AGREEMENT AND PLAN OF MERGER
BY AND AMONG
GO2NET, INC.
WTO ACQUISITION CORP.
WEB21
AND
THE PRINCIPAL SHAREHOLDER OF
WEB21
DATED
DECEMBER 31, 1998
TABLE OF CONTENTS
ARTICLE I
THE MERGER...............................................................................................1
1.1 The Merger......................................................................................1
1.2 Effective Time..................................................................................2
1.3 Effect of the Merger............................................................................2
1.4 Articles of Incorporation; By-Laws..............................................................2
1.5 Directors and Officers..........................................................................2
1.6 Additional Actions..............................................................................3
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES......................................................................3
2.1 Merger Consideration............................................................................3
2.2 Conversion of Shares............................................................................3
2.3 Exchange of Certificates........................................................................5
2.4 No Fractional Securities........................................................................6
2.5 Stock Transfer Books............................................................................6
2.6 No Further Ownership Rights in Company Stock....................................................6
2.7 Adjustment Event................................................................................6
2.8 Escrow..........................................................................................7
2.9 Tax Consequences................................................................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE PRINCIPAL SHAREHOLDER
........................................................................................................7
3.1 Corporate Organization..........................................................................7
3.2 Authorization...................................................................................8
3.3 Consents and Approvals; No Violations...........................................................8
3.4 Capitalization..................................................................................9
3.5 Financial Statements; Business Information......................................................9
3.6 Absence of Undisclosed Liabilities.............................................................10
3.7 Absence of Certain Changes or Events...........................................................10
3.8 Legal Proceedings, etc.........................................................................10
3.9 Taxes..........................................................................................11
3.10 Title to Properties and Related Matters........................................................12
3.11 Intellectual Property; Proprietary Rights; Employee Restrictions...............................13
3.12 Contracts......................................................................................15
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3.13 Employees; Employee Benefits...................................................................16
3.14 Compliance with Applicable Law.................................................................18
3.15 Ability to Conduct the Business................................................................19
3.16 Major Customers................................................................................19
3.17 Consultants, Sales Representatives and Other Agents............................................19
3.18 Accounts Receivable............................................................................19
3.19 Insurance......................................................................................20
3.20 Bank Accounts; Powers of Attorney..............................................................20
3.21 Minute Books, etc..............................................................................20
3.22 Related Person Indebtedness and Contracts......................................................20
3.23 Brokers; Payments..............................................................................20
3.24 Company Action.................................................................................21
3.25 Pooling of Interests...........................................................................21
3.26 Year 2000 Matters..............................................................................21
3.27 Disclosure.....................................................................................21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL SHAREHOLDER............................................................................21
4.1 Authorization etc..............................................................................21
4.2 Parent Common Stock............................................................................23
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION...........................................................................25
5.1 Corporate Organization.........................................................................25
5.2 Authorization..................................................................................25
5.3 Consents and Approvals; No Violations..........................................................26
5.4 Capitalization.................................................................................26
5.5 SEC Reports and Financial Statements...........................................................27
5.6 Absence of Certain Changes.....................................................................28
5.7 Litigation.....................................................................................28
5.8 Compliance with Applicable Law.................................................................28
5.9 Disclosure.....................................................................................29
5.10 Pooling of Interests...........................................................................29
5.11 Parent Action..................................................................................29
5.12 Intellectual Property..........................................................................29
5.13 Contracts......................................................................................29
5.14 Related Person Indebtedness and Contracts......................................................29
5.15 Brokers Fees...................................................................................29
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ARTICLE VI
CONDUCT OF BUSINESS OF THE COMPANY AND
THE PARENT PRIOR TO THE EFFECTIVE TIME..................................................................30
6.1 Conduct of Business of the Company.............................................................30
6.2 Conduct of Business of the Parent..............................................................31
6.3 Conduct of Business of Acquisition.............................................................32
6.4 Other Negotiations.............................................................................32
ARTICLE VII
ADDITIONAL AGREEMENTS...................................................................................33
7.1 Access to Properties and Records...............................................................33
7.2 Transfer of Shares.............................................................................33
7.3 Affiliates' Letters............................................................................33
7.4 Reasonable Efforts; etc........................................................................33
7.5 Material Events................................................................................33
7.6 Pooling of Interests...........................................................................34
7.7 Fees and Expenses..............................................................................34
7.8 Nasdaq National Market Listing.................................................................34
7.9 Tax Treatment..................................................................................34
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF
THE PARENT AND ACQUISITION..............................................................................34
8.1 Representations and Warranties True............................................................34
8.2 Performance....................................................................................35
8.3 Affiliates Letters.............................................................................35
8.4 Pooling of Interests...........................................................................35
8.5 Absence of Litigation..........................................................................35
8.6 Consents.......................................................................................35
8.7 Additional Agreements..........................................................................36
8.8 Opinion of Company Counsel.....................................................................36
8.9 Delivery of Certificates for Cancellation......................................................36
8.10 Appraisal Rights...............................................................................36
8.11 Certificate of Merger..........................................................................36
8.12 Payment of Indebtedness........................................................................36
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY AND THE PRINCIPAL SHAREHOLDER...................................................................37
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9.1 Representations and Warranties True............................................................37
9.2 Performance....................................................................................37
9.3 Absence of Litigation..........................................................................37
9.4 Consents.......................................................................................37
9.5 Additional Agreements..........................................................................38
9.6 Opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇.........................................................38
9.7 Certificate of Merger..........................................................................38
9.8 Shares of Parent Common Stock..................................................................38
9.9 Tax Opinion....................................................................................38
ARTICLE X
TERMINATION.............................................................................................38
10.1 Termination....................................................................................38
10.2 Effect of Termination..........................................................................39
ARTICLE XI
INDEMNIFICATION; SURVIVAL OF
REPRESENTATIONS AND WARRANTIES..........................................................................39
11.1 Indemnity Obligations..........................................................................39
11.2 Notification of Claims.........................................................................40
11.3 Duration.......................................................................................40
11.4 Escrow.........................................................................................41
11.5 No Contribution................................................................................41
ARTICLE XII
REGISTRATION RIGHTS.....................................................................................42
12.1 Registrable Shares.............................................................................42
12.2 Required Registration..........................................................................42
12.3 Effectiveness; Suspension Right................................................................42
12.4 Expenses.......................................................................................44
12.5 Indemnification................................................................................44
12.6 Procedures for Sale of Shares Under Registration Statement.....................................46
12.7 Transferability of Registration Rights.........................................................47
ARTICLE XIII
MISCELLANEOUS PROVISIONS................................................................................47
13.1 Amendment......................................................................................47
13.2 Waiver of Compliance...........................................................................47
13.3 Notices........................................................................................48
13.4 Assignment.....................................................................................48
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13.5 No Third Party Beneficiaries...................................................................49
13.6 Public Announcements...........................................................................49
13.7 Counterparts...................................................................................49
13.8 Headings.......................................................................................49
13.9 Entire Agreement...............................................................................49
13.10 Governing Law..................................................................................49
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EXHIBITS
Exhibit A-1 Certificate of Merger (Delaware)
Exhibit A-2 Agreement of Merger (California)
Exhibit B Form of Letter of Transmittal
Exhibit C Escrow Agreement
Exhibit D Form of Affiliate Letter
Exhibit E Form of Employment and Non-Competition Agreement
Exhibit F Opinion of ▇▇▇▇▇▇▇ Coie LLP
Exhibit G Opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 31, 1998 by and among
Go2Net, Inc., a corporation organized under the laws of the State of Delaware
(the "Parent"), WTO Acquisition Corp., a corporation organized under the laws of
the State of Delaware and a wholly-owned subsidiary of the Parent
("Acquisition"), Web21, a corporation organized under the laws of the State of
California (the "Company"), and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, the principal shareholder of
the Company, (the "Principal Shareholder").
WHEREAS, the respective Boards of Directors of the Parent, Acquisition
and the Company have approved the merger of Acquisition with and into the
Company (the "Merger"), pursuant to which the Company will be the surviving
corporation and the shareholders of the Company immediately prior to such merger
(the "Shareholders") will be entitled to receive the consideration provided for
in this Agreement, all upon the terms and subject to the conditions set forth
herein;
WHEREAS, it is intended that the Merger qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and be accounted for as a pooling of interests
under the requirements of Opinion No. 16 (Business Combinations) of the
Accounting Principles Board of the American Institute of Certified Public
Accountants; and
WHEREAS, as a condition and inducement to Parent's willingness to enter
into this Agreement, all of the Shareholders have, concurrently with the
execution of this Agreement, executed and delivered to Parent written consents
approving this Agreement, the Merger and the other transactions contemplated
hereby.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements set forth herein, and intending to be
legally bound hereby, the parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. (a) At the Effective Time (as defined in Section 1.2),
and subject to and upon the terms and conditions of this Agreement, the
California General Corporate Code (the "CGCL") and the Delaware General
Corporation Law (the "DGCL"), Acquisition shall be merged with and into the
Company, the separate corporate existence of Acquisition shall cease, and the
Company shall continue as the surviving corporation. The Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
(b) Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Article X and subject to the satisfaction or waiver of the conditions set forth
in Articles VIII and IX, the consummation of
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the Merger (the "Closing") will take place as promptly as practicable (and in
any event within two business days) after satisfaction or waiver of the
conditions set forth in Articles VIII and IX, at the offices of ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional Corporation, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇, unless another date, time or place is agreed to in writing by the
Company and the Parent. The date of such Closing is referred to herein as the
"Closing Date."
1.2 Effective Time. As promptly as practicable after the satisfaction
or waiver of the conditions set forth in Articles VIII and IX, the parties
hereto shall cause the Merger to be consummated by filing agreements or
certificates of merger as contemplated by the CGCL and the DGCL in the forms of
Exhibit A-1 and Exhibit A-2 hereto (collectively, the "Certificate of Merger"),
together with any required related certificates, with the Secretary of State of
the State of California and the Secretary of State of the State of Delaware, in
such form as required by, and executed in accordance with the relevant
provisions of, the CGCL and the DGCL (the time of such filings being the
"Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of the CGCL and the DGCL. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, powers and franchises of the Company and Acquisition shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Acquisition shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Articles of Incorporation; By-Laws.
(a) Articles of Incorporation. Unless otherwise determined by
the Parent prior to the Effective Time, at the Effective Time, the Articles of
Incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended in accordance with the CGCL and such Articles of
Incorporation.
(b) By-Laws. Unless otherwise determined by the Parent prior
to the Effective Time, the By-Laws of the Company, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation
until thereafter amended in accordance with the CGCL, the Articles of
Incorporation of the Surviving Corporation and such By-Laws.
1.5 Directors and Officers. The directors of Acquisition immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Acquisition immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
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1.6 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other acts or things are necessary or
desirable to vest, perfect or confirm, or record or otherwise, in the Surviving
Corporation, its right, title or interest in or to any of the rights, properties
or assets of Acquisition or the Company acquired or to be acquired by reason of,
or as a result of, the Merger, or otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors shall
be authorized to execute and deliver, in the name and on behalf of Acquisition
or the Company, all such deeds, bills of sale, assignments and assurances and to
do, in the name and on behalf of Acquisition or the Company, all such other acts
and things necessary or desirable to vest, perfect or confirm any and all right,
title or interest in, to or under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this Agreement.
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES
2.1 Merger Consideration. Except as set forth in Section 2.2(d) hereof,
the consideration payable in the Merger to holders of shares of the Company's
Common Stock, no par value ("Company Common Stock"), shall consist solely of
shares of the Common Stock, par value $.01 per share, of the Parent ("Parent
Common Stock"), such shares of Parent Common Stock to be issuable at the Closing
in accordance with the terms of this Agreement.
2.2 Conversion of Shares.
(a) Conversion of Shares. Each share of Company Common Stock
issued and outstanding as of the Effective Time (other than shares owned by
holders who have properly exercised their rights of appraisal within the meaning
of Chapter 13 of the CGCL ("Dissenting Shares")) shall, by virtue of the Merger
and without any action on the part of the holder thereof, automatically be
converted into that number of shares of Parent Common Stock as shall be obtained
by dividing (A) 385,000 plus the number of shares of Parent Common Stock
determined by dividing (i) the cash proceeds received by the Company on or
immediately prior to the Closing Date with respect to the exercise of
outstanding stock options by (ii) the Closing Market Price (as defined below)
(the "Merger Consideration") by (B) the number of Fully Diluted Shares (as
hereinafter defined), with the resulting quotient (carried to five decimal
places) being referred to herein as the "Exchange Ratio." "Fully Diluted Shares"
shall be equal to the total number of outstanding shares of Company Common Stock
calculated on a fully diluted, fully converted basis as though all convertible
debt and equity securities and options (whether vested or unvested) and warrants
had been converted or exercised. The Exchange Ratio shall not change as a result
of fluctuations in the market price of Parent Common Stock between the date of
this Agreement and the Effective Time. The aggregate number of shares of Parent
Common Stock issued pursuant to this Section 2.2(a) shall be referred to in this
Agreement as the
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"Merger Shares." On the Closing Date, the Company will deliver to Parent a
certificate certifying the cash proceeds received by the Company from the
exercise of stock options.
(b) Treasury Shares. Each share of Company Common Stock held
in the Company's treasury as of the Effective Time, if any, shall, by virtue of
the Merger, be canceled without payment of any consideration therefor.
(c) Stock Options. At the Effective Time, all outstanding
options to purchase shares of Company Common Stock (each a "Stock Option"),
whether vested or unvested, shall be deemed assumed by the Parent and deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Stock Option prior to the Effective Time (including terms
and conditions relating to such Stock Option's term, exercisability, vesting
schedule and status as an "incentive stock option" under Section 422 of the
Code), the number (rounded down to the nearest whole number) of shares of Parent
Common Stock equal to the aggregate of that number of shares of Parent Common
Stock (based on the Exchange Ratio) as the holder of such Stock Option would
have been entitled to receive pursuant to the Merger had such holder exercised
such Option in full immediately prior to the Effective Time (not taking into
account whether or not such Option was in fact exercisable). The exercise price
for such Stock Options shall be the price per share equal to (x) the aggregate
exercise price for Company Common Stock otherwise purchasable pursuant to such
Stock Option divided by (y) the number of shares of Parent Common Stock deemed
purchasable pursuant to such Stock Option (the exercise price per share, so
determined, being rounded up to the nearest full cent). No payment shall be made
for fractional shares. The aggregate number of shares of Parent Common Stock
issuable upon the exercise of Options assumed by Parent pursuant to this Section
2.2(c) shall be referred to in this Agreement as the "Option Shares." Any
adjustment to an incentive stock option made under this Section 2.2(c) shall
comply with Section 424(a) of the Code. Parent shall use best efforts to prepare
and file with the Securities and Exchange Commission, concurrently with the
filing of the Registration Statement under Article XII hereof, a Registration
Statement on Form S-8 for purposes of registering the Option Shares.
(d) Acquisition Shares. Each share of common stock, par value
$0.01 per share, of Acquisition issued and outstanding at the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, automatically be converted into one fully paid and nonassessable share
of common stock of the Surviving Corporation, as such shares of common stock are
constituted immediately following the Effective Time.
(e) Dissenting Shares. Any Dissenting Shares shall be
converted into the right to receive from the Surviving Corporation such
consideration as may be determined to be due with respect to each such
Dissenting Share pursuant to Chapter 13 of the CGCL; provided, however, Shares
that are Dissenting Shares at the Effective Time of the Merger and are held by a
holder who shall, after the Effective Time of the Merger, withdraw his demand
for appraisal or lose his right of appraisal as provided in the Chapter 13 of
the CGCL, shall be deemed to be converted, as of the Effective Time of the
Merger, into the right to receive the Merger Shares in
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accordance with the procedures specified in Section 2.3. The Company shall give
Parent (i) prompt notice of any written demands for appraisal, withdrawals of
demands for appraisal and any other instruments served pursuant to Chapter 13 of
the CGCL received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under Chapter
13 of the CGCL. The Company will not voluntarily make any payment with respect
to any demands for appraisal and will not, except with the prior written consent
of Parent, settle or offer to settle any such demands. It is understood and
agreed that the obligation to make any payment under Chapter 13 of the CGCL
shall be exclusively that of the Surviving Corporation and that Parent shall be
under no obligation to perform and discharge any such obligation or to reimburse
or make any contribution to the capital of the Surviving Corporation to enable
it to perform and discharge any such obligation.
2.3 Exchange of Certificates.
(a) At the Closing, certificates (the "Certificates")
representing all of the issued and outstanding shares of Company Common Stock
shall be surrendered for cancellation and termination in the Merger. At the
Effective Time, each Certificate shall be cancelled in exchange for a
certificate representing the number of whole shares of Parent Common Stock
(other than the Escrow Shares, as defined below) into which the Company Common
Stock evidenced by the Certificates so surrendered shall have been converted
pursuant to Section 2.2(a) of this Agreement. Such certificates representing
shares of Parent Common Stock will be delivered to the Shareholders as soon as
practicable but no later than ten business days after the Closing. The surrender
of Certificates shall be accompanied by duly completed and executed Letters of
Transmittal in the form of Exhibit B attached hereto. Until surrendered, each
outstanding Certificate which prior to the Effective Time represented shares of
Company Common Stock shall be deemed for all corporate purposes to evidence
ownership of the number of whole shares of Parent Common Stock into which the
shares of Company Common Stock have been converted but shall, subject to
applicable appraisal rights under the CGCL and Section 2.2(e), have no other
rights. Subject to appraisal rights under the CGCL and Section 2.2(e), from and
after the Effective Time, the holders of shares of Company Common Stock shall
cease to have any rights in respect of such shares and their rights shall be
solely in respect of the Parent Common Stock into which such shares of Company
Common Stock have been converted.
(b) If any shares of Parent Common Stock are to be issued in
the name of a person other than the person in whose name the Certificate(s)
surrendered in exchange therefor is registered, it shall be a condition to the
issuance of such shares that (i) the Certificate(s) so surrendered shall be
transferable, and shall be properly assigned, endorsed or accompanied by
appropriate stock powers, (ii) such transfer shall otherwise be proper and (iii)
the person requesting such transfer shall pay Parent, or its exchange agent, any
transfer or other taxes payable by reason of the foregoing or establish to the
reasonable satisfaction of Parent that such taxes have been paid or are not
required to be paid. Notwithstanding the foregoing, neither Parent nor the
Company shall be liable to a holder of shares of Company Common Stock for shares
of Parent or the Company issuable to such holder pursuant to the provisions of
Section
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2.2(a) of this Agreement that are delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(c) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, Parent shall issue in
exchange for such lost, stolen or destroyed Certificate the shares of Parent
Common Stock issuable in exchange therefor pursuant to the provisions of Section
2.2(a) of this Agreement. The Board of Directors of Parent may in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed Certificate to provide to Parent, at Parent's option,
either a performance bond or an indemnity agreement against any claim that may
be made against Parent with respect to the Certificate alleged to have been
lost, stolen or destroyed.
2.4 No Fractional Securities. No fractional shares of Parent Common
Stock shall be issuable by the Parent upon the conversion of shares of Company
Common Stock in the Merger pursuant to Section 2.2(a) hereof. In lieu of any
such fractional shares, each holder of Company Common Stock who would otherwise
have been entitled to receive a fraction of a share of Parent Common Stock shall
be entitled to receive instead an amount in cash equal to such fraction
multiplied by the Closing Market Price. For purposes of this Agreement, the term
"Closing Market Price" shall mean the average of the last quoted sale price for
shares of Parent Common Stock on The Nasdaq National Market for each of the five
trading days preceding the Effective Time.
2.5 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers of Company Common Stock thereafter on the records of the Company.
2.6 No Further Ownership Rights in Company Stock. The Merger Shares
delivered upon the surrender for exchange of shares of Company Common Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates for shares of Company
Common Stock are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article II.
2.7 Adjustment Event. If, between the date hereof and the Effective
Time, the issued and outstanding shares of Parent Common Stock shall have been
combined, split, reclassified or otherwise changed into a different number of
shares or a different class of shares, an appropriate adjustment to the Exchange
Ratio shall be made to fully reflect such change in such manner as is reasonably
acceptable to the Parent and the Company.
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2.8 Escrow. At the Effective Time, Parent will deposit on behalf of the
Principal Shareholder in escrow certificates representing ten percent (10%) of
the Merger Shares received by the Principal Shareholder, but in no event less
than eight percent (8%) of the sum of the Merger Shares and Option Shares (which
shall reduce the Merger Shares otherwise issuable to the Principal Shareholder
under Section 2.2(a)) registered in the name of U.S. Trust National Association,
as Escrow Agent (collectively, the "Escrow Shares"). The Escrow Shares shall be
held as security for the indemnification obligations under Article XI pursuant
to the provisions of an Escrow Agreement (the "Escrow Agreement ") in the form
of Exhibit C attached hereto.
2.9 Tax Consequences. For Federal income tax purposes, the parties
intend that Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and that this Agreement shall constitute a "plan of
reorganization" within the meaning of Section 368(a) of the Code.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE PRINCIPAL SHAREHOLDER
The Company and the Principal Shareholder jointly and severally
represent and warrant to the Parent and Acquisition as set forth below, subject
to the exceptions set forth in the disclosure schedules attached hereto (the
"Disclosure Schedules"), the section numbers and letters of which correspond to
the section and subsection numbers and letters of this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, any
information disclosed in one section of the Disclosure Schedules shall, should
the existence of the information be relevant to any other section of the
Disclosure Schedules, be deemed to be disclosed in all sections of the
Disclosure Schedules, but only to the extent that the relevance of such
information to such other section is reasonably apparent in the section of the
Disclosure Schedules on which such information is disclosed. The disclosure of
any information shall not be deemed to constitute an acknowledgment that such
information is required to be disclosed in connection with the representations
and warranties made by the Company in this Agreement or that it is material, nor
shall such information be deemed to establish a standard of materiality
3.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. The Company has no Subsidiaries (as that term is hereinafter
defined). The Company has all requisite corporate power and authority to own,
operate and lease the properties and assets it now owns, operates and leases and
to carry on its business as presently conducted. The Company is duly qualified
to transact business as a foreign corporation and in good standing in the
jurisdictions set forth in Schedule 3.1, which are the only jurisdictions where
such qualification is required by reason of the nature of the properties and
assets currently owned, operated or leased by the Company or the business
currently conducted by it, except for such jurisdictions where the failure to be
so qualified would not have a Company Material Adverse Effect (as defined
below). The Company has previously
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delivered to the Parent complete and correct copies of its Articles of
Incorporation (certified by the secretary of state of the jurisdiction in which
it was formed as of a recent date) and its ByLaws (certified by the Secretary of
the Company as of a recent date). Except as set forth in Schedule 3.1, neither
the Articles of Incorporation nor the By-Laws of the Company have been amended
since the respective dates of certification thereof, nor has any action been
taken for the purpose of effecting any amendment of such instruments. The term
"Company Material Adverse Effect" means, for purposes of this Agreement, any
change, event or effect that is, or that would be, materially adverse to the
business, operations, assets, liabilities, financial condition or results of
operations of the Company, taken as a whole.
3.2 Authorization. The Company has full corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly approved by the Board of
Directors and shareholders of the Company, and no other corporate action on the
part of the Company is necessary to approve and authorize the execution and
delivery of this Agreement or (subject to the filing of the Certificate of
Merger pursuant to the CGCL and the DGCL) the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding agreement of the Company,
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in law or in equity.
3.3 Consents and Approvals; No Violations. Subject to the filing of the
Certificate of Merger with the Secretary of State of the State of California and
the Secretary of State of the State of Delaware and compliance with applicable
federal and state securities laws, the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not: (i)
violate or conflict with any provision of the Articles of Incorporation or
By-Laws of the Company, (ii) breach, violate or constitute an event of default
(or an event which with the lapse of time or the giving of notice or both would
constitute an event of default) under, give rise to any right of termination,
cancellation, modification or acceleration under, or require any consent or the
giving of any notice under, any note, bond, indenture, mortgage, security
agreement, lease, license, franchise, permit, agreement or other instrument or
obligation to which the Company is a party, or by which the Company or any of
its properties or assets may be bound, or result in the creation of any lien,
claim or encumbrance or other right of any third party of any kind whatsoever
upon the properties or assets of the Company pursuant to the terms of any such
instrument or obligation, other than any breach, violation, default,
termination, cancellation, modification or acceleration which would not have a
Company Material Adverse Effect, (iii) violate or conflict with any law,
statute, ordinance, code, rule, regulation, judgment, order, writ, injunction,
decree or other instrument of any Federal, state, local or foreign court or
governmental or regulatory body, agency or authority applicable to the Company
or by which any of its properties or assets may be bound except for such
violations and conflicts which would
- 8 -
not have a Company Material Adverse Effect or (iv) require, on the part of the
Company, any filing or registration with, or permit, license, exemption,
consent, authorization or approval of, or the giving of any notice to, any
governmental or regulatory body, agency or authority, other than any filing,
registration, permit, license, exemption, consent, authorization, approval or
notice which if not obtained would not have a Company Material Adverse Effect.
3.4 Capitalization.
(a) The authorized capital stock of the Company consists of
10,000,000 shares of Company Common Stock, of which 5,149,375 shares are issued
and outstanding. Schedule 3.4(a) sets forth a complete and correct list of the
record and beneficial ownership of the issued and outstanding shares of Company
Common Stock. Except as set forth on Schedule 3.4, all of the issued and
outstanding shares of Company Common Stock were duly authorized and validly
issued and are fully paid and nonassessable, and were not issued in violation of
any preemptive rights or Federal or state securities laws. Except as disclosed
in Schedule 3.4(a) hereto, the Company has never repurchased or redeemed any
shares of its capital stock, and there are no amounts owed or which may be owed
to any person by the Company as a result of any repurchase or redemption of
shares of its capital stock. Except as disclosed in Schedule 3.4(a) hereto,
there are no agreements, arrangements or understandings to which the Company is
a party or by which it is bound to redeem or repurchase any shares of its
capital stock. Except as set forth in Schedule 3.4(a), there are no outstanding
options, warrants or other rights to purchase, or any securities convertible
into or exchangeable for, shares of the capital stock of the Company, and there
are no agreements, arrangements or understandings to which the Company is a
party or by which it is bound pursuant to which the Company is or may be
required to issue additional shares of its capital stock.
(b) The Company does not own, directly or indirectly, any
equity securities, or options, warrants or other rights to acquire equity
securities, or securities convertible into or exchangeable for equity
securities, of any other corporation, or any partnership interest in any general
or limited partnership or unincorporated joint venture (a "Subsidiary").
3.5 Financial Statements; Business Information. (a) Attached hereto as
Schedule 3.5(a) are (i) the audited balance sheet of the Company as of September
30, 1998 and the statements of income for the year then ended, and (ii) the
unaudited balance sheets of the Company as of November 30, 1998 and December 31,
1997 and the statements of income of the Company for the fiscal year or period
then ended (hereinafter collectively referred to as the "Financial Statements").
The Financial Statements (i) have been prepared from the books and records of
the Company, (ii) have been prepared in accordance with generally accepted
accounting principles consistently applied during the periods covered thereby,
except, in the case of the Financial Statements for the period ended December
31, 1997, as otherwise noted on Schedule 3.5 and (iii) present fairly in all
material respects the financial condition and results of operations of the
Company as at the dates, and for the periods, stated therein, except that the
interim Financial Statements are subject to normal year-end adjustments which
will not be
- 9 -
individually or in the aggregate material in amount or effect and the Financial
Statements do not include footnotes.
(b) Schedule 3.5(b) attached hereto sets forth certain
statistics regarding the Company's business which are true and correct in all
material respects as of the dates stated in the Schedule. Without limiting the
materiality of any other representations, warranties and covenants of the
Company and the Principal Shareholder contained herein, the Company and the
Principal Shareholder specifically acknowledge that the accuracy of such
statistics is material to the Parent's decision to enter into the transactions
contemplated by this Agreement and to issue the Merger Shares.
3.6 Absence of Undisclosed Liabilities. Except (i) as set forth or
reserved against in the balance sheet of the Company dated as of November 30,
1998, included in the Financial Statements (the "Balance Sheet") and (ii) for
obligations incurred since November 30, 1998 in the ordinary course of business,
do not individually or in the aggregate exceed $25,000, the Company does not
have any material liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise.
3.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 3.7, since November 30, 1998, the Company has carried on its business
in all material respects in the ordinary course and consistent with past
practice. Except as set forth on Schedule 3.7 hereto, since November 30, 1998,
the Company has not: (i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise) except in the ordinary course of
business and consistent with past practice; (ii) experienced any Company
Material Adverse Effect; (iii) suffered any material damage, destruction or
loss, whether or not covered by insurance, affecting its properties, assets or
business; (iv) mortgaged, pledged or subjected to any lien, charge or other
encumbrance, or granted to third parties any rights in, any of its assets,
tangible or intangible; (v) sold or transferred any of its assets, except in the
ordinary course of business and consistent with past practice, or canceled or
compromised any debts or waived any claims or rights of a material nature; (vi)
issued any additional shares of capital stock or any rights, options or warrants
to purchase, or securities convertible into or exchangeable for, shares of its
capital stock; (vii) declared or paid any dividends on or made any distributions
(however characterized) in respect of shares of its capital stock; (viii)
repurchased or redeemed any shares of its capital stock; (ix) granted any
general or specific increase in the compensation payable or to become payable to
any of their Employees (as that term is hereinafter defined) or any bonus or
service award or other like benefit, or instituted, increased, augmented or
improved any Benefit Plan (as that term is hereinafter defined); or (x) entered
into any agreement to do any of the foregoing.
3.8 Legal Proceedings, etc. Except as set forth in Schedule 3.8, there
are no suits, actions, claims or proceedings (including, without limitation,
arbitral or administrative proceedings) or, to the knowledge of the Company or
the Principal Shareholder, investigations pending or, to the knowledge of the
Company or the Principal Shareholder, threatened against the Company or its
properties, assets or business or, to the best knowledge of the Company or the
- 10 -
Principal Shareholder, pending or threatened against any of the officers,
directors, employees, agents or consultants of the Company in connection with
the business of the Company. There are no such suits, actions, claims,
proceedings or investigations pending against the Company, or, to the best
knowledge of the Company or the Principal Shareholder, threatened against the
Company challenging the validity or propriety of the transactions contemplated
by this Agreement. There is no judgment, order, injunction, decree or award
(whether issued by a court, an arbitrator or an administrative agency) to which
the Company is a party, or involving the Company's properties, assets or
business, which is unsatisfied or which requires continuing compliance therewith
by the Company.
3.9 Taxes.
(a) Except as set forth in Schedule 3.9, the Company has duly
and timely filed, all Tax returns and other filings in respect of Taxes (as that
term is hereinafter defined) required to be filed by it prior to November 30,
1998, and has in a timely manner paid all Taxes which are (or will be) due for
all periods ending on or before November 30, 1998, whether or not shown on such
returns, except to the extent the Company has established adequate reserves on
the Balance Sheet for such Taxes. All such Tax returns have been accurately and
completely prepared in all material respects in compliance with all laws, rules
and regulations.
(b) Except as set forth in Schedule 3.9 hereto, there are no
actions or proceedings currently pending or, to the knowledge of the Company or
the Principal Shareholder, threatened against the Company by any governmental
authority for the assessment or collection of Taxes, no written claim for the
assessment or collection of Taxes has been asserted against the Company, and
there are no matters under discussion by the Company with any governmental
authority regarding claims for the assessment or collection of Taxes. Any Taxes
that have been claimed or imposed as a result of any examinations of any tax
return of the Company by any governmental authority are being contested in good
faith and have been disclosed in writing to the Parent. Except as set forth in
Schedule 3.9, there are no agreements or applications by the Company for an
extension of time for the assessment or payment of any Taxes nor any waiver of
the statute of limitations in respect of Taxes. There are no Tax liens on any of
the assets of the Company, except for liens for Taxes not yet due or payable.
(c) For purposes of this Agreement, the terms "Tax" and
"Taxes" shall mean and include any and all United States, state, local, foreign
or other income, sales, use, withholding, employment, payroll, social security,
property taxes and all other taxes of any kind, deficiencies, fees or other
governmental charges, including, without limitation, any installment payment for
taxes and contributions or other amounts determined with respect to compensation
paid to directors, officers, employees or independent contractors from time to
time imposed by or required to be paid to any governmental authority (including
penalties and additions to tax thereon, penalties for failure to file a return
or report, and interest on any of the foregoing).
- 11 -
(d) There is no agreement, plan or arrangement covering any
employee or independent contractor or former employee or independent contractor
of the Company that, considered individually or considered collectively with any
other such agreement, plan or arrangement, will, or could reasonably be expected
to, give rise directly or indirectly to the payment of any amount that would not
be deductible pursuant to Section 280G of the Code or that would be subject to
an excise tax under Section 4999 of the Code.
(e) The Company is not and has never been a party to or bound
by any tax sharing agreement or similar agreement or arrangement and the Company
does not have any liability for Taxes of any person (other than the Company)
under Treasury Regulation 1.1502-6 (or any similar provision of state, local or
foreign law).
(f) The Company has withheld amounts from its employees and
other persons required to be withheld under the tax, social security,
unemployment and other withholding provisions of all federal, state, local and
foreign laws.
3.10 Title to Properties and Related Matters. (a) Except as set forth
on Schedule 3.10(a), the Company has good and valid title to all personal
property, tangible or intangible, which the Company purports to own, including
the properties reflected on the Balance Sheet or acquired after the date thereof
(other than properties and assets sold or otherwise disposed of in the ordinary
course of business and consistent with past practice since November 30, 1998),
free and clear of any claims, liens, pledges, security interests or encumbrances
of any kind whatsoever (other than (i) purchase money security interests and
common law vendor's liens, in each case for goods purchased on open account in
the ordinary course of business and having a fair market value of less than
$5,000 in each individual case), (ii) liens for Taxes not yet due and payable,
and (iii) such imperfections of title and encumbrances, if any, that are not
material in character, amount or extent and that do not materially detract from
the value, or materially interfere with the use of, the property subject thereto
or affected thereby.
(b) The Company does not own any real property or any interest
in real property, except for the leasehold created under the lease referred to
in Schedule 3.10(d).
(c) Schedule 3.10(c) sets forth a list, which is correct and
complete in all material respects, of all equipment, machinery, instruments,
vehicles, furniture, fixtures and other items of personal property currently
owned or leased by the Company with a book value as of November 30, 1998, in
each case of $5,000 or more. All such personal property is in suitable operating
condition (ordinary and reasonable wear and tear excepted), is physically
located in or about one of the Company's places of business and is owned by the
Company or is leased by the Company under one of the leases set forth in
Schedule 3.10(d). Except as disclosed in Schedule 3.10(c), none of such personal
property is subject to any agreement or commitment for its use by any person
other than the Company. The maintenance and operation of such personal property
has been in material conformance with all applicable laws and regulations except
for such nonconformance as would not have a Company Material Adverse Effect.
There are no assets leased
- 12 -
by the Company or required for the operation of the business of the Company that
are owned, directly or indirectly, by any Related Person (as that term is
hereinafter defined).
(d) Schedule 3.10(d) sets forth a complete and correct list of
all real property and personal property leases to which the Company is a party.
The Company has previously delivered to the Parent complete and correct copies
of each lease (and any amendments or supplements thereto) listed in Schedule
3.10(d). Except as set forth in Schedule 3.10(d), (i) each such lease is valid
and binding and in full force and effect; except to the extent that applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights may affect such validity or enforceability,
(ii) neither the Company nor (to the knowledge of the Company or the
Shareholder) any other party is in default under any such lease, and no event
has occurred which constitutes, or with the lapse of time or the giving of
notice or both would constitute, a default by the Company or (to the knowledge
of the Company or the Shareholder) a default by any other party under such
lease; (iii) to the knowledge of the Company or the Shareholder, there are no
disputes or disagreements between the Company and any other party with respect
to any such lease; and (iv) the lessor under each such lease has consented or
been given notice (or prior to the Closing shall have consented or been given
notice), where such consent or the giving of such notice is necessary,
sufficient that such lease shall remain in full force and effect following the
consummation of the transactions contemplated by this Agreement without
requiring modification in the rights or obligations of the lessee under any such
lease.
3.11 Intellectual Property; Proprietary Rights; Employee Restrictions.
(a) The Company has disclosed in Schedule 3.11 all registered copyrights,
copyright registrations and copyright applications, trademark registrations and
applications for registration, patents and patent applications, trademarks,
service marks, trade names, or Internet domain names (collectively,
"Intellectual Property Rights") used by the Company in the Company's business as
presently conducted, including all Intellectual Property Rights owned by the
Company and used in connection with or contained in all versions of the
Company's World Wide Web site (including, without limitation, ▇▇▇.▇▇▇▇▇.▇▇▇,
▇▇▇.▇▇▇▇▇▇.▇▇▇ and ▇▇▇.▇▇▇▇▇▇.▇▇▇) and all licenses, assignments and releases of
Intellectual Property Rights of others in material works embodied in its
products. All Intellectual Property Rights purported to be owned by the Company
held by any employee, officer or consultant are owned by the Company by
operation of law or have been validly assigned to the Company. The Intellectual
Property Rights are sufficient in all material respects to carry on the business
of the Company as presently conducted. The Company has exclusive ownership of or
license to use all Intellectual Property Rights identified in Schedule 3.11 as
owned or licensed by the Company or has obtained any licenses, releases or
assignments reasonably necessary to use all third parties' Intellectual Property
Rights in works embodied in the Company's products. The present business
activities or products of the Company (including, without limitation, the
operation of the Company's Web sites) do not infringe any Intellectual Property
Rights of others. Except as set forth in Schedule 3.11, the Company has not
received any notice or other claim from any person asserting that any of the
- 13 -
Company's present activities infringe in any material respect or may infringe
any Intellectual Property Rights of such person.
The Company has the right to use all trade secrets, customer lists, log
files, hardware designs, programming processes, software and other information
required for or incident to its products or its business (including, without
limitation, the operation of its Web sites) as presently conducted in any
material respect and has no reason to believe that any of such information that
is provided to the Company by third parties will not continue to be provided to
the Company on the same terms and conditions as currently exist. The Company has
taken all reasonable measures to protect and preserve the security and
confidentiality of its trade secrets and other confidential information. To the
knowledge of the Company and the Principal Shareholder, all trade secrets and
other confidential information of the Company are not part of the public domain
or knowledge, nor, to the knowledge of the Company and the Principal
Shareholder, have they been misappropriated by any person having an obligation
to maintain such trade secrets or other confidential information in confidence
for the Company. To the knowledge of the Company and the Principal Shareholder,
no employee or consultant of the Company has used any trade secrets or other
confidential information of any other person in the course of their work for the
Company.
The Company is the exclusive owner of all right, title and
interest in its Intellectual Property Rights as purported to be owned by the
Company, and to the Company's and the Principal Shareholder's knowledge, such
Intellectual Property Rights are valid and in full force and effect. No
university, government agency (whether federal or state) or other organization
which sponsored research and development conducted by the Company or has any
claim of right to or ownership of or other encumbrance upon the Intellectual
Property Rights of the Company. The Company is not aware of any infringement by
others of its copyrights or other Intellectual Property Rights in any of its
products, technology or services, or any violation of the confidentiality of any
of its proprietary information. To the Company's and the Principal Shareholder's
knowledge, the Company is not making unlawful use of any confidential
information or trade secrets of any past or present employees of the Company.
Neither the Company nor, to the knowledge of the Company and
the Principal Shareholder, any of the Company's employees, have any agreements
or arrangements with former employers of such employees relating to confidential
information or trade secrets of such employers or are bound by any consulting
agreement relating to confidential information or trade secrets of another
entity that are being violated by such persons. The activities of the Company's
employees on behalf of the Company do not violate in any material respects any
agreements or arrangements known to the Company which any such employees have
with former employers or any other entity to whom such employees may have
rendered consulting services. For the purposes of this Section 3.11,
Intellectual Property Rights also includes any and all intellectual property
rights, licenses, databases, computer programs and other computer software user
interfaces, know-how, trade secrets, customer lists, proprietary technology,
processes and formulae, source code, object code, algorithms, architecture,
structure, display screens, layouts,
- 14 -
development tools, instructions, templates, marketing materials created by the
Company, inventions, trade dress, logos and designs.
(b) The Company has all franchises, permits, licenses and
other rights and privileges reasonably necessary to permit it to own its
property and to conduct its business as it is presently conducted other than any
franchises, permits, licenses and other rights and privileges which if not held
by the Company would not have a Company Material Adverse Effect or result in a
fine or penalty in excess of $10,000 individually or in the aggregate.
3.12 Contracts. (a) Except as set forth in Schedule 3.12(a) (or in
Schedule 3.4, Schedule 3.10(d), Schedule 3.11, or Schedule 3.13(a)), the Company
is not a party to, or subject to:
(i) any contract, arrangement or understanding,
or series of related contracts, arrangements or understandings, which involves
annual expenditures or receipts by the Company of more than $10,000;
(ii) any note, indenture, credit facility,
mortgage, security agreement or other contract, arrangement or understanding
relating to or evidencing indebtedness for money borrowed or a security
interest or mortgage in the assets of the Company;
(iii) any guaranty issued by the Company;
(iv) any contract, arrangement or understanding
relating to the acquisition, issuance or transfer of any securities;
(v) any contract, arrangement or understanding
relating to the acquisition, transfer, distribution, use, development,
sharing or license of any technology or Intellectual Property Rights other
than licenses granted in the ordinary course of business with a term of less
than one year;
(vi) any contract, arrangement or understanding
granting to any person the right to use any property or property right of
the Company other than licenses granted in the ordinary course of business with
a term of less than one year;
(vii) any contract, arrangement or understanding
restricting the Company's or any Subsidiary's right to (A) engage in any
business activity or compete with any business, or (B) develop or distribute
any technology;
(viii) any contract, arrangement or understanding
relating to the employment of, or the performance of services of, any employee,
consultant or independent contractor and pursuant to which the Company is
required to pay more than $10,000 per year;
- 15 -
(ix) any contract, arrangement or understanding
with a Related Person (as that term is hereinafter defined); or
(x) any outstanding offer, commitment or
obligation to enter into any contract or arrangement of the nature described
in subsections (i) through (vi) of this subsection 3.12(a).
(b) The Company has previously made available for inspection
and copying to the Parent complete and correct copies (or, in the case of oral
contracts, a complete and correct description) of each contract (and any
amendments or supplements thereto) listed on Schedule 3.12(a). Except as set
forth in Schedule 3.12(b), (i) each contract listed in Schedule 3.12(a) is in
full force and effect; (ii) neither the Company nor (to the knowledge of the
Company or the Principal Shareholder) any other party is in material default
under any material contract, and no event has occurred which constitutes, or
with the lapse of time or the giving of notice or both would constitute, a
material default by the Company or (to the knowledge of the Company or the
Principal Shareholder) a material default by any other party under such
contract; (iii) to the knowledge of the Company or the Principal Shareholder,
there are no disputes or disagreements between the Company and any other party
with respect to any material contract; and (iv) each other party to each
material contract has consented or been given notice (or prior to the Closing
shall have consented or been given notice), where such consent or the giving of
such notice is necessary, sufficient that such contract shall remain in full
force and effect following the consummation of the transactions contemplated by
this Agreement without modification in the rights or obligations of the Company
thereunder.
(c) Except as set forth and described in Schedule 3.12(d), the
Company has not issued any warranty or any agreement or commitment to indemnify
any person other than in the ordinary course of business.
3.13 Employees; Employee Benefits.
(a) Schedule 3.13(a) sets forth the names of all current
employees of the Company (the "Employees") and such Employee's job title, the
location of employment of such Employee, such Employee's current salary, the
amount of any bonuses or other compensation paid since December 31, 1997 to such
Employee, the date of employment of such Employee and the accrued vacation time
of such Employee. Schedule 3.13(a) hereto sets forth a true and correct
statement of the liability, if any, of the Company for accrued but unused sick
pay. Except as set forth on Schedule 3.13(a), there are no outstanding loans
from the Company to any officer, director, employee, agent or consultant of the
Company, or to any other Related Person. Schedule 3.13(a) hereto sets forth a
complete and correct description of all severance policies of the Company.
Complete and correct copies of all written agreements with Employees and all
employment policies, and all amendments and supplements thereto, have previously
been delivered or made available to the Parent, and a list of all such
agreements and policies is set forth on Schedule 3.13(a). None of the Employees
has, to the knowledge of the Company or the
- 16 -
Principal Shareholder, indicated a desire to terminate his or her employment, or
any intention to terminate his or her employment upon a sale of, or business
combination relating to, the Company or in connection with the transactions
contemplated by this Agreement. Except as set forth on Schedule 3.13(a), since
November 30, 1998, the Company has not (i) increased the salary or other
compensation payable or to become payable to or for the benefit of any of the
Employees, (ii) increased the term or tenure of employment for any Employee,
except in the ordinary course of business consistent with past practice, (iii)
increased the amounts payable to any of the Employees upon the termination of
any such person's employment or (iv) adopted, increased, augmented or improved
benefits granted to or for the benefit of any of the Employees under any Benefit
Plan.
(b) Except as disclosed on Schedule 3.13(b), the Company has
complied in all material respects with Title VII of the Civil Rights Act of
1964, as amended, the Age Discrimination in Employment Act, as amended, the Fair
Labor Standards Act, as amended, the Immigration Reform and Control Act of 1986,
and all applicable laws, rules and regulations governing payment of minimum
wages and overtime rates, the withholding and payment of taxes from
compensation, discriminatory practices with respect to employment and discharge,
or otherwise relating to the conduct of employers with respect to Employees or
potential employees, and there have been no claims made or, to the knowledge of
the Company or the Principal Shareholder, threatened thereunder against the
Company arising out of, relating to or alleging any violation of any of the
foregoing. Except as disclosed in Schedule 3.13(b), there are no material
controversies, strikes, work stoppages, picketing or disputes pending or, to the
knowledge of the Company or the Principal Shareholder, threatened between the
Company and any of the Employees or Former Employees; no labor union or other
collective bargaining unit represents or has ever represented any of the
Employees, including any "leased employees" (within the meaning of Section
414(n) of the Code); no organizational effort by any labor union or other
collective bargaining unit currently is under way or, to the knowledge of the
Company or the Principal Shareholder, threatened with respect to any Employees;
and the consent of no labor union or other collective bargaining unit is
required to consummate the transactions contemplated by this Agreement.
(c) Schedule 3.13(c) sets forth a list of each material
defined benefit and defined contribution plan, stock ownership plan, employment
or consulting agreement, executive compensation plan, bonus plan, incentive
compensation plan or arrangement, deferred compensation agreement or
arrangement, agreement with respect to temporary employees or "leased employees"
(within the meaning of Section 414(n) of the Code), vacation pay, sickness,
disability or death benefit plan (whether provided through insurance, on a
funded or unfunded basis or otherwise), employee stock option, stock
appreciation rights or stock purchase plan, severance pay plan, arrangement or
practice, employee relations policy, practice or arrangement, and each other
employee benefit plan, program or arrangement, including, without limitation,
each "employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which has been
maintained by the Company for the benefit of or relating to any of the Employees
or to any Former Employees or
- 17 -
their dependents, survivors or beneficiaries, whether or not legally binding,
whether written or oral or whether express or implied, all of which are
hereinafter referred to as the "Benefit Plans."
(d) Except as set forth on Schedule 3.13(d), each Benefit Plan
which is an "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) and which is intended to meet the requirements of Section 401(a) of the
Code meets such requirements; the trust, if any, forming part of such plan is
exempt from U.S. federal income tax under Section 501(a) of the Code; a
favorable determination letter has been issued by the Internal Revenue Service
(the "IRS") with respect to each plan and trust and each amendment thereto; and
nothing has occurred since the date of such determination letter that would
adversely affect the qualification of such plan; no Benefit Plan is a "voluntary
employees beneficiary association" (within the meaning of section 501(c)(9) of
the Code) and there have been no other "welfare benefit funds" (within the
meaning of Section 419 of the Code) relating to Employees or Former Employees;
no event or condition exists with respect to any Benefit Plan that could subject
the Company to any material Tax under Section 4980B of the Code. With respect to
each Benefit Plan, the Company has heretofore delivered or made available to the
Parent complete and correct copies of the following documents, where applicable
and to the extent available: (i) the most recent annual report (Form 5500
series), together with schedules, as required, filed with the IRS, and any
financial statements and opinion required by Section 103(a)(3) of ERISA, (ii)
the most recent determination letter issued by the IRS, (iii) the most recent
summary plan description and all modifications, as well as all other
descriptions distributed to Employees or set forth in any manuals or other
documents, (iv) the text of the Benefit Plan and of any trust, insurance or
annuity contracts maintained in connection therewith and (v) the most recent
actuarial report, if any, relating to the Benefit Plan.
(e) There is no agreement, plan or arrangement covering any
employee or independent contractor or former employee or independent contractor
of the Company that considered individually or considered collectively with any
other such agreement, plan or arrangement, will, or could reasonably be expected
to, give rise directly or indirectly to the payment of any amount as a result of
the Merger that would not be deductible pursuant to Section 280G of the Code or
that would be subject to an excise tax under Section 4999 of the Code.
3.14 Compliance with Applicable Law. The Company is not in violation in
any material respect of any applicable safety, health, environmental or other
law, statute, ordinance, code, rule, regulation, judgment, order, injunction,
writ or decree of any Federal, state, local or foreign court or governmental or
regulatory body, agency or authority having, asserting or claiming jurisdiction
over it or over any part of its business, operations, properties or assets,
except for any violation that would not have a Company Material Adverse Effect
or result in a fine or penalty in excess of $10,000 individually or in the
aggregate. The Company has not received any notice alleging any such violation,
nor to the knowledge of the Company or any Shareholder, is there any inquiry,
investigation or proceedings relating thereto.
- 18 -
3.15 Ability to Conduct the Business. There is no agreement,
arrangement or understanding, nor any judgment, order, writ, injunction or
decree of any court or governmental or regulatory body, agency or authority
applicable to the Company or to which the Company is a party or by which it (or
any of its properties or assets) is bound, that will prevent the use by the
Surviving Corporation, after the Effective Time, of the properties and assets
owned by, the business conducted by or the services rendered by the Company on
the date hereof, in each case on substantially the same basis as the same are
used, owned, conducted or rendered on the date hereof. The Company has in force,
and is in compliance with, in all material respects, all material governmental
permits, licenses, exemptions, consents, authorizations and approvals used in or
required for the conduct of their business as presently conducted, all of which
shall continue in full force and effect, without requirement of any filing or
the giving of any notice and without modification thereof, following the
consummation of the transactions contemplated hereby. The Company has not
received any notice of, and to the knowledge of the Company or the Principal
Shareholder, there are no inquiries, proceedings or investigations relating to
or which could result in the revocation or modification of any such permit,
license, exemption, consent, authorization or approval.
3.16 Major Customers. Schedule 3.16 sets forth a complete and correct
list of the ten largest advertising customers of the Company, in terms of
revenue recognized in respect of such customers during the eleven months ended
November 30, 1998, showing the amount of revenue recognized for each such
customer during such period. Except as set forth and described in Schedule 3.16,
to the knowledge of the Company or the Principal Shareholder, the Company has
not received any notice or other communication (written or oral) from any of the
customers listed in Schedule 3.16 hereto terminating or reducing in any material
respect, or setting forth an intention to terminate or reduce in the future, or
otherwise reflecting a material adverse change in, the business relationship
between such customer and the Company.
3.17 Consultants, Sales Representatives and Other Agents. Schedule 3.17
hereto sets forth a complete and correct list of the names and addresses of each
consultant, sales representative or other agent (other than any such person
performing solely clerical functions) currently engaged by the Company who is
not an employee of the Company and who has received compensation in excess of
$10,000 in respect of the six months ended June 30, 1998, the commission rates
or other compensation applicable with respect to each such person and the amount
of commissions or other compensation earned by each such person for the six
months ended November 30, 1998. Except as described on Schedule 3.17, complete
and correct copies of all current agreements between the Company and any such
person have previously been delivered or made available by the Company to the
Parent.
3.18 Accounts Receivable. All accounts receivable of the Company
reflected on the Balance Sheet (i) arose from bona fide transactions in the
ordinary course of business and consistent with past practice, and (ii) except
as set forth on Schedule 3.18, are owned by the Company free and clear of any
claim, security interest, lien or other encumbrance, and (iii) are accurately
and fairly reflected on the Balance Sheet, or, with respect to accounts
receivable of the
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Company created after November 30, 1998, are accurately and fairly reflected in
the books and records of the Company. Except as described on Schedule 3.18, the
reserves for bad debts reflected on the Balance Sheet are adequate and were
calculated in accordance with generally accepted accounting principles
consistent with past practice.
3.19 Insurance. Schedule 3.19 hereto is a true and complete list of all
insurance policies carried by the Company with respect to its business, together
with, in respect of each such policy, the name of the insurer, the number of the
policy, the limits of coverage, the deductible amount (if any), the expiration
date thereof and each pending claim thereunder. Complete and correct copies of
each certificate of insurance have previously been delivered or made available
by the Company to the Parent. All such policies are in full force and effect.
All premiums due thereon have been paid in a timely manner.
3.20 Bank Accounts; Powers of Attorney. Schedule 3.20 sets forth
a complete and correct list showing:
(i) all bank accounts of the Company, together
with, with respect to each such account, the account number, the names of all
signatories thereof, the authorized powers of each such signatory and the
approximate balance thereof on the date of this Agreement; and
(ii) the names of all persons holding powers of
attorney from the Company and a summary statement of the terms thereof.
3.21 Minute Books, etc. The minute books, stock certificate book and
stock ledger of the Company are complete and correct in all material respects.
The minute books of the Company contain accurate and complete records of all
meetings or written consents to action of the Board of Directors and
shareholders of the Company and accurately reflect all corporate actions of the
Company which are required by law to be passed upon by the Board of Directors or
shareholders of the Company.
3.22 Related Person Indebtedness and Contracts. Schedule 3.22 sets
forth a complete and correct summary of all contracts, commitments, arrangements
and understandings not described elsewhere in this Agreement between the Company
and any of the following (collectively, "Related Persons"): (i) the
Shareholders; (ii) the spouses and children of any of the Shareholders
(collectively, "near relatives"); (iii) any trust for the benefit of any of the
Shareholders or any of their respective near relatives; or (iv) any corporation,
partnership, joint venture or other entity or enterprise owned or controlled by
any of the Shareholders or by any of their respective near relatives.
3.23 Brokers; Payments. Except as set forth on Schedule 3.23, no
broker, investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this
- 20 -
Agreement based upon arrangements made by or on behalf of the Company or the
Principal Shareholder. The Company has suspended or terminated, and has the
legal right to terminate or suspend, all negotiations and discussions of
Acquisition Transactions (as defined in Section 6.4) with parties other than
Parent. No valid claim exists against the Company or, based on any action by the
Company, against the Surviving Corporation or the Parent for payment of any
"topping," "break-up" or "bust-up" fee or any similar compensation or payment
arrangement as a result of the transactions contemplated hereby.
3.24 Company Action. The Board of Directors of the Company, by
unanimous written consent or at a meeting duly called and held, has (i)
determined that the Merger is fair and in the best interests of the Company and
its shareholders, (ii) approved the Merger and this Agreement in accordance with
the provisions of the CGCL, and (iii) directed that this Agreement and the
Merger be submitted to the Company shareholders for their approval and resolved
to recommend that the Company's shareholders vote in favor of the approval of
this Agreement and the Merger. The shareholders of the Company have approved the
Merger and this Agreement in accordance with the provisions of the CGCL.
3.25 Pooling of Interests. To the knowledge of the Company and the
Principal Shareholder, neither the Company nor any of its affiliates has taken
or agreed to take any action which would prevent the Parent from accounting for
the business combination to be effected by the Merger as a pooling of interests.
3.26 Year 2000 Matters. To the knowledge of the Company and the
Principal Shareholder, except as set forth in Schedule 3.26, the management
information systems (including all computer hardware and software) owned,
licensed or otherwise used by the Company will not perform differently and
experience any material malfunctions or usage problems due to the change in the
calendar year from 1999 to the year 2000.
3.27 Disclosure. No representation or warranty by the Company or the
Principal Shareholder contained in this Agreement and no statement contained in
any of the Disclosure Schedules delivered or to be delivered pursuant to this
Agreement by the Company contains or will contain, when considered together as a
whole, any untrue statement of a material fact or omits or will omit to state
any material fact necessary to make the statements contained therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL SHAREHOLDER
4.1 Authorization etc. The Principal Shareholder represents and
warrants to the Parent and Acquisition as follows:
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(i) the Principal Shareholder is the sole and exclusive record and
beneficial owner of the shares of the Company's capital stock set forth opposite
his name in Schedule 3.4 hereto, free and clear of any claims, liens, pledges,
options, rights of first refusal or other encumbrances or restrictions of any
nature whatsoever (other than restrictions on transfer imposed under applicable
securities laws), and, except as set forth on Schedule 3.4 hereto, there are no
agreements, arrangements or understandings to which such Principal Shareholder
is a party (other than this Agreement) involving the purchase, sale or other
acquisition or disposition of the shares owned by such Principal Shareholder;
(ii) such Principal Shareholder shall (A) concurrently with such Principal
Shareholder's execution and delivery of this Agreement, execute and deliver to
Parent a written consent in which such Principal Shareholder voted all shares of
capital stock owned by such Principal Shareholder in favor of the Merger and the
adoption of this Agreement by the Company, (B) at the Effective Time, deliver or
cause to be delivered to the Parent certificates representing all shares of
Company Common Stock owned by such Principal Shareholder, each such certificate
to be duly endorsed for transfer and free and clear of any claims, liens,
pledges, options, rights of first refusal or other encumbrances or restrictions
of any nature whatsoever (other than restrictions imposed under applicable
securities laws); (iii) such Principal Shareholder has all necessary legal
capacity, right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby, and this Agreement
constitutes a valid and binding obligation of such Principal Shareholder
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors,
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in law or in equity; and (iv) the
execution and delivery of this Agreement by such Principal Shareholder and the
consummation of the transactions contemplated hereby will not (A) violate or
conflict with any provision of any partnership agreement or other constitutional
documents of any such Principal Shareholder that is constituted as a general or
limited partnership, (B) breach, violate or constitute an event of default (or
an event which with the lapse of time or the giving of notice or both would
constitute an event of default) under, give rise to any right of termination,
cancellation, modification or acceleration under or require any consent or the
giving of any notice under, any note, bond, indenture, mortgage, security
agreement, lease, license, franchise, permit, agreement or other instrument or
obligation to which such Principal Shareholder is a party, or by which such
Principal Shareholder or the shares of Company Stock held by such Principal
Shareholder may be bound, or result in the creation of any material lien, claim
or encumbrance or other right of any third party of any kind whatsoever upon the
properties or assets of such Principal Shareholder pursuant to the terms of any
such instrument or obligation, which breach, violation or event of default would
have a material adverse effect on such Principal Shareholder's ability to
perform such Principal Shareholder's obligations hereunder, or (C) to such
Principal Shareholder's knowledge, violate or conflict with any law, statute,
ordinance, code, rule, regulation, judgment, order, writ, injunction, decree or
other instrument of any court or governmental or regulatory body, agency or
authority applicable to such Principal Shareholder or by which such the shares
of Company Stock held by such Principal Shareholder may be bound.
- 22 -
4.2 Parent Common Stock.
The Principal Shareholder acknowledges, represents and warrants to the
Parent and Acquisition as follows:
(i) The Principal Shareholder understands that the shares of Parent
Common Stock to be issued to the Principal Shareholder in the Merger will not
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities law by reason of specific exemptions
under the provisions thereof which depend in part upon the other representations
and warranties made by the Principal Shareholder in this Agreement. The
Principal Shareholder understands that the Parent is relying upon the Principal
Shareholder's representation and warranties contained in this Section 4.2 for
the purpose of determining whether this transaction meets the requirements for
such exemptions.
(ii) The Principal Shareholder has such knowledge, skill and
experience in business, financial and investment matters so that the Principal
Shareholder is capable of evaluating the merits and risks of an investment in
the Parent Common Stock pursuant to the transactions contemplated by this
Agreement or to the extent that the Principal Shareholder has deemed it
appropriate to do so, the Principal Shareholder has relied upon appropriate
professional advice regarding the tax, legal and financial merits and
consequences of an investment in Parent Common Stock pursuant to the
transactions contemplated by this Agreement.
(iii) The Principal Shareholder has made, either
alone or together with
the Principal Shareholder's advisors, such independent investigation of the
Parent, its management and related matters as the Principal Shareholder deems to
be, or such advisors have advised to be, necessary or advisable in connection
with an investment in the Parent Common Stock through the transactions
contemplated by this Agreement; and the Principal Shareholder and advisors have
received all information and data that the Principal Shareholder and such
advisors believe to be necessary in order to reach an informed decision as to
the advisability of an investment in the Parent Common Stock pursuant to the
transactions contemplated by this Agreement.
(iv) The Principal Shareholder has reviewed the Principal
Shareholder's financial condition and commitments, alone and together with the
Principal Shareholder's advisors, and, based on such review, the Principal
Shareholder is satisfied that (A) the Principal Shareholder has adequate means
of providing for the Principal Shareholder's financial needs and possible
contingencies and has assets or sources of income which, taken together, are
more than sufficient so that he could bear the risk of loss of the Principal
Shareholder's entire investment in the Parent Common Stock, (B) the Principal
Shareholder has no present or contemplated future need to dispose of all or any
portion of the Parent Common Stock to satisfy any existing or contemplated
undertaking, need or indebtedness, and (C) the Principal Shareholder is capable
of bearing the economic risk of an investment in the Parent
- 23 -
Common Stock for the indefinite future. The Principal Shareholder shall furnish
any additional information about the Principal Shareholder reasonably requested
by the Parent to assure the compliance of this transaction with applicable
federal and state securities laws.
(v) The Principal Shareholder understands that the shares of the Parent
Common Stock to be received by the Principal Shareholder in the transactions
contemplated hereby will be "restricted securities" under applicable federal
securities laws and that the Securities Act and the rules of the Securities and
Exchange Commission (the "SEC") promulgated thereunder provide in substance that
the Principal Shareholder may dispose of such shares only pursuant to an
effective registration statement under the Securities Act or an exemption from
registration if available. The Principal Shareholder further understands that,
except as provided in Article XII, the Parent has no obligation or intention to
register the sale of any of the shares of the Parent Common stock to be received
by the Principal Shareholder in the transactions contemplated hereby, or take
any other action so as to permit sales pursuant to, the Securities Act.
Accordingly, except as provided in Article XII, the Principal Shareholder
understands that the Principal Shareholder may dispose of such shares only in
transactions which are of a type exempt from registration under the Securities
Act, including (without limitation) a "private placement," in which event the
transferee will acquire such shares as "restricted securities" and subject to
the same limitations as in the hands of the Principal Shareholder. The Principal
Shareholder further understands that applicable state securities laws may impose
additional constraints upon the sale of securities. As a consequence, the
Principal Shareholder understands that the Principal Shareholder may have to
bear the economic risk of an investment in the Parent Common Stock to be
received by the Principal Shareholder pursuant to the transactions contemplated
hereby for an indefinite period of time.
(vi) The Principal Shareholder is acquiring shares of the Parent
Common Stock pursuant to the transactions contemplated hereby for investment
only and not with a view to or intention of or in connection with any resale or
distribution of such shares or any interest therein.
(vii) The certificate(s) evidencing the shares of the
Parent Common
Stock to be issued pursuant to the transactions contemplated hereby shall bear
the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
any state securities laws and may not be sold or transferred
in the absence of such registration or an exemption therefrom
under the Securities Act of 1933, as amended, and applicable
state securities laws."
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION
The Parent and Acquisition jointly and severally represent and warrant
to the Company that:
5.1 Corporate Organization. Each of the Parent and Acquisition is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of the Parent and Acquisition has all requisite
corporate power and authority to own, operate and lease the properties and
assets it now owns, operates and leases and to carry on its business as now
being conducted. The Parent and Acquisition are each duly qualified to transact
business as a foreign corporation and are each in good standing in the
jurisdictions set forth opposite their respective names in Schedule 5.1, which
are the only jurisdictions where such qualification is required by reason of the
nature of the properties and assets currently owned, operated or leased by the
Parent or Acquisition or the business currently conducted by them, except for
such jurisdictions where the failure to be so qualified would not have a Go2Net
Material Adverse Effect (as defined below). Acquisition is a corporation newly
formed by Parent for the sole purpose of consummating the transactions
contemplated by this Agreement and has not conducted any business other than as
expressly set forth in or contemplated by this Agreement. The Parent has
previously delivered to the Company complete and correct copies of (i) its
Certificate of Incorporation (certified by the Secretary of State of Delaware as
of a recent date) and its By-Laws (certified by the Secretary of the Parent as
of a recent date) and (ii) the Certificate of Incorporation of Acquisition and
all amendments thereto to the date hereof (certified by the Secretary of State
of the State of Delaware as of a recent date) and the By-Laws of Acquisition
(certified by the secretary of Acquisition as of a recent date). Neither the
Certificate of Incorporation nor the By-Laws of the Parent or Acquisition has
been amended since the respective dates of certification thereof, nor has any
action been taken for the purpose of effecting any amendment of such
instruments. The term "Go2Net Material Adverse Effect" means for purposes of
this Agreement, any change, event or effect that is, or would be, materially
adverse to the business, operation, assets, liabilities, financial condition or
results of operations of the Parent and Acquisition, taken as a whole.
5.2 Authorization. Each of the Parent and Acquisition has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly approved by the Boards of Directors of the Parent and Acquisition and
by the Parent as the sole shareholder of Acquisition, and no other corporate
proceedings on the part of the Parent or Acquisition are necessary to approve
and authorize the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by the Parent and Acquisition and constitutes the valid and
binding agreement of the Parent and Acquisition,
- 25 -
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or in law).
5.3 Consents and Approvals; No Violations. Subject to (a) the filing of
Certificate of Merger with the Secretary of State of the State of California and
the Secretary of State of the State of Delaware and (b) compliance with
applicable federal and state securities laws, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not:
(i) violate or conflict with any provisions of the Certificate of Incorporation
or By-Laws of the Parent or Acquisition; (ii) breach, violate or constitute an
event of default (or an event which with the lapse of time or the giving of
notice or both would constitute an event of default) under, give rise to any
right of termination, cancellation, modification or acceleration under, or
require any consent or the giving of any notice under, any note, bond,
indenture, mortgage, security agreement, lease, license, franchise, permit,
agreement or other instrument or obligation to which the Parent or Acquisition
is a party, or by which any of them or any of their respective properties or
assets may be bound, or result in the creation of any lien, claim or encumbrance
of any kind whatsoever upon the properties or assets of the Parent or
Acquisition pursuant to the terms of any such instrument or obligation, other
than any breach, violation, default, termination, cancellation, modification or
acceleration which would not have a Go2Net Material Adverse Effect; (iii)
violate or conflict with any law, statute, ordinance, code, rule, regulation,
judgment, order, writ, injunction or decree or other instrument of any Federal,
state, local or foreign court or governmental or regulatory body, agency or
authority applicable to the Parent or Acquisition or by which any of their
respective properties or assets may be bound, except for such violations or
conflicts which would not have a Go2Net Material Adverse Effect; or (iv)
require, on the part of the Parent or Acquisition, any filing or registration
with, or permit, license, exemption, consent, authorization or approval of, or
the giving of any notice to, any governmental or regulatory body, agency or
authority other than any filing, registration, permit, license, exemption,
consent, authorization, approval or notice which if not obtained or made would
not have a Go2Net Material Adverse Effect.
5.4 Capitalization. (a) The authorized capital stock of the Parent
consists of 50,000,000 shares of Parent Common Stock, of which 5,976,632 shares
are issued and outstanding as of December 28, 1998 and 1,000,000 shares of
Preferred Stock, none of which are issued or outstanding. All of the issued and
outstanding shares of Parent Common Stock are (and all shares of Parent Common
Stock to be issued in connection with the Merger, when issued in accordance with
this Agreement, shall be) duly authorized, validly issued, fully paid and
nonassessable, and none of such shares has been issued in violation of any
applicable preemptive rights. There are no agreements or commitments to which
the Parent is a party or by which it is bound for the redemption or repurchase
of any shares of its capital stock. Except for options issued under the Parent's
1996 Stock Option Plan (collectively, the "Stock Option Plan"), there are no
outstanding options, warrants or other rights to purchase, or securities
convertible into or exchangeable for, shares of the capital stock of the Parent,
and (except as contemplated by this
- 26 -
Agreement and except with respect to options issued under the Stock Option Plan)
there are no agreements or commitments to which the Parent is a party or by
which it is bound pursuant to which the Parent is or may become obligated to
issue additional shares of its capital stock.
(b) The authorized capital stock of Acquisition consists of
1,000 shares of common stock, par value $0.01 per share, of which 100 shares are
issued and outstanding, all of which shares are owned beneficially and of record
by the Parent. There are no outstanding options, warrants or other rights to
purchase, or securities convertible into or exchangeable for, shares of the
capital stock of Acquisition, and there are no agreements or commitments to
which Acquisition is a party or by which it is bound pursuant to which
Acquisition is or may become obligated to issue additional shares of its capital
stock.
5.5 SEC Reports and Financial Statements. The Parent has heretofore
delivered or made available to the Company complete and correct copies of all
reports and other filings filed by the Parent with the SEC pursuant to the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the "Acts") since and
including the filing date of the Registration Statement with respect to the
Company's initial public offering (such reports and other filings collectively
referred to herein as the "SEC Filings"). The SEC Filings constitute all of the
documents required to be filed by the Parent under the SEC Acts with the SEC.
All documents required to be filed as exhibits to the SEC Filings have been so
filed, and all contracts so filed as exhibits are in full force and effect,
except those which are expired in accordance with their terms, and neither
Parent nor any of its subsidiaries is in default thereunder. As of their
respective dates, the SEC Filings did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited financial statements of the
Parent included in the SEC Filings comply in all material respects with the
published rules and regulations of the SEC with respect thereto, and such
audited financial statements (i) were prepared from the books and records of the
Parent, (ii) were prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein or
in the notes or schedules thereto) and (iii) present fairly the financial
position of the Parent as at the dates thereof and the results of operations and
cash flows (or changes in financial position, for the fiscal year ended
September 30, 1998 and earlier years) for the periods then ended. The unaudited
financial statements included in the SEC Filings comply in all material respects
with the published rules and regulations of the SEC with respect thereto; and
such unaudited financial statements (i) were prepared from the books and records
of the Parent, (ii) were prepared in accordance with generally accepted
accounting principles, except as otherwise permitted under the Exchange Act and
the rules and regulations thereunder, on a consistent basis (except as may be
indicated therein or in the notes or schedules thereto) and (iii) present fairly
the financial position of the Parent as at the dates thereof and the results of
operations and cash flows (or changes in financial condition) for the periods
then ended, subject to normal year-end adjustments and any other adjustments
described therein or in the notes or schedules thereto. The foregoing
representations
- 27 -
and warranties in this Section 5.5(a) shall also be deemed to be made with
respect to all filings made with the SEC on or before the Effective Time.
5.6 Absence of Certain Changes. Except as set forth in Schedule 5.6,
since September 30, 1998, the Parent has carried on its business in the ordinary
course and consistent with past practice. Except as set forth on Schedule 5.6
hereto, since September 30, 1998, the Parent has not: (i) incurred any material
obligation or liability (whether absolute, accrued, contingent or otherwise)
except in the ordinary course of business and consistent with past practice;
(ii) experienced any Go2Net Material Adverse Effect; (iii) made any change in
any accounting principle or practice or in its methods of applying any such
principle or practice; (iv) suffered any material damage, destruction or loss,
whether or not covered by insurance, affecting its properties, assets or
business; (v) mortgaged, pledged or subjected to any lien, charge or other
encumbrance, or granted to third parties any rights in, any of its assets,
tangible or intangible; (vi) sold or transferred any of its assets, except in
the ordinary course of business and consistent with past practice, or canceled
or compromised any debts or waived any claims or rights of a material nature;
(vii) issued any additional shares of capital stock or any rights, options or
warrants to purchase, or securities convertible into or exchangeable for, shares
of its capital stock other than options to purchase shares of Parent Common
Stock granted under its employee stock plans, shares of Parent Common Stock
issued upon exercise of employee stock options and shares of Parent Common Stock
issued upon the exercise of outstanding warrants; (viii) declared or paid any
dividends on or made any distributions (however characterized) in respect of
shares of its capital stock; (ix) repurchased or redeemed any shares of its
capital stock; (x) granted any general or specific increase in the compensation
payable or to become payable to any of its executive officers or any bonus or
service award or other like benefit such persons; or (xi) entered into any
agreement to do any of the foregoing.
5.7 Litigation. Except as set forth in Schedule 5.7 hereto, there are
no suits, actions, claims, proceedings (including, without limitation, arbitral
or administrative proceedings) or investigations pending or, to the knowledge of
the Parent, threatened against the Parent or its properties, assets or business
or, to the knowledge of the Parent, pending or threatened against any of the
officers, directors, employees, agents or consultants of the Parent in
connection with the business of the Parent. There are no such suits, actions,
claims, proceedings or investigations pending, or, to the knowledge of the
Parent, threatened challenging the validity or propriety of the transactions
contemplated by this Agreement. There is no judgment, order, injunction, decree
or award (whether issued by a court, an arbitrator or an administrative agency)
to which the Parent is a party, or involving the Parent's properties, assets or
business, which is unsatisfied or which requires continuing compliance therewith
by the Parent.
5.8 Compliance with Applicable Law. Except as set forth in Schedule 5.8
the Parent is not in violation of any applicable safety, health, environmental
or other law, statute, ordinance, code, rule, regulation, judgment, order,
injunction, writ or decree of any Federal, state, local or foreign court or
governmental or regulatory body, agency or authority having, asserting or
claiming jurisdiction over it or over any part of its business, operations,
properties or assets,
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except where any such violation would not have a Go2Net Material Adverse Effect.
The Parent has not received any notice alleging any such violation, nor to the
knowledge of the Parent, is there any inquiry, investigation or proceedings
relating thereto.
5.9 Disclosure. No representation or warranty by the Parent or
Acquisition contained in this Agreement and no statement contained in any of the
Disclosure Schedules delivered or to be delivered pursuant to this Agreement
contains or will contain, when considered together as a whole, any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make the statements contained therein not misleading.
5.10 Pooling of Interests. To the knowledge of the Parent, neither the
Parent nor any of its affiliates has taken or agreed to take any action which
would prevent the Parent from accounting for the business combination to be
effected by the Merger as a pooling of interests.
5.11 Parent Action. The Board of Directors of the Parent, by unanimous
written consent or at a meeting duly called and held, has approved the Merger
and this Agreement in accordance with the provisions of the DGCL.
5.12 Intellectual Property. Parent owns or has licenses to use all
copyrights, trademarks, patents, service marks, trade names and Internet domain
names (collectively, the "Parent Intellectual Property Rights") reasonably
required for Parent to carry on the business of Parent as presently conducted,
except where the failure to own or have licenses for such Parent Intellectual
Property Rights would not have a Go2Net Material Adverse Effect.
5.13 Contracts. Parent has filed as exhibits to the SEC Filings all
agreements which are required by Rule 601 of Regulation S-K promulgated under
the Securities Act to be filed with the SEC as material agreements.
5.14 Related Person Indebtedness and Contracts. Schedule 5.14 sets
forth a complete and correct summary of all contracts, commitments, arrangements
and understandings not described elsewhere in this Agreement or in the SEC
Filings between the Parent and any of the following (collectively, "Go2Net
Related Persons"): (i) any holders of in excess of 5% of the outstanding shares
of Parent Common Stock; (ii) the spouses and children of any of such holders
(collectively, "near relatives"); (iii) any trust for the benefit of any of such
holders of any of their respective near relatives; or (iv) any corporation,
partnership, joint venture or other entity of enterprise owned or controlled by
any of such holders or by any of their respective near relatives.
5.15 Brokers Fees. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Parent.
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ARTICLE VI
CONDUCT OF BUSINESS OF THE COMPANY AND
THE PARENT PRIOR TO THE EFFECTIVE TIME
6.1 Conduct of Business of the Company. During the period commencing on
the date hereof and continuing until the Effective Time, the Company and the
Principal Shareholder agree that the Company, except as otherwise expressly
contemplated by this Agreement or agreed to in writing by the Parent:
(a) will carry on its business only in the ordinary course
and consistent with past practice;
(b) will not declare or pay any dividend on or make any other
distribution (however characterized) in respect of shares of its capital stock;
(c) will not, directly or indirectly, redeem or repurchase, or
agree to redeem or repurchase, any shares of its capital stock;
(d) will not amend its Articles of Incorporation or By-Laws;
(e) will not issue, or agree to issue, any shares of its
capital stock, or any options, warrants or other rights to acquire shares of its
capital stock, or any securities convertible into or exchangeable for shares of
its capital stock;
(f) will not combine, split or otherwise reclassify any
shares of its capital stock;
(g) will not form a Subsidiary;
(h) will use its commercially reasonable best efforts to
preserve intact its present business organization, keep available the services
of its officers and key employees and preserve its relationships with clients
and others having business dealings with it to the end that its goodwill and
ongoing business shall not be materially impaired at the Effective Time;
(i) will not (i) make any capital expenditures individually in
excess of $5,000 or in the aggregate in excess of $15,000, (ii) enter into any
license, distribution, OEM, reseller, joint venture or other similar agreement,
(iii) enter into or terminate any lease of, or purchase or sell, any real
property, (iv) enter into any leases of personal property involving individually
in excess of $5,000 annually or in the aggregate in excess of $15,000 annually,
(v) incur or guarantee any additional indebtedness for borrowed money, (vi)
create or permit to become effective any security interest, mortgage, lien,
charge or other encumbrance on its properties or assets, or (vii) enter into any
agreement to do any of the foregoing;
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(j) will not adopt or amend any Benefit Plan for the benefit
of Employees, or increase the salary or other compensation (including, without
limitation, bonuses or severance compensation) payable or to become payable to
its Employees or accelerate, amend or change the period of exercisability or the
vesting schedule of options granted under any stock option plan or agreements
except as specifically required by the terms of such plans or agreements, or
enter into any agreement to do any of the foregoing;
(k) will not accelerate receivables or delay payables;
(l) will promptly advise the Parent of the commencement of, or
threat of (to the extent that such threat comes to the knowledge of the Company,
or any of the Principal Shareholder), any claim, action, suit, proceeding or
investigation against, relating to or involving the Company or any of its
Subsidiaries or any of their directors, officers, employees, agents or
consultants in connection with their businesses or the transactions contemplated
hereby that could reasonably be expected to have a Company Material Adverse
Effect;
(m) will use its commercially reasonable efforts to maintain
in full force and effect all insurance policies maintained by the Company on the
date hereof; and
(n) will not enter into any agreement to dissolve, merge,
consolidate or, except in the ordinary course, sell any material assets of the
Company, or acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership or
other business organization or division, or otherwise acquire or agree to
acquire any assets in excess of $15,000 in the aggregate.
6.2 Conduct of Business of the Parent. During the period commencing on
the date hereof and continuing until the Effective Time, the Parent agrees that,
except as expressly contemplated by this Agreement or agreed to in writing by
the Company, the Parent:
(a) subject to the fiduciary duties of the Parent's Board of
Directors, as advised in writing by counsel, will carry on its business only in
the ordinary course consistent with past practice;
(b) will promptly advise the Company of the commencement of
any claim, action, suit, proceeding or investigation against, relating to or
involving the Parent or any Parent Subsidiary or any of their directors,
officers, employees, agents or consultants in connection with their businesses
or the transactions contemplated hereby;
(c) will not enter into any agreement to dissolve, merge,
consolidate or, except in the ordinary course of business, sell any material
assets of the Parent;
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(d) will not take any action which could cause the Merger to
fail to qualify as a reorganization under the provisions of Section 368(a) of
the Code;
(e) will not declare or pay any dividend on or make any other
distribution (however characterized) in respect of shares of its capital stock;
(f) will not amend its Certificate of Incorporation or By-Laws;
(g) will not, directly or indirectly, redeem or repurchase, or
agree to redeem or repurchase, any shares of its capital stock, except for the
repurchase of shares from terminated employees;
(h) will use commercially reasonable efforts to preserve
intact its present business organization, keep available the services of its
officers and key employees and preserve its relationships with clients and
others having business dealings with it to the end that its goodwill and ongoing
business shall not be materially impaired at the Effective Time; and
(i) will not combine, split, or otherwise reclassify any
shares of its capital stock unless there is a proportionate equitable adjustment
to the Merger Shares.
6.3 Conduct of Business of Acquisition. During the period commencing on
the date hereof and continuing until the Effective Time, Acquisition shall not
engage in any activities of any nature except as provided in or contemplated by
this Agreement.
6.4 Other Negotiations. Neither the Company nor the Principal
Shareholder will (nor will they permit any of their respective officers,
directors, employees, agents, partners and affiliates on their behalf to) take
any action to solicit, initiate, seek, encourage or support any inquiry,
proposal or offer from, furnish any information to, or participate in any
negotiations with, any corporation, partnership, person or other entity or group
(other than Parent) regarding any acquisition of the Company, any merger or
consolidation with or involving the Company, or any acquisition of any material
portion of the stock or assets of the Company, or any equity or debt financing
of the Company or any material license of Intellectual Property Rights (any of
the foregoing being referred to in this Agreement as an "Acquisition
Transaction") or enter into an agreement concerning any Acquisition Transaction
with any party other than Parent. If between the date of this Agreement and the
termination of this Agreement pursuant to Article X, the Company receives from a
third party any offer to negotiate or consummate an Acquisition Transaction, the
Company shall (i) notify Parent immediately (orally and in writing) of such
offer, including the identity of such party and the terms of any proposal
therein, and (ii) notify such third party of the Company's obligations under
this Agreement.
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ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access to Properties and Records. The Company and the Parent will
provide each other and their respective accountants, counsel and other
authorized advisors, with reasonable access, during business hours, to their
premises and properties and their books and records (including, without
limitation, contracts, leases, insurance policies, litigation files, minute
books, accounts, working papers and tax returns filed and in preparation) and
will cause its officers to furnish to each other and their respective authorized
advisors such additional financial, tax and operating data and other information
pertaining to their respective businesses as the Company or the Parent, as the
case may be, shall from time to time reasonably request. All of such data and
information shall be kept confidential by Parent and the Company until the
consummation of the Merger.
7.2 Transfer of Shares. The Principal Shareholder agrees that he (i)
shall not dispose of or in any way encumber said shares prior to the
consummation of the transactions contemplated hereby, (ii) shall take no action
inconsistent with the approval and consummation of said transactions and (iii)
at the Closing shall surrender the stock certificates representing all shares of
Company Stock owned by him, duly endorsed for transfer.
7.3 Affiliates' Letters. Concurrently with the execution of this
Agreement, all persons who are "affiliates" of the Company or Parent for
purposes of Rule 145 under the Securities Act, which shall include each of ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and Nigel Seed, shall deliver, and the
Principal Shareholder agrees to deliver to the Company, a signed, written
agreement, in the form attached as Exhibit D hereto, to the effect that such
person will not sell, or in any other way reduce such person's risk relative to
(within the meaning of the SEC's rules relating to pooling of interests
accounting), any shares of Parent Common Stock issued to such person pursuant to
the Merger until such time as financial statements (including combined revenues
and net income) covering at least 30 days of post-Merger operations have been
published.
7.4 Reasonable Efforts; etc. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use his/its reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including obtaining any consents, authorizations, exemptions and approvals from,
and making all filings with, any governmental or regulatory authority, agency or
body which are necessary in connection with the transactions contemplated by
this Agreement.
7.5 Material Events. At all times prior to the Effective Time, each
party shall promptly notify the others in writing of the occurrence of any event
which will or may result in the failure to satisfy any of the conditions
specified in Article VIII or Article IX hereof.
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7.6 Pooling of Interests. The Company, the Parent, Acquisition and the
Principal Shareholder will not take any actions that would prevent the Merger
from being accounted for as a pooling of interests.
7.7 Fees and Expenses. The parties hereto shall bear and pay all of
their own fees, costs and expenses relating to the transactions contemplated by
this Agreement, including, without limitation, the fees and expenses of their
respective counsel, accountants, brokers and financial advisors, except that the
Principal Shareholder shall be responsible for all fees, costs and expenses
incurred by the Company in connection with this Agreement and the transactions
contemplated hereby and such fees, costs and expenses shall be deemed expenses
of the Principal Shareholder and paid by the Principal Shareholder, provided
that, upon the Closing, the Parent shall pay up to $550,000 of the fees and
expenses of the Company, subject to the receipt of appropriate documentation and
invoices.
7.8 Nasdaq National Market Listing. Parent shall cause the shares of
Parent Common Stock issuable in the Merger to be authorized for listing on The
Nasdaq National Market.
7.9 Tax Treatment. Each of the Parent, Acquisition, the Company and the
Principal Shareholder shall use their reasonable commercial efforts to cause the
Merger to qualify as a reorganization under Section 368(a) of the Code. Parent
and its Subsidiaries will not take, or cause the Company to take, any action
after the Effective Time which will cause the Merger to fail to qualify as a
reorganization under the provisions of Section 368(a) of the Code.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF
THE PARENT AND ACQUISITION
The obligation of the Parent and Acquisition to consummate the
transactions contemplated hereby shall be subject to the satisfaction, on or
prior to the Closing Date, of each of the following conditions (any of which may
be waived in writing by the Parent and Acquisition in their sole discretion):
8.1 Representations and Warranties True. The representations and
warranties of the Company and the Principal Shareholder which are contained in
this Agreement, or contained in any Schedule or certificate delivered or to be
delivered pursuant to this Agreement, shall be true and correct in all material
respects at and as of the Closing Date as though such representations and
warranties were made on and as of the Closing Date, and at the Closing the
Company shall have delivered to the Parent and Acquisition a certificate (signed
on behalf of the Company by the Chief Executive Officer of the Company) to that
effect with respect to all such representations and warranties made by the
Company, and the Principal Shareholder shall have executed and delivered to the
Parent and Acquisition a certificate to that effect with respect to all such
representations and warranties made by the Principal Shareholder.
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8.2 Performance. The Company and the Principal Shareholder shall have
performed and complied in all material respects with all of the obligations
under this Agreement which are required to be performed or complied with by them
on or prior to the Closing Date, and at the Closing the Company shall have
delivered to the Parent and Acquisition a certificate (duly executed on behalf
of the Company by the Chief Executive Officer of the Company) to that effect
with respect to all such obligations required to have been performed or complied
with by the Company on or before the Closing Date, and the Principal Shareholder
shall have executed and delivered to the Parent and Acquisition a certificate to
that effect with respect to all such obligations required to have been performed
or complied with by the Principal Shareholder on or before the Closing Date.
8.3 Affiliates Letters. The Company shall have obtained from the
Principal Shareholder and each other person who is an "affiliate" (as such term
is defined in Rule 145 of the Securities Act) of the Company an executed letter
agreement in the form annexed as Exhibit D hereto and shall have delivered such
letter agreements to the Parent.
8.4 Pooling of Interests. Ernst & Young LLP, independent auditors to
the Parent, shall have delivered a letter addressed to the Parent, dated the
Closing Date, regarding that firm's concurrence with Parent's management and the
Company's management conclusion that the business combination to be effected in
the Merger will qualify as a pooling of interests transaction under generally
accepted accounting principles if consummated in accordance with this Agreement.
8.5 Absence of Litigation. No statute, rule or regulation shall have
been enacted or promulgated, and no order, decree, writ or injunction shall have
been issued and shall remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental or regulatory body,
agency or authority shall have been instituted by any person (or instituted or
threatened by any governmental or regulatory body, agency or authority), and no
investigation by any governmental or regulatory body, agency or authority shall
have been commenced with respect to the transactions contemplated hereby or with
respect to the Company which would have a material adverse effect on the
transactions contemplated hereby or on the business of the Company taken as a
whole.
8.6 Consents. All approvals, consents, waivers and authorizations
required to be obtained by the Company or any Shareholder in connection with the
Merger and the other transactions contemplated by this Agreement (including
those identified on Schedule 3.3) shall have been obtained and shall be in full
force and effect.
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8.7 Additional Agreements. Parent shall have the following
agreements:
(i) the Employment and Non-Competition Agreement in the form of
Exhibit E hereto, duly executed by ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇;
(ii) the Escrow Agreement annexed as Exhibit C hereto, duly
executed by the Principal Shareholder;
(iii) Resignations of all officers and directors of the
Company, effective as of the Effective Time; and
(iv) the Letter of Transmittal in the form of Exhibit B duly
executed by holders of 100% of the outstanding shares of Company Stock (the
"Letter of Transmittal"), and
8.8 Opinion of Company Counsel. The Company shall have delivered to the
Parent an opinion of ▇▇▇▇▇▇▇ Coie LLP, counsel to the Company and the Principal
Shareholder, in substantially the form attached as Exhibit F hereto.
8.9 Delivery of Certificates for Cancellation. The share certificates
representing all of the issued and outstanding shares of Company Common Stock as
of the Closing Date, duly endorsed in blank, shall have been surrendered for
cancellation.
8.10 Appraisal Rights. The holders of 100% of the issued and
outstanding shares of Company Stock shall have voted in favor of the approval of
the Merger and the transactions contemplated hereby and no holders of shares of
Company Stock shall have demanded appraisal rights in respect of the Merger.
8.11 Certificate of Merger. The Company shall have executed and
delivered to the Parent counterparts of the Articles/Certificate of Merger to be
filed with the Secretary of State of the State of California and the Secretary
of State of the State of Delaware in connection with the Merger.
8.12 Payment of Indebtedness. At or prior to the Effective Time, the
Company shall have paid in full all outstanding indebtedness such that at the
Closing the Company shall not have any outstanding indebtedness (other than
accounts payable incurred in the ordinary course of business).
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ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY AND THE PRINCIPAL SHAREHOLDER
The obligation of the Company and the Principal Shareholder to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction, on or prior to the Closing Date, of each of the following
conditions (any of which may be waived in writing by the Company and the
Principal Shareholder in their sole discretion):
9.1 Representations and Warranties True. The representations and
warranties of each of the Parent and Acquisition contained in this Agreement, or
contained in any Schedule, certificate or other instrument or document delivered
or to be delivered pursuant to this Agreement, shall be true and correct in all
material respects at and as of the Closing Date as though such representations
and warranties were made on and as of the Closing Date, and at the Closing each
of the Parent and Acquisition shall have delivered to the Company and the
Principal Shareholder a certificate (signed on its behalf by its President and
its Chief Financial Officer) to that effect with respect to all such
representations and warranties made by such entity.
9.2 Performance. Each of the Parent and Acquisition shall have
performed and complied in all material respects with all of the obligations
under this Agreement which are required to be performed or complied with by them
on or prior to the Closing Date, and at the Closing each of the Parent and
Acquisition shall have delivered to the Company and the Principal Shareholder a
certificate, signed on its behalf by its President and its Chief Financial
Officer, to that effect with respect to all such obligations required to have
been performed or complied with by such entity on or before the Closing Date.
9.3 Absence of Litigation. No statute, rule or regulation shall have
been enacted or promulgated, and no order, decree, writ or injunction shall have
been issued and shall remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental or regulatory body,
agency or authority shall have been instituted by any person (or instituted or
threatened by any governmental or regulatory body, agency or authority) and no
investigation by any governmental or regulatory body, agency or authority shall
have been commenced with respect to the transactions contemplated hereby or with
respect to the Parent or the Parent Subsidiaries which would have a material
adverse effect on the transactions contemplated hereby or on the business of the
Parent and the Parent Subsidiaries taken as a whole.
9.4 Consents. All approvals, consents, waivers and authorizations
required to be obtained by Parent or Acquisition in connection with the Merger
and the other transactions contemplated by this Agreement (including those
identified on Schedule 5.3) shall have been obtained and shall be in full force
and effect.
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9.5 Additional Agreements. The Parent shall have executed and delivered
(and shall have agreed to cause the Surviving Corporation to execute and deliver
immediately following the Effective Time, as applicable) counterparts of the
following agreements;
(i) the Employment and Non-Competition Agreement referred to in
Section 8.7(i) hereof;
(ii) the Escrow Agreement referred to in Section 8.7(ii)
hereof, together with counterparts signed by the escrow agent named therein;
9.6 Opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇. The Parent shall have
delivered to the Company an opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to
the Parent and Acquisition in substantially the form annexed as Exhibit G
hereto.
9.7 Certificate of Merger. The Parent and Acquisition shall have
executed and delivered to the Company counterparts of the Articles/Certificate
of Merger to be filed with the Secretary of State of the State of California and
the Secretary of the State of the State of Delaware in connection with the
Merger.
9.8 Shares of Parent Common Stock. Subject to the deposit into escrow
of shares of Parent Common Stock contemplated under Section 2.8, at the Closing
the Parent shall deliver to the Shareholders the shares of Parent Common Stock
issuable to the Shareholders pursuant to Section 2.2(a) hereof.
9.9 Tax Opinion. The Company shall have received an opinion of ▇▇▇▇▇▇▇
Coie LLP to the effect that the Merger will be treated as a reorganization
within the meaning of Section 386(a) of the Code and that the Shareholders will
recognize no gain or loss with respect to the Merger to the extent they receive
shares of Parent Common Stock in the Merger in exchange for their shares of
Company Common Stock.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by the mutual written consent of the Company and
the Parent;
(b) by either the Company or the Parent
(i) if any court or governmental or regulatory
agency, authority or body shall have enacted, promulgated or issued any statute,
rule, regulation, ruling, writ or
- 38 -
injunction, or taken any other action, restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby and all appeals and means of
appeal therefrom have been exhausted; or
(ii) if the Effective Time shall not have occurred on or before
December 31, 1998; provided, however, that the right to terminate this Agreement
pursuant to this Section 10.1(b)(ii) shall not be available to any party whose
(or whose affiliate(s)') breach of any representation or warranty or failure to
perform or comply with any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before such
date; or
(c) by the Company, if any of the conditions specified in
Article IX have not been met or waived prior to such time as such condition can
no longer be satisfied; or
(d) by the Parent, if any of the conditions specified in
Article VIII shall not have been met or waived prior to such time as such
condition can no longer be satisfied.
10.2 Effect of Termination. In the event of termination of this
Agreement, this Agreement shall forthwith become void and there shall be no
liability on the part of any of the parties hereto or (in the case of the
Company, the Parent and Acquisition) their respective officers or directors,
except for Sections 7.7 and 13.6 and the last sentence of Section 7.1, which
shall remain in full force and effect, and except that nothing herein shall
relieve any party from liability for a breach of this Agreement prior to the
termination hereof.
ARTICLE XI
INDEMNIFICATION; SURVIVAL OF
REPRESENTATIONS AND WARRANTIES
11.1 Indemnity Obligations. Subject to Section 11.4 hereof, the
Principal Shareholder hereby agrees to indemnify and hold the Parent harmless
from, and to reimburse the Parent for, any Indemnity Claims (as that term is
hereinafter defined) arising under the terms and conditions of this Agreement.
For purposes of this Agreement, the term "Indemnity Claim" shall mean any and
all losses, damages, deficiencies, liabilities, obligations, actions, claims,
suits, proceedings, demands, assessments, judgments, recoveries, fees, costs and
expenses (including, without limitation, all out-of-pocket expenses, reasonable
investigation expenses and reasonable fees and disbursements of accountants and
counsel) of any nature whatsoever, net of insurance proceeds actually realized
by Parent (collectively, "Losses") arising out of, based upon or resulting from
(i) any inaccuracy in or breach of any representation and warranty of the
Company or the Principal Shareholder which is contained in this Agreement or the
Letter of Transmittal or any Schedule or certificate delivered pursuant hereto
or thereto; or (ii) any breach or nonfulfillment of, or any failure to perform,
any of the covenants, agreements or undertakings of the Company (which
covenants, agreements or undertakings were to be performed or complied with on
or prior
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to the consummation of the Merger) or the Principal Shareholder which are
contained in or made pursuant to the terms and conditions of this Agreement or
the Letter of Transmittal.
11.2 Notification of Claims. Subject to the provisions of Section 11.3
below, in the event of the occurrence of an event which the Parent asserts
constitutes an Indemnity Claim, Parent shall provide the Principal Shareholder
with prompt written notice of such event and shall otherwise promptly make
available to the Principal Shareholder all relevant information which is
material to the claim and which is in the possession of the indemnified party.
If such event involves the claim of any third party (a "Third-Party Claim"), the
Principal Shareholder as the indemnifying party shall have the right to elect to
join in the defense, settlement, adjustment or compromise of any such
Third-Party Claim, and, if he so elects to control such defense, settlement,
adjustment or compromise, and to employ counsel to assist such indemnifying
party in connection with the handling of such claim, at the sole expense of the
indemnifying party, in the case of the Principal Shareholder as the indemnifying
party, to be paid from amounts held in escrow by the Escrow Agent in accordance
with the terms of the Escrow Agreement. Unless the Principal Shareholder elects
to assume such defense, settlement, adjustment or compromise, Parent shall have
the right to settle any such Third-Party Claim; provided, however, that Parent
may not effect the settlement, adjustment or compromise of any such Third-Party
Claim without the written consent of the Principal Shareholder, which consent
shall not be unreasonably withheld. In the event that the Principal Shareholder
has consented in writing to any such settlement, adjustment or compromise, the
Principal Shareholder shall have no power or authority to object to the amount
of any claim by Parent against the escrow for indemnity with respect to such
settlement, adjustment or compromise. The Principal Shareholder shall have the
right to settle, adjust, or compromise any Third-Party Claim, the defense of
which is controlled by the Principal Shareholder, using amounts held in escrow;
provided, however, that, unless the settlement, adjustment or compromise
involves no more than the payment of an amount that is less than the amount of
funds then remaining in the escrow and provides for the unconditional release of
Parent, the Company and their respective affiliates, the Principal Shareholder
may not effect the settlement, adjustment, compromise or satisfaction of any
such Third-Party Claim without the consent of the Parent, which consent shall
not be unreasonably withheld. Parent's failure to give timely notice or to
promptly furnish the Representative with any relevant data and documents in
connection with any Third-Party Claim shall not constitute a defense (in part or
in whole) to any claim for indemnification by such party, except and only to the
extent that such failure shall result in any prejudice to the indemnifying
party. In connection with any ThirdParty Claim, the indemnified party, or the
indemnifying party if it has assumed the defense of such claim pursuant to the
preceding sentence, shall diligently pursue the defense of such ThirdParty
Claim.
11.3 Duration. Except as otherwise provided in this Agreement, all
representations, warranties, covenants and agreements of the parties contained
in this Agreement, and the rights of the parties to seek indemnification with
respect thereto, shall survive the Closing but, except in respect of any claims
for indemnification as to which notice shall have been duly given prior to the
Escrow Release Date (as defined below), the representations and warranties of
the
- 40 -
Company and the Principal Shareholder contained in this Agreement and the Letter
of Transmittal shall expire on the earlier of (i) the date Parent has received a
signed opinion from its independent auditors certifying the financial statements
for Parent for the fiscal year ending September 30, 1999 in connection with
their completion of the audit of such financial statements and (ii) the first
anniversary of the Closing Date (the "Escrow Release Date"). To be duly given,
any such notice shall set forth in reasonable detail the nature of such claim,
the provisions under this Agreement or the Letter of Transmittal pursuant to
which such claim is being asserted and, to the extent feasible, a reasonable
estimate of the anticipated amount of such claim ("Claim Notice").
11.4 Escrow. At the Effective Time, ten percent (10%) of the Merger
Shares received by the Principal Shareholder, but in no event less than eight
percent (8%) of the sum of the Merger Shares and Option Shares (collectively,
the "Escrow Shares") shall be delivered to U.S. Bank, as escrow agent (the
"Escrow Agent "), to be held for a period ending on the Escrow Release Date,
except Escrow Shares may be withheld after the Escrow Release Date to satisfy
claims for indemnification which are the subject to a Claims Notice delivered
prior to the Escrow Release Date. The Escrow Shares shall be held and disbursed
by the Escrow Agent in accordance with an Escrow Agreement in the form attached
hereto as Exhibit C. For the purpose of any claim against the Escrow Shares
hereunder, the value per share of the Escrow Shares shall be deemed to be the
Closing Market Price. Except with respect to claims based on fraud committed by
the Company or the Principal Shareholder which are not limited, if the Closing
occurs, Parent agrees that Parent's sole and exclusive remedy and recourse
against the Principal Shareholder under this Agreement for Losses attributable
to any inaccuracy or breach of any representation or warranty of the Company or
the Principal Shareholder which is contained in this Agreement or the Letter of
Transmittal or any Schedule or certificate delivered pursuant hereto or thereto
other than Losses arising from breaches of the representations and warranties
set forth in Sections 3.4, 3.11 and 3.23 (the "Covered Representations") shall
be against the Merger Shares held in escrow pursuant to the Escrow Agreement.
Notwithstanding anything herein to the contrary, (i) the Principal Shareholder
shall have no liability for indemnification pursuant to this Article XI until
the aggregate Losses to the Parent and the Company exceed $25,000, at which
point the Principal Shareholder shall be liable for the full amount of all
Losses, and (ii) except as provided in the next sentence, the maximum aggregate
liability of the Principal Shareholder hereunder shall not exceed the value
(determined by reference to the Closing Market Price) of the Escrow Shares. Any
claims for indemnification arising under Section 11.1(i) from any inaccuracy in
or breach of any Covered Representations or under Section 11.1(ii) of this
Article XI will not be subject to any limitation.
11.5 No Contribution. The Principal Shareholder hereby waives, and
acknowledges and agrees that the Principal Shareholder shall not have and shall
not exercise or assert (or attempt to exercise or assert), any right of
contribution, right of indemnity or other right or remedy against the Company in
connection with any indemnification payments which the Principal Shareholder is
required to make under this Article XI.
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ARTICLE XII
REGISTRATION RIGHTS
12.1 Registrable Shares. For purposes of this Agreement, "Registrable
Shares" shall mean the shares of Parent Common Stock issued in the Merger; and
any shares of Parent Common Stock issued upon the exercise of Stock Options
which are exercised prior to the filing of the Registration Statement (as
defined below) provided, however, that a distribution of shares of Parent Common
Stock issued in the Merger without additional consideration, to underlying
beneficial owners (such as the general and limited partners, shareholders of
trust beneficiaries of a Shareholder) shall not be deemed such a sale or
transfer for purposes of this Article XII and such underlying beneficial owners
shall be entitled to the same rights under this Article XII as the initial
Shareholder from which the Registrable Shares were received and shall be deemed
a Shareholder for the purposes of this Article XII.
12.2 Required Registration. Parent shall use its best efforts to
prepare and file with the SEC, at least ten (10) days prior to the date that
Parent is scheduled to publicly issue its initial press release of Parent's
financial results for the fiscal quarter ending March 31, 1999 and reflecting at
least thirty days of combined operations of Parent and the Company (the "Pooling
Release Date"), a registration statement on Form S-3 (or such successor or other
appropriate form) under the Securities Act with respect to the Registrable
Shares (the "Registration Statement") and to effect all such registrations,
qualifications and compliances (including, without limitation, obtaining
appropriate qualifications under applicable state securities or "Blue sky" laws
and compliance with any other applicable governmental requirements or
regulations) as any selling Shareholder may reasonably request and that would
permit or facilitate the sale of Registrable Shares (provided however that
Parent shall not be required in connection therewith to qualify to do business
or to file a general consent to service of process in any such state or
jurisdiction).
12.3 Effectiveness; Suspension Right.
(a) Parent will use its best efforts to cause the Registration
Statement to become effective under the Securities Act (including without
limitation the filing of any amendments or other documents necessary for such
effectiveness) and to maintain the effectiveness of the Registration Statement
and other applicable registrations, qualifications and compliances until one
year from the Closing Date (the "Registration Effective Period"), and from time
to time will amend or supplement the Registration Statement and the prospectus
contained therein as and to the extent necessary to comply with the Securities
Act, the Exchange Act and any applicable state securities statute or regulation,
subject to the following limitations and qualifications.
(b) Following the later to occur of the Pooling Release Date
and such date as the Registration Statement is first declared effective, the
Shareholders will be permitted to offer
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and sell the Registrable Shares registered therein during the Registration
Effective Period in the manner described in the Registration Statement provided
that the Registration Statement remains effective and has not been suspended.
(c) Notwithstanding any other provision of this Article XII,
Parent shall have the right at any time to require that all Shareholders suspend
further open market offers and sales of Registrable Shares whenever, and for so
long as, in the reasonable judgment of Parent, upon written advice of counsel,
there is in existence material undisclosed information or events with respect to
Parent (the "Suspension Right"). In the event Parent exercises the Suspension
Right, such suspension will continue for the period of time reasonably necessary
for disclosure to occur at a time that is not detrimental to Parent and its
shareholders or until such time as the information or event is no longer
material, each as determined in good faith by Parent after consultation with
counsel, provided that the holders of Registrable Shares will be afforded the
right to effect open market offers and sales of Registrable Shares for a minimum
of ten trading days during each calendar quarter; provided, further, that any
such suspension shall apply only for so long as "affiliates" (as defined in Rule
501 under the Securities Act of 1933) of the Parent are restricted from selling
shares of Parent Common Stock. Parent will promptly give the Shareholders notice
of any such suspension and will use all reasonable efforts to minimize the
length of the suspension.
(d) The Parent agrees that if at any time prior to the first
anniversary of the Effective Time one or more of its officers, directors or
holders of its outstanding Parent Common Stock intend to offer equity securities
to the public for cash pursuant to any type of registration under the Securities
Act, the Parent will notify the Holders in writing at least twenty days (20)
days prior to the initial filing of a registration statement relating to such
offering with the SEC (the "Piggyback Registration Statement"). Thereafter, the
Parent will use its best efforts to include in such registration statement, in
accordance with the Securities Act, such Registrable Shares as any Holder of
such Registrable Shares shall request within ten (10) days of receipt of
notification from the Parent of its intention to file such registration
statement; provided, that the inclusion thereof will not preclude the Parent's
use of the registration form intended to be utilized by the Parent and further
provided, that the reselling shareholders will agree, if requested by the
underwriter, not to sell those of their Registrable Shares not included in such
registration statement for the period requested by the underwriters not to
exceed 180 days following the effective date of the registration statement; and
further provided that the foregoing requirements shall not apply in the event
that the Parent proposes to file a registration statement in connection with (i)
any issuance of securities pursuant to any stock option, stock purchase or other
employee benefit plan; or (ii) any issuance of securities in connection with any
business combination, whether by way of merger, consolidation, purchase of stock
or assets or otherwise. If the Registration Statement under which the Parent
gives notice under this Section 12.3(d) is for an underwritten offering, the
Parent shall so advise the Holders of Registrable Shares. In such event, the
right of any such Holder to be included in a registration pursuant to this
Section 12.3(d) shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Shares in the
underwriting to the extent provided herein.
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All Holders proposing to distribute their Registrable Shares through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the Parent.
Notwithstanding any other provision of the Section 12.3(d), if the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares to be underwritten, the number of shares that may be included
in the underwriting shall be allocated, first, to the Parent; and second, to the
Holders and any other shareholder of the Parent electing to include shares
therein on a pro rata basis based upon the total number of shares of Parent
Common Stock held by such persons. No such reduction shall reduce the securities
being offered by the Parent for its own account to be included in the
registration and underwriting.
12.4 Expenses. The costs and expenses to be borne by Parent for
purposes of this Article XII shall include, without limitation, printing
expenses (including a reasonable number of prospectuses for circulation by the
selling Shareholders), legal fees and disbursements of counsel for Parent, "blue
sky" expenses, accounting fees and filing fees, but shall not include
underwriting commissions or similar charges, legal fees (if any) and
disbursements of counsel for the selling Shareholders.
12.5 Indemnification.
(a) To the extent permitted by law, Parent will indemnify and
hold harmless each Shareholder, any underwriter (as defined in the Securities
Act) for such Shareholder, its officers, directors, shareholders or partners and
each person, if any, who controls such Shareholder or underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (A) any untrue statement
or alleged untrue statement of a material fact contained or incorporated by
reference in the Registration Statement, including any preliminary prospectus or
final prospectus contained therein or any amendments or supplements thereto, (B)
the omission or alleged omission to state or incorporate by reference therein a
material fact required to be stated or incorporated by reference therein, or
necessary to make the statements included or incorporated by reference therein
not misleading, or (C) any violation or alleged violation by Parent of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law; and Parent will pay to each such Shareholder (and its officers,
directors, shareholders or partners), underwriter or controlling person, any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section
12.6(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of Parent (which consent may not be unreasonably withheld); nor shall Parent be
liable in any such case for any such loss, claim, damage, liability, or action
to the
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extent that it arises out of or is based upon (i) a Violation which occurs in
reliance upon and in conformity with written information furnished by any such
Shareholder expressly for use in the Registration Statement, or (ii) a Violation
that would not have occurred if such Shareholder had delivered to the purchaser
the version of the Prospectus most recently provided by Parent to the
Shareholder as of a date prior to such sale.
(b) To the extent permitted by law, each selling Shareholder,
severally and not jointly, will indemnify and hold harmless Parent, each of its
directors, each of its officers who has signed the Registration Statement, each
person, if any, who controls Parent within the meaning of the Securities Act,
any underwriter, any other Shareholder selling securities pursuant to the
Registration Statement and any controlling person of any such underwriter or
other Shareholder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Securities Act, the Exchange Act or other federal or state law, insofar as, and
only to the extent that, such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation (which
includes without limitation the failure of the Shareholder to comply with the
prospectus delivery requirements under the Securities Act, and the failure of
the Shareholder to deliver the most current prospectus provided by Parent prior
to the date of such sale), in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished by such Shareholder expressly for use in the Registration
Statement or such Violation is caused by the Shareholder's failure to deliver to
the purchaser of the Shareholder's Registrable Shares a prospectus (or amendment
or supplement thereto) that had been made available to the Shareholder by Parent
prior to the date of the sale; and each such Shareholder will pay any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this Section 12.5(b) in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 12.5(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Shareholder, which consent
shall not be unreasonably withheld. The aggregate indemnification and
contribution liability of each Shareholder under this Section 12.5(b) shall not
exceed the net proceeds received by such Shareholder in connection with sale of
shares pursuant to the Registration Statement.
(c) Each person entitled to indemnification under this Section
12.5 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought and shall permit the Indemnifying Party to assume the defense of any such
claim and any litigation resulting therefrom, provided that counsel for the
Indemnifying Party who conducts the defense of such claim or any litigation
resulting therefrom shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may participate
in such defense at such party's expense, and provided further that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 12.5 unless the
Indemnifying Party is
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materially prejudiced thereby. No Indemnifying Party, in the defense of any such
claim or litigation, shall (except with the consent of each Indemnified Party)
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with the defense of such claim and litigation resulting therefrom.
(d) To the extent that the indemnification provided for in
this Section 12.5 is held by a court of competent jurisdiction to be unavailable
to an Indemnified Party with respect to any loss, liability, claim, damage or
expense referred to herein, then the Indemnifying Party, in lieu of indemnifying
such Indemnified Party hereunder, shall contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one had and of the Indemnified Party on the other
in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue of alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Indemnifying Party or by the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
12.6 Procedures for Sale of Shares Under Registration Statement.
(a) Notice and Approval. If any Shareholder shall propose to
sell (which may include an intent to sell over a specific period of time)
Registrable Shares pursuant to the Registration Statement, it shall notify
Parent of its intent to do so (including the proposed manner and timing of all
sales) at least one (1) full trading day prior to such sale, and the provision
of such notice to Parent shall conclusively be deemed to reestablish and
reconfirm an agreement by such Shareholder to comply with the registration
provisions set forth in this Agreement. Unless otherwise specified in such
notice, such notice shall be deemed to constitute a representation that any
information previously supplied by such Shareholder expressly for inclusion in
the Registration Statement (as the same may have been superseded by subsequent
such information) is accurate as of the date of such notice. At any time within
such one (1) trading-day period, Parent may refuse to permit the Shareholder to
resell any Registrable Shares pursuant to the Registration Statement; provided,
however, that in order to exercise this right, Parent must deliver a certificate
in writing to the Shareholder to the effect that a delay in such sale is
necessary because a sale pursuant to the Registration Statement in its
then-current form without the addition of material, non-public information about
Parent, could constitute a violation of the federal securities laws.
Notwithstanding the foregoing, Parent will ensure that in any event the
Shareholders shall have at least ten (10) trading days (prorated for partial
quarters) available to
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sell Registrable Shares during each calendar quarter (or portion thereof) from
the Pooling Release Date until the expiration of the applicable Registration
Effective Period.
(b) Delivery of Prospectus. For any offer or sale of any of
the Registrable Shares by a Shareholder in a transaction that is not exempt
under the Securities Act, the Shareholder, in addition to complying with any
other federal securities laws, shall deliver a copy of the final prospectus (or
amendment of or supplement to such prospectus) of Parent covering the
Registrable Shares in the form furnished to the Shareholder by Parent to the
purchaser of any of the Registrable Shares on or before the settlement date for
the purchase of such Registrable Shares.
(c) Copies of Prospectuses. Subject to the provisions of this
Section 12.6, when a Shareholder is entitled to sell and gives notice of its
intent to sell Registrable Shares pursuant to the Registration Statement, Parent
shall, within two (2) trading days following the request, furnish to such
Shareholder a reasonable number of copies of a supplement to or in amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Shares, such prospectus shall not as of the date
of delivery to the Shareholder include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statement therein not misleading or incomplete in the light of the
circumstances then existing.
12.7 Transferability of Registration Rights. The rights under this
Article XII are not transferable except (a) a transfer by will or intestacy, (b)
estate planning transfers consisting of gifts to the spouse or issue of the
transferee and transfers to trusts for the benefit of the spouse or issue of the
transferee, (c) a transfer to the constituent partners of a Shareholder that is
a partnership as part of a pro rata distribution of the shares of Parent Common
Stock held by such partnership so long as all such transferees appoint a single
representative as their attorney-in-fact for the purpose of receiving any
notices and exercising their rights under this Article XII, or (d) with the
written consent of Parent.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Amendment. This Agreement may be amended by written agreement
among the Company and the Parent prior to the Effective Time.
13.2 Waiver of Compliance. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant or agreement contained herein may be waived only by a written notice
from the party or parties entitled to the benefits thereof. No failure by any
party hereto to exercise, and no delay in exercising, any right hereunder, shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder preclude any other or future exercise of that right by that
party.
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13.3 Notices. All notices and other communications hereunder shall be
deemed given if given in writing and delivered personally, by registered or
certified mail, return receipt requested, postage prepaid, or by overnight
courier to the party to receive the same at its respective address set forth
below (or at such other address as may from time to time be designated by such
party to the others in accordance with this Section 13.3):
(a) if to the Company or the Shareholders, to:
Web21
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
with copies to:
▇▇▇▇▇▇▇ Coie LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III, Esq.
(b) if to the Parent or Acquisition, to:
Go2Net, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with copies to:
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
A Professional Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
All such notices and communications hereunder shall be deemed given
when received, as evidenced by the signed acknowledgment of receipt of the
person to whom such notice or communication shall have been personally
delivered, the acknowledgment of receipt returned to the sender by the
applicable postal authorities or the confirmation of delivery rendered by the
applicable overnight courier service.
13.4 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors (or, in the case
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of the Principal Shareholder, his heirs, administrators, executors and personal
representatives) and permitted assigns. Neither this Agreement nor any rights,
duties or obligations hereunder shall be assigned by any party hereto without
the prior written consent of the other parties hereto, except that vested rights
to receive payment or to initiate legal action with respect to causes of action
that have accrued hereunder shall be assignable by devise, descent or operation
of law.
13.5 No Third Party Beneficiaries. Neither this Agreement or any
provision hereof nor any Schedule, certificate or other instrument delivered
pursuant hereto, nor any agreement to be entered into pursuant hereto or any
provision hereof, is intended to create any right, claim or remedy in favor of
any person or entity, other than the parties hereto and their respective
successors (or, in the case of the Principal Shareholder, his heirs,
administrators, executors and personal representatives) and permitted assigns
and any other parties indemnified under Article XI.
13.6 Public Announcements. Promptly upon execution and delivery of this
Agreement, the Parent and the Company shall issue a press release in such form
as they shall mutually agree. Thereafter, and prior to the consummation of the
Merger or the termination of this Agreement, none of the parties hereto shall,
except as mutually agreed by the Parent and the Company, or except as may be
required by law or applicable regulatory authority (including, without
limitation, the rules applicable to Nasdaq National Market companies), issue any
reports, releases, announcements or other statements to the public relating to
the transactions contemplated hereby.
13.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.8 Headings. The article and section headings contained in this
Agreement are solely for convenience of reference, are not part of the agreement
of the parties and shall not be used in construing this Agreement or in any way
affect the meaning or interpretation of this Agreement.
13.9 Entire Agreement. This Agreement, and the Schedules, certificates
and other instruments and documents delivered pursuant hereto, together with the
other agreements referred to herein and to be entered into pursuant hereto,
embody the entire agreement of the parties hereto in respect of, and there are
no other agreements or understandings, written or oral, among the parties
relating to, the subject matter hereof, other than the Confidentiality
Agreements. This Agreement supersedes all prior agreements and understandings,
written or oral, between the parties with respect to such subject matter, other
than the Confidentiality Agreements.
13.10 Governing Law. The parties hereby agree that this Agreement,
and the respective rights, duties and obligations of the parties hereunder,
shall be governed by and construed in
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accordance with the laws of the State of Washington, without giving effect to
principles of conflicts of law thereunder. Each of the parties hereby (i)
irrevocably consents and agrees that any legal or equitable action or proceeding
arising under or in connection with this Agreement shall be brought exclusively
in the Federal or state courts sitting in Seattle, Washington and any court to
which an appeal may be taken in any such litigation, and (ii) by execution and
delivery of this Agreement, irrevocably submits to and accepts, with respect to
any such action or proceeding, for itself and in respect of its properties and
assets, generally and unconditionally, the jurisdiction of the aforesaid courts,
and irrevocably waives any and all rights such party may now or hereafter have
to object to such jurisdiction.
* * *
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IN WITNESS WHEREOF, the Parent, Acquisition, the Company and the
Shareholders named below have caused this Agreement to be duly executed and
delivered as of the date first above written.
GO2NET, INC.
By:
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
WTO ACQUISITION CORP.
By:
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
WEB21
By:
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President
PRINCIPAL SHAREHOLDER:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
HWD: 374809-4
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