a). Except as set
forth on Schedule 3.6(a), the Company and the Subsidiary have all Permits
required for the conduct of its business. All of the Company's and the
Subsidiary's Permits are valid and in full force and effect, and the
Company and the Subsidiary have duly performed and are in compliance with
all of their obligations under such Permits. No event (including without
limitation the execution, delivery and performance of this Agreement and
the consummation of the Merger) has occurred with respect to such Permits
which allows, or after notice or lapse of time or both would allow, the
suspension, limitation, revocation, non-renewal or termination thereof or
would result in any other material impairment of the rights of the Company
in and under any of such Permits, and no terminations thereof or
proceedings to suspend, limit, revoke or terminate any Permit have been
threatened.
(b) (i) None of the Company, the Subsidiary or any Seller
has received any notices, directives, violation reports, actions or claims
or other communications from or by any foreign, federal, state or local
governmental agency or any other Person concerning the Company or the
Subsidiary or any of their predecessors and any Environmental Laws (as
defined in Section 3.6(b)(ii)), including, without limitation, requests to
perform any investigatory or remedial activity, or alleging that, in
connection with Hazardous Materials (as defined in Section 3.6(b)(ii)),
conditions at any real properties owned or leased by the Company or the
Subsidiary or their predecessors have resulted in or caused or threatened
to result in or cause injury or death to any Person or damage to any
property, including, without limitation, damage to natural resources, and,
to the knowledge of the Company and the Sellers, no such notices,
directives, violation reports, actions, claims, assessments or allegations
exist; (ii) neither the Company nor the Subsidiary currently leases,
operates or owns any real properties that are listed or, to the knowledge
of the Company or any Seller, are threatened to be listed on a "Superfund"
list or with respect to which there is any pending proceeding or
investigation under any Environmental Law and, to the knowledge of the
Company and the Sellers, no such proceeding or investigation is threatened;
(iii) throughout the period of operation of any real properties by the
Company and the Subsidiary, the Company and the Subsidiary have operated
and continue to operate such real properties in material compliance with
all Environmental Laws; (iv) to the knowledge of the Company and the
Sellers, no underground or above-ground storage tanks either are, or have
been, located at, on, under, about, or within any of such real properties;
(v) there has been no spill, discharge, release, contamination or cleanup
by the Company or the Subsidiary of any Hazardous Materials used,
generated, treated, stored, disposed of or handled by the Company or the
Subsidiary at such real properties in a manner which would give rise to any
Liability under any Environmental Laws and, to the knowledge of the Company
and the Sellers, no spill, discharge or release or contamination or cleanup
by the Company or the Subsidiary of any Hazardous Materials has occurred on
or to such real properties by any third party in a manner which would give
rise to any Liability under any Environmental Laws; (vi) neither the
Company nor the Subsidiary have used, generated, treated, stored, disposed
of, handled, transported or released any Hazardous Material in a manner
which would give rise to any Liability under any Environmental Laws; (vii)
to the knowledge of the Company and the Sellers, there are no facts,
events, or conditions (including, without limitation, the generation,
treatment, transport, storage, emission, disposal, release or other
placement, deposit or location of any substance) which interfere with or
prevent continued compliance by the Company and the Subsidiary with, or
give rise to any present or potential Liability (including with respect to
past activities) under, any Environmental Laws; and (viii) the Company and
the Subsidiary have obtained, are in compliance with, and have made all
appropriate filings for issuance or renewal of, all applicable Permits
which are required to be obtained under all applicable Environmental Laws,
including, without limitation, those regulating emissions, discharges, or
releases of Hazardous Materials, and all such Permits are in full force and
effect.
(ii) For the purposes of this Agreement, the term
"Environmental Laws" shall mean, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. xx.xx.
9601 et seq., the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. xx.xx. 11001 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. xx.xx. 6901 et seq., the Toxic Substances Control
Act, 15 U.S.C. xx.xx. 2601 et seq., the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. xx.xx. 136 et seq., the Clean Air Act, 42 U.S.C.
xx.xx. 7401 et seq., the Clean Water Act (Federal Water Pollution Control
Act), 33 U.S.C. xx.xx. 1251 et seq., the Safe Drinking Water Act, 42 U.S.C.
xx.xx. 300f et seq., the Occupational Safety and Health Act, 29 U.S.C.
xx.xx. 641, et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
xx.xx. 1801, et seq., as any of the above statutes have been or may be
amended from time to time, all rules and regulations promulgated pursuant
to any of the above statutes, and any other foreign, federal, state or
local law, statute, ordinance, rule or regulation governing Environmental
Matters, as the same have been or may be amended from time to time,
including any common law cause of action (including, without limitation,
nuisance and trespass causes of action) providing any right or remedy
relating to Environmental Matters, all indemnity agreements and other
contractual obligations (including without limitation leases, asset
purchase agreements and merger agreements) relating to Environmental
Matters, and all applicable judicial and administrative decisions and
Orders relating to Environmental Matters; the term "Hazardous Materials"
shall mean any pollutants, contaminants, substances, materials, wastes,
constituents, compounds, chemicals, natural or man-made elements or forces
(including, without limitation, petroleum or any by-products or fractions
thereof, any form of natural gas, lead, asbestos or asbestos-containing
materials, building construction materials and debris, polychlorinated
biphenyls ("PCBs") or PCB-containing equipment, radon and other radioactive
elements, electromagnetic field and other types of radiation, sonic forces,
infectious, carcinogenic, mutagenic, or etiologic agents, pesticides,
defoliants, explosives, flammables, corrosives and urea formaldehyde foam
insulation) that are regulated by, or may now or in the future form the
basis of Liability under, any Environmental Laws; and the term
"Environmental Matters" shall mean any matter arising out of, relating to,
or resulting from pollution, contamination, protection of the environment,
human health or safety, or health or safety of employees, and any matter
relating to emissions, discharges, disseminations, releases or threatened
releases of Hazardous Materials into the air (indoor or outdoor), surface
water, groundwater, soil, buildings, facilities, real or personal property
or fixtures, or otherwise arising out of, relating to, or resulting from
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, handling, release or threatened release of Hazardous
Materials.
Section 3.7 Consents; No Violations. (a) Except as set forth on
Schedule 3.7(a), neither the execution, delivery or performance of this
Agreement or the Ancillary Documents by the Company or the Sellers nor the
consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a breach or a violation of, any provision of
the Certificate of Incorporation, as amended, or the Amended and Restated
By-laws or the other organizational documents of the Company or the
Memorandum and Articles of Association or other organizational documents of
the Subsidiary; (ii) constitute, with or without notice or the passage of
time or both, a breach, violation or default, create an Encumbrance, or
give rise to any right of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration, under (x)
any Law, (y) any judgment, order, injunction, ruling, decree, stipulation
or award of any Governmental Entity or private arbitration panel (each, an
"Order") to which the Company, the Subsidiary or any Seller is subject or
by which the Company, the Subsidiary or any Seller or any of their
respective properties is bound or (z) any Permit or Commitment of any
Seller, the Subsidiary or the Company, or to which they or any of them or
any of their, his or its properties is subject; (iii) require any consent,
approval or authorization of, notification to, filing with, or exemption or
waiver by, any governmental or regulatory authority, agency, court,
commission, body or other governmental entity (each, a "Governmental
Entity") or third party; or (iv) create any Encumbrance upon any of the
assets or properties of the Company or the Subsidiary.
(b) The Company is its own "ultimate parent entity" as
defined in the rules promulgated by the Federal Trade Commission to
implement the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act Rules"), and the Company does not (together with all
entities it controls as determined in accordance with the HSR Act Rules
(including, without limitation, the Subsidiary)) have annual net sales or
total assets equal to or greater than $10,000,000, as calculated in
accordance with the HSR Act Rules.
Section 3.8 Commitments. (a) Schedule 3.8(a) sets forth a true and
complete list of contracts, agreements, understandings, arrangements or
commitments of any nature whatsoever, whether written or oral, including
all amendments thereof and supplements thereto ("Commitments") of the
following types to which (i) the Company or the Subsidiary is a party or
(ii) any Seller is a party in connection with the business or operations of
the Company or the Subsidiary, or, in either case, by or to which the
Company or the Subsidiary or any of their properties may be bound or
subject:
(i) Commitments for the sale of any real or personal
(tangible or intangible) properties other than in the ordinary course
of business, or for the grant of any option or preferential rights to
purchase any such properties;
(ii) Commitments for the construction, modification or
repair of any building, structure or facility or for the incurrence of
any capital expenditures or for the acquisition of fixed assets,
providing for payments in excess of $10,000 in the aggregate;
(iii) Commitments relating to the acquisition by the
Company or the Subsidiary of any operating business or the capital
stock of any other Person that has not been consummated or that has
been consummated but contains representations, covenants, guaranties,
indemnities or other obligations that remain in effect;
(iv) Commitments relating to any Litigation (as defined
in Section 3.15);
(v) Commitments relating to the lending or borrowing of
money, including loan agreements, guarantees of any debt, obligation
or other Liability of any Person, performance bonds, letters of
credit, bankers acceptances and similar instruments or arrangements,
and Commitments otherwise relating to Indebtedness;
(vi) Commitments under which the Company or the
Subsidiary agrees to indemnify any Person;
(vii) Commitments containing covenants of the Company
or the Subsidiary or any successor thereto or any Employee (as defined
in Section 3.20(k)(ii)) not to compete, do business in any line of
business or in any geographical area or with any Person, or to
disclose certain information, or covenants of any other Person not to
compete with the Company or the Subsidiary in any line of business or
in any geographical area or disclose information concerning the
Company or the Subsidiary;
(viii) Commitments pursuant to which the Company or the
Subsidiary leases, subleases, licenses or otherwise has the right to
use any real or personal property;
(ix) Commitments in respect of licenses or other
Commitments relating to Intellectual Property (as defined in Section
3.16(a)) and Commitments relating to retailer relationships,
e-commerce relationships and advertising arrangements;
(x) Commitments in respect of any joint venture,
partnership or other similar arrangement (including, without
limitation, any joint development agreement);
(xi) Commitments with any Governmental Entity;
(xii) Commitments relating to general or special powers
of attorney (whether as grantor or grantee);
(xiii) Commitments with any Employee or consultant
relating to (A) non-disclosure, confidentiality, assignment of
inventions, proprietary rights or non-competition agreements and (B)
severance, bonus or similar arrangements that become operative in
connection with or following the Merger or otherwise;
(xiv) Commitments (other than those specified in any of
clauses (i) through (xiii) of this clause (a)) which relate to or
affect the business, operations or any of the assets or properties of
the Company or the Subsidiary in any way, except those (A) which are
specifically not required to be scheduled pursuant to the provisions
of any of clauses (i) through (xiii) of this paragraph (a), (B) which
are cancellable by the Company or the Subsidiary on 90 days' or less
notice without any penalty or other financial obligation and which
involve payments of less than $10,000 in such 90 day period, or (C)
which involve annual aggregate payments of $10,000 or less; and, in
the case of each of clauses (A), (B) and (C) above, are not material;
and
(xv) Commitments currently in negotiation by the
Company or the Subsidiary of a type which if entered into would be
required to be listed on Schedule 3.8(a) or to be disclosed on any
other Schedule hereto.
(b) True and complete copies of all Commitments listed on
Schedule 3.8(a) have been delivered to theglobe. Except as set forth on
Schedule 3.8(b), all of the Commitments referred to in the preceding
paragraph (a) are valid, binding, in full force and effect and enforceable
in accordance with their terms against the Company, the Subsidiary or the
applicable Sellers (as the case may be), and, to the knowledge of the
Company and the Sellers, against the respective counterparties to such
Commitments. Complete copies (or, if oral, full written descriptions) of
all Commitments required to be so listed, including all amendments thereto,
and complete copies of all standard form Commitments used by the Company or
the Subsidiary in the conduct of their businesses, have been delivered to
theglobe. Except as set forth on Schedule 3.8(b), (i) there is no breach,
violation or default and no event which, with notice or lapse of time or
both, would constitute a breach, violation or default, or give rise to any
Encumbrance or right of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration, under any
Commitment listed or required to be listed on Schedule 3.8(a) and (ii) none
of the Company, the Subsidiary or, to the knowledge of the Company and the
Sellers, any other party to any of the Commitments listed on Schedule
3.8(a) is in material arrears in respect of the performance or satisfaction
of the terms and conditions on its part to be performed or satisfied under
any of such Commitments and no waiver or indulgence has been granted by any
of the parties thereto.
Section 3.9 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 3.9 or incurred in connection with the transactions contemplated
hereby, neither the Company nor the Subsidiary has any debts, liabilities
or obligations (absolute, accrued, contingent or otherwise) matured or
unmatured ("Liabilities") other than (a) Liabilities which are adequately
reflected, or fully accrued or provided for in the 1998 Financial
Statements or (b) Liabilities arising since December 31, 1998 in the
ordinary course of business consistent (in amount and kind) with past
practice which are not, individually or in the aggregate, material.
Section 3.10 Absence of Certain Changes. Except as set forth on
Schedule 3.10, since December 31, 1998: (i) the respective businesses of
the Company and the Subsidiary have been conducted in the ordinary course
of business consistent with past practice, and (ii) neither the Company nor
the Subsidiary has (a) suffered any change, event or development or series
of changes, events or developments which individually or in the aggregate
has had or could reasonably be expected to have a material adverse effect
on the business, financial condition, operations, results of operations or
prospects of the Company and the Subsidiary taken as a whole; (b) suffered
any damage, destruction or casualty loss to its physical properties
(whether or not covered by insurance) which individually or in the
aggregate has been or could reasonably be expected to be material; (c) been
the subject of any threatened or commenced investigation by a Governmental
Entity or Litigation; (d) except for fair consideration, in the ordinary
course of business and consistent with past practice, canceled or
compromised any debts or waived or permitted to lapse any claims or rights
or sold, transferred or otherwise disposed of any of its properties or
assets; (e) made or committed to make any capital expenditure or commitment
individually in excess of $10,000 or in the aggregate in excess of $50,000;
(f) made any change in any method of accounting or accounting practice; (g)
increased any salaries, wages or employee benefits, paid any bonuses, or
otherwise increased the compensation of any of its officers, directors,
Employees or consultants, other than in the ordinary course of business and
consistent with past practice; (h) declared, set aside or paid any
dividends or made other distributions to any holder of its capital stock or
other securities or redeemed or otherwise acquired any shares of its
capital stock or other equity securities or issued or sold any additional
shares of the capital stock of, or any other equity interests in, the
Company or the Subsidiary, or securities convertible into or exchangeable
for such shares or equity interests; (i) made any loan to or engaged in any
other transaction with any officer, director, Employee, consultant or
shareholder, other than advances to such persons in the ordinary course of
business in connection with travel and other business-related expenses; or
(j) agreed to take any action referred to in this Section 3.10(ii).
Section 3.11 Brokers and Finders; Fees. None of the Company, the
Subsidiary or the Sellers has employed any broker or finder or incurred any
Liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
Section 3.12 Real Estate. (a) "Owned Real Property" shall mean the
real property owned by the Company or the Subsidiary, together with all
buildings and other structures, facilities or improvements currently or
hereafter located thereon, all fixtures, systems, equipment and items of
personal property of the Company or the Subsidiary attached or appurtenant
thereto and all easements, licenses, rights and appurtenances relating to
the foregoing. Schedule 3.12(a) sets forth a list of all Owned Real
Property. With respect to the Owned Real Property, (i) the Company or the
Subsidiary has good and marketable title in fee simple to the Owned Real
Property, free and clear of all Encumbrances except for (A) Encumbrances
disclosed in Schedule 3.12(a), (B) liens for taxes not yet due and payable,
and (C) Encumbrances that are not material, (ii) there are no outstanding
options or rights of first refusal in favor of any other party to purchase
the Owned Real Property or any portion thereof or interest therein, (iii)
there are no leases, subleases, licenses, options, rights, concessions or
other agreements affecting any portion of the Owned Real Property, (iv) all
existing water, sewer, gas, electricity, telephone and other utilities
required for the construction, use, occupancy, operation and maintenance of
the Owned Real Property are adequate in all material respects for the use,
occupancy, operation and maintenance thereof, as currently conducted or
currently exists, and (v) the Company or the Subsidiary, as applicable, has
all rights of access necessary for ingress to and egress from the Owned
Real Property from or to public streets.
(b) "Leased Real Property" shall mean the real property
leased or subleased by the Company or the Subsidiary, as tenant, together
with, to the extent leased or subleased by the Company or the Subsidiary,
all buildings and other structures, facilities or improvements currently or
hereafter located thereon, all fixtures, systems, equipment and items of
personal property of the Company or the Subsidiary attached or appurtenant
thereto, and all easements, licenses, rights and appurtenances relating to
the foregoing. Schedule 3.12(b) sets forth a list of all Leased Real
Property. With respect to the Leased Real Property, (i) the Company or the
Subsidiary has good and valid leasehold estates in the Leased Real
Property, free and clear of all Encumbrances, (ii) all existing water,
sewer, gas, electricity, telephone and other utilities required for the
construction, use, occupancy, operation and maintenance of the Leased Real
Property are adequate in all material respects for the use, occupancy,
operation and maintenance thereof, as currently conducted or currently
exists, and (iii) the Company or the Subsidiary, as applicable, has all
rights of access necessary for ingress to and egress from the Leased Real
Property from or to public streets. Except as set forth on Schedule
3.12(b), (A) each such lease or sublease is legal, valid, binding and
enforceable and in full force and effect and (B) the execution and delivery
of this Agreement and the consummation of the transactions contemplated by
this Agreement will not cause a breach or require any third party consent
under any such lease or sublease.
(c) Except as set forth on Schedule 3.12(c), (i) there are
not now nor have there ever been any pending or, to the knowledge of the
Company and the Sellers, threatened condemnation or eminent domain
proceedings or their local equivalent with respect to the Owned Real
Property or the Leased Real Property, (ii) the Owned Real Property, the use
and occupancy thereof by the Company or the Subsidiary, as applicable, and
the conduct of their respective businesses thereon and therein do not
violate any deed restrictions, applicable Law consisting of building codes,
zoning, subdivision or other land use or similar Laws the violation of
which would materially and adversely affect the use, value or occupancy of
any such property or the conduct of such business thereon, (iii) there are
not now nor have there ever been any material violations by the Company,
the Subsidiary or any of the Sellers of any of the restrictions or Laws
described in the foregoing clause (ii), and (iv) none of the structures or
improvements on any of the Owned Real Property encroaches upon real
property of another Person, and no structure or improvement of another
Person encroaches upon any of the Owned Real Property or Leased Real
Property, which would materially interfere with the use thereof in the
ordinary course of business.
Section 3.13 Sufficiency of Assets. The assets, rights, and properties
owned, leased or licensed by the Company and the Subsidiary constitute all
assets, rights, and properties used or held for use in, and necessary to,
the conduct of their businesses as presently conducted or proposed to be
conducted.
Section 3.14 Tangible Property. Except as set forth on Schedule 3.14,
the buildings, facilities, machinery, equipment, furniture, leasehold and
other improvements, fixtures, vehicles, structures, any related items and
other tangible property that are required to properly operate the business
of the Company or the Subsidiary or are individually or in the aggregate
material to the business, financial condition, operations, results of
operations or prospects of the Company and the Subsidiary taken as a whole
(the "Tangible Property") are in good operating condition and repair
(normal wear and tear excepted), free of any material structural or
engineering defects, are being maintained and replaced in accordance with
past practice, and are suitable for their current use. The Company or the
Subsidiary has good and marketable title to, or a valid leasehold interest
in or contractual right to use, all Tangible Property, free and clear of
all Encumbrances except as disclosed in Schedule 3.14.
Section 3.15 Litigation and Orders. There is no claim, demand, notice,
action, suit, proceeding, arbitration, investigation, audit, inquiry or
hearing by or before any Governmental Entity or private arbitration
tribunal ("Litigation") pending or, to the knowledge of the Company and the
Sellers, threatened against, affecting or involving the Company, the
Subsidiary or any of their respective rights or properties, or which seek
to prevent or challenge the transactions contemplated hereby. There are no
unsatisfied judgments against the Company or the Subsidiary or any consent
decrees or other Orders to which the Company or the Subsidiary is subject
or their respective assets or properties are bound.
Section 3.16 Intellectual Property. (a) Except as set forth on
Schedule 3.16(a), the Company or the Subsidiary owns, or licenses or
otherwise possesses legally enforceable rights to use (i) all inventions
(whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereon, and all patents, patent applications
and patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof;
(ii) all trademarks, service marks, trade dress, logos, trade names and
corporate names, together with all translations, adaptations, derivations
and combinations thereof and including all goodwill associated therewith,
and all applications, registrations and renewals in connection therewith;
(iii) all copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith; (iv) all mask works and
all applications, registrations and renewals in connection therewith; (v)
all trade secrets and confidential business information (including ideas,
inventory, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technology,
technical data, designs, drawings, specifications, net lists, schematics,
algorithms, tangible and intangible proprietary information, customer,
supplier and material lists, pricing and cost information and business and
marketing plans and proposals); (vi) all computer software or applications
including data and related documentation (in source code and/or object code
form); (vii) all other proprietary rights; (viii) all copies and tangible
embodiments of the foregoing (in whatever form or medium); and (ix) all
licenses or agreements in connection with the foregoing (collectively,
"Intellectual Property") that have been used in the business of the Company
or the Subsidiary or are used in the business of the Company or the
Subsidiary as currently conducted (collectively, "Company Intellectual
Property"). Neither the Company nor the Subsidiary has (i) licensed any of
the Company Intellectual Property in source code form to any Person or (ii)
entered into any exclusive agreements relating to the Company Intellectual
Property with any Person.
(b) Schedule 3.16(b) lists (i) all patents and patent
applications and all registered trademarks, trade names, and service marks,
trademark applications, service xxxx applications, registered copyrights,
and registered mask works included in the Company Intellectual Property,
including the jurisdictions in which such Intellectual Property has been
issued or registered or in which any application for such issuance and
registration has been filed; (ii) all unregistered trademarks, trade names,
service marks, copyrights, and mask works included in the Company
Intellectual Property; (iii) all licenses, sublicenses and other agreements
as to which the Company or the Subsidiary is a party and pursuant to which
any Person is authorized to use any Intellectual Property; (iv) all
licenses, sublicenses and other agreements as to which the Company or the
Subsidiary is a party and pursuant to which the Company or the Subsidiary
is authorized to use any third party patents, trademarks or copyrights,
including software (collectively, "Third Party Intellectual Property
Rights") which are incorporated in, are, or form a part of any product of
the Company or the Subsidiary; and (v) all universal resource locators
("URLs") owned or used by the Company or the Subsidiary and any URLs with
respect to which the Company or the Subsidiary has any rights.
(c) Other than as set forth on Schedule 3.16(c), no Employee
or consultant or former Employee or consultant of the Company, the
Subsidiary or, to the knowledge of the Company and the Sellers, any other
third party, has interfered with, infringed upon, misappropriated, made
unauthorized use of, disclosed, or otherwise come into conflict with any
Company Intellectual Property, and neither the Company nor the Subsidiary
has brought any action, suit or proceeding for infringement of Company
Intellectual Property or breach of any license or agreement involving
Company Intellectual Property against any third party.
(d) Other than as set forth on Schedule 3.16(d), neither the
Company nor the Subsidiary nor any Employee, consultant or former Employee
or consultant of the Company or the Subsidiary nor, to the knowledge of the
Company and the Sellers, any other third party (but, with respect to such
other third parties, only to an extent that could result directly or
indirectly in Liability to the Company or the Subsidiary), has interfered
with, infringed upon, misappropriated, made unauthorized use, disclosed, or
otherwise come into conflict with any Intellectual Property rights of third
parties, and neither the Company nor the Subsidiary has received any
charge, complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation or violation (including any claim that the
Company or the Subsidiary must license or refrain from using any
Intellectual Property rights of third parties). The continued operation of
the respective businesses of the Company and the Subsidiary as presently
conducted and as presently proposed to be conducted will not interfere
with, infringe upon, misappropriate, or otherwise come into conflict with,
any Intellectual Property rights of third parties. Neither the Company nor
the Subsidiary is, nor will either of them be, as a result of the Company's
execution and delivery of this Agreement or the performance of the
Company's obligations under this Agreement, in breach of any license,
sublicense or other Commitment relating to any Intellectual Property, Third
Party Intellectual Property Rights or Intellectual Property rights of third
parties.
(e) All Company Intellectual Property is valid and
subsisting. Each item of Company Intellectual Property will be owned or
available for use by the Company or the Subsidiary on identical terms and
conditions immediately subsequent to the Effective Time. Except as set
forth in Schedule 3.16(e), the Company or the Subsidiary has taken
reasonably appropriate action to maintain and protect each item of Company
Intellectual Property, including, where necessary, appropriate steps to
protect and preserve confidentiality.
(f) With respect to each item of Company Intellectual
Property (and any item of Intellectual Property underlying Company
Intellectual Property pursuant to a license, sublicense, agreement or
permission), except as set forth in Schedule 3.16(f):
(i) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to
the knowledge of the Company and the Sellers, threatened which
challenges the legality, validity, enforceability, use or ownership of
the item and such item is not subject to any outstanding Order;
(ii) in the case of Company Intellectual Property, the
Company or the Subsidiary possesses all right, title and interest in
and to the item, free and clear of any Encumbrance;
(iii) in the case of Company Intellectual Property,
each license, sublicense, agreement or permission covering the item is
legal, valid, binding, enforceable and in full force and effect;
(iv) in the case of Company Intellectual Property, each
license, sublicense, agreement or permission covering the item will
continue to be legal, valid, binding, enforceable and in full force
and effect on identical terms immediately subsequent to the Effective
Time;
(v) in the case of Company Intellectual Property,
neither the Company nor the Subsidiary is, and to the knowledge of the
Company and the Sellers no other Person is, in breach or default of
any license, sublicense, agreement or permission covering the item,
and no event has occurred which with notice or lapse of time or both
would constitute a breach or default or permit termination,
modification or acceleration thereunder;
(vi) in the case of Company Intellectual Property, no
party to any license, sublicense, agreement or permission has
repudiated any material provision thereof;
(vii) with respect to any sublicense relating to the
item of Company Intellectual Property, the representations and
warranties set forth in subsections (iii) through (vi) are true and
correct with respect to the underlying license;
(viii) with respect to each license, sublicense,
agreement or permission, neither the Company nor the Subsidiary has
granted any sublicense or similar right with respect to the license,
sublicense, agreement or permission; and
(ix) neither the Company nor the Subsidiary has ever
agreed to indemnify any Person for or against any interference,
infringement, or misappropriation with respect to any item of
Intellectual Property.
(g) The Company and the Subsidiary have secured (or, at the
Closing, will secure) valid written assignments from all consultants and
Employees who contributed to the creation or development of the Company
Intellectual Property of the rights to such contributions that the Company
or the Subsidiary do not already own by operation of law.
(h) The Company and the Subsidiary have taken reasonable
steps to protect and preserve the confidentiality of all Company
Intellectual Property not otherwise protected by patents, patent
applications or copyrights ("Confidential I.P. Information"). All use,
disclosure or appropriation of Confidential I.P. Information owned by the
Company or the Subsidiary by or to a third party has been pursuant to the
terms of a written agreement between the Company or the Subsidiary and such
third party. All use, disclosure or appropriation of Confidential I.P.
Information not owned by the Company or the Subsidiary has been pursuant to
the terms of a written agreement between the Company or the Subsidiary and
the owner of such Confidential I.P. Information, or is otherwise lawful.
(i) The Company has made available to theglobe copies of the
current versions of all material proprietary software, in Source Code (as
defined below) and object code forms, that are used or are proposed to be
used in the respective businesses of the Company or the Subsidiary,
together with all material documentation used in connection therewith
("Software"). "Source Code" means the complete and current version of the
source code and all source documentation to enable theglobe to exercise the
foregoing license above.
Section 3.17 Year 2000 Compliance. The Software, computers and other
hardware and systems used by the Company or the Subsidiary will not require
expenditures on the part of the Company and the Subsidiary in excess of
$25,000, in the aggregate, in order to: (a) accurately process date
information before, during and after January 1, 2000, including, but not
limited to, accepting date input, providing date output and performing
calculations on dates or portions of dates; (b) function accurately and
without interruption before, during and after January 1, 2000 without any
change in operations associated with the advent of the new century; (c)
respond to two digit year date input in a way that resolves the ambiguity
as to century in a disclosed, defined and predetermined manner; and (d)
store and provide output of date information in ways that are unambiguous
as to century. The Company and the Subsidiary have contacted their
principal vendors of hardware and software and other Persons with whom the
Company or the Subsidiary have material business relationships and all such
vendors and other Persons have notified the Company or the Subsidiary that
their hardware or software is Year 2000 compliant to the extent affecting
the Company or the Subsidiary, and, to the knowledge of the Company and the
Sellers, the hardware and software of such vendors or other Persons is Year
2000 compliant except in ways that will not adversely affect the Company or
the Subsidiary.
Section 3.18 Taxes. (a) Except as set forth in Schedule 3.18:
(i) The Company and the Subsidiary have duly filed all
Tax Returns (as defined in Section 3.18(c)) required to have been
filed by the Company or the Subsidiary in a timely manner (taking into
account all lawful extensions of due dates), all of which Tax Returns
are true and complete in all material respects;
(ii) all Taxes (as defined in Section 3.18(c)) required
to have been paid by the Company or the Subsidiary have been paid.
Adequate reserves have been established in the 1998 Balance Sheet for
the payment of all Taxes of the Company and the Subsidiary that are
attributable to the period ending on December 31, 1998 that are not
yet due and payable; and adequate reserves have been or will be
established in the books and records of the Company and the Subsidiary
for the payment of all Taxes of the Company and the Subsidiary that
are attributable to the period beginning after December 31, 1998 and
ending on the Closing Date that are not yet due and payable;
(iii) the Company and the Subsidiary have complied with
all applicable Laws relating to the withholding of Taxes (including
withholding of Taxes pursuant to Sections 1441 and 1442 of the Code or
similar provisions under any foreign Laws), and have, within the time
and within the manner prescribed by Law, withheld and paid over to the
proper governmental entities all amounts required to be withheld and
paid over under all applicable Laws in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder
or other third party;
(iv) no outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect
to any Taxes or Tax Returns of the Company or the Subsidiary have been
given by or on behalf of the Company or the Subsidiary;
(v) neither the Company nor the Subsidiary has
requested an extension of time within which to file any Tax Return in
respect of any fiscal year which has not since been filed;
(vi) neither the Company nor the Subsidiary nor any of
the Sellers has taken or agreed to take any action that would prevent
or impede the Merger from qualifying as a reorganization under Section
368 of the Code. The Company, the Subsidiary and the Sellers have not
failed to take any action which, if such action were not taken, would
prevent or impede the Merger from qualifying as a reorganization under
Section 368 of the Code;
(vii) for taxable years for which the applicable
statute of limitations has not expired (A) there is no Litigation
pending or, to the knowledge of the Company and the Sellers,
threatened, with respect to any Liability for Taxes for which the
Company or the Subsidiary could be liable, (B) no taxing authority in
a jurisdiction where the Company or the Subsidiary do not file Tax
Returns has made a claim, assertion or threat that such non-filing
entity is or may be subject to taxation by such jurisdiction, (C)
there are no Tax rulings, requests for rulings, or closing agreements
relating to the Company or the Subsidiary which could affect the
Liability for Taxes of the Company or the Subsidiary for any period
(or portion of a period) after the date hereof, (D) any adjustment of
Taxes of the Company or the Subsidiary made by the Internal Revenue
Service (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, and (E) neither the Company nor the Subsidiary has
agreed and is not required to include in income any adjustment
pursuant to Section 481 or 482 of the Code (or analogous provisions of
foreign, state or local Law) which could affect the Liability for
Taxes of the Company or the Subsidiary for any period (or portion of a
period) after the date hereof, and the IRS (or other taxing authority)
has not proposed, and, to the knowledge of the Company and the
Sellers, is not considering, any such adjustment which could have such
an effect;
(viii) the states, territories and jurisdictions
(whether foreign or domestic) in which the Company or the Subsidiary
has filed income, franchise, sales and use Tax Returns are set forth
in Schedule 3.18;
(ix) none of the assets of the Company or the
Subsidiary (A) is property that is required to be treated as being
owned by any other Person pursuant to the "safe harbor lease"
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954,
(B) is "tax-exempt use property" within the meaning of Code Section
168(h), or (C) directly or indirectly secures any debt the interest of
which is tax exempt under Code Section 103(a);
(x) except as reflected as a liability for deferred
Income Taxes on the 1998 Balance Sheet, no item of income or gain
reported by the Company or the Subsidiary for financial accounting
purposes in any pre-Closing period is required to be included in
taxable income for a post-Closing period;
(xi) no power of attorney has been granted by or with
respect to the Company or the Subsidiary with respect to any matter
relating to Taxes;
(xii) all Tax deficiencies which have been claimed,
proposed or assessed against the Company or the Subsidiary have been
fully paid or finally settled;
(xiii) neither the Company nor the Subsidiary has filed
a consent pursuant to Section 341(f) of the Code (or any predecessor
provision);
(xiv) neither the Company nor the Subsidiary is
obligated by any Commitment to indemnify any other Person with respect
to Taxes; neither the Company nor the Subsidiary is now nor has it
ever been a party to or bound by any Commitment (including, without
limitation, any arrangement required or permitted by applicable Law
(including pursuant to Treasury Regulation Section 1.1502-6 or any
analogous provision of state, local or foreign Law) and including any
Tax sharing agreement) which (i) requires the Company or the
Subsidiary to make any Tax payment to or for the account of any other
Person, (ii) affords any other Person the benefit of any net operating
loss, net capital loss, investment Tax credit, foreign Tax credit,
charitable deduction or any other credit or Tax attribute which could
reduce Taxes (including, without limitation, deductions and credits
related to alternative minimum Taxes) of the Company or the Subsidiary
or (iii) requires or permits the transfer or assignment of income,
revenues, receipts or gains to the Company or the Subsidiary from any
other Person;
(xv) there are no liens with respect to Taxes upon any
of the properties or assets, real or personal, tangible or intangible,
of the Company or the Subsidiary (other than Encumbrances for Taxes
not yet due);
(xvi) each of the Company and the Subsidiary is not and
has not been since its inception a "United States Real Property
Holding Corporation" within the meaning of Section 897 of the Code.
(b) The Company has previously made available to theglobe
complete and accurate copies of each of: (i) all audit reports, revenue
agent's reports and other written assertions of deficiencies or other
liabilities for Taxes of the Company or the Subsidiary issued by any
Governmental Entity with respect to past periods for which the limitations
period has not run, letter rulings and Technical Advice Memoranda relating
to federal, state, local and foreign Taxes due from or with respect to the
Company or the Subsidiary, (ii) all Tax Returns filed by the Company or the
Subsidiary and (iii) any closing agreements entered into by the Company or
the Subsidiary with any taxing authority. The Company will promptly deliver
to theglobe all Tax materials with respect to the foregoing for all Tax
matters arising after the date hereof.
(c) For purposes of this Agreement, (i) "Tax" (and, with
correlative meaning, "Taxes") means any federal, state, local or foreign
income, gross receipts, property, sales, use, license, excise, franchise,
employment, payroll, premium, withholding, alternative or added minimum, ad
valorem, inventory, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty or addition to tax, imposed by any
Governmental Entity, and includes, without limitation, any taxes of another
Person, including taxes owing under a contract, as transferee or successor,
under Treas. Reg. ss. 1.1502-6 or analogous provision of state, foreign or
local law or otherwise, (ii) "Tax Return" means any return, report or
similar statement required to be filed with respect to any Tax (including
any attached schedules), including, without limitation, any information
return, claim for refund, amended return or declaration of estimated Tax,
and (iii) "Income Tax" or "Income Taxes" means any federal, state, local or
foreign income, franchise or similar Tax and in each instance any interest,
penalties or additions to tax attributable to such Tax.
Section 3.19 Insurance. Schedule 3.19 sets forth a list of all
policies or binders of fire, liability, product liability, workers
compensation, vehicular and other insurance held by or on behalf of the
Company or the Subsidiary, including the amounts of such insurance and
annual premiums with respect thereto. Such policies and binders are in full
force and effect. The Company and the Subsidiary have each obtained and
maintained in full force and effect insurance with responsible and
reputable insurance companies or associations in such amounts, on such
terms, with such deductibles, and covering such risks, as is customarily
carried by reasonably prudent Persons conducting businesses or owning
assets similar to those of the Company and the Subsidiary, and have
maintained in full force and effect liability insurance against claims for
personal injury or death or property damage occurring in connection with
the activities of the Company and the Subsidiary, or any properties owned,
occupied or controlled by it in such amount as is customarily carried by
reasonably prudent Persons conducting businesses or owning assets similar
to those of the Company and the Subsidiary. There is no default with
respect to any provision contained in any such policy or binder, nor has
the Company or the Subsidiary failed to give any notice or present any
claim under any such policy or binders in due and timely fashion. There are
no outstanding claims by the Company or the Subsidiary in excess of normal
retentions that are not covered under any such policies or binders and
there has not occurred any event that might reasonably form the basis of
any claim in excess of normal retentions that is not covered against or
relating to the Company or the Subsidiary that is not covered by any of
such policies or binders. No notice of cancellation or non-renewal of any
such policies or binders has been received by the Company or the
Subsidiary.
Section 3.20 Employee Benefits. (a) Schedule 3.20(a) contains a true
and complete list of each Company Employee Plan (as defined in Section
3.20(k)) and each Employee Agreement (as defined in Section 3.20(k)).
Neither the Company nor the Subsidiary has any plan or commitment to
establish any new Company Employee Plan, to enter into any Employee
Agreement or to modify or to terminate any Company Employee Plan or
Employee Agreement.
(b) The Company has made available, or has caused to be made
available, to theglobe current, accurate and complete copies of all
documents embodying or relating to each Company Employee Plan and each
Employee Agreement.
(c) Each of the Company and the Subsidiary has performed all
obligations required to be performed by it under each Company Employee Plan
and Employee Agreement. Each Company Employee Plan has been established and
maintained in accordance with its terms and in compliance with all
applicable Laws and Orders. No Company Employee Plan is an "employee
pension benefit plan" as defined in Section 3(2) of ERISA (as defined in
Section 3.20(k)), or a Multiemployer Plan (as defined in Section 3.20(k)).
There is no Litigation pending or, to the knowledge of the Company and the
Sellers, threatened or anticipated (other than routine claims for benefits)
with respect to any Company Employee Plan or Employee Agreement or by any
Employee (as defined in Section 3.20(k)) with respect to the Company or the
Subsidiary. Each Company Employee Plan can be amended, terminated or
otherwise discontinued without Liability to the Company or the Subsidiary.
No Company Employee Plan is under audit or investigation by the IRS, the
Department of Labor, the PBGC (as defined in Section 3.20(k)(viii)) or
other Governmental Entity, and to the knowledge of the Company and the
Sellers, no such audit or investigation is threatened. No Liability under
any Company Employee Plan has been funded nor has any such obligation been
satisfied with the purchase of a contract from an insurance company as to
which the Company or the Subsidiary has received notice that such insurance
company is insolvent or is in rehabilitation or any similar proceeding.
(d) Except as set forth on Schedule 3.20(d), neither the
Company nor the Subsidiary maintains or contributes to any Company Employee
Plan which provides, or has any Liability to provide, life insurance,
medical, severance or other employee welfare benefits to any Employee upon
his retirement or termination of employment, except as may be required by
Section 4980B of the Code and Sections 601 through 609 of ERISA.
(e) The execution of, and performance of the transactions
contemplated by, this Agreement will not (either individually, in the
aggregate or upon the occurrence of any additional or subsequent events)
(i) constitute an event that will or may result in any payment (whether of
severance pay or otherwise), acceleration of benefits, forgiveness of
indebtedness, vesting or distribution of benefits, increase in benefits or
obligation to fund benefits with respect to any Employee, or (ii) result in
the triggering or imposition of any restrictions or limitations on the
right of the Company, the Subsidiary or theglobe to amend or terminate any
Company Employee Plan. No payment or benefit which will or may be made by
the Company, the Subsidiary, theglobe, the Sellers or any of their
respective Affiliates with respect to any Employee may be characterized as
an "excess parachute payment" within the meaning of Section 280G(b)(1) of
the Code which is contingent on the change in ownership of the Company
resulting from the Merger. Except as expressly set forth in Schedule
3.20(e), no officer, director or Employee of the Company, nor any
Stockholder, is entitled to any "sale bonus payment," "retention payment,"
or any other payment or benefit in connection with, or as a result of, the
transactions contemplated by this Agreement.
(f) Each of the Company and the Subsidiary is in compliance
in all material respects with all applicable Laws (domestic and foreign)
respecting employment, employment practices, labor, terms and conditions of
employment, wages and hours, withholding taxes, unemployment compensation
and Social Security.
(g) No work stoppage or labor strike against the Company or
the Subsidiary by Employees is pending or, to the knowledge of the Company
and the Sellers, threatened. Each of the Company and the Subsidiary (i) is
not involved in or, to the knowledge of the Company and the Sellers,
threatened with any labor dispute, grievance, or Litigation relating to
labor matters and (ii) is not presently, nor has it been in the past a
party to, or bound by, any collective bargaining, union or similar
Commitment, nor is any such Commitment currently being negotiated by the
Company or the Subsidiary. No Employees are currently or while employed by
the Company or the Subsidiary have ever been represented by any labor union
with respect to their employment by the Company or the Subsidiary and to
the knowledge of the Company and the Sellers, no activities the purpose of
which is to achieve such representation of all or some of such Employees
are threatened or ongoing.
(h) With respect to each Welfare Plan (as defined in Section
3.20(k)(ix)), all benefit claims incurred (including claims incurred but
not reported) by Employees thereunder for which the Company or the
Subsidiary is, or will become, liable are (i) insured pursuant to a
contract of insurance whereby the insurance company bears all risk of loss
with respect to such claims; (ii) covered under a contract with a health
maintenance organization (an "HMO") pursuant to which the HMO bears all
Liability for such claims, or (iii) reflected as a Liability or accrued for
on the 1998 Balance Sheet.
(i) Neither the Company nor the Subsidiary has any ERISA
Affiliates, nor has it ever had any ERISA Affiliates.
(j) To the knowledge of the Company and the Sellers, no key
Employee or group of Employees have any plans to terminate employment with
the Company.
(k) For purposes of this Agreement,
(i) "Company Employee Plan" shall mean each Employee
Plan (other than an Employee Agreement) to which the Company or the
Subsidiary has or may have any Liability, contingent or otherwise.
(ii) "Employee" shall mean each current, former, or
retired employee, officer, consultant, advisor, independent
contractor, agent or director of the Company or the Subsidiary.
(iii) "Employee Agreement" shall mean each management,
employment, severance, change of control, consulting, non-compete,
confidentiality, or similar Commitment between the Company or the
Subsidiary and any Employee pursuant to which the Company or the
Subsidiary has or may have any Liability.
(iv) "Employee Plan" shall mean each plan, trust,
program, policy, payroll practice, contract, agreement or other
arrangement providing for compensation, severance, termination pay,
performance awards, stock or stock-related awards, fringe benefits or
other employee benefits of any kind, whether formal or informal,
funded or unfunded, written or oral and whether or not legally
binding.
(v) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and all applicable
rules and regulations thereunder.
(vi) "ERISA Affiliate" shall mean each business or
entity which is a member of a "controlled group of corporations,"
under "common control" or a member of an "affiliated service group"
with the Company within the meaning of Sections 414(b), (c) or (m) of
the Code, or required to be aggregated with the Company under Section
414(o) of the Code, or is under "common control" with the Company,
within the meaning of Section 4001(a)(14) of ERISA.
(vii) "Multiemployer Plan" shall mean any Employee Plan
which is a "multiemployer plan," as defined in Section 3(37) or
4001(a)(3) of ERISA.
(viii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation.
(ix) "Welfare Plan" shall mean each Company Employee
Plan that is an "employee welfare benefit plan" within the meaning of
Section 3(1) of ERISA.
Section 3.21 Personnel Information. Schedule 3.21 contains a list of
all individuals employed by the Company or the Subsidiary and all directors
and independent contractors providing material services to the Company or
the Subsidiary in connection with the operation of the business thereof.
Section 3.22 Affiliate Relationships. Except as set forth on Schedule
3.22, no (i) officer or director of the Company or the Subsidiary or
Stockholder, (ii) spouse, former spouse, child, parent, parent of a spouse,
sibling or grandchild of any of the Persons described in clause (i), or
(iii) trust, partnership or corporation in which any of the Persons
described in clause (i) or (ii) has or has had a direct or indirect
interest, (A) has or has had an interest in any entity which furnishes or
sells or proposes to furnish or sell services or products to the Company or
the Subsidiary, (B) has or has had any interest in any entity that
purchases from or sells or furnishes to the Company or the Subsidiary any
products or services, or (C) has or has had an interest in (including,
without limitation, as a party to) any Commitment to which the Company or
the Subsidiary is a party or which otherwise is required to be disclosed in
Schedule 3.8(a); provided, that ownership of no more than one percent of
the outstanding voting stock of a publicly traded corporation shall not be
deemed an "interest in any entity" for purposes of this Section 3.22.
Section 3.23 No Termination of Business Relationship. None of the
Persons with which the Company or the Subsidiary has a material business
relationship has given notice or other indication of any intention to
cancel or otherwise terminate a business relationship with the Company or
the Subsidiary and, to the knowledge of the Company and the Sellers, no
event has occurred or failed to occur (including, without limitation, the
transactions contemplated hereby) which would precipitate the cancellation
or termination of, or entitle any such entity or customer to terminate,
such a business relationship.
Section 3.24 Disclosure. No statement (including the representations,
warranties and covenants) made by the Company and the Sellers contained in
this Agreement, the Schedules and Exhibits to this Agreement, the Ancillary
Documents, or the documents, written statements or certificates furnished
or to be furnished to theglobe or Merger Sub or their representatives
pursuant hereto or in connection with the transactions contemplated hereby
constitutes an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. The projections contained in materials provided by
the Company or any Sellers to theglobe or its representatives were prepared
in good faith and at the time prepared there was a reasonable basis for
such projections and the assumptions made in connection therewith. Except
as set forth on Schedule 3.24, to the knowledge of the Company and the
Sellers, there has been no event or occurrence since the date such
projections were prepared that would cause the Company or any Seller to
believe that there is not on the date hereof and at the Effective Time a
reasonable basis for such projections and the assumptions made in
connection therewith assuming for this purpose that such projections were
made on the date hereof or immediately prior to the Effective Time, as
applicable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THEGLOBE
theglobe represents and warrants to the Company and the Sellers
as of the date of this Agreement and as of the Closing Date as follows:
Section 4.1 Organization. theglobe is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to carry on
its business as it is now being conducted. Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to
carry on its business as it is now being conducted. Each of theglobe and
Merger Sub is duly qualified and licensed as a foreign corporation to do
business, and is in good standing (and has paid all relevant franchise or
analogous taxes), in each jurisdiction where the character of its assets
owned or held under lease or the nature of its business makes such
qualification necessary, except where the failure to be so qualified and in
good standing would not, individually or in the aggregate, have a material
adverse effect on the ability of theglobe and Merger Sub to perform their
obligations under this Agreement.
Section 4.2 Authority. Each of theglobe and Merger Sub has the
requisite right, power and authority to enter into this Agreement and any
Ancillary Documents to which it is a party and to carry out its obligations
hereunder and thereunder. This Agreement has been, and each Ancillary
Document to which theglobe and Merger Sub are parties will be, duly and
validly executed and delivered by theglobe and Merger Sub and constitute or
will constitute, as the case may be, a valid and binding obligation of
theglobe and Merger Sub, enforceable against them in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or other similar laws affecting
creditors' rights generally or by general principles of equity. All
corporate proceedings or other actions on the part of each of theglobe and
Merger Sub necessary to authorize this Agreement or any of the Ancillary
Documents to which it is a party and the transactions contemplated hereby
and thereby have been taken.
Section 4.3 Merger Sub's Operations. Merger Sub was formed solely for
the purpose of engaging in the transactions contemplated hereby and has not
(i) engaged in any business activities, (ii) conducted any operations other
than in connection with the transactions contemplated hereby or (iii)
incurred any Liabilities other than in connection with the transactions
contemplated hereby.
Section 4.4 Capitalization; Title to Shares. (a) The authorized
capital stock of theglobe consists of 100,000,000 shares of theglobe Common
Stock and 3,000,000 shares of preferred stock, $0.001 per share, of which
10,662,771 shares of theglobe Common Stock and no shares of preferred stock
were issued and outstanding as of March 31, 1999. All the issued and
outstanding shares of theglobe Common Stock are validly issued, fully paid
and nonassessable. Except pursuant to this Agreement and except as
disclosed in theglobe SEC Reports (as defined in Section 4.7(a)) and
Schedule 4.4(a), there are no shares of capital stock of theglobe
authorized and there are no outstanding subscriptions, options, warrants,
rights, stock-based or stock-related awards or convertible or exchangeable
securities or other agreements to which theglobe is a party of any
character relating to, or obligating theglobe to issue, grant, award,
transfer or sell, any issued or unissued shares of theglobe's capital stock
or other securities of theglobe. Except as disclosed in theglobe SEC
Reports, there are no voting trusts, proxies or other agreements or
understandings to which theglobe is a party with respect to the voting of
capital stock of theglobe. theglobe has full corporate power and authority
to deliver theglobe Shares to the Stockholders pursuant to the Merger and
to transfer to the Stockholders good and valid title to theglobe Shares.
(b) theglobe owns all of the issued and outstanding capital
stock of Merger Sub. There are no options, warrants, or other convertible
or exchangeable securities, subscriptions, rights (including, without
limitation, preemptive rights), stock-based or stock-related awards or
other contracts, agreements or arrangements (or Commitments with respect to
issuance of any of the foregoing) to which Merger Sub is a party or by
which Merger Sub may be bound of any character relating, or obligating
Merger Sub, to issue, grant, award, transfer or sell, or based on the value
of, any issued or unissued shares of Merger Sub capital stock.
Section 4.5 Securities of theglobe. The shares of theglobe Common
Stock to be issued pursuant to this Agreement have been duly authorized for
issuance, and such securities, when issued and delivered to the Company's
Stockholders, will be validly issued, fully paid and nonassessable free and
clear of all Encumbrances except as contemplated by this Agreement.
Section 4.6 Consents; No Violations. Except as set forth on Schedule
4.6, neither the execution, delivery or performance of this Agreement or
the Ancillary Documents by theglobe or Merger Sub nor the consummation of
the transactions contemplated hereby or thereby will (a) conflict with, or
result in a breach or a violation of, any provision of the charter or
bylaws of theglobe or Merger Sub; (b) constitute, with or without notice or
the passage of time or both, a breach, violation or default, create an
Encumbrance, or give rise to any right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration, under (i) any Law, (ii) any Order to which theglobe or Merger
Sub is subject or by which theglobe, Merger Sub or any of their respective
properties are bound or (iii) any Permit or Commitment of theglobe or
Merger Sub, or to which theglobe, Merger Sub or any of their respective
properties are subject; (c) require any consent, approval or authorization
of, notification to, filing with, or exemption or waiver by, any
Governmental Entity or third party; or (d) create any Encumbrance upon any
of the assets or properties of theglobe or Merger Sub; except any such
conflict, breach, violation, default, creation or requirement described in
any of clauses (a), (b), (c) or (d) that would not have a material adverse
effect on theglobe's or Merger Sub's ability to consummate the transactions
contemplated by this Agreement or the Ancillary Documents.
Section 4.7 SEC Reports; Financial Statements. (a) theglobe has timely
filed all forms, reports and documents (including all Exhibits, Schedules
and Annexes thereto) required to be filed by it with the Securities and
Exchange Commission (the "SEC") since November 12, 1998, including any
amendments or supplements thereto (collectively, including any such forms,
reports and documents filed after the date hereof, "theglobe SEC Reports").
theglobe SEC Reports as of their respective filing dates (i) were in all
material respects in accordance with the requirements of the Securities Act
or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
the case may be, and the rules and regulations promulgated thereunder, and
(ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) The financial statements, including all related notes
and schedules, contained in theglobe SEC Reports (or incorporated therein
by reference) fairly present in all material respects, the consolidated
financial position of theglobe and its consolidated subsidiaries as at the
respective dates thereof and the consolidated results of operations,
retained earnings and cash flows of theglobe and its consolidated
subsidiaries for the respective periods indicated, in each case in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except for changes in accounting principles disclosed in the
notes thereto) and the rules and regulations of the SEC, except that
interim financial statements are subject to normal year-end adjustments
which are not and are not expected to be, individually or in the aggregate,
material in amount and do not include certain notes which may be required
by GAAP but which are not required by Form 10-Q of the Exchange Act.
Section 4.8 Absence of Certain Changes. Since December 31, 1998, there
has not occurred any event which would have a material adverse effect on
the ability of theglobe or Merger Sub to perform their obligations under
this Agreement.
Section 4.9 Taxes. Neither theglobe nor Merger Sub has taken or agreed
to take any action that would prevent or impede the Merger from qualifying
as a reorganization under Section 368 of the Code. Neither theglobe nor
Merger Sub has failed to take any action which, if such actions were not
taken, would prevent or impede the Merger from qualifying as a
reorganization under Section 368 of the Code.
Section 4.10 Litigation. Except as disclosed in theglobe SEC Reports
filed prior to the date hereof, there is no Litigation pending or, to the
knowledge of theglobe, threatened, against theglobe or Merger Sub or any of
their properties or assets, except for Litigation which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of theglobe or Merger Sub to perform their
obligations under this Agreement.
Section 4.11 Board Action. The Boards of Directors of theglobe and the
Merger Sub have approved this Agreement, the Ancillary Documents and the
transactions contemplated hereby and thereby, including the Merger.
Section 4.12 Brokers and Finders. Neither theglobe nor Merger Sub has
employed any broker or finder or incurred any Liability for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated hereby.
Section 4.13 Accounting Matters. Neither theglobe nor Merger Sub has
taken or agreed to take any action that would prevent theglobe from
accounting for the business combination to be effected by the Merger as a
pooling-of-interests for accounting purposes.
ARTICLE V
COVENANTS
Section 5.1 No Solicitation. From the date of this Agreement until the
Closing, other than in connection with the transactions contemplated
hereby, neither the Company nor any Seller shall solicit, propose or
facilitate (including by way of providing information regarding the
Company, the Subsidiary or their respective businesses to any Person),
directly or indirectly, any inquiries, discussions, offers or proposals
for, continue or enter into negotiations looking toward, or enter into or
consummate any agreement or understanding in connection with any offer or
proposal regarding, any purchase or other acquisition of all or any portion
of the Company or the Subsidiary, the business or assets of the Company or
the Subsidiary (other than the ordinary course of business sale of
inventory or replacement of assets), or any of the equity securities
(whether newly issued or currently outstanding) of the Company or the
Subsidiary, or any merger, business combination or recapitalization
involving the Company, the Subsidiary or their respective businesses, other
than as expressly contemplated or permitted by this Agreement; and the
Company and the Sellers shall cause the Subsidiary and the officers,
directors, Employees, representatives, agents and Affiliates of the Company
and the Subsidiary to refrain from engaging in any of the above activities
that the Company is restricted from engaging in. The Company shall promptly
notify theglobe orally and in writing of any such inquiries, discussions,
offers or proposals (including, without limitation, the terms and
conditions of any such offers or proposals, any amendments or revisions,
and the identity of the Person making any of the foregoing), and shall keep
theglobe promptly and fully informed of the status and terms of any such
inquiry, discussion, offer or proposal.
Section 5.2 Interim Operations. (a) Unless theglobe otherwise agrees
in writing and except as otherwise expressly contemplated by this
Agreement, between the date of this Agreement and the Closing, the Company
shall, and the Sellers shall cause the Company and the Subsidiary to, (i)
conduct the business of the Company and the Subsidiary only in the ordinary
course and consistent with past practice; (ii) use reasonable best efforts
to preserve and maintain their assets and properties and the current
relationships of the Company and the Subsidiary with their respective
customers, suppliers, advertisers, distributors, agents, officers and
Employees and other Persons with which the Company and the Subsidiary have
significant business relationships; (iii) use reasonable best efforts to
maintain all of the material assets owned or used by the Company and the
Subsidiary in the ordinary course of business consistent with past
practice; (iv) continue capital expenditures substantially in accordance
with the timing and amounts forecast for capital expenditures as set forth
in the schedule of capital expenditures previously provided by the Company
to theglobe; (v) maintain insurance in full force and effect substantially
comparable in amount, scope and coverage to that in effect on the date of
this Agreement; (vi) use reasonable best efforts to preserve the goodwill
and ongoing operations of the business of the Company and the Subsidiary;
(vii) maintain the books and records of the Company and the Subsidiary in
the usual, regular and ordinary manner, on a basis consistent with past
practice; (viii) perform and comply in all material respects with its
Commitments; and (ix) comply in all material respects with applicable Laws.
(b) Except as expressly contemplated by this Agreement,
between the date of this Agreement and the Closing, the Company will not,
and the Sellers will cause the Company and the Subsidiary not to, do any of
the following without the prior written consent of theglobe:
(i) create any Encumbrance on any material properties
or assets (whether tangible or intangible) of the Company or the
Subsidiary;
(ii) (A) other than inventory in the ordinary course of
business, sell, assign, transfer, lease or otherwise dispose of or
agree to sell, assign, transfer, lease or otherwise dispose of any
assets of the Company or the Subsidiary or (B) cancel any indebtedness
owed to the Company or the Subsidiary;
(iii) merge or consolidate with any Person;
(iv) acquire assets or capital stock of or other equity
interests in any Person;
(v) (A) issue, incur, create, assume or otherwise
become liable for any Indebtedness, (B) assume, grant, guarantee or
endorse, or make any other accommodation or arrangement making the
Company or the Subsidiary responsible for, any Liabilities of any
other Person, (C) make any loans, advances or capital contributions
to, or investments in, any Person or (D) repay any amounts owing under
any Indebtedness;
(vi) change any method of accounting or accounting
practice used by the Company or the Subsidiary;
(vii) (A) enter into or adopt or amend any existing
Commitment relating to severance, (B) enter into or adopt or amend any
existing severance plan, (C) enter into or adopt or amend any
Commitment with any Employee or any Company Employee Plan (including,
without limitation, the plans, programs, agreements and arrangements
referred to in Section 3.20), (D) grant any options or awards pursuant
to equity-based plans, or (E) grant any increases in compensation
(except compensation increases associated with promotions and annual
reviews in the ordinary course of business, which such compensation
increases shall be subject to the prior written approval of theglobe,
which approval shall not be unreasonably withheld);
(viii) make any change in the Company's or the
Subsidiary's Tax accounting methods, any new election with respect to
Taxes or any modification or revocation of any existing election with
respect to Taxes or settle or otherwise dispose of any Tax audit,
dispute, or other Tax proceeding, in each case without theglobe's
express written consent thereto.
(ix) accelerate or delay the purchase of supplies or
inventory, the shipment or sale of inventory, the collection of
accounts or notes receivable or the payment of accounts or notes
payable or accrued liabilities or expenses or otherwise operate the
respective businesses of the Company and the Subsidiary, in each case,
in a manner that would be inconsistent with past practice;
(x) except as set forth in Schedule 5.2(b)(x), engage
in any transaction with any of the Stockholders or any of their
Affiliates;
(xi) enter into, modify, terminate, amend, or waive,
release or assign any rights or claims with respect to any Commitment
other than in the ordinary course of business consistent with past
practice;
(xii) allow the lapse of any rights of ownership or use
by the Company or the Subsidiary of any Company Intellectual Property
right;
(xiii) repurchase, redeem or otherwise acquire or
exchange any share of Company Common Stock, issue or sell any
additional shares of the capital stock of, or other equity interests
in, the Company or the Subsidiary, or issue or sell any securities
convertible into or exchangeable for such shares or equity interests,
or issue or grant any options, warrants, calls, subscription rights or
other rights of any kind to acquire additional shares of such capital
stock, such other equity interests or such securities;
(xiv) amend the Company's Certificate of Incorporation,
as amended, or Amended and Restated Bylaws or the Subsidiary's
Memorandum and Articles of Association or equivalent organizational
documents of either the Company or the Subsidiary;
(xv) declare, set aside, make or pay any dividend or
other distribution (whether in cash, stock or property or any
combination thereof);
(xvi) take any action that is reasonably likely to
result in the representations and warranties set forth in Article III
becoming false or inaccurate in any material respect as of the Closing
Date; or
(xvii) agree to take any of the actions referred to in
this Section 5.2(b).
Section 5.3 Tax Provisions. (a) Except as required by Law, the
Sellers, theglobe, and the Surviving Corporation will treat the Merger as a
reorganization under Section 368 of the Code for all Tax purposes. Except
as required by Law or this Agreement (including, without limitation,
payments with respect to dissenter's rights), neither the Sellers, nor
theglobe, nor the Surviving Corporation will take any action or fail to
take action after the Effective Time that will prevent or impede the Merger
from qualifying as a reorganization under Section 368 of the Code.
(b) All transfer, transfer gains, documentary, sales, use,
stamp, registration and other similar Taxes and fees (including any
penalties, interest, additions to tax, and costs and expenses relating to
such Taxes) incurred in connection with the Merger shall be borne by the
Sellers. The Sellers, at their own expense, shall file all necessary Tax
Returns and other documentation with respect to all such transfer, transfer
gains, documentary, sales, use, stamp, registration and other Taxes and
fees. The Surviving Corporation shall cooperate with the Sellers in the
preparation of such Tax Returns.
Section 5.4 Access and Information. (a) From the date hereof until the
Closing, each of the Company and the Sellers shall, and shall cause the
Subsidiary and the officers, directors, Employees and agents of the Company
and the Subsidiary to, afford to theglobe and its officers, directors,
Employees, counsel, accountants, advisors, representatives and agents
access to the officers, Employees, agents, customers, suppliers, properties
and offices and other facilities of the Company and the Subsidiary, and to
the Company's and the Subsidiary's books and records (including, without
limitation, Tax Returns and work papers of the Company's auditors) and
Commitments, and shall furnish theglobe and such others all financial,
operating, technical and other data and information which theglobe, through
its officers, directors, employees, counsel, accountants, advisors,
representatives or agents, may from time to time reasonably request.
(b) In connection with the continuing operation of the
business of the Company and the Subsidiary between the date of this
Agreement and the Closing, the Company shall, and shall cause the
Subsidiary to, use all reasonable best efforts to consult in good faith on
a regular and frequent basis with representatives of theglobe to report
material operational developments and the general status of ongoing
operations. The Company and the Sellers acknowledge that any such
consultation shall not constitute a waiver by theglobe of any rights it may
have under this Agreement and that theglobe shall not have any Liability or
responsibility for any actions of the Company, the Subsidiary or any of
their officers, directors, Employees, agents or Affiliates with respect to
matters which are the subject of such consultations.
Section 5.5 Consents. The Parties agree to cooperate in obtaining any
consents of any third parties necessary or desirable to any Party in
connection with the transactions contemplated hereunder (each, a
"Consent"). The Parties agree that in the event such a Consent is not
obtained prior to the Closing and the Closing occurs, the Sellers will,
subsequent to the Closing, cooperate with theglobe and the Surviving
Corporation in attempting to obtain the Consent.
Section 5.6 Best Efforts. Subject to the terms and conditions in this
Agreement, each of the Parties shall use its reasonable best efforts to
take promptly, or cause to be taken, all actions and to do promptly, or
cause to be done, all things necessary, proper or advisable under
applicable Laws to consummate and make effective the transactions
contemplated hereby and to cause the conditions to the Merger to be
satisfied.
Section 5.7 Notice. During the period from the date hereof to the
Closing, each Party shall give prompt written notice to the other Parties
of (a) the occurrence, or failure to occur, of any event which occurrence
or failure would cause or be likely to cause any representation or warranty
of the Party giving notice contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Closing, or (b) any failure of the Party giving notice 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 5.7 shall not limit or otherwise affect
the remedies available hereunder to the Parties receiving notice, or modify
in any way any disclosure made in this Agreement or the Schedules hereto as
of the date hereof.
Section 5.8 No Solicitation. Each of the Sellers agrees that for a
period of three years following the Closing it shall not, without the prior
written consent of the Company, directly or indirectly solicit for
employment, including, without limitation, recommending to any subsequent
employer the solicitation for employment of, or hire, any Employee of the
Company or the Subsidiary.
Section 5.9 Further Assurances. After the Closing, each of the Parties
will, at the request of any other Party (a "Requesting Party"), execute,
acknowledge and deliver to such Requesting Party all such further
assignments, conveyances, endorsements, deeds, powers of attorney, consents
and other documents and take such other action as a Requesting Party may
reasonably request to consummate the transactions contemplated hereby.
Section 5.10 Obligations of the Sellers. Each of the Sellers agrees to
cause the Company to perform each of its covenants and agreements contained
in this Agreement and the Ancillary Documents to be performed prior to or
at the Effective Time, and to be responsible for any breach by the Company
thereof.
Section 5.11 Confidentiality. Each of the Sellers agrees that no
Seller will disclose any Confidential Information after the date hereof to
any third party. "Confidential Information" shall mean any information
relating to the Company, the Subsidiary or theglobe which is in the
possession of any Seller or its Affiliates on the date hereof or on the
Closing Date, other than information which is or becomes available to the
public (other than as a result of the disclosure by such Sellers or any of
its Affiliates of such information in contravention of the covenants set
forth in this Section 5.11). The covenants and agreements contained in this
Section 5.11 shall expire on the fifth anniversary of the Closing Date.
Section 5.12 Preparation of Information Statement. As soon as
practicable after the execution of this Agreement, theglobe shall prepare,
with the cooperation of the Company and the Sellers, an Information
Statement (the "Information Statement") to be distributed to the
Stockholders (other than the Sellers) which shall constitute a disclosure
document for the offer and sale of the shares of theglobe Common Stock to
be received by the Stockholders in the Merger. theglobe, the Company and
each of the Sellers shall each use reasonable efforts to cause the
Information Statement to comply with applicable federal and state
securities laws. The Company agrees to provide promptly to theglobe such
information concerning its business and financial statements and affairs
and otherwise as, in the reasonable judgment of theglobe or its counsel,
may be required or appropriate for inclusion in the Information Statement,
or in any amendments or supplements thereto, and the Company further agrees
to cause its counsel and auditors to cooperate with theglobe's counsel and
auditors in the preparation of the Information Statement. The Company and
each of the Sellers will promptly advise theglobe orally and in writing if
at any time prior to the Effective Time any of them shall obtain knowledge
of any facts that might make it necessary or appropriate to amend or
supplement the Information Statement in order to make the statements
contained in or incorporated by reference therein not misleading or to
comply with applicable law.
Section 5.13 Comfort Letter; Consents of Auditors. The Company and the
Sellers shall cause PriceWaterhousecoopers LLP to deliver, on a timely
basis, (i) all necessary consents to the inclusion of the Financial
Statements in all filings of theglobe with the SEC and (ii) a "comfort"
letter customary form.
Section 5.14 Listing Application. As soon as reasonably practicable
following the Effective Time, theglobe shall prepare and submit to the
Nasdaq National Market a listing application covering the shares of
theglobe Common Stock issuable in the Merger, and shall use its reasonable
best efforts to obtain approval for the listing of such shares, subject to
official notice of issuance.
Section 5.15 Director and Officer Indemnification. theglobe agrees
that all rights to indemnification or exculpation now existing in favor of
the Employees, directors or officers of the Company and the Subsidiary (the
"Company Indemnified Parties") as provided in the Certificate of
Incorporation, as amended, or the Amended and Restated By-laws of the
Company or the Memorandum and Articles of Association of the Subsidiary
shall continue in full force and effect for a period of not less than two
years from the Effective Time; provided, however, that, in the event any
claim or claims are asserted or made within such two-year period, all
rights to indemnification in respect of any such claim or claims shall
continue until disposition of any and all such claims. Notwithstanding
anything in the first sentence of this Section 5.15 to the contrary, there
shall be no obligation on the part of the Surviving Corporation or theglobe
to indemnify or exculpate any Company Indemnified Party for any matter
arising out of the Merger or any matter with respect to which the Sellers
have indemnification obligations pursuant to this Agreement.
Section 5.16 Representation Letters. The Sellers agree to cause the
Company's and the Subsidiary's management to promptly deliver to theglobe
management representation or similar letters requested by the Company or
theglobe or their accountants in connection with the delivery of audit
reports and comfort letters.
Section 5.17 Demand Notes. The Sellers shall cause each holder of a
Demand Note to exercise simultaneously with the Effective Time its right to
have the Demand Notes held by such holder repaid in shares of theglobe
Common Stock in accordance with the original terms of such Demand Notes,
which shall result in the delivery to the holder of each Demand Note of an
amount of shares of theglobe Common Stock equal to the product of the
number of Demand Note Company Shares deemed allocable to the Demand Notes
held by such holder multiplied by the Merger Consideration Per Share. Such
delivery shall be in full satisfaction of all amounts owing and all other
obligations of the Company and theglobe arising under and with respect to
the Demand Notes, and such delivery shall be deemed made at the Closing and
the holder of the Demand Notes shall be deemed to be the record holder of
such shares for all purposes. The Sellers shall deliver each Demand Note at
the Closing, at which each such Demand Note shall be cancelled.
Section 5.18 Termination of Certain Agreements. The Company and each
of the Sellers that is a party to any of (i) the Voting Trust Agreement,
dated November 10, 1998, by and among, Fog Studios, Inc., the Company and
Xxxxx X. Xxx, (ii) the Common Stock Purchase Agreement, dated as of
December 30, 1998, by and among the Company, Xxxxx Xxx, Maricopa Investment
Corporation, Ensign Trading Company, Xxxxx Xxxxxxxx, and Xxxxxx Xxxxxx, and
the purchasers listed on Exhibit A thereto, (iii) the Investors' Rights
Agreement, dated as of December 30, 1998, by and among the Company and the
investors listed on Exhibit A thereto, (iv) the Shareholders Agreement,
dated as of November 26, 1996, by and among the Company and the other
parties signatory thereto, (v) the Put Agreement, dated as of February 6,
1997, by and between the Company and Xxxxx Xxxxxxxx Xxxxx Xxxxxxxxx, (vi)
the Put Agreement, dated as of February 6, 1997, by and between the Company
and Xxxxx X. Xxxxxxx, (vii) the Put Agreement, dated as of February 6,
1997, by and between the Company and Xxxxxxxx Xxx, or (viii) the Share
Purchase Agreement, dated February 6, 1997, Xxxxx Xxxxxxxx Xxxxx Xxxxxxxxx
and Xxxxx X. Xxxxxxx, agree that effective simultaneously with the
Effective Time (each, a "Terminating Agreement"), each such agreement to
which it is a party (including all obligations of the Company thereunder)
shall terminate and be of no further force and effect.
5.19 Conveyance Agreement. The Company and Sellers agree to obtain an
agreement from Accursed Toys, Inc. in form and substance satisfactory to
theglobe confirming that the consummation of the transactions contemplated
hereby shall not cause any acceleration of the Company's obligations under
the Conveyance Agreement (the "Accursed Confirmation Agreement").
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Obligations of theglobe and Merger Sub. The
obligations of theglobe and Merger Sub to consummate the Merger and the
other transactions contemplated by this Agreement shall be subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Representations and Warranties. Each representation and
warranty of the Company and each Seller contained in this Agreement shall
be true and correct in all material respects (without giving effect to any
materiality (or correlative meaning) qualifications included in such
representations and warranties) when made and on and as at the Effective
Time (except to the extent such representations and warranties shall have
been expressly made as of an earlier date, in which case such
representations and warranties shall have been true and correct as of such
earlier date) with the same force and effect as if made on and as at the
Effective Time.
(b) Agreements and Covenants. The Company and each Seller
shall have performed in all material respects each agreement and covenant
required by this Agreement to be performed by them at or before the
Effective Time.
(c) Certificates. theglobe shall have received a certificate
of the Sellers certifying that the conditions set forth in paragraphs (a)
and (b) above have been satisfied.
(d) Consents. All Consents necessary or desirable in
connection with any item disclosed or required to be disclosed pursuant to
clauses (ii)(z), (iii) or (iv) of Section 3.7(a) shall have been obtained
or given.
(e) Stockholder Consent. The holders of at least 90% of the
outstanding shares of the Company Common Stock shall have executed (and not
subsequently revoked their consent pursuant to) an action of stockholders
by written consent pursuant to Section 228 of the DGCL adopting this
Agreement and approving the Merger in accordance with Section 251 of the
DGCL (the "Stockholder Consent") and the Stockholder Consent shall have
been delivered to theglobe, provided that theglobe shall have the right at
any time to lower the 90% threshold, but not below the minimum amount
required for such consent pursuant to the DGCL.
(f) No Prohibitions. No statute, rule or regulation or order
of any court or administrative agency shall be in effect which prohibits
theglobe or Merger Sub from consummating the transactions contemplated
hereby.
(g) No Material Adverse Change. Since December 31, 1998, the
Company shall not have suffered any material adverse change in the
business, assets liabilities, results of operations or prospects of the
Company.
(h) Employment Agreements. Each of the persons listed on
Schedule 6.1(h) shall have executed and delivered an Employment Agreement
in form and substance satisfactory to theglobe.
(i) Opinion of the Company's Counsel. theglobe shall have
received an opinion, on and dated the Closing Date, from Xxxxxxxx
Ingersoll, outside counsel to the Company, in form and substance reasonably
satisfactory to theglobe.
(j) Blue Sky Approvals. theglobe shall have obtained all
necessary blue sky approvals for the issuance of the theglobe Common Stock
pursuant to the Merger.
(k) Secretary's Certificate. The Company shall have
delivered to theglobe a certificate of its Secretary certifying as to:
(i) the Stockholder Consent and resolutions of the
Company's Board of Directors authorizing the execution, delivery and
performance of this Agreement and the execution, delivery and
performance of all other agreements, documents and transactions
contemplated hereby; and
(ii) the incumbency of its officers executing this
Agreement and the Ancillary Documents.
(l) Escrow Agreement. The Company, each of the Sellers and
the Escrow Agent shall have executed the Escrow Agreement.
(m) Demand Notes. Each of the Demand Notes shall have been
repaid for shares of theglobe Common Stock in accordance with Section 5.17
and the terms of such Demand Note.
(n) Regulation S. Each Stockholder who is not a "U.S.
person" within the meaning of Regulation S shall have executed and
delivered to theglobe a letter in the form attached as Exhibit 6.1(n)
hereto. theglobe shall be entitled to place legends as specified in such
letters on the certificates representing any shares of theglobe Common
Stock to be received by such Stockholders pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for theglobe Common Stock consistent with the terms of such
letters.
(o) Intellectual Property Rights. Each of the persons listed
on Schedule 6.1(o) hereto shall have executed and delivered an assignment
of intellectual property rights in the form attached as Exhibit 6.1(o)
hereto.
(p) Certain Terminations. Agreements terminating each of the
Terminating Agreements in form and substance satisfactory to theglobe shall
have been executed and delivered by the parties thereto and shall be in
full force and effect at the Effective Time.
(q) Accursed Toys Confirmation Agreement. The Accursed
Confirmation Agreement shall have been executed and delivered by Accursed
Toys, Inc. and the Company and shall be in full force and effect at the
Effective Time.
Section 6.2 Conditions to Obligations of the Company and the Sellers.
The obligations of the Company and the Sellers to consummate the Merger and
the other transactions contemplated by this Agreement shall be subject to
the satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Representations and Warranties. Each representation and
warranty of theglobe and Merger Sub contained in this Agreement shall be
true and correct in all material respects (without giving effect to any
materiality (or correlative meaning) qualifications included in such
representations and warranties) when made and on and as at the Effective
Time (except to the extent such representations and warranties shall have
been expressly made as of an earlier date, in which case such
representations and warranties shall have been true and correct as of such
earlier date) with the same force and effect as if made on and as at the
Effective Time.
(b) Agreements and Covenants. Each of theglobe and Merger
Sub shall have performed in all material respects each of its agreements
and covenants required by this Agreement to be performed by them at or
before the Effective Time.
(c) Certificates. The Company shall have received a
certificate of theglobe certifying that the conditions set forth in
paragraphs (a) and (b) above have been satisfied.
(d) No Prohibition. No statute, rule or regulation or order
of any court or administrative agency shall be in effect which prohibits
the Company or the Sellers from consummating the transactions contemplated
hereby.
(e) Secretary's Certificate. Each of theglobe and Merger Sub
shall have delivered to the Company a certificate of its secretary
certifying as to:
(i) resolutions of its Board of Directors authorizing
the execution, delivery and performance of this Agreement and the
execution, delivery and performance of all other agreements, documents
and transactions contemplated hereby; and
(ii) the incumbency of its officers executing this
Agreement and the Ancillary Documents.
(f) Escrow Agreement. theglobe, Merger Sub and the Escrow
Agent shall have executed the Escrow Agreement.
(g) Registration Rights Agreement. theglobe shall have
executed and delivered the Registration Rights Agreement.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated at any time
before the Effective Time (except as otherwise provided) as follows:
(a) by mutual written consent of each of theglobe and the
Company;
(b) by either the Company or theglobe, if the Effective Time
shall not have occurred on or before April 30, 1999 (the "Termination
Date").
(c) by either the Company or theglobe, if there shall have
been a breach by the other (or any Affiliate of the other) of any of its
(x) representations or warranties contained in this Agreement, which breach
would result in the failure to satisfy one or more of the conditions set
forth in Section 6.1(a) (in the case of a breach by the Company or any of
its Affiliates) or Section 6.2(a) (in the case of a breach by theglobe or
any of its Affiliates), or (y) covenants or agreements contained in this
Agreement, which breach would result in the failure to satisfy one or more
of the conditions set forth in Section 6.1(b) (in the case of a breach by
the Company or any of its Affiliates) or Section 6.2(b) (in the case of a
breach by theglobe or any of its Affiliates), and in any such case such
breach shall be incapable of being cured or, if capable of being cured,
shall not have been cured within 15 days after written notice thereof shall
have been received by the Party alleged to be in breach.
Section 7.2 Effect of Termination and Abandonment. In the event of
termination of this Agreement pursuant to this Article VII, this Agreement
shall become void and of no effect with no Liability on the part of any
Party (or of any of its representatives); provided, however, that no such
termination shall relieve the defaulting or breaching Party (whether or not
it is the terminating Party hereto) from any Liability to any other Party
hereto; and provided, further, that Sections 5.11, 9.2, 9.8 and 9.9 and
this Section 7.2 shall survive the termination of this Agreement.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Survival. The representations and warranties of the
Parties contained herein or in any Ancillary Document shall expire,
together with any associated right of indemnification, on the second
anniversary of the Closing Date, except that the representations and
warranties set forth in Sections 3.6(b), 3.18 and 3.20(i) shall survive
until 30 days following the expiration of the applicable statute of
limitations (including any extensions thereof) and the representations and
warranties set forth in Section 3.3 shall not expire. After the expiration
of such periods, any claim by a Party based upon any such representation or
warranty shall be of no further force and effect, except to the extent a
Party has asserted a claim in accordance with this Article VIII for breach
of any such representation or warranty prior to the expiration of such
period, in which event any representation or warranty to which such claim
relates shall survive with respect to such claim until such claim is
resolved as provided in this Article VIII. All covenants and agreements of
the Parties shall survive the Closing until performed in accordance with
their terms.
Section 8.2 Indemnification by theglobe. (a) From and after the
Closing Date, theglobe shall indemnify, defend and hold harmless the
Sellers and their Affiliates (collectively, the "Sellers Indemnified
Group") from and against all Liabilities, losses, damages, penalties,
claims (including third-party claims, whether or not meritorious), costs,
interest, judgments, fines, amounts paid in settlement and expenses
(including, without limitation, reasonable attorney's fees, whether
incurred in connection with a claim for indemnification hereunder or in
connection with any third party claim) (collectively, "Losses") incurred or
suffered by any member of the Sellers Indemnified Group based upon,
resulting from or arising out of (i) the breach of any representation or
warranty of theglobe or Merger Sub contained in this Agreement or any of
the Ancillary Documents or (ii) the breach of any covenant or agreement of
theglobe or Merger Sub contained in this Agreement or any of the Ancillary
Documents.
(b) theglobe's indemnification obligations pursuant to
Section 8.2(a)(i) shall be effective only after the amount of Losses, in
the aggregate, incurred by the Seller Indemnified Group exceed $250,000,
and if such aggregate liabilities exceed $250,000, theglobe shall be liable
for all such Losses, subject to the following sentence, but only to the
extent such Losses exceed the initial $250,000. The maximum amount
recoverable by the Seller Indemnified Group, in the aggregate, under
Section 8.2(a)(i) shall be the aggregate number of shares of theglobe
Common Stock issuable in connection with the Merger or the repayment of the
Demand Notes (collectively, the "Issuable Shares"). theglobe shall make
indemnification payments pursuant to this Section 8.2 in the form of
theglobe Common Stock, and any such shares shall be valued at the Reference
Share Price.
(c) The Sellers each acknowledge and agree that, except (i)
as expressly otherwise provided herein or (ii) to the extent any Losses
incurred by such Party result from any fraudulent misrepresentation by
theglobe, the Seller Indemnified Group's sole and exclusive monetary remedy
with respect to any and all claims based upon, resulting from or arising
out of the breach of this Agreement or any Ancillary Document by theglobe
or Merger Sub or (following the Effective Time) the Company shall be
pursuant to the indemnification provisions of this Article VIII (including,
without limitation, Section 8.1).
Section 8.3 Indemnification by the Sellers. (a) From and after the
Closing Date, each of the Sellers, jointly and severally, shall indemnify,
defend and hold harmless theglobe, Merger Sub, the Surviving Corporation,
the Subsidiary and each of their respective Affiliates, officers,
directors, employees, members, agents, successors, transferees and assigns
(collectively, "theglobe Indemnified Group") from and against all Losses
incurred or suffered by any member of theglobe Indemnified Group based
upon, resulting from or arising out of (i) the breach of any representation
or warranty of any of the Sellers or the Company contained in this
Agreement or any of the Ancillary Documents, (ii) the breach of any
covenant or agreement of any of the Sellers (provided, however, that in no
event will any Seller be liable for any breach of the covenants contained
in Section 5.8 of this Agreement by any other Seller) or the Company (but
with respect to the Company only for breaches of covenants and agreements
to be performed prior to or at the Effective Time) contained in this
Agreement or any of the Ancillary Documents, (iii) any Indebtedness, other
than pursuant to the Conveyance Agreement and any portion of the
Non-Permitted Indebtedness Amount (including Indebtedness pursuant to the
Demand Notes) for which the Aggregate Consideration was reduced, incurred
prior to or at the Effective Time which remains outstanding at the
Effective Time (the Losses to include the dollar amount of any such
Indebtedness), (iv) the exercise of dissenters' rights by holders of
Dissenting Shares (the Losses to include the entire amount of any payments
required to be made by the Company in respect of dissenters' rights), (v)
any inaccuracies in the Closing Certificate, (vi) any claims relating to
shares of Company Common Stock issued, and warrants, options or other
equity awards granted, by the Company, and (vii) any claims relating to or
involving the treatment of any Options granted prior to the Closing Date as
"incentive stock options" within the meaning of Section 422 of the Code.
(b) The Sellers' indemnification obligations pursuant to
Section 8.3(a)(i) shall be effective only after the amount of Losses, in
the aggregate, incurred by theglobe Indemnified Group exceed $250,000 (the
"Basket"), and if such aggregate liabilities exceed the Basket the Sellers
shall be liable for the dollar value of such liabilities in excess of the
Basket, but only to the extent such Losses exceed the Basket. The Basket
shall not be applicable to a breach of the representations and warranties
in Sections 3.3, 3.6(b), 3.18 and 3.20(i). The maximum amount recoverable,
in the aggregate, under Section 8.3(a)(i) from any Seller shall be an
amount in cash equal to the product of (x) the Issuable Shares issued to
such Seller multiplied by (y) the Reference Share Price (each, a "Seller
Cap"); provided, however, that the Seller Caps shall not be applicable to
amounts recoverable as a result of a breach of the representations and
warranties contained in Sections 3.3, 3.6(b), 3.18 and 3.20(i).
(c) The materiality (or correlative meaning) qualifications
included in the representations and warranties set forth in Article III
shall have no effect on any provisions in this Section 8.3 concerning the
indemnities of the Seller with respect to such representations and
warranties, each of which is given as though there were no materiality
qualification for purposes of such indemnities.
(d) The Company and theglobe each acknowledge and agree
that, except (i) as expressly otherwise provided herein or (ii) to the
extent any Losses incurred by such Party result from any fraudulent
misrepresentation by the Sellers or (prior to or at the Effective Time) the
Company, theglobe Indemnified Group's sole and exclusive economic remedy
with respect to any and all claims based upon, resulting from or arising
out of the breach of this Agreement or any Ancillary Document by the
Sellers or (prior to or at the Effective Time) the Company shall be
pursuant to the indemnification provisions of this Article VIII.
Section 8.4 Escrow. (a) The number of shares of theglobe Common Stock
delivered to the Sellers at or following the Effective Time pursuant to
Section 2.5(c) or Section 5.19 shall be reduced on a pro rata basis by an
aggregate number of shares equal to ten percent of the Issuable Shares (the
"Escrowed Shares"). The Escrowed Shares shall be held in escrow pursuant to
an Escrow Agreement in the form attached as Exhibit 8.4 hereto (the "Escrow
Agreement"). At the Effective Time, theglobe shall deposit the Escrowed
Shares with the escrow agent (the "Escrow Agent") pursuant to the terms of
the Escrow Agreement. For such period of time that the Escrowed Shares are
held in Escrow, the Seller shall have all rights with respect to the voting
of such shares in connection with all matters coming before a vote of the
holders of shares of theglobe Common Stock.
(b) Notwithstanding anything in this Article VIII to the
contrary, any claim by a member of theglobe Indemnified Group for
indemnification against any Seller shall first be satisfied by recourse to
the Escrowed Shares. Any claim by a member of theglobe Indemnified Group
for indemnification shall be made by giving written notice in accordance
with the terms of Section 8.5. In accordance with the terms of the Escrow
Agreement, the Escrow Agent shall release to the member of theglobe
Indemnified Group Escrowed Shares, as applicable, having an aggregate value
(with shares valued at the Closing Share Price) equal to the Losses, if
any, ultimately allowed under such claim. theglobe shall thereupon retire
(and hold in treasury) or cancel such released shares and, if the member of
theglobe Indemnified Group with respect to such Losses is not theglobe, pay
or cause to be paid such Losses to such member of theglobe Indemnified
Group.
(c) For purposes of this Section 8.4 and the Escrow
Agreement, in view of the fact that successful claims for indemnification
will ultimately have the effect of reducing the number of shares issuable
to the Sellers, Xxxxx Xxx shall act as the representative and
attorney-in-fact (the "Representative") on behalf of himself and all of the
other Sellers, subject to the provisions of Section 8.4(d). The
Representative shall keep the Sellers reasonably informed of his decisions
of a material nature. The Representative is authorized to take any action
deemed by him appropriate or reasonably necessary to carry out the
provisions of, and is authorized to act on behalf of, the Sellers for all
purposes related to this Article VIII, including the acceptance of service
of process upon the Sellers and the acceptance or compromise of claims for
indemnification, and all decisions and actions of the Representative shall
be binding and conclusive upon the Sellers and may be relied upon by
theglobe Indemnified Parties and the Escrow Agent as the decision and
action of all of the Sellers.
(d) The Representative shall not be liable to any of the
Sellers for any error of judgment, act done or omitted by him in good
faith, or mistake of fact or Law unless caused by his own gross negligence
or willful misconduct. In taking any action or refraining from taking any
action whatsoever the Representative shall be protected in relying upon any
notice, paper or other document reasonably believed by him to be genuine,
or upon any evidence reasonably deemed by him to be sufficient. The
Representative may consult with counsel in connection with his duties and
shall be fully protected in any act taken, suffered or permitted by him in
good faith in accordance with the advice of counsel. The Representative
shall not be responsible for determining or verifying the authority of any
Person acting or purporting to act on behalf of any party to this Agreement
or the Escrow Agreement.
Section 8.5 Indemnification Procedure. (a) The party seeking
indemnification under this Agreement (the "Indemnified Party") shall
promptly notify the party from which indemnification is being sought (the
"Indemnifying Party") (or, if indemnification is sought pursuant to the
Escrow Agreement, the Representative and the Escrow Agent) of the facts and
circumstances upon which the Indemnified Party intends to base a claim for
indemnification hereunder ("Notices"). Notice shall in all events be
considered prompt if given (1) no later than 15 days after the Indemnified
Party learns of the facts upon which it will claim such indemnification or
(2) if earlier, in sufficient time to allow the Indemnifying Party to
exercise its rights pursuant to this Article VIII; provided, however, that
the failure to provide such Notice of claims promptly (so long as a notice
of claims is given before the date on which the applicable representation
or warranty ceases to survive) shall not affect the obligations of the
Indemnifying Party hereunder except to the extent the Indemnifying Party is
prejudiced thereby. The Indemnifying Party shall have the right, at its own
cost, to participate jointly in the defense of any third-party claim,
demand, lawsuit or other proceeding in connection with which the
Indemnified Party has claimed indemnification hereunder, and may elect (the
"Election") to take over the defense of such claim within 10 business days
following Notice thereof upon its written unconditional acknowledgment of
its obligation to indemnify the Indemnified Party with respect to such
claim; provided, however, that theglobe shall be permitted, at its option,
to require that the Sellers shall not take over the defense of any claim
brought by any Person with which theglobe or the Surviving Corporation has
a material business relationship against any member of theglobe Indemnified
Group for which indemnification is available pursuant to this Article VIII,
and upon exercise of such option such member of theglobe Indemnified Group
shall defend such claim, subject to the following conditions: (i) the
Sellers shall be entitled, in their discretion and at their expense, to
engage counsel and to participate in any discussions, meetings,
negotiations and other communications which may be held or conducted
between such member of theglobe Indemnified Group and such customer or
supplier, or their respective counsels, with respect to such claim; (ii)
such member of theglobe Indemnified Group shall consult with the
Representative before making or communicating to such customer or supplier,
or its counsel, any decisions concerning such member's strategy or position
with respect to the defense of such claim; and (iii) such member of
theglobe Indemnified Group shall not settle or otherwise dispose of such
claim without the consent of the Representative. If the Indemnifying Party
makes an Election, (x) it shall keep the Indemnified Party informed as to
the status of the applicable matter and shall send promptly copies of all
pleadings to the Indemnified Party, (y) with respect to any issue involved
in such claim, it shall have the sole right, with respect to claims or
portions of claims seeking monetary damages only, to settle or otherwise
dispose of such claim on such terms as it, in its sole discretion, shall
deem appropriate; provided, however, that the consent of the Indemnified
Party to the settlement or disposition shall be required if such settlement
or disposition shall result in or would reasonably be expected to result in
any Liability to, equitable relief against or adverse business effect on
the Indemnified Party, which consent shall not be unreasonably withheld or
delayed, and (z) the Indemnified Party shall have the right to participate
jointly in the defense of such claim, but shall do so at its own cost not
subject to reimbursement. If the Indemnifying Party does not elect to take
over the defense of a third-party claim, the Indemnified Party shall have
the right to contest, compromise or settle such claim in the exercise of
its reasonable judgment.
(b) Notwithstanding any provision of this Article VIII to
the contrary, with respect to any third-party claim or demand that the
Indemnifying Party is defending, the Indemnified Party shall have the right
to retain separate counsel to represent it and the Indemnifying Party shall
pay the fees and expenses of such separate counsel if the Indemnified Party
receives and certifies to the Indemnified Party that it has received advice
of counsel to the effect that there exist sufficient conflicts that make it
reasonably necessary or appropriate for separate counsel to represent the
Indemnified Party and the Indemnifying Party.
(c) The amounts for which an Indemnifying Party shall be
liable under Sections 8.2 and 8.3 of this Agreement shall be net of any
insurance proceeds received by the Indemnified Party (less the costs of
collection of such insurance proceeds) compensating the Indemnified Party
for Losses of the Indemnified Party for which the Indemnifying Party would
otherwise be liable pursuant to this Article VIII.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Public Announcements. No Party shall make any public
statements, including, without limitation, any press releases, with respect
to this Agreement and the transactions contemplated hereby without the
prior written consent of the Company and theglobe, except as may be
required by Law.
Section 9.2 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been
duly given or made as of the date of receipt and shall be delivered
personally or mailed by registered or certified mail (postage prepaid,
return receipt requested), sent by overnight courier or sent by telecopy
(with a hard copy following), to the applicable Party at the following
addresses or telecopy numbers (or at such other address or telecopy number
for a Party as shall be specified by like notice):
(a) if to the Company or any Seller or other Stockholder:
Attitude Network, Ltd.
00000 Xxxxxxx Xxxxxxx Xxxx Xxxxx, Xxxxx 0
Xxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxx Xxx
Telecopy No.: (000) 000-0000
With a copy to:
Cheffy Xxxxxxxxx Xxxxxx and Xxxxxxx
000 Xxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attention: Xx Xxxxxx, Esq.
Xxxxx Xxxxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
and a copy to:
Xxxxxxxx Ingersoll, P.C.
Nationsbank, Suite 2100
000 X.X. 0xx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
(b) if to theglobe or Merger Sub:
xxxxxxxx.xxx, inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxx X. Xxxxxxxxx
Telecopy No.: (000) 000-0000
With a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxx Jacob, Esq.
Xxxxxxxx X. Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
Section 9.3 Certain Definitions; Certain Interpretations. (a) For
purposes of this Agreement, the following terms shall have the following
meanings:
"Affiliate" of a Person means a Person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, the first mentioned
Person. Each of the Company and the Subsidiary shall be deemed to be
an Affiliate of the Sellers and the Stockholders before the Effective
Time and an Affiliate of theglobe after the Effective Time.
"Ancillary Documents" shall mean all Commitments,
certificates and other documents delivered simultaneously with this
Agreement or to be delivered at the Closing in connection with the
transactions contemplated hereby including, without limitation, the
Employment Agreements.
"control" (including the terms "controlled by" and
"under common control with") means the possession, direct or indirect,
of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise.
"Person" shall mean an individual, a corporation,
a limited liability company, a partnership, an association, a trust or
any other entity or organization, including a Governmental Entity.
(b) Whenever the words "include," "includes" or "including"
are used in this Agreement, they shall be understood to be followed by the
words "without limitation" if such words are not already present. The words
"to the knowledge of the Company and the Sellers" and words of similar
import shall mean the knowledge of any officer of the Company or the
Subsidiary or any Seller.
(c) All pronouns used herein shall be deemed to refer to the
masculine, feminine or neuter gender as the context requires.
Section 9.4 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.5 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 materially adverse to any Party. Upon a determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the Parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the maximum extent possible.
Section 9.6 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, constitutes the entire agreement and supersedes any and all
other prior agreements and undertakings, both written and oral, among the
Parties, or any of them, with respect to the subject matter hereof and,
except as specifically set forth herein, does not and is not intended to,
confer upon any Person other than the Parties any rights or remedies
hereunder.
Section 9.7 Assignment. Except as otherwise set forth herein, this
Agreement shall not be assigned by any Party by operation of law or
otherwise without the express written consent of each of the other Parties.
Section 9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with, the laws of the State of New York without
regard to the conflicts of laws provisions thereof, provided that the
provisions of Article II relating to the form of Merger shall be governed
by the applicable provisions of the DGCL. Each of the Parties irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of New York and the courts of the United States of
America each located in the Borough of Manhattan in the City of New York
for any Litigation arising out of or relating to this Agreement or the
Merger or any of the other transactions contemplated hereby (and agrees not
to commence any Litigation relating hereto except in these courts), and
further agrees that service of any process, summons, notice or document by
U.S. registered mail to its respective address set forth in Section 9.2
shall be effective service of process for any Litigation brought against it
in any such court. Each of the Parties hereby irrevocably and
unconditionally waives any objection to the laying of venue of any
Litigation arising out of this Agreement or the Merger or any of the other
transactions contemplated hereby in the courts of the State of New York or
the courts of the United States of America located in the Borough of
Manhattan in the City of New York and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court
that any such Litigation brought in any such court has been brought in an
inconvenient forum. Each of the Parties hereby irrevocably and
unconditionally waives any right it may have to trial by jury in connection
with any Litigation arising out of or relating to this Agreement, the
Merger or any of the other transactions contemplated hereby or thereby.
Section 9.9 Transaction Costs. All Transaction Costs other than
Invoiced Transaction Costs which reduced the Aggregate Consideration shall
be paid by the Sellers. All fees and expenses of financial, legal,
accounting and other advisors retained by the Sellers and other
out-of-pocket costs of the Sellers incurred in connection with the
transactions contemplated hereby shall be paid by the Sellers. All fees and
expenses of financial, legal, accounting and other advisors retained by
theglobe and other out-of-pocket costs of theglobe incurred in connection
with the transactions contemplated hereby shall be paid by theglobe.
Section 9.10 Amendments. This Agreement may be amended at any time
before the Effective Time but only pursuant to a writing executed and
delivered by theglobe and the Company and only in accordance with the
provisions of applicable Law.
Section 9.11 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different Parties in separate counterparts,
each of which when executed shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
xxxxxxxx.xxx, inc.
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
BUCKY ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Treasurer and Secretary
ATTITUDE NETWORK LTD.
By: /s/ Xxxxx X. Xxx
-----------------------------------
Name: Xxxxx X. Xxx
Title: Chief Executive Officer
SELLERS:
/s/ Xxxxx X. Xxx
--------------------------------------
Xxxxx X. Xxx
/s/ Xxx Xxxxx
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Xxx Xxxxx
/s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx
/s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
/s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
MARICOPA INVESTMENT CORPORATION
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title:
CARIBBEAN CHILDREN'S FOUNDATION, LTD.
By: /s/ Xxxxxx Xxxxxx
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Name: Xxxxxx Xxxxxx
Title: Investment Advisor
ENSIGN TRADING CORPORATION
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title:
