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EXHIBIT 10.11
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
By and Among
ADVANTIX, INC.
ADVANTIX ACQUISITION II CORP.,
TICKETSLIVE CORPORATION
and
CERTAIN OF ITS SHAREHOLDERS
Dated as of March 18, 1999
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TABLE OF CONTENTS
ARTICLE I THE MERGER.........................................................................2
1.1 The Merger....................................................................2
1.2 Closing.......................................................................2
1.3 Effective Time................................................................2
1.4 Effects of the Merger.........................................................2
1.5 Certificate of Incorporation; Bylaws..........................................2
1.6 Directors and Officers........................................................2
1.7 Merger Consideration; Conversion and Cancellation of Company Capital Stock....3
1.8 Dissenters' Rights............................................................4
1.9 Options and Warrants to Purchase Company Common Stock.........................5
1.10 Tax Consequences..............................................................5
1.11 Exemption from Registration...................................................5
ARTICLE II EXCHANGE OF SHARES................................................................6
2.1 Exchange Agent................................................................6
2.2 Exchange Fund.................................................................6
2.3 Escrow Fund...................................................................8
2.4 Exchange of Shares............................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY SHAREHOLDERS......11
3.1 Corporate Organization.......................................................12
3.2 Capitalization...............................................................12
3.3 Authority; No Violation......................................................13
3.4 Consents and Approvals.......................................................14
3.5 Financial Statements.........................................................15
3.6 Absence of Undisclosed Liabilities...........................................15
3.7 Absence of Certain Changes or Events.........................................15
3.8 Legal Proceedings............................................................16
3.9 Restrictions on Business Activities..........................................17
3.10 Governmental Authorization...................................................17
3.11 Title and Condition of Personal Property.....................................17
3.12 Real and Leased Property.....................................................17
3.13 Intellectual Property........................................................19
3.14 Taxes........................................................................21
3.15 Environmental Matters........................................................22
3.16 Major Customers and Suppliers; Supplies......................................22
3.17 List of Accounts.............................................................23
3.18 Employment Agreements........................................................23
3.19 Employee Benefit Plans.......................................................23
3.20 Labor Matters................................................................26
3.21 Contracts and Commitments....................................................27
3.22 Absence of Breaches or Defaults..............................................29
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3.23 Interested Party Transactions................................................29
3.24 Compliance with Applicable Law...............................................29
3.25 Insurance....................................................................30
3.26 Reorganization...............................................................30
3.27 Section 912 of the NYBCL Not Applicable......................................30
3.28 Brokers......................................................................30
3.29 Minute Books.................................................................30
3.30 Accounts and Notes Receivable................................................30
3.31 Vote Required................................................................31
3.32 Board Approval...............................................................31
3.33 Employee Nondisclosure and Assignment of Inventions Agreements...............31
3.34 Year 2000 Compliance.........................................................31
3.35 Certain Payments.............................................................31
3.36 Representations Complete.....................................................32
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..........................32
4.1 Corporate Organization.......................................................32
4.2 Authority; No Violation......................................................32
4.3 Capitalization of Parent and Merger Sub......................................33
4.4 Subsidiaries.................................................................34
4.5 Consents and Approvals.......................................................34
4.6 Parent Financial Statements..................................................34
4.7 Absence of Undisclosed Liabilities...........................................35
4.8 Absence of Certain Changes...................................................35
4.9 Brokers......................................................................35
4.10 Vote Required................................................................35
4.11 Additional Representations and Warranties....................................35
4.12 ProTix Confidential Private Offering Memorandum..............................36
4.13 Representations Complete.....................................................36
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS.........................................36
5.1 Covenants of the Company.....................................................36
5.2 Covenants of Parent..........................................................37
ARTICLE VI ADDITIONAL AGREEMENTS............................................................38
6.1 Intentionally Deleted........................................................38
6.2 Shareholders' Meetings.......................................................38
6.3 Access to Information........................................................38
6.4 Public Disclosure............................................................39
6.5 Consents; Cooperation........................................................40
6.6 Legal Requirements...........................................................40
6.7 Blue Sky Laws................................................................40
6.8 Employee Benefit Plans.......................................................40
6.9 Loan to the Company..........................................................41
6.10 Reorganization...............................................................41
6.11 Control of Operations........................................................41
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6.12 Best Efforts and Further Assurances..........................................41
6.13 Amendment to Certificate of Incorporation....................................42
6.14 Shareholder Voting Agreements; Irrevocable Proxies...........................42
6.15 Stockholders Agreement.......................................................42
6.16 Indemnification for Personal Guarantees......................................42
6.17 Filing of Form S-8...........................................................42
6.18 Board Representation.........................................................43
6.19 No Impairment of Obligations.................................................43
6.20 Guarantee of Company Promissory Notes........................................43
ARTICLE VII CONDITIONS PRECEDENT............................................................43
7.1 Conditions to Each Party's Obligation to Effect the Merger...................43
7.2 Conditions to Obligations of Parent and Merger Sub...........................44
7.3 Conditions to the Obligations of Company and Company Shareholders............45
ARTICLE VIII TERMINATION AND AMENDMENT......................................................47
8.1 Termination..................................................................47
8.2 Effect of Termination........................................................48
8.3 Amendment....................................................................48
8.4 Extension; Waiver............................................................48
ARTICLE IX INDEMNIFICATION AND ESCROW FUND..................................................48
9.1 Indemnity; Escrow Fund.......................................................48
9.2 Claims.......................................................................49
9.3 Objections to Claims.........................................................50
9.4 Attempt to Resolve Conflicts; Arbitration....................................50
9.5 Actions of the Shareholders' Agent...........................................53
9.6 Third-Party Claims...........................................................53
9.7 Limitations..................................................................53
ARTICLE X GENERAL PROVISIONS................................................................54
10.1 Survival of Representations, Warranties and Agreements.......................54
10.2 Expenses.....................................................................55
10.3 Notices......................................................................55
10.4 Governing Law................................................................58
10.5 Severability.................................................................58
10.6 Assignment; Binding Effect; Benefit..........................................58
10.7 Headings.....................................................................58
10.8 Entire Agreement.............................................................59
10.9 Counterparts.................................................................59
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EXHIBITS AND SCHEDULES
Exhibit A Form of Escrow Agreement
Exhibit B Form of Secured Promissory Note
Exhibit C Form of Shareholder Voting Agreement
Exhibit D Form of Irrevocable Proxy
Exhibit E Form of Second Amended and Restated Stockholders Agreement
Exhibit F Form of Series A Note
Exhibit G Form of Opinion of Company's counsel
Exhibit H Form of Shareholder Representation Agreement
Exhibit I Form of Optionee Market Stand-Off Agreement
Exhibit J Opinion of Parent's counsel
Exhibit K Form of Third Amended and Restated Investor Rights Agreement
Exhibit L Form of Employment Agreement with Xxxxx Xxxxx
Exhibit M Form of Employment Agreement with Xxxxxx Xxxx
Exhibit N Form of Agreement with Xx Xxxxx
Exhibit O Arbitration Procedures
Schedule I Company Shareholders
Schedule II Shareholders Executing Shareholders Representation Agreement
Schedule III Shareholders Executing Shareholders Voting Agreement
Schedule IV Preferred Stock Conversion Shares
Schedule V Persons Who Constitute Knowledge of the Company
Schedule VI Persons Who Constitute Knowledge of Parent and Merger Sub
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "Agreement"),
is made and entered into as of March 18, 1999, by and among ADVANTIX, INC., a
Delaware corporation ("Parent"), ADVANTIX ACQUISITION II CORP., a Delaware
corporation and wholly-owned subsidiary of Parent ("Merger Sub"), TICKETSLIVE
CORPORATION, a New York corporation (the "Company"), and the individual
shareholders of the Company listed on Schedule I hereto (individually, a
"Company Shareholder" and collectively, the "Company Shareholders"). Merger Sub
and the Company are sometimes collectively referred to herein as the
"Constituent Corporations."
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company
have each determined that it is in the best interest of their respective
companies and in the best interest of their respective stockholders to
consummate the business combination transaction provided for herein in which
Merger Sub will, subject to the terms and conditions set forth herein, merge
with and into the Company (the "Merger"); and
WHEREAS, pursuant to the Merger, among other things, (i) all of the
outstanding shares of Common Stock, par value $.01 per share, of the Company
("Company Common Stock") and all of the outstanding shares of the Company's
Series A Convertible Participating Preferred Stock, par value $1.00 per share,
of the Company ("Company Series A Preferred") shall be converted into shares of
Common Stock, par value $.0001 per share, of Parent ("Parent Common Stock") at
the rate set forth herein. As used herein, the Company Common Stock and Company
Series A Preferred are sometimes collectively referred to as the "Company
Capital Stock".
WHEREAS, for federal income tax purposes, it is intended that the Merger
will qualify as a tax-free reorganization under the provisions of Section 368(a)
of the United States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this
Agreement, in accordance with the applicable provisions of the General
Corporation Law of the State of Delaware (the "DGCL") and the New York Business
Corporation Law ("NYBCL"), at the Effective Time (as defined in Section 1.3
hereof), Merger Sub shall merge with and into the Company. The Company shall be
the surviving company (hereinafter sometimes called the "Surviving Corporation")
in the Merger, and shall continue its corporate existence under the laws of the
State of New York. Upon consummation of the Merger, the separate corporate
existence of Merger Sub shall terminate, and the Company shall be a wholly-owned
subsidiary of Parent.
1.2 Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place as soon as practicable after the satisfaction
or waiver of each of the conditions set forth in Article VII hereof or at such
other time as the parties hereto agree (the "Closing Date"), provided, however,
that the parties shall use reasonable commercial efforts to effect the Closing
on or prior to March 31, 1999. The Closing shall take place at the offices of
Xxxxxxx, Phleger & Xxxxxxxx LLP, 00 Xxxxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxx or at
such other location as the parties hereto agree.
1.3 Effective Time. The Merger shall become effective upon the
filing of a Certificate of Merger with the Secretary of State of the State of
Delaware and the New York Department of State in such form as is required by,
and executed in accordance with the relevant provisions of, the DGCL and the
NYBCL on the Closing Date (the "Certificate of Merger"). The term "Effective
Time" shall be the date and time of the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware and the New York Department of
State, or such later time as is specified in the Certificate of Merger.
1.4 Effects of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in this Agreement, the Certificate of
Merger and the applicable provisions of the DGCL and the NYBCL. 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
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
1.5 Certificate of Incorporation; Bylaws. At the Effective Time, the
Certificate of Incorporation of the Company as in effect at the Effective Time,
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with applicable law.
At the Effective Time, the Bylaws of the Company, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.6 Directors and Officers. The persons set forth on Section 1.6 of
the Parent Disclosure Schedule shall be the directors and officers of the
Surviving Corporation, each to hold
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office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation until their respective successors are duly elected or
appointed and qualified.
1.7 Merger Consideration; Conversion and Cancellation of Company
Capital Stock. By virtue of the Merger without any action on the part of Parent,
Merger Sub, the Company or the holders of any Company Capital Stock (the holders
of Company Capital Stock immediately prior to the Effective Time are sometimes
hereinafter referred to individually as a "Holder" and collectively as the
"Holders") or capital stock of Merger Sub:
(a) Conversion of Company Capital Stock. Subject to the
terms and conditions of this Agreement, at the Effective Time, each share of
Company Capital Stock issued and outstanding immediately prior to the Effective
Time (other than Dissenting Shares (as hereinafter defined)) and all rights in
respect thereof shall be converted and exchanged for that number of shares of
Parent Common Stock equal to the quotient of (A) 13,000,000 divided by (B) the
sum of (1) the number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time, (2) the number of shares of Company
Common Stock into which the Company Series A Preferred issued and outstanding
immediately prior to the Effective Time are convertible (or have been converted,
as the case may be), and (3) the number of shares of Company Common Stock
issuable upon conversion or exercise of all other securities convertible into
Company Common Stock and all stock options, warrants and other rights (if any)
to purchase Company Common Stock issued and outstanding immediately prior to the
Effective Time (the "Exchange Ratio").
(ii) At the Effective Time, all shares of Company
Capital Stock converted into the right to receive shares of Parent Common Stock
at the Exchange Ratio (the "Merger Consideration") pursuant to this Article I
shall no longer be outstanding and shall automatically be canceled and shall
cease to exist, and each certificate (each a "Certificate") previously
representing any such shares of Company Capital Stock shall thereafter only
represent the right to receive the shares of Parent Common Stock into which the
shares represented by such Certificate have been converted pursuant to this
Section 1.7(a). Certificates previously representing shares of Company Capital
Stock shall be exchanged for shares of Parent Common Stock upon surrender of
such Certificates in accordance with Section 2.4 hereof, without any interest.
The allocation of the Merger Consideration among the Holders and the holders of
options ("Company Optionees") issued under the Company Stock Option Plan (as
defined in paragraph (c) of this Section 1.7) shall be subject to adjustment
pursuant to Section 2.2(b) hereof.
(b) Cancellation of Company Capital Stock Owned by Parent or
Company. At the Effective Time, all shares of Company Capital Stock that are
owned by the Company as treasury stock, each share of Company Capital Stock
owned by Parent or any direct or indirect wholly owned subsidiary of Parent or
of the Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Company Stock Option Plan. At the Effective Time, the
Company's Amended and Restated Stock Award and Incentive Plan (the "Company
Stock Option Plan") and all options to purchase Company Common Stock then
outstanding under the Company Stock Option Plan shall be assumed by Parent in
accordance with Sections 1.9 and 6.8 of this Agreement.
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(d) Certain Adjustments to Exchange Ratio. The Exchange
Ratio shall be adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of securities
convertible into the applicable class or series of Company Capital Stock or
Parent Common Stock), reorganization, recapitalization or other like change with
respect to the applicable class or series of Company Capital Stock, any
termination or cancellation of any previously granted stock options or any
issuances of stock options permitted by the terms hereof, occurring after the
date hereof and prior to the Effective Time.
(e) Conversion of Merger Sub Capital Stock. Each share of
Common Stock of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one newly and validly
issued, fully paid and nonassessable share of Common Stock of the Surviving
Corporation.
(f) Fractional Shares. No fraction of a share of Parent
Common Stock will be issued, but in lieu thereof each holder of shares of
Company Capital Stock who would otherwise be entitled to a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of the
applicable class or series of Parent Common Stock to be received by such holder)
shall receive from Parent an amount of cash (rounded to the nearest whole cent)
equal to the product of (i) such fraction, multiplied by (ii) $2.15.
1.8 Dissenters' Rights.
(a) Notwithstanding any provision of the Agreement to the
contrary, each share of Company Capital Stock that is issued and outstanding
immediately prior to the Effective Time and is held by shareholders who have not
voted such shares in favor of the approval and adoption of this Agreement and
who shall have properly demanded appraisal of such shares in accordance with
Section 9.10 of the NYBCL ("Dissenting Shares") shall not be converted into the
right to receive the relevant Merger Consideration at the Effective Time, unless
and until the holder of such Dissenting Shares shall have failed to perfect or
shall have effectively withdrawn or lost such right to appraisal and payment
under the NYBCL. If a holder of Dissenting Shares (a "Dissenting Shareholder")
shall have so failed to perfect or shall have effectively withdrawn or lost such
right to appraisal and payment, then, as of the Effective Time or the occurrence
of such event, whichever last occurs, such Dissenting Shares shall be converted
into and represent solely the right to receive the relevant Merger
Consideration, without any interest thereon, as provided in Section 1.7.
(b) The Company shall give Parent (i) prompt notice of any
written demands for payment, withdrawal of demands for payment and any other
instruments served pursuant to Section 623 of the NYBCL and (ii) the opportunity
to direct all proceedings with respect to demands for appraisal under Section
623 of the NYBCL. The Company agrees that prior to the Effective Time, it will
not, without the prior written consent of Parent, voluntarily make or agree to
make any payment with respect to, or settle or offer to settle, any such
demands.
(c) Each holder of Dissenting Shares who becomes entitled,
pursuant to the provisions of Section 910 of the NYBCL, to payment of his or her
Dissenting Shares shall receive payment therefor after the Effective Time from
the Surviving Corporation (but only after
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the amount thereof shall have been agreed upon or finally determined pursuant to
such provisions) and such shares shall be canceled.
(d) Parent hereby assumes responsibility for the preparation
and delivery of any and all notices, documents, information or instruments
required by law to be delivered to shareholders of the Company in connection
with the provisions of Section 623 of the NYBCL and for compliance of such
materials with any disclosure obligations imposed by applicable law.
1.9 Options and Warrants to Purchase Company Common Stock. At the
Effective Time, each option or warrant granted by the Company to purchase shares
of Company Common Stock (each, a "Company Stock Option") which is outstanding
and unexercised immediately prior to the Effective Time shall be assumed by
Parent and converted into an option or warrant to purchase shares of Parent
Common Stock in such number and at such exercise price as provided below and
otherwise having the same terms and conditions as in effect immediately prior to
the Effective Time (except to the extent that such terms, conditions and
restrictions may be altered in accordance with their terms as a result of the
Merger):
(a) the number of shares of Parent Common Stock to be
subject to the new option or warrant shall be equal to the product of (i) the
number of shares of Company Common Stock subject to the original option (subject
to adjustment pursuant to Section 2.2(b)) or warrant and (ii) the Exchange
Ratio;
(b) the exercise price per share of Parent Common Stock
under the new option (including options issued pursuant to Section 2.2(b)
hereof) or warrant shall be equal to the quotient of (i) the exercise price per
share of Company Common Stock under the original option or warrant divided by
(ii) the Exchange Ratio; and
(c) upon each exercise of options or warrants by a holder
thereof, the aggregate number of shares of Parent Common Stock deliverable upon
such exercise shall be rounded down, if necessary, to the nearest whole share
and the aggregate exercise price shall be rounded up, if necessary, to the
nearest cent.
The adjustments provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with the requirements of Section 424(a) of the Code; provided,
however, that any options which are the subject of any modifications to the
exercise period or other conditions of exercise for employees of the Company
whose employment is terminated after the Effective Time shall not be required to
maintain their status as "incentive stock options."
1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Code.
1.11 Exemption from Registration. Assuming the accuracy of the
representations contained in the Shareholder Representation Agreements delivered
to Parent by those holders of Company Capital Stock set forth on Schedule II
hereto pursuant to Section 7.2 hereof and the Shareholder Voting Agreements
delivered to Parent by holders of Company Capital Stock set forth on Schedule
III hereto, the shares of Parent Common Stock to be issued in
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connection with the Merger will be issued in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act").
ARTICLE II
EXCHANGE OF SHARES
2.1 Exchange Agent. The Company and Parent shall mutually select an
agent to serve as exchange agent (the "Exchange Agent") in the Merger.
2.2 Exchange Fund. (a) At or prior to the Effective Time, Parent
shall deposit, or shall cause to be deposited, with the Exchange Agent for the
benefit of the holders of Certificates, for exchange in accordance with this
Article II (i) certificates evidencing a number of shares of Parent Common Stock
for the conversion of Company Capital Stock in accordance with the provisions of
Section 1.7(a), less such numbers of shares of Parent Common Stock (A) as shall
be deposited into the Escrow Fund (as defined in Section 2.3 below) and (B) as
shall be held by Parent and delivered pursuant to paragraph (b) of this Section
2.2, and (ii) cash in an amount sufficient to provide for the payments to be
made in lieu of issuing any fractional shares of Parent Common Stock as provided
in Section 1.7(f) of this Agreement (such certificates and cash being
hereinafter referred to as the "Exchange Fund").
(b) Parent shall reserve for issuance 2,325,582 shares of
Parent Common Stock (the "Preferred Stock Conversion Shares") which shall be
delivered within five (5) days following the Determination Date (as defined
below) in accordance with the provisions of this Section 2.2(b) (except that
certain of such shares may be delivered to the Company's optionees in the form
of options to purchase Parent Common Stock and except as set forth in Section
2.2(d)). Parent shall also reserve for issuance 234,257 options (the "Additional
Options") to purchase shares of Parent Common Stock, which may become payable to
certain of the Company's optionees pursuant to the terms of this Section 2.2(b).
In the event that on the Determination Date the Determination Date Valuation Per
Share is equal to or greater than the Target Valuation Per Share, then, except
as set forth in Section 2.2(d), 2,091,325 of the Preferred Stock Conversion
Shares shall be distributed to the Holders and the Additional Options shall be
distributed to the optionees, in each case in accordance with Schedule IV
hereto. In all other cases, the Preferred Stock Conversion Shares shall be
valued at the Determination Date Valuation Per Share and, subject to Section
2.3(c), shall be distributed as follows: (i) the first $5 Million in value shall
be distributed 40% to Intel Corporation, 40% to CMG@Ventures II, LLC, and 20% to
Liberty Ventures I, L.P. (in each case taking into account Preferred Stock
Conversion Shares distributed pursuant to Section 2.2(d) and valued at the
Determination Date Valuation per Share), and (ii) the balance, if any, shall be
distributed among the Holders and optionees, in shares of Parent Common Stock or
options to purchase Parent Common Stock, as the case may be, according to such
persons' proportionate interests in the Company, as determined according to the
interests set forth on Schedule IV. In no event shall Parent be required to make
any distribution pursuant to this Section 2.2(b) for an aggregate number of
shares of Parent Common Stock and options to purchase Parent Common Stock in
excess of 2,325,582. The obligations of Parent with regard to the issuance of
the Preferred Stock Conversion Shares pursuant to the terms hereof are
unconditional; provided, however, that Parent shall have no obligation to make
any distribution pursuant to this Section 2.2(b) until it shall have received
written instructions executed by each member of the committee which
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constitutes the Shareholders' Agent (as defined in Section 9.4(f)) specifying
the number of shares and/or options to be distributed to each Holder and/or
optionee under this Section 2.2(b). Parent shall have no right to setoff its
obligations under this Section 2.2(b) against any amounts owing by the Company
or any Holder or optionee to Parent, its affiliates (including the Company) or
any third party, including without limitation in the event of breach of this
Agreement or the transactions contemplated hereby by the Company or any Holder
or optionee; provided, however, that immediately following the Determination
Date, up to an additional 152,364 Preferred Stock Conversion Shares may be
placed into the Escrow Fund in accordance with Section 2.3 hereof (as a result
of the Reallocation pursuant to paragraph (c) thereof) and shall be subject to
the provisions of Article IX hereof. In the event that for any reason Parent is
uncertain as to the appropriate allocation of Preferred Stock Conversion Shares
or uncertain as to any of its other obligations under this Section 2.2(b), it
shall request instruction from the Shareholders' Agent. Instruction from the
Shareholders' Agent on matters relating to this Section 2.2(b) shall require
unanimous consent of the members of the committee comprising the Shareholders'
Agent.
(c) For purposes of this Section 2.2(b) and Section 2.3, the
following terms shall have the following meanings:
"Determination Date" shall mean the earlier of (i) the closing
date of a Liquidation Event, or (ii) October 29, 1999.
"Determination Date Valuation Per Share" shall mean (i) in the
event of an initial public offering, the per share offering price in such IPO,
(ii) in the event of any other Liquidation Event, the sum of (x) the cash
received per share, if any, and (y) the average of the closing bid and asked
price for any shares of stock received, if any, multiplied by the number of
shares received and divided by the number of shares surrendered, and (iii) if no
Liquidation Event shall have occurred on or before October 29, 1999, the per
share price of the most recently closed private placement financing of Parent's
common or preferred stock.]
"Liquidation Event" shall mean either (i) an initial public
offering of Parent Common Stock, or (ii) a sale of all or substantially all of
the outstanding shares of Parent capital stock or a merger of Parent with or
into a third party in which the sole consideration received by the holders of
Parent Common Stock (who were formerly holders of Company preferred stock) is
cash and/or freely tradeable shares of a publicly listed entity.
"Reallocation" shall mean a distribution of Preferred Stock
Conversion Shares other than according to Schedule IV (i.e., additional shares
are allocated to Intel, CMGI and Liberty Ventures).
"Target Valuation Per Share" shall mean the dollar amounts
indicated on the following chart for a given Determination Date.
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DETERMINATION DATE TARGET VALUATION PER SHARE
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on or before 4/29/99 $3.69
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DETERMINATION DATE TARGET VALUATION PER SHARE
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after 4/29/99 and on or before 5/27/99 $3.81
after 5/27/99 and on or before 6/29/99 $3.92
after 6/29/99 and on or before 7/29/99 $4.04
after 7/29/99 and on or before 8/30/99 $4.15
after 8/30/99 and on or before 9/29/99 $4.27
after 9/29/99 and on or before 10/28/99 $4.39
on 10/29/99 $4.50
==========================================================================
(d) At the Effective Time, in addition to any other Parent
Common Stock issued pursuant to the terms hereof (and except as provided in
paragraph (e) of this Section 2.2), Parent shall make the following issuances of
the Preferred Stock Conversion Shares:
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NUMBER OF PREFERRED STOCK CONVERSION
HOLDER SHARES TO BE ISSUED AT THE EFFECTIVE TIME
----------------------------------------------------------------------------------------
Intel Corporation 320,779
CMGI @ Ventures II, LLC 320,779
Liberty Ventures I, L.P. 160,389
========================================================================================
(e) The number of Preferred Stock Conversion Shares that the
foregoing Holders would otherwise be entitled to receive pursuant to the terms
of Section 2.2(b) shall be reduced by the number of Preferred Stock Conversion
Shares issued pursuant to the terms of this Section 2.2(d).
2.3 Escrow Fund.
(a) Deposit of Shares.
At or prior to the Effective Time, Parent shall cause to be issued in
the name of each holder of a Certificate, a certificate representing ten percent
(10%) of the number of shares of Parent Common Stock to be received by such
holder in the Merger (to be calculated assuming that 100% of the Preferred Stock
Conversion Shares is distributed according to Schedule IV) (the "Escrow Shares")
and shall deposit the Escrow Shares on behalf of such holders with the Escrow
Agent to be held (together with any monies exchanged for Escrowed Shares
pursuant to paragraph (b) of this Section 2.3 and any shares of Parent Common
Stock distributed with respect to the Escrowed Shares in a stock split or
reverse stock split) in a fund (the "Escrow
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Fund"), pursuant to the Escrow Agreement attached hereto as Exhibit A (the
"Escrow Agreement"), to be held in escrow in accordance with the terms and
conditions of such Escrow Agreement.
(b) Withdrawal of Shares During Escrow Period.
At any time during the twelve (12) month period following the Closing
Date (the "Escrow Period") each Holder may withdraw such Holder's shares of
Parent Common Stock from the Escrow Fund by (i) delivering to each of the Escrow
Agent and Parent a notice (a "Withdrawal Notice") setting forth the number and
class or series of shares of Parent Common Stock to be withdrawn, and (ii) by
delivering to the Escrow Agent a certified or bank cashier's check in an amount
equal to the product of (a) $2.15 and (b) the number of shares of Parent Common
Stock set forth in the Withdrawal Notice. Promptly following receipt of such
certified or bank cashier's check, the Escrow Agent shall deliver to the Holder
a certificate or certificates representing the number of shares of Parent Common
Stock withdrawn pursuant to the Withdrawal Notice. In the event that claims have
been made against the Escrow Fund pursuant to Article IX hereof and such claims
have not been resolved by the end of the Escrow Period, each Holder shall have
an additional thirty (30) days following the end of the Escrow Period to
complete the procedures set forth in (i) and (ii) above with respect to shares
of such Holder held in the Escrow Fund in contemplation of such claims.
(c) Adjustment for Distribution of Preferred Stock
Conversion Shares.
In the event of a Reallocation, then the number of shares of each Holder
held as Escrow Shares shall be appropriately adjusted. If additional shares of
Parent Common Stock received and to be received by a Holder are required to be
deposited as Escrow Shares as a result of the distribution of Preferred Stock
Conversion Shares in order for such Holders' shares in the Escrow Fund to equal
10% of the number of shares of Parent Common Stock to be received by such Holder
in the Merger, Parent shall cause to be issued in the name of such Holder a
certificate representing the number of such additional shares and such
certificate shall be placed and held in the Escrow Fund according to the terms
of the Escrow Agreement. If fewer shares of Parent Common Stock received and to
be received by a Holder are required to be held as Escrow Shares as a result of
the distribution of Preferred Stock Conversion Shares in order for such Holders'
shares in the Escrow Fund to equal 10% of the number of shares of Parent Common
Stock to be received by such Holder in the Merger, Parent shall cause to be
released from the Escrow Fund and delivered to such Holder the number of shares
of Parent Common Stock equal to the number of shares of such Holder originally
placed in the Escrow Fund minus the number of shares equal to 10% of the number
of shares of Parent Common Stock to be received by such Holder in the Merger.
2.4 Exchange of Shares.
(a) Exchange Procedures. As soon as practicable after the
Effective Time, and in no event more than three (3) business days thereafter,
the Exchange Agent shall mail to each holder of record of a Certificate or
Certificates a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent) and instructions
for use in effecting the
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surrender of the Certificates in exchange for shares of Parent Common Stock and
cash in lieu of any fractional shares, into which the shares of Company Capital
Stock shall have been converted pursuant to this Agreement. The Company shall
have the right to approve both the letter of transmittal and the instructions
prior to the Effective Time, which approval shall not be unreasonably withheld.
Upon surrender of a Certificate for exchange and cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, the holder of
such Certificate shall be entitled to receive in exchange therefor a certificate
representing ninety percent (90%) of that number of whole shares of Parent
Common Stock which such holder has the right to receive pursuant to the
provisions of Section 1.7(a) and cash in the amount such holder has the right to
receive pursuant to the provisions of Section 1.7(f), and the Certificates so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the cash payable to holders of Certificates.
(b) Transfers of Ownership. If any payment for shares of
Company Capital Stock is to be made in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such payment that the Certificate so surrendered shall be properly
endorsed (or accompanied by an appropriate instrument of transfer) and otherwise
in proper form for transfer, and that the person requesting such exchange shall
pay to the Exchange Agent in advance any transfer or other taxes required by
reason of the payment of the relevant Merger Consideration to a person other
than the registered holder of the Certificate surrendered, or required for any
other reason, or shall establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable.
(c) Distribution With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the Certificates representing whole shares of
Parent Common Stock issued in exchange thereof, without interest, at the time of
such surrender, the amount of dividends or other distributions with a record
date after the Effective Time payable with respect to such whole shares of
Parent Common Stock.
(d) No Liability. Notwithstanding anything to the contrary
in this Section 2.4, none of the Parent, Company, Exchange Agent, the Escrow
Agent, the Surviving Corporation or any other party hereto shall be liable to a
holder of shares of Parent Common Stock or Company Capital Stock for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(e) No Further Ownership Rights in Company Capital Stock.
The Merger Consideration paid upon the surrender for exchange of shares of
Company Capital Stock in accordance with the terms hereof (including any cash
paid in lieu of fractional shares), shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Capital Stock
and there shall be no further registration of transfers on the records of
Company of shares of Company Capital Stock which were outstanding immediately
prior to the Effective
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Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
Section 2.4.
(f) Lost, Stolen or Destroyed Certificates. In the event any
Certificate evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Parent Common Stock and cash for
fractional shares, if any, as may be required pursuant to Section 2.4(a);
provided, that Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificates to indemnify Parent against any loss or cost incurred by or claim
that may be made against Parent, the Surviving Corporation, or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
(g) Transfer Restrictions; Legends. The shares of Parent
Common Stock issued in the Merger shall not be transferable in the absence of an
effective registration statement under the Securities Act or an exemption
therefrom. In the absence of an effective registration statement under the
Securities Act, neither such shares of Parent Common Stock nor any interest
therein shall be sold, transferred, assigned or otherwise disposed of, unless
Parent shall have previously received an opinion of counsel knowledgeable in
Federal securities law, in form and substance reasonably satisfactory to Parent,
to the effect that registration under the Securities Act is not required in
connection with such disposition. At any time after shares of Parent Common
Stock have been registered under the Securities Act, Parent shall make available
its regular outside counsel (at Parent's expense) for purposes of delivering
such opinion. Parent shall be entitled to give stop transfer instructions to its
transfer agent with respect to such shares of Parent Common Stock in order to
enforce the foregoing restrictions.
The certificate or certificates representing the shares of Parent Common
Stock issued in the Merger shall bear the following legend restricting the
transfer thereof, in addition to any other legend required by applicable law:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS (1) A REGISTRATION STATEMENT
WITH RESPECT THERETO IS IN EFFECT UNDER SUCH ACT, (2) SUCH TRANSFER IS
PURSUANT TO RULE 144 UNDER SUCH ACT OR (3) THE HOLDER HEREOF FURNISHES
TO ADVANTIX, INC. AN OPINION OF COUNSEL, WHICH COUNSEL AND WHICH OPINION
SHALL BE REASONABLY SATISFACTORY TO ADVANTIX, INC. THAT REGISTRATION
UNDER SUCH ACT IS NOT REQUIRED.."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE COMPANY SHAREHOLDERS
For purposes of this Agreement, the phrases "knowledge of the Company,"
or "to the Company's knowledge", or references to the absence of "notice to the
Company" or the like
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shall refer to the actual knowledge of those persons set forth on Schedule V
attached hereto after due inquiry by one or more of such persons. The Company,
Xxxxx X. Xxxxx ("Xx. Xxxxx"), individually, and each of the other Company
Stockholders (with respect to any matters regarding such Company Stockholder but
not with respect to matters regarding the Company or any other Company
Stockholder), represent and warrant to Parent and Merger Sub that, except as
disclosed in the disclosure schedule attached hereto (the "Company Disclosure
Schedule"):
3.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. The Company has the corporate power and authority to own or lease its
properties and assets and to carry on its business as it is now being conducted,
and is qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such qualification necessary. The copies of
the Certificate of Incorporation and Bylaws of the Company which have previously
been delivered to Parent are true and correct copies of such documents as in
effect as of the date of this Agreement. For purposes of this Agreement, an
action, event or occurrence has a "Material Adverse Effect" if it has a material
adverse effect on the assets, liabilities, business, financial condition or
results of operations of the Company or Parent, as the case may be.
(b) Set forth in Section 3.1(b) of the Company Disclosure
Schedule is a complete list of all subsidiaries of the Company ("Company
Subsidiaries"), setting forth for each (i) the date of incorporation or other
organization, (ii) the number of shares of each class of capital stock or other
ownership interests in each Company Security which are issued and outstanding,
(iii) the jurisdiction under which such Company Subsidiary was incorporated or
organized, and (iv) the address of such Company Subsidiary's principal executive
offices. Except as Set forth in Section 3.1(b) of the Company Disclosure
Schedule, the Company owns 100% of the outstanding shares of capital stock (or
other ownership interests) in each Company Subsidiary. Each Company Subsidiary
is duly organized, validly existing and in good standing under the laws of the
jurisdiction set forth in Section 3.1(b) of the Company Disclosure Schedule with
respect to such Company Subsidiary. Each Company Subsidiary has full lawful
power and authority to own or lease its properties and assets and to carry on
its business as it is now being conducted, and is qualified to do business in
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such qualification necessary. The copies of the constituent documents of each
Company Subsidiary which have previously been made available to Parent are true
and correct copies of such documents as in effect as of the date of this
Agreement.
3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
25,000,000 shares of Company Common Stock, par value $0.01 per share, and
5,000,000 shares of Company Series A Preferred. As of the date hereof, there are
(i) 8,894,694 shares of Company Common Stock outstanding and no shares of
Company Common Stock held by the Company as treasury stock, (ii) 5,000,000
shares of Company Series A Preferred, (iii) a sufficient number of shares of
Company Common Stock have at all times been reserved for issuance upon exercise
of outstanding stock options, and (iv) a sufficient number of shares of Company
Common Stock have at all times been reserved for issuance upon conversion of the
Company Series A Preferred.
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Except as set forth in Section 3.2(a) of the Company Disclosure Schedule, all of
the issued and outstanding shares of Company Capital Stock were duly authorized
and validly issued and are fully paid and nonassessable and are free of any
liens or encumbrances created by or resulting from the actions of the Company,
and are not subject to preemptive rights or rights of first refusal created by
statute, the Certificate of Incorporation or Bylaws of the Company or any
agreement to which the Company or any Company Shareholder is a party or by which
it is bound. All outstanding shares of Company Capital Stock were issued in
compliance with all applicable federal and state securities laws. Except as
described in this Section 3.2 or reflected in Section 3.2(a) of the Company
Disclosure Schedule, the Company does not have and is not bound by any
outstanding subscriptions, options, warrants, convertible securities, calls,
commitments, agreements or obligations of any character calling for the
purchase, redemption or issuance of any shares of Company Capital Stock or any
other equity security of the Company or any securities representing the right to
purchase or otherwise receive any shares of Company Capital Stock or any other
equity security of the Company. The terms of the Company Stock Option Plan
permit the assumption or substitution of options to purchase Parent Common Stock
as provided in this Agreement, without the consent or approval of the holders of
such securities or the Company Shareholders. True and complete copies of all
forms of agreements and instruments relating to or issued under the Company
Stock Option Plan have been made available to Parent and such agreements and
instruments have not been amended, modified or supplemented, and there are no
agreements to amend, modify or supplement such agreements or instruments in any
case from the form made available to Parent.
(b) Except as set forth in Section 3.2(b) of the Company
Disclosure Schedule, the Company owns directly or indirectly each of the
outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of directors or others
performing similar functions) of each of the entities set forth in Section
3.2(b) to the Company Disclosure Schedule ("Company Subsidiaries"). All of the
issued and outstanding shares of capital stock of the Company Subsidiaries
("Subsidiary Capital Stock") were duly authorized and validly issued and are
fully paid and nonassessable and are free of any liens or encumbrances created
by or resulting from the actions of the Company or any Company Subsidiary, and
are not subject to preemptive rights or rights of first refusal created by
statute, the Certificate of Incorporation or Bylaws of the Company or any
Company Subsidiary or any agreement to which the Company or any Company
Subsidiary is a party or by which any of them may be bound.
3.3 Authority; No Violation.
(a) The Company has full corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder 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 and validly approved by the Board of Directors of the Company. The
Board of Directors of the Company has directed that this Agreement and the
transactions contemplated hereby be submitted to the Company's shareholders for
approval at a meeting of such shareholders and, except for the adoption of this
Agreement by the requisite vote of the Company's shareholders, no other
corporate proceedings on the part of the Company are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This Agreement
and all other agreements and documents to
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be entered into in connection herewith have been duly and validly executed and
delivered by the Company and each of the Company Shareholders and (assuming due
authorization, execution and delivery by Parent and Merger Sub) constitute valid
and binding obligations of the Company and each of the Company Shareholders,
enforceable against the Company and each of the Company Shareholders, in
accordance with their respective terms, except as enforcement may be limited by
general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally.
(b) Except as set forth in Section 3.3(b) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement by the
Company and each of the Company Shareholders, nor the consummation by the
Company and each of the Company Shareholders of the transactions contemplated
hereby, nor compliance by the Company and each of the Company Shareholders with
any of the terms or provisions hereof, will (i) violate any provision of the
Certificate of Incorporation or Bylaws of the Company or the constituent
documents of any Company Subsidiary, or (ii) assuming that the consents and
approvals referred to in Section 3.4 hereof are duly obtained, (x) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to the Company, any Company Subsidiary or any of the
Company Shareholders or any of their respective properties or assets, or (y)
violate, materially conflict with, result in a material breach of any provision
of or the loss of any material benefit under, constitute a material default (or
an event which, with notice or lapse of time, or both, would constitute a
material default) under, result in the termination of or a right of termination
or cancellation under, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other encumbrance
upon any of the properties or assets of the Company, any Company Subsidiary or
any of the Company Shareholders under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
sublicense, lease, agreement or other instrument or obligation to which the
Company, any Company Subsidiary or any of the Company Shareholders is a party,
or by which the Company, any Company Subsidiary or any of the Company
Shareholders or any of their respective properties or assets may be bound or
affected.
3.4 Consents and Approvals. Except for (a) the approval of this
Agreement by the requisite vote of the Company Shareholders, (b) the filing of
Certificate of Merger with the Secretary of State of the State of Delaware
pursuant to Section 259 of the DGCL and Section 9.04 of the NYBCL, and (c) such
filings, authorizations or approvals as may be set forth in Section 3.4 of the
Company Disclosure Schedule, no consents or approvals orders or authorizations
of or filings or registrations with any court, administrative agency or
commission or other governmental or quasi-governmental authority or
instrumentality, whether in the United States of America or otherwise (each a
"Governmental Entity") or with any third party are necessary with respect to the
Company or any of the Company Shareholders in connection with (1) the execution
and delivery of this Agreement and (2) the consummation of the Merger and the
other transactions contemplated hereby. At or before the Effective Time, each
holder of the Company Series A Preferred shall have waived any and all rights to
receive any distribution under Article FIFTH of the Certificate of Amendment of
the Certificate of Incorporation (the "Amended Certificate of Incorporation") of
the Company as a result of the consummation of the transactions contemplated in
this Agreement.
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3.5 Financial Statements. Set forth in Section 3.5 of the Company
Disclosure Schedule are true and correct copies of (a) audited consolidated
balance sheets of the Company at April 30, 1996, 1997 and 1998, together with
related audited consolidated statements of operations, shareholders' equity and
cash flows for the fiscal years then ended, and (b) the Company's unaudited
consolidated balance sheet (the "Reference Balance Sheet") together with related
unaudited consolidated statements of operations, shareholders' equity and cash
flows as of and for the nine (9) month period ended January 31, 1999 (the
"Reference Balance Sheet Date") (collectively, the "Financial Statements"). Such
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") (except that the unaudited Financial Statements
do not contain all footnotes required by GAAP and are subject to normal year-end
audit adjustments that in the aggregate will not be material) applied on a
consistent basis throughout the periods indicated and with each other. The
Financial Statements fairly present the financial condition and operating
results of the Company in all material respects in accordance with GAAP as of
the dates, and for the periods indicated therein, subject to normal year-end
audit adjustments. The books and records of the Company have been, and are
being, maintained in all material respects in accordance with GAAP and any other
applicable legal and accounting requirements.
3.6 Absence of Undisclosed Liabilities. Neither the Company nor any
Company Subsidiary has any material obligations or liabilities of any nature
(matured or unmatured, fixed or contingent, including without limitation any
obligations or liabilities as guarantor or indemnitor of any other person, firm,
partnership or corporation ("Person")) other than (i) those set forth or
adequately provided for in the Reference Balance Sheet, (ii) those incurred in
the ordinary course of business and not required to be set forth in the
Reference Balance Sheet under GAAP, (iii) those incurred in the ordinary course
of business since the Reference Balance Sheet Date and consistent with past
practice, (iv) those set forth in Section 3.6 of the Company Disclosure
Schedule, and (v) those incurred in connection with the execution of this
Agreement.
3.7 Absence of Certain Changes or Events. Except as disclosed in
Section 3.7 of the Company Disclosure Schedule, since the Reference Balance
Sheet Date, the Company and each Company Subsidiary has conducted its business
in the ordinary course consistent with past practice, and except as contemplated
by this Agreement, there has not occurred (i) any purchase or other acquisition
of, sale, lease, disposition, or other transfer of, or mortgage, pledge or
subjection to any material encumbrance or lien on, any material asset, tangible
or intangible, of the Company or any Company Subsidiary, other than in the
ordinary course of business; (ii) any change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by the
Company or any Company Subsidiary or any revaluation by the Company or any
Company Subsidiary of any of its assets; (iii) any declaration, setting aside,
or payment of a dividend or other distribution with respect to the shares of the
Company Capital Stock, or any split-up or other recapitalization in respect of
the Company Capital Stock, or any direct or indirect redemption, purchase or
other acquisition by the Company of any shares of Company Capital Stock; (iv)
any material contract entered into by the Company or any Company Subsidiary,
other than in the ordinary course of business and as provided to Parent, or any
amendment or termination of, or default under, any material contract to which
the Company or any Company Subsidiary is a party or by which it is bound; (v)
any amendment or change to the Certificate of Incorporation or Bylaws of the
Company or the constituent documents of any Company Subsidiary; (vi) any
material increase in or modification of the compensation or
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benefits payable or to become payable by the Company or any Company Subsidiary
to any of their respective officers, directors or employees; (vii) any issuance,
transfer, sale or pledge by the Company, any Company Subsidiary or any Company
Shareholder of any shares of Company Capital Stock or Subsidiary Capital Stock
or other securities or of any commitment, option, right or privilege under which
the Company or any Company Subsidiary is or may become obligated to issue any
shares of Company Capital Stock or Subsidiary Capital Stock or other securities;
(viii) any indebtedness for borrowed money incurred by the Company or any
Company Subsidiary, except such as may have been incurred or entered into in the
ordinary course of business not exceeding $50,000; (ix) any loan made or agreed
to be made by the Company or any Company Subsidiary, nor has the Company or any
Company Subsidiary become liable or agreed to become liable as a guarantor with
respect to any loan (other than loans between the Company and any Company
Subsidiary or between Company Subsidiaries); (x) any waiver or compromise by the
Company or any Company Subsidiary of any right or rights or any payment, direct
or indirect, of any material debt, liability or other obligation, other than in
the ordinary course of business; (xi) any sale, assignment, or transfer of any
patents, trademarks, copyrights, trade secrets or other intangible assets,
including, without limitation, any Intellectual Property (as defined below)
associated with the Company's event ticketing software products, other than in
the ordinary course of business; (xii) any actual or, to the knowledge of the
Company, threatened termination or loss of (a) any material contract, lease,
license or other agreement to which the Company or any Company Subsidiary was or
is a party; (b) any certificate, license or other authorization required for the
continued operation by the Company or any Company Subsidiary of any portion of
any of its business; or (c) any customer or other revenue source, which
termination or loss could reasonably be expected to result in loss of revenues
to the Company or any Company Subsidiary in excess of $75,000 per year, and the
Company has no knowledge of any event (other than the transactions contemplated
hereby, with respect to which the Company has not received any written notice
from any customer or other revenue source of an intention to terminate any
arrangement as a result of the transactions contemplated hereby) which could
reasonably be expected to result in any such termination or loss; (xiii) any
resignation of employment of any key officer or employee of the Company or any
Company Subsidiary, or to the knowledge of the Company, any impending
resignation of employment of any such officer or employee; (xiv) any negotiation
by any executive officer of the Company or any agreement by the Company or any
Company Subsidiary to do any of the things described in the preceding clauses
(i) through (xiii) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement); or (xv) any other
event or circumstance that will have or, to the knowledge of the Company could
reasonably be expected to have a Material Adverse Effect on the Company or any
Company Subsidiary.
3.8 Legal Proceedings. Except as set forth in Section 3.8 of the
Company Disclosure Schedule, there are no legal actions, suits, arbitrations or
other legal, administrative or governmental proceedings or investigations
pending or, to the knowledge of the Company, threatened against the Company or
any Company Subsidiary or any of their respective properties, assets or business
in which an unfavorable outcome, ruling or finding would have a Material Adverse
Effect and to the knowledge of the Company and the Company Shareholders there
exist no facts which could reasonably be expected to result in any such action,
suit or other proceeding or which would challenge the validity or propriety of
the transactions contemplated by this Agreement. Neither the Company nor any
Company Subsidiary is in default with respect to any judgment, order or decree
of any court or any governmental agency or instrumentality
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which would have a Material Adverse Effect on the Company or any Company
Subsidiary. The foregoing includes, without limiting the generality thereof,
pending or threatened actions involving the Company's or any Company
Subsidiary's use in connection with the Company's or any Company Subsidiary's
business of any information or techniques allegedly proprietary to a former
employee.
3.9 Restrictions on Business Activities. Except as set forth in
Section 3.9 of the Company Disclosure Schedule, there is no agreement, judgment,
injunction, order or decree binding upon the Company or any Company Subsidiary
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any current business practice of the Company or any Company
Subsidiary, any acquisition of property by the Company or any Company
Subsidiary, the ability of the Company or any Company Subsidiary to compete with
any other person or the conduct of business by the Company or any Company
Subsidiary as currently conducted by the Company or any Company Subsidiary.
3.10 Governmental Authorization. The Company and each Company
Subsidiary has obtained each federal, state, county, local or foreign
governmental consent, license, permit, grant, or other authorization of a
Governmental Entity (i) pursuant to which the Company or any Company Subsidiary
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of the Company's or any Company Subsidiary's
business or the holding of any such interest ((i) and (ii) herein collectively
called the "Company Authorizations"), and all of such Company Authorizations are
in full force and effect, except where the failure to obtain or have any such
Company Authorizations could not reasonably be expected to have a Material
Adverse Effect on the Company.
3.11 Title and Condition of Personal Property. The Company and each
Company Subsidiary has good and marketable title to all personal property owned
by it and reflected in the Reference Balance Sheet or acquired after the
Reference Balance Sheet Date (other than property sold or otherwise disposed of
since the Balance Sheet Date in the ordinary course of business), free and clear
of all mortgages, liens, pledges, charges or encumbrances of any kind or
character or claims thereto, except (i) the lien of current taxes not yet due
and payable, (ii) such imperfections of title, liens and easements as do not and
will not materially detract from or interfere with the use of the properties
subject thereto or affected thereby, or otherwise materially impair business
operations involving such properties, (iii) liens securing debt which is
reflected on the Reference Balance Sheet, and (iv) as set forth in Section 3.11
of the Company Disclosure Schedule. The plants, property and equipment of the
Company or any Company Subsidiary that is used in the operations of its business
are in all material respects in good operating condition and repair. All
properties used in the operations of the Company and each Company Subsidiary are
reflected in the Reference Balance Sheet to the extent GAAP require the same to
be reflected.
3.12 Real and Leased Property.
(a) Neither the Company nor any Company Subsidiary owns any
fee simple interest in real property. Neither the Company nor any Company
Subsidiary leases or subleases any real property other than as set forth on
Section 3.12 of the Company Disclosure Schedule. Section 3.12 of the Company
Disclosure Schedule sets forth the street address of each
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parcel of real property leased or subleased by the Company or any Company
Subsidiary (the "Leased Property"). The Company has previously delivered to
Parent a true and complete copy of all of the lease and sublease agreements, as
amended to date (the "Leases") relating to the Leased Property. The Company and
each Company Subsidiary enjoys a peaceful and undisturbed possession of the
Leased Property held by it. All improvements located on the Leased Property are
in a state of good maintenance and repair and in a condition adequate and
suitable for the effective conduct therein of the business conducted and
proposed to be conducted by the Company or any Company Subsidiary. To the
Company's knowledge, no person other than the Company or any Company Subsidiary
has any right to use or occupy any part of the Leased Property, whether pursuant
to sublease, license or otherwise. The Leases are valid, binding and in full
force and effect, all rent and other sums and charges payable thereunder are
current, no notice of default or termination under any of the Leases is
outstanding, no termination event or condition or uncured default on the part of
the Company or any Company Subsidiary or, to the Company's knowledge, on the
part of the landlord or sublandlord, as the case may be, thereunder, exists
under the Leases, and to the Company's knowledge no event has occurred and no
condition exists which, with the giving of notice or the lapse of time or both,
would constitute such a default or termination event or condition. In the event
that any of the Leases is a sublease, the Company or a Company Subsidiary, as
the case may be, as sublessee or sublessor, as the case may be, has obtained the
required consent of the prime landlord to such sublease, and such prime lease is
in full force and effect, there are no outstanding uncured notices of default or
termination, and no right of the Company or any Company Subsidiary in any such
sublease conflicts with such prime lease. All of the Leased Property is used in
the conduct of the Company's or a Company Subsidiary's business.
(b) The heating, ventilation, air conditioning, plumbing,
electrical systems and telephone systems at the Leased Property are in a
condition adequate and suitable for the effective conduct therein of the
business conducted and proposed to be conducted by the Company or any Company
Subsidiary and will be so adequate and suitable on the Closing Date. Neither the
Company nor any Company Subsidiary has experienced any material interruption in
the services provided to any of the Leased Property within the last six (6)
months. To the Company's knowledge, no landlord under the Leases has any plans
to make any material alterations to any of the Leased Property, the construction
of which would interfere with the use of any portion of the Leased Property. To
the Company's knowledge, no landlord under the Leases has any plans to make any
material alterations to any of the buildings in which Leased Property is
located, the costs of which alterations would be borne in any part by a tenant
under the applicable Lease.
(c) Section 3.12 of the Company Disclosure Schedule sets
forth all material permits, licenses, franchises, approvals and authorizations
(collectively, the "Real Property Permits") of all Governmental Entities having
jurisdiction over each Leased Property and from all insurance companies and fire
rating and other similar boards and organizations (collectively, the "Insurance
Organizations"). All such Real Property Permits required or appropriate have
been lawfully issued to the Company or a Company Subsidiary to enable each
Leased Property to be lawfully occupied and used for all of the purposes for
which they are currently occupied and useful and are, as of the date hereof, in
full force and effect. Neither the Company nor any Company Subsidiary has
received or been informed by a third party of the receipt by it of any notice
from any Governmental Entity having jurisdiction over any Leased
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Property or from any Insurance Organization threatening a suspension,
revocation, modification or cancellation of any Real Property Permit or of any
insurance policies and, to the Company's knowledge, there is no basis for the
issuance of any such notice or the taking of any such action. No action is
required in order for all Real Property Permits and liability and casualty
insurance policies required under any of the Leases to remain Real Property
Permits and insurance policies of the Surviving Corporation.
(d) Neither the Company nor any Company Subsidiary has
received any notice nor has any knowledge of any pending, threatened or
contemplated condemnation proceeding affecting any Leased Property or any part
thereof.
(e) To the Company's knowledge, there are no liabilities
(other than rent and other sums and charges regularly payable) associated with
any of the Leases including, without limitation, any liability under any
Environmental Law or regulation, which is or which may become payable by the
Surviving Corporation.
3.13 Intellectual Property.
(a) Section 3.13(a) of the Company Disclosure Schedule sets
forth an accurate and complete description of (i) all foreign and domestic
patents, patent applications, patent rights, trademarks, service marks, trade
names, brands and copyrights of the Company and each Company Subsidiary which
are registered or issued or for which registration or issuance is pending with
any Governmental Entity specifying as to each such item, as applicable, the
jurisdiction(s) by or in which such patent, trademark or copyright has been
issued or registered or in which an application for such issuance or
registration has been filed or proposed, including the registration or
application number; (ii) substantially all foreign and domestic franchises,
licenses, sublicenses, contracts, options and agreements pursuant to which any
person other than the Company or a Company Subsidiary is authorized to use any
foreign and domestic patents, patent rights, trademarks, trade names, service
marks, brands, copyrights, and any applications therefor, maskworks, net lists,
URLs, domain names, schematics, technology, know-how, trade secrets, inventory,
ideas, algorithms, processes, computer software programs or applications (in
both source code and object code form), and tangible or intangible proprietary
information or material ("Intellectual Property") owned by the Company and each
Company Subsidiary; and (iii) substantially all foreign and domestic franchises,
licenses, sublicenses, contracts, options and agreements, other than shrink-wrap
software licenses, pursuant to which the Company or any Company Subsidiary is
authorized to use any such Intellectual Property not owned by the Company or any
Company Subsidiary ("Third Party Intellectual Property Rights") including, with
respect to (ii) or (iii), the identity and location (city, state and country) of
all parties thereto and, for each party, a description of the nature and subject
matter thereof, account type, date of installation, and the current version of
Company software being utilized and a description of any contracts the terms of
which could adversely impact the ownership, use or distribution of any
Intellectual Property (including, without limitation, any contract terms which
under any circumstances could make any source code available to a third party).
(b) Except as set forth in Section 3.13(b) of the Company
Disclosure Schedule, the Company and each Company Subsidiary owns or has the
right to use, pursuant to franchise, license, sublicense, contract, agreement,
or permission, all of the Intellectual Property
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necessary for the conduct of its business as currently conducted by it,
including, without limitation, all network operating system and database
softwares or other Intellectual Property used by the Company or any Company
Subsidiary and developed or owned by Megasoft, Inc. ("Megasoft"). Except as set
forth in Section 3.13(b) of the Company Disclosure Schedule, all applicable
fees, royalties and other amounts due and payable by the Company or any Company
Subsidiary to any person or to the Company or any Company Subsidiary by any
person in respect of such Intellectual Property have been paid. The Company and
each Company Subsidiary has taken all commercially reasonable measures to
maintain and protect the Intellectual Property that it owns or has the right to
use. At the Effective Time, the Company will have good and marketable title,
free and clear of all liens, encumbrances and claims of third parties of any
kind, to 100% of the assets of Megasoft, including, without limitation, the
assets listed on Section 7.2(j) of the Company Disclosure Schedule.
(c) Except for third party licenses listed in Section
3.13(c) of the Company Disclosure Schedule, the Company and each Company
Subsidiary is the sole and exclusive owner of its Intellectual Property
including, but not limited to, those listed or described on the Company
Disclosure Schedule, or has the right to the use thereof for the material
covered thereby in connection with the services or products in respect to which
they have been or are now being used.
(d) Except as set forth in Section 3.13(d) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary (i) is the
subject of any pending litigation or, to the Company's knowledge, any claim
regarding infringement of or misappropriation or misuse of any Intellectual
Property of the Company or other tangible right of any other person, (ii) has
knowledge of any such infringement, whether or not claimed by any other person,
(iii) has knowledge of any infringement by any other person of the Intellectual
Property of the Company or any Company Subsidiary, and (iv) has knowledge of any
facts or circumstances which would reasonably lead the Company to conclude that
the continued operation and conduct of any aspect of its or any Company
Subsidiary's business would result in any such litigation or claim. To the
knowledge of the Company, except as set forth in Section 3.13(d) of the Company
Disclosure Schedule, there is no other person that is operating under or
otherwise using any name confusingly similar with any trade names, trademarks,
service names, service marks, URLs, domain names or logos included in the
Intellectual Property owned by the Company or any Company Subsidiary. To the
Company's knowledge, no Intellectual Property licensed by the Company or any
Company Subsidiary from a third party is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting the use thereof by the
Company or any Company Subsidiary. Except as set forth in Section 3.13(d) of the
Company Disclosure Schedule, no Intellectual Property of the Company or any
Company Subsidiary is subject to any outstanding order, judgment, decree,
stipulation or agreement restricting the use thereof by the Company or any
Company Subsidiary. Except as set forth in Section 3.13(d) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary has entered
into any agreement to indemnify any other person against any charge of
infringement of any Third Party Intellectual Property.
(e) To the Company's knowledge, except as set forth in
Section 3.13(e) of the Company Disclosure Schedule, there has been no
unauthorized use, disclosure, infringement
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or misappropriation of any Intellectual Property rights of the Company or any
Company Subsidiary, any trade secret material to the Company or any Company
Subsidiary, or any Intellectual Property right of any third party to the extent
licensed by or through the Company or any Company Subsidiary, by any third
party, including any employee or former employee of the Company or any Company
Subsidiary.
(f) Except as set forth in Section 3.13(g) of the Company
Disclosure Schedule, to the Company's knowledge, no material trade secrets
included in the Intellectual Property of the Company have been disclosed by the
Company to any person other than employees, agents and representatives of the
Company or Parent. The Company has taken such reasonable measures as is
appropriate to protect all of its trade secrets, including securing valid
written assignments from all consultants and employees who contributed to the
creation or development of Intellectual Property of the rights to such
contributions that the Company or a Company Subsidiary does not already own by
operation of law.
(g) Except for obligations that arise under the common law
of the appropriate jurisdiction, to the Company's knowledge, neither the
Company, any Company Subsidiary nor any of their respective employees has, other
than confidentiality and other agreements assigning inventions made prior to
their employment with the Company or such Company Subsidiary, any written
agreements or arrangements with former employers of such employees relating to
trade secrets of such employers, the assignment of inventions of such employers,
or such employee's engagement in activities competitive with such employers.
Except for obligations that arise under the common law of the appropriate
jurisdiction, to the Company's knowledge, the activities of such employees on
behalf of the Company or such Company Subsidiary do not violate any agreements
or arrangements known to the Company which any such employees have with former
employers.
3.14 Taxes.
(a) Except as set forth in Section 3.14(a) of the Company
Disclosure Schedule, the Company and each Company Subsidiary has duly and timely
filed (including applicable extensions granted without penalty) all material Tax
Returns (as hereinafter defined) required to be filed at or prior to the
Effective Time, and such Tax Returns are true and correct in all material
respects, except where failure to do so would not have a Material Adverse Effect
and the Company or such Company Subsidiary paid in full or made adequate
provision in the financial statements of the Company (in accordance with GAAP)
for all material Taxes (as hereinafter defined) shown to be due on such Tax
Returns except where failure to do so would not have a Material Adverse Effect.
Except as set forth in Section 3.14(a) of the Company Disclosure Schedule, as of
the date hereof (i) neither the Company nor any Company Subsidiary has requested
any extension of time within which to file any Tax Returns in respect of any
fiscal year which have not since been filed and no request for waivers of the
time to assess any Taxes are pending or outstanding, (ii) no claim for Taxes has
become a lien against the property of the Company or any Company Subsidiary or
is being asserted against the Company or any Company Subsidiary other than liens
for Taxes not yet due and payable, (iii) no audit of any Tax Return of the
Company or any Company Subsidiary is being conducted by a Tax authority, (iv) no
extension of the statute of limitations on the assessment of any Taxes has been
granted to the Company or any Company Subsidiary and is currently in effect, and
(v) there is no agreement,
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contract or arrangement to which the Company or any Company Subsidiary is a
party that may result in the payment of any amount that would not be deductible
by reason of Sections 280G, 162 or 404 of the Code. Neither the Company nor any
Company Subsidiary has been or will be required to include any adjustment in
taxable income for any Tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or foreign Tax laws
as a result of transactions, events or accounting methods employed prior to the
Merger.
(b) For the purposes of this Agreement, "Taxes" shall mean
all taxes, charges, fees, levies, penalties or other assessments imposed by any
United States federal, state, local or foreign taxing authority, including, but
not limited to income, excise, property, sales, transfer, franchise, payroll,
withholding, social security or other taxes, including any interest, penalties
or additions attributable thereto. For purposes of this Agreement, "Tax Return"
shall mean any return, report, information return or other document (including
any related or supporting information) filed or required to be filed with a
Governmental Entity with respect to Taxes.
3.15 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any
federal, state, local or foreign laws, ordinances, codes, regulations, rules,
policies and orders that are intended to assure the protection of the
environment, or that classify, regulate, call for the remediation of, require
reporting with respect to, or list or define air, water, groundwater, solid
waste, hazardous or toxic substances, materials, wastes, pollutants or
contaminants, or which are intended to assure the safety of employees, workers
or other persons, including the public.
(ii) "Property" shall mean all real property leased
or owned by the Company or any Company Subsidiary either currently or in the
past.
(iii) "Facilities" shall mean all buildings and
improvements on the Property of the Company or any Company Subsidiary.
(b) The Company represents and warrants as follows: (i)
neither the Company nor any Company Subsidiary has received notice (oral or
written) of any noncompliance of the Facilities or its past or present
operations with Environmental and Safety Laws; (ii) no notices, administrative
actions or suits are pending or, to the Company's knowledge, threatened relating
to a violation of any Environmental and Safety Laws; (iii) the Company's or any
Company Subsidiary's uses of and activities within the Facilities have at all
times complied with all Environmental and Safety Laws; and (iv) the Company and
each Company Subsidiary has all the permits and licenses required to be issued
and are in full compliance with the terms and conditions of those permits.
3.16 Major Customers and Suppliers; Supplies. Parent has been
provided with a list of customers of the Company and the Company Subsidiaries
and all suppliers of significant goods or services to the Company and the
Company Subsidiaries for the year ended April 30, 1998 and the eight (8) months
ended December 31, 1998. Section 3.16 of the Company Disclosure Schedule
identifies those suppliers of significant goods or services with respect to
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which alternative sources of supply are not readily available on reasonably
comparable terms and conditions. Except as indicated in Section 3.16 of the
Company Disclosure Schedule, all supplies and services necessary for the conduct
of the business of the Company and each Company Subsidiary as presently
conducted, may be obtained from alternate sources on terms and conditions
comparable to those presently available to the Company or such Company
Subsidiary, and no facts, circumstances or conditions exist which create a
reasonable basis for believing that the Company or any Company Subsidiary will
be unable to continue to procure the supplies and services necessary to conduct
its business on substantially the same terms and conditions as such supplies and
services are currently procured. To the Company's knowledge, there has not been,
and there will not be, any material adverse change in the relations of the
Company or any Company Subsidiary with its suppliers, contractors, creditors, or
and lessors, as a result of the announcement or consummation of the transactions
contemplated by this Agreement.]
3.17 List of Accounts. Set forth in Section 3.17 of the Company
Disclosure Schedule is: (a) the name and address of each bank or other
institution in which the Company or any Company Subsidiary maintains an account
(cash, securities or other) or safe deposit box; (b) the name, phone number and
telefax number of the contact person at such bank or institution and (c) the
account number of the relevant account, a description of the type of account and
a list of the authorized signatories on such account.
3.18 Employment Agreements. Section 3.18 of the Company Disclosure
Schedule contains the names, start dates, contracts dates, job descriptions,
annual salary rates and other compensation (including, without limitation
bonuses, stock options and stock purchase rights) of all officers, directors and
employees of the Company or any Company Subsidiary or consultants being paid
more than $75,000 a year by the Company or any Company Subsidiary (including
compensation paid or payable by the Company or any Company Subsidiary under the
Company Employee Plans). Section 3.18 of the Company Disclosure Schedule
contains a list of all employee policies, employee manuals or other written
statements of rules or policies as to hiring practices and procedures, working
conditions, vacation and sick leave, a complete copy of each of which has been
made available to Parent. Except as set forth in Section 3.18 of the Company
Disclosure Schedule, there are no employment, consulting, severance or
indemnification arrangements, agreements or understandings between the Company
or any Company Subsidiary and any officer, director, consultant or employee
including, without limitation, any contracts to employ executive officers, any
severance, change in control or similar arrangements with any officers,
employees or agents of the Company or any Company Subsidiary that will result in
any obligation (absolute or contingent) of the Company or any Company Subsidiary
to make any payment to any officer, employee or agent of the Company or any
Company Subsidiary following either the consummation of the transactions
contemplated hereby, termination of employment, or both ("Company Employment
Agreements").
3.19 Employee Benefit Plans.
(a) Section 3.19(a) of the Company Disclosure Schedule
lists, with respect to the Company and any trade or business (whether or not
incorporated) which is treated as a single employer with the Company (an "ERISA
Affiliate") within the meaning of Section 414(b), (c), (m) or (o) of the Code,
(i) all material employee benefit plans (as defined in Section
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3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) maintained, sponsored or contributed to or required to be contributed
to by the Company or an ERISA Affiliate, (ii) each loan to a non-officer
employee in excess of $10,000, loans to officers and directors and any stock
option, stock purchase, phantom stock, stock appreciation right, supplemental
retirement, severance, sabbatical, medical, dental, vision care, disability,
employee relocation, cafeteria benefit (Code section 125) or dependent care
(Code Section 129), life insurance or accident insurance plans, programs or
arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (iv) other fringe or
employee benefit plans, programs or arrangements that apply to senior management
of the Company and that do not generally apply to all employees, and (v) any
current or former employment or executive compensation or severance agreements,
written or otherwise, as to which unsatisfied obligations of the Company of
greater than $10,000 remain for the benefit of, or relating to, any present or
former employee, consultant or director of the Company (together, the "Company
Employee Plans").
(b) The Company has furnished to Parent a copy of the
Company Employee Plans and related plan documents, to the extent reduced to
writing (including trust documents, insurance policies or contracts, employee
booklets, summary plan descriptions and other authorizing documents, and, to the
extent still in its possession, any material employee communications relating
thereto) and has, with respect to each Company Employee Plan which is subject to
ERISA reporting requirements, provided copies of the Form 5500 reports filed for
the last three plan years. The Company has, with respect to any Company Employee
Plan intended to be qualified under Section 401(a) of the Code, either obtained
from the Internal Revenue Service a favorable determination letter as to its
qualified status under the Code, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent legislation, or applied to the
Internal Revenue Service for such a determination letter prior to the expiration
of the requisite period under applicable Treasury Regulations or Internal
Revenue Service pronouncements in which to apply for such determination letter
and to make any amendments necessary to obtain a favorable determination. The
Company has also furnished Parent with the most recent Internal Revenue Service
determination letter issued with respect to each such Company Employee Plan, and
nothing has occurred since the issuance of each such letter which could
reasonably be expected to cause the loss of the tax-qualified status of any
Company Employee Plan subject to Code Section 401(a).
(c) Except as disclosed in Section 3.19(c) of the Company
Disclosure Schedule, (i) none of the Company Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person; (ii) there has
been no "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Code, with respect to any Company Employee Plan,
for which no exemption exists; (iii) each Company Employee Plan has been
administered substantially in accordance with its terms and in substantial
compliance with the requirements prescribed by any applicable statutes, rules
and regulations (including applicable provisions of ERISA and the Code), and the
Company and each ERISA Affiliate have performed substantially all obligations
required to be performed by them under, are not in any material respect in
default under or violation of, and have no knowledge of any material default or
violation by any other party to, any of the Company Employee Plans; (iv) to the
Company's knowledge neither the Company nor any ERISA Affiliate is subject to
any liability or penalty under Sections 4976 through 4980 of the Code or Title I
of ERISA with respect to any of the
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Company Employee Plans, other than obligations for the payment of benefits in
the normal operation of the Plan; (v) all material contributions required to be
made by the Company and ERISA Affiliate to any Company Employee Plan have been
made on a timely basis and any accruals required by GAAP for contributions to
each Company Employee Plan for the current plan years are reflected on the
financial statements of the Company; (vi) with respect to each Company Employee
Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the thirty (30) day notice requirement has
been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 of ERISA has occurred with respect to
any Company Employee Plan subject to Title IV of ERISA; (vii) none of the
Company nor any ERISA Affiliate has incurred any liability under Title IV of
ERISA or Section 412 of the Code and (viii) no Company Employee Plan which is
subject to Title IV or ERISA has an "unfunded benefit liability" within the
meaning of Section 4001(a)(18) of ERISA. With respect to each Company Employee
Plan subject to ERISA as either an employee pension plan within the meaning of
Section 3(2) of ERISA or an employee welfare benefit plan within the meaning of
Section 3(1) of ERISA, the Company has prepared in good faith and timely filed
all requisite governmental reports (which were true and correct as of the date
filed) and has properly and timely filed and distributed or posted all notices
and reports to employees required to be filed, distributed or posted with
respect to each such Company Employee Plan. No suit, administrative proceeding,
action or other litigation has been brought, or to the best knowledge of the
Company is threatened, against or with respect to any such Company Employee
Plan, including any audit or inquiry by the IRS or United States Department of
Labor. Neither the Company nor any ERISA Affiliate has any liability (including
current or potential withdrawal liability) with respect to any "multiemployer
plan" as such term is defined in Section 3(37) of ERISA. Each Company Employee
Plan can be amended, terminated or otherwise discontinued after Closing in
accordance with its terms without material liability (other than expenses
typically incurred in a termination event). The consummation of the transactions
contemplated by this Agreement will not entitle any current or former employee
or other service provider of the Company or any ERISA Affiliate to severance
benefits or any other payment, except as provided by this Agreement or the
schedules attached hereto.
(d) With respect to each Company Employee Plan, the Company
has complied with (i) the applicable health care continuation and notice
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and the proposed regulations thereunder, (ii) the applicable
requirements of the Family Leave Act of 1993 and the regulations thereunder and
(iii) the applicable requirements of the Health Insurance Portability and
Accountability Act of 1996.
(e) Except as set forth in Section 3.19(e) of the Company
Disclosure Schedule, consummation of the transactions contemplated by this
Agreement will not entitle any current or former employee or other service
provider of the Company or any other ERISA Affiliate to severance benefits or
any other payment, except as vesting, or increase the amount of compensation due
any such employee or service provider.
(f) Except as disclosed in Section 3.19(f) of the Company
Disclosure Schedule, there has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or other ERISA Affiliate
relating to, or change in participation or coverage under, any Company Employee
Plan which would increase the expense of maintaining
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such Plan above the level of expense incurred with respect to that Plan for the
most recent fiscal year included in the Company's financial statements, other
than increases resulting from premium increases or the employment of additional
employees, in each case in the ordinary course of business.
3.20 Labor Matters. Except as set forth in Section 3.20 of the
Company Disclosure Schedule, (a) neither the Company nor any Company Subsidiary
is a party to or otherwise bound by or threatened by with any collective
bargaining agreement or other labor union contract and to the Company's
knowledge currently there are no organizational campaigns, petitions or other
unionization activities seeking recognition of a collective bargaining unit
which could affect the Company or such Company Subsidiary; (b) there are no
controversies, strikes, slowdowns, work stoppages or labor disturbances pending
or to the Company's knowledge threatened between the Company, any Company
Subsidiary and any of their respective employees, and neither the Company nor
any Company Subsidiary has experienced any such controversy, strike, slowdown,
work stoppage or labor disturbances within the past three years; (c) neither the
Company nor any Company Subsidiary has breached or otherwise failed to comply
with the provisions of any collective bargaining or union contract and there are
no grievances outstanding against the Company or any Company Subsidiary under
any such agreement or contract; (d) there are no unfair labor practice
complaints pending against the Company or any Company Subsidiary before the
National Labor Relations Board or any other Governmental Entity or any current
union representation questions involving employees of the Company or any Company
Subsidiary; (e) there are no pending claims against the Company or any Company
Subsidiary under any workers' compensation plan or policy or for long-term
disability; (f) to the Company's knowledge, neither the Company nor any Company
Subsidiary has any obligations under COBRA with respect to any former employees
or qualifying beneficiaries thereunder; (g) the Company and each Company
Subsidiary is currently in compliance with all applicable Laws relating to the
employment of labor, including those related to wages, hours, collective
bargaining and the payment and withholding of taxes and other sums as required
by the appropriate Governmental Entity and has withheld and paid to the
appropriate Governmental Entity or is holding for payment not yet due to such
Governmental Entity all amounts required to be withheld from employees of the
Company or any Company Subsidiary and is not liable for any arrears of wages,
taxes, penalties or other sums for failure to comply with any of the foregoing;
(h) the Company and each Company Subsidiary has paid in full to all their
respective employees or adequately accrued for in accordance with GAAP all
wages, salaries, commissions, bonuses, benefits and other compensation due to or
on behalf of such employees, including all compensation owing and due for
over-time work; (i) the Company and each Company Subsidiary has provided its
employees with all relocation benefits, stock options, bonuses and incentives,
and all other compensation that such employee has earned up through the date of
this Agreement or that such employee was otherwise promised in their employment
agreements with the Company or such Company Subsidiary; (j) there is no claim
with respect to payment of wages, salary or overtime pay that has been asserted
or is now pending or to the Company's knowledge threatened before any
Governmental Entity with respect to any Persons currently or formerly employed
by the Company or any Company Subsidiary; (k) neither the Company nor any
Company Subsidiary is a party to, or otherwise bound by, any consent decree
with, or citation by, any Governmental Entity relating to employees or
employment practices; (l) there is no charge or proceeding with respect to a
violation of any occupational safety or health standards that has been asserted
or is now pending or to the Company's knowledge threatened
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with respect to the Company or any Company Subsidiary; (m) there is no charge of
discrimination in employment or employment practices, for any reason, including,
without limitation, age, gender, race, religion or other legally protected
category, which has been asserted or is now pending or threatened before the
United States Equal Employment Opportunity Commission, or any other Governmental
Entity in any jurisdiction in which the Company or any Company Subsidiary has
employed or currently employs any Person; (n) the Company and each Company
Subsidiary is in compliance in all material respects with the requirements of
the Americans With Disabilities Act and any similar law of any Government
Entity; and (o) the Company and each Company Subsidiary to which it is
applicable is in compliance with the requirements of the Workers Adjustment and
Retraining Notification Act ("WARN") and each has no liabilities pursuant to
WARN.
Except as set forth in Section 3.20 of the Company Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any severance benefits or
any other payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any current
or former director, employee or other service provider of the Company or any
Company Subsidiary or any other ERISA Affiliate, (ii) increase any benefits
otherwise payable by the Company or any Company Subsidiary or (iii) result in
the acceleration of the time of payment or vesting of any such benefits, or any
options or warrants to purchase Company Capital Stock, or any increase in the
amount of compensation of benefits due any such person.
3.21 Contracts and Commitments. Section 3.21 of the Company
Disclosure Schedule contains a complete and accurate list of all contracts and
agreements (including, without limitation, oral and informal arrangements, but
excluding agreements between the Company and any Company Subsidiary or among
Company Subsidiaries) of the following categories to which the Company or any
Company Subsidiary is a party or by which it is bound as of the date of this
Agreement.
(a) labor contracts or collective bargaining agreements;
(b) material manufacturing, distribution, franchise,
license, sales, agency or advertising contracts;
(c) contracts which require the payment in excess of $50,000
per year for (i) the purchase of inventory, materials, supplies or equipment
which are not cancelable (without material penalty, cost or other liability)
within one (1) year, (ii) management, consulting, service or other similar
contracts, (iii) advertising or marketing agreements or arrangements, and (iv)
other contracts made in the ordinary course of business involving annual
expenditures or liabilities in excess of $50,000 which are not cancelable
(without material penalty, cost or other liability) within ninety (90) days,
other than purchase orders made in the ordinary course of business consistent
with past practice;
(d) promissory notes, loans, agreements, indentures,
evidences of indebtedness or other instruments proving for the lending of money,
whether as borrower, lender or guarantor;
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(e) contracts (other than Leases) containing covenants
limiting the freedom of the Company or any Company Subsidiary to engage in any
line of business or compete with any Person or operate at any location;
(f) joint venture or partnership agreements or joint
development or similar agreements;
(g) agreement, contract or other arrangement with (i) the
Company or any affiliate of the Company (other than any Company Subsidiary) or
(ii) any current or former officer, director or employee of the Company or any
Company Subsidiary or any affiliate of the Company or of any Company Subsidiary
(other than non-compete or intellectual property agreements);
(h) material lease or similar agreement with any person
under which (i) the Company or any Company Subsidiary is lessee of, or holds or
uses, any machinery, equipment, vehicle or other tangible property owned by any
person or (ii) the Company or any Company Subsidiary is a lessor or sublessor
of, or makes available for use by any person, any tangible personal property
owned or leased by the Company or any Company Subsidiary, in any such case which
has an aggregate future liability or receivable, as the case may be, and is not
terminable by the Company or such Company Subsidiary by notice of not more than
sixty (60) days;
(i) contracts or other instruments (including so-called
take-or-pay or keepwell agreements) under which (i) any person has directly or
indirectly guaranteed indebtedness, liabilities or obligations of the Company or
any Company Subsidiary or (ii) the Company or any Company Subsidiary has
directly or indirectly guaranteed indebtedness, liabilities or obligations of
any person (in each case other than endorsements for the purpose of collection
in the ordinary course of business);
(j) contracts or other instruments under which the Company
or any Company Subsidiary has, directly or indirectly, made any advance, loan,
extension of credit or capital contribution to, or other investment in, any
person involving aggregate payments in excess of $50,000, excluding agreements
between the Company and a Company Subsidiary or between Company Subsidiaries;
(k) mortgage, pledge, security agreement, deed of trust or
other instrument granting a lien or other encumbrance upon any property of the
Company or any Company Subsidiary;
(l) agreement or instrument involving aggregate payments in
excess of $50,000 providing for indemnification of any person with respect to
liabilities relating to any current or former business of the Company or any
Company Subsidiary, or any predecessor person;
(m) contract for the acquisition, sale or lease of any
assets or capital stock or other ownership interests outside the ordinary course
of the business or involving aggregate payments in excess of $50,000 or to
effect any merger of the Company or any Company Subsidiary; and
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(n) any exclusive retainer agreement or arrangement with
attorneys, accountants, actuaries, appraisers, investment bankers or other
professional advisors.
(o) any agreements or arrangements with respect to
telecommunications, web hosting or similar or related matters involving payments
in excess of $50,000.
True copies of the written contracts identified in Section 3.21 of the
Company Disclosure Schedule have been made available to Parent.
3.22 Absence of Breaches or Defaults. Neither the Company nor any
Company Subsidiary is, and, to the knowledge of the Company, no other party is,
in default under, or in breach or violation of, any contract to which the
Company or any Company Subsidiary is a party, including, without limitation,
those identified on Section 3.21 of the Company Disclosure Schedule and, to the
knowledge of the Company, no event has occurred which, with the giving of notice
or passage of time or both would constitute a default under any contract
identified on Section 3.21 of the Company Disclosure Schedule, except in each
case set forth above for defaults, breaches, violations or events which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company or any Company Subsidiary. Other than contracts which have
terminated or expired in accordance with their terms, each of the contracts
identified on Section 3.21 of the Company Disclosure Schedule is valid, binding
and enforceable in accordance with its terms (subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered on a proceeding in equity or at law))
and is in full force and effect, and assuming all consents required by the terms
thereof or applicable law have been obtained, such contracts will continue to be
valid, binding and enforceable in accordance with their respective terms and in
full force and effect immediately following the consummation of the transactions
contemplated hereby, in each case except where the failure to be valid, binding,
enforceable and in full force and effort would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. No event has occurred
which either entitles, or would, on notice or lapse of time or both, entitle the
holder of any indebtedness for borrowed money affecting the Company or any
Company Subsidiary (except for the execution or consummation of this Agreement)
to accelerate, or which does accelerate, the maturity of any indebtedness
affecting the Company or any Company Subsidiary, except as set forth in Section
3.22 of the Company Disclosure Schedule.
3.23 Interested Party Transactions. Except as set forth in Section
3.23 of the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary is indebted to any director, officer, employee or agent of the
Company or any Company Subsidiary (except for amounts due as normal salaries and
bonuses and in reimbursement of ordinary expenses), and no such person is
indebted to the Company or any Company Subsidiary. Except as set forth in
Section 3.23 of the Company Disclosure Schedule, no affiliate of the Company,
any Company Subsidiary or any Company Shareholder has, or has had, any interest
in any material property (whether real, personal, or mixed and whether tangible
or intangible), used in or pertaining to the Company or any Company Subsidiary.
3.24 Compliance with Applicable Law. The Company and each Company
Subsidiary holds, and has at all times held, all licenses, franchises, permits
and authorizations
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which (a) are necessary for it to engage in the business currently conducted by
it and (b) if not possessed by the Company or such Company Subsidiary would have
a Material Adverse Effect. The Company and each Company Subsidiary has complied
with and is not in default in any respect under any, applicable law, statute,
order, rule, regulation, policy and/or guideline of any Governmental Entity
relating to the Company or such Company Subsidiary except where the failure to
do so would not have a Material Adverse Effect and the Company has not received
notice of any violations of any of the above.
3.25 Insurance. Section 3.25 of the Company Disclosure Schedule sets
forth a true and complete list of all insurance policies providing insurance
coverage of any nature to the Company and each Company Subsidiary. Such policies
are sufficient for compliance by the Company and each Company Subsidiary with
all requirements of law and all material agreements to which the Company or such
Company Subsidiary is a party or by which any of their assets are bound. All of
such policies are in full force and effect and are valid and enforceable, and
the Company and each Company Subsidiary has complied with all material terms and
conditions of such policies, including premium payments. None of the insurance
carriers has indicated to the Company or any Company Subsidiary an intention to
cancel any such policy. Except as set forth in Section 3.25 of the Company
Disclosure, neither the Company nor any Company Subsidiary has any claim pending
against any of the insurance carriers under any of such policies and the Company
has no knowledge of any actual or alleged occurrence of any kind which may give
rise to any such claim.
3.26 Reorganization. Neither the Company nor, to the knowledge of the
Company, any of its directors, officers or shareholders has taken any action
which would prevent the Merger from constituting a reorganization qualifying
under the provisions of Section 368(a)(2)(E) of the Code.
3.27 Section 912 of the NYBCL Not Applicable. The Board of Directors
of the Company has taken all actions so that the restrictions contained in
Section 912 of the NYBCL applicable to a "business combination" (as defined in
Section 912(a)(5) of the NYBCL) will not apply to the execution, delivery or
performance of this Agreement or to the consummation of the Merger or the other
transactions contemplated by this Agreement.
3.28 Brokers. Neither the Company nor any of its officers or
directors has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with any of the
transactions contemplated by this Agreement.
3.29 Minute Books. The minute books of the Company and each Company
Subsidiary made available to Parent contain a complete and accurate summary of
all meetings of directors and shareholders or actions by written consent since
the time of incorporation of the Company and each Company Subsidiary through the
date of this Agreement, and reflect all transactions referred to in such minutes
accurately.
3.30 Accounts and Notes Receivable. Subject to any reserves set forth
on the Reference Balance Sheet, the accounts receivable and the notes receivable
shown on the Reference Balance Sheet represent and will represent bona fide
claims arising in the ordinary course of business against debtors for sales and
other charges, and are not subject to discount
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except for normal cash and immaterial trade discounts. To the Company's
knowledge, and subject to any reserves set forth on the Reference Balance Sheet,
such accounts receivable and notes receivable are collectible by the Company or
the appropriate Company Subsidiary in the ordinary course of business. The
amount carried for doubtful accounts and allowances disclosed in the Reference
Balance Sheet is sufficient to provide for any losses which may be sustained on
realization of the accounts receivable and notes receivable.
3.31 Vote Required. The affirmative vote of the holders of a majority
of the shares of Company Common Stock and the consent of the holders of 60% of
the shares of Company Series A Preferred, voting separately as a class, in each
case outstanding on the record date set for the Company Shareholders Meeting (as
defined below) are the only votes of the holders of any of Company Capital Stock
necessary to approve this Agreement and the transactions contemplated hereby.
3.32 Board Approval. The Board of Directors of the Company has (i)
approved this Agreement and the Merger and all transactions contemplated hereby,
(ii) determined that the Merger is in the best interests of the shareholders of
the Company and is on terms that are fair to such shareholders and (iii)
recommended that the shareholders of the Company approve this Agreement and
consummation of the Merger.
3.33 Employee Nondisclosure and Assignment of Inventions Agreements.
Except as set forth in Section 3.33 of the Company Disclosure Schedule, each
employee of the Company and each Company Subsidiary who has access to
confidential information has executed and delivered to the Company the standard
employee confidentiality and assignment of inventions agreement in the form
previously delivered to Parent.
3.34 Year 2000 Compliance. Except as set forth in Section 3.34 of the
Company Disclosure Schedule, the Company and each Company Subsidiary has
performed all acts necessary to ensure it is Year 2000 Compliant. As used
herein, "Year 2000 Compliant" shall mean, in regard to any entity, that all
software (except for software licensed from third parties other than Megasoft),
hardware, firmware equipment, goods or systems utilized by or material to the
business, operation or financial condition of such entity, including, without
limitation, all telephone or other communications systems and all software
licensed to clients, will properly perform date sensitive functions before,
during and after the year 2000; provided, however, that the term "Year 2000
Compliant" does not relate to the impact on the Company or any Company
Subsidiary of the failure of any third party (other than Megasoft) to be Year
2000 Compliant. The Company shall, and shall cause each Company Subsidiary
promptly upon request, provide to Parent such certifications or other evidence
of its compliance with the terms hereof as Parent may from time to time require.
3.35 Certain Payments. Since January 1, 1995, to the Company's
knowledge, none of the Company, any Company Subsidiary, nor any officer, agent
or employee of the Company or any Company Subsidiary or, to the Company's
knowledge, any other person affiliated with or acting on behalf of the Company
or any Company Subsidiary has directly or indirectly (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or other payment in
violation of any applicable law, rule or regulation to any person, private or
public, regardless of form, whether in money, property, or services (i) to
obtain favorable
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treatment in securing business, (ii) to pay for favorable treatment for business
secured, or (iii) to obtain special concessions or for special concessions
already obtained, for or in respect of the Company or any Company Subsidiary, or
(b) established or maintained any fund or material asset that has not been
recorded in the books and records of the Company.
3.36 Representations Complete. None of the representations or
warranties made by the Company or Company Shareholders herein or in any Schedule
hereto, including the Company Disclosure Schedule, or certificate furnished by
the Company pursuant to this Agreement, contains any untrue statement of a
material fact, or omits to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
For purposes of this Agreement, the phrases "knowledge of Parent and
Merger Sub," or "to Parent's and Merger Sub's knowledge" or references to the
absence of "notice to Parent and Merger Sub" and the like shall mean the actual
knowledge of those persons set forth on Schedule VI hereto after due inquiry by
one or more of such persons. Parent and Merger Sub hereby jointly and severally
represent and warrant to the Company that, except as set forth in the disclosure
schedule attached hereto (the "Parent Disclosure Schedule"):
4.1 Corporate Organization. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Parent and Merger Sub have the corporate power and
authority to own or lease their respective properties and assets and to carry on
their respective businesses as they are now being conducted, and are duly
qualified to do business in each jurisdiction in which the nature of the
business conducted by them or the character or location of the properties and
assets owned or leased by them makes such qualification necessary, except where
the failure to be so qualified (i) would not individually or in the aggregate
have a Material Adverse Effect or (ii) would not adversely affect the ability of
Parent or Merger Sub to consummate the transactions contemplated hereby. The
copies of the Certificate of Incorporation and Bylaws of Parent and Merger Sub
which have previously been made available to the Company are true and correct
copies of such documents as in effect as of the date of this Agreement.
4.2 Authority; No Violation.
(a) Each of Parent and Merger Sub has the requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The Board of Directors of Parent has (i) unanimously approved this
Agreement and the Merger and all transactions contemplated hereby, (ii)
determined that the Merger is in the best interests of the stockholders of
Parent and is on terms that are fair to such stockholders and (iii) determined
that this Agreement is advisable and recommended that the stockholders of Parent
approve this Agreement and consummation of the Merger. The Board of Directors
and the stockholder of Merger Sub have approved this Agreement and the Merger
and all transactions contemplated hereby. No other corporate
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proceedings on the part of Parent or Merger Sub are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This Agreement
and all other agreements and documents to be entered into in connection herewith
have been duly and validly executed and delivered by Parent and Merger Sub and
(assuming due authorization, execution and delivery by the Company and Company
Shareholders) constitute valid and binding obligations of Parent and Merger Sub,
enforceable against each of them, in accordance with their terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(b) Except as set forth in Section 4.2(b) of the Parent
Disclosure Schedule, neither the execution and delivery of this Agreement by
Parent and Merger Sub, nor the consummation by Parent and Merger Sub of the
transactions contemplated hereby, nor compliance by Parent and Merger Sub with
any of the terms or provisions hereof, will (i) violate any provision of the
Certificate of Incorporation or Bylaws of Parent or Merger Sub, or (ii) assuming
that the consents and approvals referred to in Section 4.5 hereof are duly
obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Parent or Merger Sub or any of
their respective properties or assets, or (y) violate, conflict with, result in
a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the properties or assets of Parent or Merger Sub under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Parent or Merger Sub is a party, or by which either of them
or any of their respective properties or assets may be bound or affected.
4.3 Capitalization of Parent and Merger Sub.
(a) Parent's authorized capital stock consists solely of (i)
100,000,000 shares of Parent Common Stock, of which (A) 16,171,091 shares were
issued and outstanding, (B) no shares were issued and held in treasury (which
does not include the shares reserved for issuance set forth in clause (C) below)
and no shares were held by Subsidiaries of Parent, and (C) 12,225,000 shares
were reserved for issuance upon the exercise of outstanding options and
37,554,287 shares were reserved for issuance upon the conversion or exchange of
convertible or exchangeable securities granted or issued by Parent; and (ii)
35,000,000 shares of Parent Preferred Stock of which 8,440,002 shares were
designated as Series A Preferred of which 8,440,002 shares were issued and
outstanding, 9,500,000 shares were designated as Series B Preferred, of which
9,499,874 shares were issued and outstanding, and 11,597,112 shares were
designated Series C Preferred, of which 11,547,112 shares were issued and
outstanding. Each outstanding share of Parent Common Stock is, and all shares of
Parent Common Stock to be issued in connection with the Merger will be, duly
authorized and validly issued, fully paid and nonassessable, and each
outstanding share of Parent Common Stock has not been, and all shares of Parent
Common Stock to be issued in connection with the Merger will not be, issued in
violation of any preemptive or similar rights. As of the date hereof, other than
as set forth herein or in Section 4.3 of the Parent Disclosure Schedule, and
except for shares to be issued in connection with the Merger (including shares
of Parent Common Stock to be issued upon the
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exercise of Company Stock Options), there are no outstanding subscriptions,
options, warrants, calls, commitments, agreements, or obligations of any
character calling for the purchase, redemption or issuance by Parent of any
equity securities of Parent, nor are there outstanding any securities which are
convertible into or exchangeable for any shares of Parent Common Stock and
neither Parent nor any Subsidiary has any obligation of any kind to issue any
additional securities or to pay for or repurchase any securities of Parent, its
Subsidiaries or its or their predecessors. Except as set forth in Section 4.3 of
the Parent Disclosure Schedule, Parent has no agreement, arrangement or
understanding to register any securities of Parent or any of its Subsidiaries
under the Securities Act or under any state securities law and has not granted
registration rights to any person or entity; copies of all such agreements have
previously been provided to the Company.
(b) Merger Sub's authorized capital stock consists solely of
10,000 shares of Common Stock, par value $.0001 per share ("Merger Sub Common
Stock"), of which, as of the date hereof, 1,000 shares are issued and
outstanding and none are reserved for issuance. As of the date hereof, all of
the outstanding shares of Merger Sub Common Stock are owned free and clear of
any liens, claims or encumbrances by Parent.
4.4 Subsidiaries. Section 4.4 of the Parent Disclosure Schedule sets
forth a list of all entities in which Parent has an equity interest
("Subsidiaries"). Except as set forth in Section 4.4 of the Parent Disclosure
Schedule, Parent owns directly or indirectly all of the outstanding shares of
capital stock (or other ownership interests having by their terms ordinary
voting power to elect a majority of directors or others performing similar
functions) of each of such Subsidiaries.
4.5 Consents and Approvals. Neither the execution and delivery of
this Agreement by Parent or Merger Sub nor the consummation of the transactions
contemplated hereby will require any action or consent or approval of, or review
by, or registration or filing by Parent or any of its affiliates with, any third
party or any Governmental Entity, other than (i) registrations or other actions
required under federal and state securities laws as are contemplated by this
Agreement or (ii) consents or approvals of any Governmental Entity set forth in
Section 4.5 to the Parent Disclosure Schedule, except for those which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent and its Subsidiaries taken as a whole or a Material
Adverse Effect on the ability of the parties to consummate the transactions
contemplated hereby.
4.6 Parent Financial Statements. Set forth in Section 4.6 of Parent
Disclosure Schedule are true and correct copies of (a) an audited consolidated
balance sheet of Parent at December 31, 1997, together with related audited
statements of operations, stockholders' equity and cash flows for the fiscal
year then ended, and (b) Parent's unaudited consolidated balance sheet (the
"Parent Balance Sheet") and income statement as of and for the year ended
December 31, 1998 (collectively, the "Parent Financial Statements"). Such Parent
Financial Statements have been prepared in accordance with GAAP (except that the
unaudited Parent Financial Statements do not contain all footnotes required by
GAAP and are subject to normal year-end audit adjustments that in the aggregate
will not be material) applied on a basis consistent throughout the periods
indicated and with each other. The Parent Financial Statements fairly present
the consolidated financial condition and operating results of Parent as of the
dates, and
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for the periods indicated therein, subject to normal year-end audit adjustments.
The books and records of Parent have been, and are being, maintained in
accordance with GAAP and any other applicable legal and accounting requirements.
4.7 Absence of Undisclosed Liabilities. Except (i) as and to the
extent disclosed or reserved against in the Parent Balance Sheet, (ii) as
incurred in the ordinary course of business and consistent with past practice
and not prohibited by this Agreement, (iii) as incurred in connection with the
execution of this Agreement and (iv) as disclosed in Section 4.7 of the Parent
Disclosure Schedule, Parent, together with its Subsidiaries, does not have any
liabilities or obligations of any nature, whether known or unknown, absolute,
accrued, contingent or otherwise and whether due or to become due, that,
individually or in the aggregate, have or would have a Material Adverse Effect
on Parent and its Subsidiaries, taken as a whole.
4.8 Absence of Certain Changes. Since December 31, 1998, (a) except
as disclosed in Section 4.8 of Parent Disclosure Schedule, there has not been
any change that would have a Material Adverse Effect on the assets, business,
properties, operations or financial condition of Parent and its Subsidiaries,
taken as a whole, or any condition, event or occurrence that, individually or in
the aggregate, could reasonably be expected to result in a Material Adverse
Effect on Parent, (b) neither Parent nor any of its Subsidiaries has
participated in any transaction, or otherwise acted outside the ordinary course
of business, including, without limitation, declaring or paying any dividend or
declaring or making any distribution to its stockholders except out of the
earnings of Parent, issuing Parent Common Stock or any securities convertible
into Parent Common Stock, or acquiring any other business, whether by merger,
acquisition of stock or assets, or otherwise, and (c) neither Parent nor any of
its Subsidiaries has increased the compensation of any of its officers or the
rate of pay of any of its employees, except as part of regular compensation
increases in the ordinary course of business.
4.9 Brokers. Except as set forth in Section 4.9 of the Parent
Disclosure Schedule, neither Parent, Merger Sub, nor any of their respective
officers or directors has employed any broker or finder or incurred any
liability for any broker's fees, commissions or finder's fees in connection with
any of the transactions contemplated by this Agreement.
4.10 Vote Required. No approval of the stockholders of Parent is
necessary to approve this Agreement and the transactions contemplated hereby.
4.11 Additional Representations and Warranties. Except as disclosed
in Section 4.11 of the Parent Disclosure Schedule, the representations and
warranties of Parent set forth in Sections 3.5, 3.6, 3.8, 3.9, 3.12, 3.14, 3.16
through 3.18 and 3.20 through 3.27 (the "Series C Representations") of that
certain Stock Purchase Agreement, dated as of May 26, 1998, by and among Parent,
General Atlantic Partners 46, L.P., GAP Coinvestment Partners, L.P. and Bayview
Investors, Ltd. (the "Series C Purchase Agreement") are true and correct in all
material respects as of the date hereof. For the purposes of this Section 4.11,
all capitalized terms used in the Series C Representations and not otherwise
defined herein shall have the meanings given to them in Section 1.1 of the
Series C Purchase Agreement. All schedules referred to in the Series C
Representations shall refer to the applicable schedules set forth in Section
4.11 of the Parent Disclosure Schedule.
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4.12 ProTix Confidential Private Offering Memorandum. The information
regarding Parent and its subsidiaries set forth in the Confidential Private
Offering Memorandum dated September 30, 1998 delivered by Parent to the
shareholders of ProTix, Inc. (the "ProTix Memorandum") was true and correct in
all material respects as of the date thereof; provided, however, that neither
Parent nor Merger Sub makes any representation or warranty with respect to the
truth and accuracy of information contained in the ProTix Memorandum at any date
other than September 30, 1998.
4.13 Representations Complete. None of the representations or
warranties made by Parent or Merger Sub herein or in any Schedule hereto,
including the Parent Disclosure Schedule, or certificate furnished by the Parent
pursuant to this Agreement, contains any untrue statement of a material fact, or
omits to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which made,
not misleading.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of the Company. During the period from the date of
this Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior written consent of
Parent, the Company and each Company Subsidiary shall carry on its business in
the ordinary course consistent with past practice. Without limiting the
generality of the foregoing, and except as set forth in Section 5.1 of the
Company Disclosure Schedule or as otherwise contemplated by this Agreement or
consented to in writing by Parent, neither the Company nor any Company
Subsidiary shall:
(a) declare or pay any dividends on, or make other
distributions in respect of, any of the Company Capital Stock;
(b) (i) repurchase, redeem or otherwise acquire any shares
of its capital stock, or any securities convertible into or exercisable for any
shares of such capital stock, (ii) split, combine or reclassify any shares of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iii) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with respect to any of the
foregoing;
(c) amend its Certificate of Incorporation, Bylaws or other
similar governing documents, except as contemplated by Section 6.13 of this
Agreement;
(d) make any capital expenditures other than those which are
made in the ordinary course of business or are necessary to maintain existing
assets in good repair;
(e) enter into any new line of business;
(f) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other
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manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire any assets, which
would be material, individually or in the aggregate, to the Company;
(g) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue, or in any of the conditions to the
Merger set forth in Article I not being satisfied;
(h) change its methods of accounting in effect at April 30,
1998, except as required by changes in GAAP or as concurred with by the
Company's independent auditors;
(i) (i) except as required by applicable law or as required
to maintain qualification pursuant to the Code, adopt, amend, or terminate any
employee benefit plan (including, without limitation, any Company Employee Plan)
or any agreement, arrangement, plan or policy between the Company or any Company
Subsidiary and one or more of its current or former directors, officers or
employees, (ii) except for normal increases in the ordinary course of business
consistent with past practice or except as required by applicable law, increase
in any manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any Company Employee Plan or
agreement as in effect as of the date hereof (including, without limitation, the
granting of stock options, stock appreciation rights, restricted stock,
restricted stock units or performance units or shares); provided, however, that
nothing contained herein shall prohibit the Company or any Company Subsidiary
from paying any bonuses listed in Section 5.1(i) of the Company Disclosure
Schedule;
(j) other than activities in the ordinary course of business
consistent with past practice, sell, lease, encumber, assign or otherwise
dispose of, or agree to sell, lease, encumber, assign or otherwise dispose of,
any of its material assets, properties or other rights or agreements;
(k) other than in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money or assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity;
(l) create, renew, amend or terminate or give notice of a
proposed renewal, amendment or termination of, any material contract, agreement
or lease for goods, services or office space to which the Company or any Company
Subsidiary is a party or by which the Company, any Company Subsidiary or any of
their respective properties are bound, other than the renewal in the ordinary
course of business of any lease the term of which expires prior to the Closing
Date; or
(m) agree to do any of the foregoing
5.2 Covenants of Parent. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior written consent of
the Company, and except as set forth in Section 5.2 of the Parent Disclosure
Schedule, Parent and its Subsidiaries shall carry on their respective businesses
in the ordinary course consistent with past practice. Without limiting the
generality
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of the foregoing, and except as set forth in Section 5.2 of the Parent
Disclosure Schedule or as otherwise contemplated by this Agreement or consented
to in writing by the Company, Parent shall not, and shall not permit any of its
Subsidiaries to:
(a) declare or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, in respect of any of its capital
stock, except that any Parent Subsidiary may pay dividends or make other
distributions to Parent or any other Parent Subsidiary;
(b) purchase or otherwise acquire, directly or indirectly,
any of its capital stock;
(c) split, combine or reclassify any shares of its capital
stock, unless appropriate adjustment to the Exchange Ratio is made pursuant to
Section 1.7(d) hereof;
(d) sell, transfer, license, sublicense or otherwise dispose
of any material assets;
(e) acquire any other business whether by merger, purchase
of stock or assets, or otherwise;
(f) except upon the exercise of outstanding options or
warrants, issue any shares of Parent Common Stock or any security convertible
into Parent Common Stock;
(g) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue, or in any of the conditions to the
Merger set forth in Article I not being satisfied; or
(h) agree to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS.
6.1 Intentionally Deleted.
6.2 Shareholders' Meetings. Company shall call and hold the Company
Shareholders' Meeting, or solicit written stockholder consent, as the case may
be, as promptly as practicable after the date hereof for the purpose of voting
upon the approval of this Agreement, the Merger and the transactions
contemplated hereby pursuant to the Information Statement. Company shall use all
reasonable efforts to solicit from its shareholders proxies in favor of the
approval of this Agreement, the Merger and the transactions contemplated hereby
pursuant to the Information Statement and shall take all other action necessary
or advisable to secure the vote or consent of shareholders required by the NYBCL
to obtain such approval. Each of the parties hereto shall take all other action
necessary or, in the opinion of the other parties hereto, advisable to promptly
and expeditiously secure any vote or consent of stockholders required by
applicable law and such party's Certificate of Incorporation and Bylaws to
effect the Merger.
6.3 Access to Information.
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(a) Upon reasonable notice and subject to applicable laws
relating to the exchange of information, the Company shall afford to the
officers, employees, accountants, counsel and other representatives of Parent,
access, during normal business hours during the period prior to the Effective
Time, to all its properties, books, contracts, commitments, records, officers,
employees, accountants, counsel and other representatives and, during such
period, the Company shall make available to Parent all information concerning
its business, properties and personnel as Parent may reasonably request. The
Company shall not be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of its
customers, jeopardize any attorney-client privilege or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply. All information furnished to
Parent pursuant to this Section 6.3(a) shall be subject to, and Parent shall
hold all such information in confidence in accordance with, the provisions of
the confidentiality agreement, dated December 10, 1998 (the "Confidentiality
Agreement"), between Parent and the Company.
(b) Upon reasonable notice and subject to applicable laws
relating to the exchange of information, Parent shall, and shall cause its
Subsidiaries to, afford to the officers, employees, accountants, counsel and
other representatives of the Company, access, during normal business hours
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments, records, officers, employees, accountants, counsel and
other representatives and, during such period, the Parent shall make available
to the Company all information concerning its business, properties and personnel
as the Company may reasonably request. Neither Parent nor any of its
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of
Parent's customers, jeopardize any attorney-client privilege or contravene any
law, rule, regulation, order, judgment, decree, fiduciary duty or binding
agreement entered into prior to the date of this Agreement. The parties hereto
will make appropriate substitute disclosure arrangements under circumstances in
which the restrictions of the preceding sentence apply. All information
furnished to the Company pursuant to this Section 6.3(b) shall be subject to,
and the Company shall hold all such information in confidence in accordance
with, the provisions of the confidentiality agreement, dated December 10, 1998
(the "Confidentiality Agreement"), between Parent and the Company.
(c) No investigation by Parent or the Company or their
respective representatives shall affect the representations, warranties,
covenants or agreements of the other set forth herein; provided, however, that
neither Parent nor the Company is aware as of the date hereof of any breach of
representations or warranties of the other party with respect to which breach it
has failed to notify such other party.
6.4 Public Disclosure. Unless otherwise permitted by this Agreement,
Parent and the Company shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement
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or disclosure without the prior approval of the other (which approval shall not
be unreasonably withheld), except as may be required by law.
6.5 Consents; Cooperation.
(a) Each of Parent, Merger Sub and the Company shall
promptly apply for or otherwise seek, and use its best efforts to obtain, all
consents and approvals required to be obtained by it for the consummation of the
Merger, and shall use commercially reasonable efforts to obtain all necessary
consents, waivers and approvals under any of its material contracts in
connection with the Merger for the assignment thereof or otherwise. The parties
hereto will consult and cooperate with one another, and consider in good faith
the views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to any other federal or state antitrust or fair trade law.
(b) Notwithstanding anything to the contrary in Section
6.6(a) neither Parent nor any of it Subsidiaries nor the Company shall be
required to divest any of their respective businesses, product lines or assets,
or to take or agree to take any other action or agree to any limitation.
6.6 Legal Requirements. Each of Parent, Merger Sub and the Company
will, and will cause their respective subsidiaries to, take all reasonable
actions necessary to comply promptly with all legal requirements which have been
or which may be imposed on them with respect to the consummation of the
transactions contemplated by this Agreement and will promptly cooperate with and
furnish information to any party hereto necessary in connection with any such
requirements imposed upon such other party in connection with the consummation
of the transactions contemplated by this Agreement and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
person, required to be obtained or made in connection with the taking of any
action contemplated by this Agreement.
6.7 Blue Sky Laws. Parent shall take such steps as may be necessary
to comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common Stock in connection with the
Merger. The Company shall use its best efforts to assist Parent as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable in connection with the issuance of Parent Common Stock in
connection with the Merger.
6.8 Employee Benefit Plans. At the Effective Time, the Company Stock
Option Plan and each outstanding option to purchase shares of Company Common
Stock under the Company Stock Option Plan shall vest and shall be assumed by
Parent and any outstanding repurchase rights shall be assigned to Parent.
Section 6.8 of the Company Disclosure Schedule sets forth a true and complete
list as of the date hereof of all holders of outstanding options under the
Company Stock Option Plan including the number of shares of Company Common Stock
subject to each such option, the date of grant of each such option, the exercise
or vesting schedule, the exercise price per share and the term of each such
option. On the Closing Date, the
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Company shall deliver to Parent an updated Section 6.8 of the Company Disclosure
Schedule current as of such date. Each such option so assumed by Parent under
this Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Company Stock Option Plan immediately prior to the
Effective Time, except that (i) such option will be exercisable for that number
of whole shares of Parent Common Stock equal to the product of the number of
shares of Company Common Stock that were issuable upon exercise of such option
immediately prior to the Effective Time multiplied by the Exchange Ratio and
rounded down to the nearest whole number of shares of Parent Common Stock, and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed option will be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
option was exercisable immediately prior to the Effective Time by the Exchange
Ratio, rounded up to the nearest whole cent. It is the intention of the parties
that the options so assumed by Parent qualify following the Effective Time as
incentive stock options as defined in Section 422 of the Code to the extent such
options qualified as incentive stock options prior to the Effective Time. Within
ten (10) business days after the Effective Time, Parent will issue to each
person who, immediately prior to the Effective Time was a holder of an
outstanding option under the Company Stock Option Plan a document in form and
substance satisfactory to the Company evidencing the foregoing assumption of
such option by Parent.
6.9 Loan to the Company. Parent agrees that, on the earlier of (i)
ten (10) days following the execution of this Agreement or (ii) one (1) business
day following the closing of the offering of Series D Preferred Stock of Parent
(the "Parent Series D Preferred"), in the event the Company shall have exhausted
its ability to borrow under any credit facility (the "Marine Midland Facility")
with Marine Midland Bank ("Marine Midland") and upon the execution and delivery
by the Company of a Senior Subordinated Promissory Note and Security Agreement
in the form attached hereto as Exhibit B (the "Promissory Note"), Parent shall
lend funds to the Company for working capital in an amount up to $1,000,000 in
accordance with the terms of such Promissory Note.
6.10 Reorganization. Parent and the Company shall each use its best
efforts to cause the business combination to be effected by the Merger to be
qualified as a "reorganization" described in Section 368(a) of the Code.
6.11 Control of Operations. Nothing contained in this Agreement shall
give Parent, directly or indirectly, the right to control or direct the
operations of the Company prior to the Effective Time. Prior to the Effective
Time, each of Parent and the Company shall exercise, consistent with the terms
and conditions of this Agreement, complete control and supervision over its
respective operations.
6.12 Best Efforts and Further Assurances. Each of the parties to this
Agreement shall use its best efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to Closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby.
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6.13 Amendment to Certificate of Incorporation.
By executing this Agreement, each of the Company Shareholders holding
Company Series A Preferred hereby waives any and all rights to receive any
distribution under Section 3(a) of Article FIFTH of the Amended Certificate of
Incorporation as a result of the consummation of the transactions contemplated
in this Agreement and agrees to vote all shares of Company Series A Preferred
held by it in favor of the amendment of the Amended Certificate of Incorporation
to eliminate all rights to receive any distribution under Section 3(a) of
Article FIFTH of the Amended Certificate of Incorporation which might otherwise
be receivable as a result of the transactions contemplated by this Agreement.
6.14 Shareholder Voting Agreements; Irrevocable Proxies.
Each of the Company Shareholders agrees, concurrently with the execution
of this Agreement, to execute a Shareholder Voting Agreement in the form
attached hereto as Exhibit C (each a "Shareholder Voting Agreement"). In
addition, each Company Shareholder hereby agrees to vote for approval of this
Agreement and the Merger pursuant to the Shareholder Voting Agreement or
pursuant to an irrevocable proxy in the form attached hereto as Exhibit D (each
an "Irrevocable Proxy"). Xx. Xxxxx, in her capacity as Proxy Agent under each
Irrevocable Proxy, agrees to vote all shares of Company Capital Stock with
respect to which she has or will be granted a proxy, (i) in favor of approval
and adoption of the Merger Agreement and the Merger and any matter that could
reasonably be expected to facilitate the Merger, including, without limitation,
in favor of the amendment to the Company's Amended Certificate of Incorporation
contemplated by Section 6.13 of the Merger Agreement, and (ii) against approval
of any corporate action that, in the reasonable judgment of Advantix's Board of
Directors, would violate, frustrate the purpose of, prevent or delay
consummation of such Merger.
6.15 Stockholders Agreement. Parent shall execute, and use its best
efforts to cause the necessary parties to that certain Amended and Restated
Stockholders Agreement to be dated on or about March 16, 1999 among Parent, and
the several stockholders of Parent named therein to execute a Second Amended and
Restated Stockholders Agreement (the "Second Amended Stockholders Agreement") in
the form of Exhibit E hereto, to add the holders of Company Series A Preferred
(the "Company Series A Holders") as parties thereto for the purpose of granting
certain rights to the Company Series A Holders.
6.16 Indemnification for Personal Guarantees. Parent shall indemnify,
defend and hold harmless Xx. Xxxxx and Xx. Xxxx from and against any obligations
or liabilities incurred under their guarantee of the Marine Midland Facility as
a result of any claim under the Marine Midland Facility occurring from and after
the Effective Time.
6.17 Filing of Form S-8. Parent shall use commercially reasonable
efforts (which shall not be less than the efforts used with respect to the
options granted to its employees under Parent's stock option plans) to file, not
later than 90 days following the effective date of a Parent IPO, a registration
statement on Form S-8 covering the shares of Parent Common Stock issuable upon
exercise of options granted under the Company Stock Option Plan, and to keep
such registration statement (or a successor registration statement) effective
for so long as there are options outstanding and exercisable under such plan.
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6.18 Board Representation. In the event that a Parent IPO does not
close on or before August 31, 1999, consistent with applicable law and its
Bylaws, the Board of Directors of Parent shall increase the number of members of
its Board of Directors by one and shall elect a nominee designated by notice
signed by all members of the committee which constitutes the Shareholders' Agent
(the "Committee Nominee") to fill such vacancy, to serve as such until the next
annual meeting of Parent stockholders or such time as her successor shall have
been duly elected or appointed and qualified; provided, however, that in the
event that a Parent IPO does not close on or before the date required for
director nominations for such next annual meeting of Parent stockholders, the
Board of Directors of Parent shall nominate the Committee Nominee (or such other
nominee as the committee which constitutes the Shareholders' Agent shall
unanimously nominate in writing to the Board of Directors of Parent) for
election as a director at such annual meeting; provided, further, that term of
office of any Committee Nominee as a director of Parent shall terminate and such
Committee Nominee shall resign as a director effective at the effective time of
a Parent IPO.
6.19 No Impairment of Obligations. Parent agrees that, for a period
of twelve (12) months following the Effective Time, it will not, and will not
permit the Company to, by amendment of its Certificate of Incorporation or
through reorganization, consolidation, merger, dissolution, issuance of
securities, sale of assets or other voluntary action, avoid or seek to avoid the
observance or performance of any of the Company's contracts or obligations.
6.20 Guarantee of Company Promissory Notes. Parent hereby guarantees
the obligation, if any, of the Company, to pay the principal and interest on the
promissory notes in the form of Exhibit F (the "Series A Notes") payable to the
holders of the Company Series A Preferred pursuant to the terms thereof, if and
to the extent the Company fails to pay such principal and interest as provided
therein; provided, however, that Parent shall have no obligation under this
Section 6.20 if the Merger does not close.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Shareholder Approval. This Agreement shall have been
approved and adopted by the requisite vote or written consent of (i) the holders
of the outstanding shares of Company Capital Stock as of the record date set for
the Company Shareholders' Meeting, and (ii) Parent, as the sole stockholder of
Merger Sub.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the
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consummation of the Merger illegal. In the event an injunction or other order
shall have been issued, each party agrees to use its reasonable diligent efforts
to have such injunction or other order lifted.
(c) Governmental Approval. The Company, each Company
Subsidiary, Parent and its Subsidiaries shall have timely obtained from each
Governmental Entity all approvals, waivers and consents, if any, necessary for
consummation of or in connection with the Merger and the several transactions
contemplated hereby (each a "Requisite Regulatory Approval"), including such
approvals, waivers and consents as may be required under the Securities Act and
under state blue sky laws (other than those filings, approvals, waivers and
consents relating to the Merger or affecting Parent's ownership of Company or
any of its properties that, if not obtained would not have a Material Adverse
Effect to either party).
(d) Tax-Free Reorganization. The Company shall have received
an opinion from its tax advisors to the effect that the Merger should constitute
a reorganization within the meaning of Section 368(a) of the Code, and such
opinion shall have been reviewed and approved by Xxxxxx Xxxxxxxx LLP on behalf
of Parent. In rendering such opinion, the Company's tax advisors shall be
entitled to rely upon representations of Parent and Company and certain
shareholders of the Company.
7.2 Conditions to Obligations of Parent and Merger Sub. The
obligation of Parent and Merger Sub to effect the Merger is also subject to the
satisfaction or waiver by Parent and Merger Sub at or prior to the Effective
Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date. Parent shall have received a certificate signed on behalf of
the Company by the Chief Executive Officer and the Chief Financial Officer of
the Company to the foregoing effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company to such effect.
(c) Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Parent's conduct or operation of the
business of the Company or any Company Subsidiary following the Merger shall be
in effect, nor shall any proceeding brought by an administrative agency or
commission or other Governmental Entity, domestic or foreign, seeking the
foregoing be pending.
(d) No Material Adverse Changes. There shall not have
occurred any material adverse change in the condition (financial or otherwise),
properties, assets (including
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intangible assets), liabilities, business, operations or results of operations
of the Company or any Company Subsidiary.
(e) Third Party Consents. Parent shall have been furnished
with evidence satisfactory to it of the consent or approval of those persons
whose consent or approval shall be required in connection with the Merger under
the contracts of the Company and each Company Subsidiary set forth on Section
3.4 of the Company Disclosure Schedule.
(f) Legal Opinion. Parent shall have received a legal
opinion from Xxxxxxx, Xxxxxxxx & Kotel in substantially the form attached hereto
as Exhibit G.
(g) Shareholder Representation Agreements. Parent shall have
received from each holder of Company Capital Stock listed on Schedule II
attached hereto an executed Shareholder Representation Agreement in
substantially the form attached hereto as Exhibit H.
(h) Approval of Company Shareholders. Shareholders of the
Company holding 100% of the outstanding Company Capital Stock shall have voted
their shares of Company Capital Stock in favor of, or executed a written consent
approving, the Merger.
(i) Assets of Megasoft. The Company shall have acquired good
and marketable title, free and clear of all liens, encumbrances and claims of
third parties of any kind, to 100% of the assets of Megasoft, Inc., including,
without limitation, the assets listed on Section 7.2(j) of the Company
Disclosure Schedule.
(j) Waiver and Consent of Marine Midland Bank. Marine
Midland shall have (a) executed a written waiver of any and all defaults of the
Company under any of the Company's credit facilities with Marine Midland up to
and including the Closing Date and (b) executed a written consent to the
transactions contemplated by this Agreement, each in form and substance
satisfactory to Parent.
(k) Market Stand-Off. The holders of not less than 95% of
the outstanding Company Stock Options shall have executed an agreement
containing market stand-off provisions in the form attached hereto as Exhibit I.
7.3 Conditions to the Obligations of Company and Company
Shareholders. The obligation of the Company to effect the Merger is also subject
to the satisfaction or waiver by the Company at or prior to the Effective Time
of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date. The Company shall have received a certificate
signed (i) on behalf of Parent by the Chief Executive Officer and the Chief
Financial Officer of Parent and (ii) on behalf of Merger Sub by the President of
Merger Sub, in each case to the foregoing effect.
(b) Performance of Obligations of Parent and Merger Sub.
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed
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by them under this Agreement at or prior to the Closing Date, and the Company
shall have received a certificate signed (i) on behalf of Parent by the Chief
Executive Officer and the Chief Financial Officer of Parent and (ii) on behalf
of Merger Sub by the President of Merger Sub, in each case to such effect.
(c) Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Parent's business following the
Merger shall be in effect, nor shall any proceeding brought by an administrative
agency or commission or other Governmental Entity, domestic or foreign, seeking
the foregoing be pending.
(d) No Material Adverse Changes. There shall not have
occurred any material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of Parent and its Subsidiaries, taken as a
whole.
(e) Legal Opinion. Company shall have received a legal
opinion from Xxxxxxx Xxxxxxx & Xxxxxxxx LLP in substantially the form attached
hereto as Exhibit J.
(f) Investor Rights Agreement.
Parent shall execute, and use its best efforts to cause the necessary
parties to that certain Amended and Restated Investor Rights Agreement to be
dated on or about March 16, 1999 among Parent and the several stockholders of
Parent named therein to execute a Third Amended and Restated Investor Rights
Agreement (the "Third Amended Investor Rights Agreement") in the form of Exhibit
K hereto, to (i) grant certain registration rights to Xxxxx X. Xxxxx, and (ii)
to add each of the Holders as a "Designated Holder" for purposes of Section 4
thereof.
(g) Employment Agreements.
Parent shall have entered into employment agreements with Xxxxx X. Xxxxx
and Xxxxxx X. Xxxx in substantially the form of Exhibit L and Exhibit M,
respectively, hereto.
(h) Equity Financing. Parent shall have closed the offering
of Parent Series D Preferred in an aggregate amount not less than $20 million at
a combined pre-money valuation of Parent and Company of no less than $190
million (assuming consummation of the Merger).
(i) Agreement with Xx. Xxxxx.
Parent shall have executed the Agreement with Xxxxx X. Xxxxx in the form
of Exhibit N hereto.
(j) Release from Stockholder's Agreement.
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The Company shall executed a written release of Xxxxx X. Xxxxx,
Xxxxxxxxxxx X. Xxxxx, Xxx X. Xxxxx, Xxxxxx X. Xxxxxxxxx and Xxx Xxxxxx from each
such stockholder's obligations under their respective Stockholder's Agreements
with the Company, as each may have been amended, and Parent hereby consents to
the grant of such release.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the matters presented
in connection with the Merger by the shareholders of the Company:
(a) by mutual consent of the Company, Parent and Merger Sub
in a written instrument, if the Board of Directors of each so determines by a
vote of a majority of the members of its entire Board;
(b) by either Parent or the Company upon written notice to
the other party if any Governmental Entity of competent jurisdiction shall have
issued a final nonappealable order enjoining or otherwise prohibiting the
Merger.
(c) by either Parent or the Company if the Merger shall not
have been consummated on or before April 15, 1999 unless the failure of the
Closing to occur by such date shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein;
(d) by either Parent or the Company if any approval of the
shareholders of the Company required for the consummation of the Merger shall
not have been obtained by reason of the failure to obtain the required vote at a
duly held meeting of such stockholders or at any adjournment or postponement
thereof;
(e) by either Parent or the Company if there shall have been
a material breach of any of the representations or warranties set forth in this
Agreement on the part of the other party, which breach is not cured within
thirty (30) days following written notice to the party committing such breach,
or which breach, by its nature, cannot be cured prior to the Closing; provided,
however, that neither party shall have the right to terminate this Agreement
pursuant to this Section 8.1(e) unless the breach of representation or warranty,
together with all other such breaches, would entitle the party receiving such
representation not to consummate the transactions contemplated hereby under
Section 7.2(d) (in the case of a breach of representation or warranty by the
Company) or Section 7.3(d) (in the case of a breach of representation or
warranty by Parent);
(f) by either Parent or the Company if there shall have been
a material breach of any of the covenants or agreements set forth in this
Agreement on the part of the other party, which breach shall not have been cured
within thirty (30) days following receipt by the breaching party of written
notice of such breach from the other party hereto, or which breach, by its
nature, cannot be cured prior to the Closing.
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8.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect except that (i) the
last sentence of Section 6.3(a), the last sentence of Section 6.3(b), and each
of Sections 6.4, 6.11, 8.2, 10.2, 10.3, 10.4, 10.5 and 10.8 shall survive any
termination of this Agreement and (ii) notwithstanding anything to the contrary
contained in this Agreement, no party shall be relieved or released from any
liabilities or damages arising out of its willful breach of any provision of
this Agreement.
8.3 Amendment. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized by
their respective Boards of Directors, at any time before or after approval of
the matters presented in connection with the Merger by the shareholders of the
Company; provided, however, that after any approval of the transactions
contemplated by this Agreement by the Company's shareholders, there may not be,
without further approval of such shareholders, any amendment of this Agreement
which reduces the amount or changes the form of the consideration to be
delivered to the Company shareholders hereunder or which otherwise changes any
of the principal terms of this Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, each
of the parties hereto, by action taken or authorized by its Board of Directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions of the other party contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf of
such party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE IX
INDEMNIFICATION AND ESCROW FUND
9.1 Indemnity; Escrow Fund.
(a) The Holders (pro rata in accordance with each such
Holder's percentage interest in Company Capital Stock immediately prior to the
Effective Time; except that each holder shall be solely responsible for all
Damages (as defined below) arising from any breach of the representations,
warranties or covenants set forth in each such Holder's Shareholder Voting
Agreement or Shareholder Representation Agreement, as the case may be) shall
indemnify and hold harmless Parent and the Surviving Corporation (as used in
this Article IX, the "Holder Indemnified Parties" and/or "Parent Indemnifying
Parties") in respect of any and all loss, expense, liability or other damage,
including, without limitation, reasonable attorneys' fees, accountants' fees,
and all other reasonable costs and expenses of litigation, investigation,
defense or settlement of claims (including costs of all appeals related thereto)
or threats thereof and amounts paid in settlement to the extent of the amount of
such loss, expense, liability or other damage (collectively, "Damages") that
Parent or the Surviving Corporation incur by reason
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of any breach by the Company or any Company Shareholder of any representation,
warranty, covenant or agreement of the Company or any Company Shareholder
contained herein or in the Shareholders Voting Agreement or Shareholders
Representation Agreement, as the case may be (subject to the foregoing
limitation regarding warranties given on a several rather than a joint basis)
("Company Indemnifiable Items").
(b) Parent and Merger Sub shall indemnify and hold harmless
the Holders (as used in this Article IX, the "Parent Indemnified Parties" and/or
"Holder Indemnifying Parties") in respect of any and all Damages that the
Holders incur by reason of the breach by Parent or Merger Sub of any
representation, warranty, covenant or agreement of the Parent or Merger Sub
contained herein ("Parent Indemnifiable Items").
(c) To secure performance of the Holders' indemnification
obligations hereunder, the Escrow Shares shall be deposited with the Escrow
Agent in accordance with Section 2.3 hereof. The Escrow Fund shall be available
to compensate Parent and the Surviving Corporation for any Damages that Parent
and the Surviving Corporation incur by reason of any Company Indemnifiable Item.
Subject to Section 2.3(b) and Article IX hereof, the Escrow Shares shall be held
in the Escrow Fund for the Escrow Period. Any Escrow Shares or funds remaining
in the Escrow Fund upon expiration of the Escrow Period shall be distributed to
the Holders pro rata in accordance with their percentage interests in Company
Capital Stock immediately prior to the Effective Time, provided that to the
extent any Holder has made a withdrawal in accordance with Section 2.3(b) hereof
shall receive such Holder's interest in cash, pro rata in accordance with such
Holder's percentage interests in Company Capital Stock immediately prior to the
Effective Time.
9.2 Claims.
(a) Claims by Parent. Upon receipt by the Escrow Agent on or
before the last day of the Escrow Period of a certificate of Parent (an
"Officer's Certificate") setting forth a claim under this Article IX and
specifying in reasonable detail (i) the individual items of such Damages
included in the amount so stated, (ii) the date each such item was paid or
properly accrued or arose, and (iii) the nature of the Company Indemnifiable
Item to which such item is related, the Escrow Agent shall, subject to the
provisions of Sections 9.3(a) and 9.7 hereof, deliver to Parent out of the
Escrow Fund, as promptly as practicable, Parent Capital Stock, cash (or a
certified or bank cashier's check or wire transfer) or other assets held in the
Escrow Fund having a fair market value (determined in accordance with Section
2.4 of the Escrow Agreement) equal to such Damages, in the same proportion of
Parent Capital Stock, cash and such other assets as constitutes the Escrow Fund
at the time of such delivery, whereupon the Holders shall have no further
liability to Parent with respect to the claim set forth in such Officer's
Certificate.
(b) Claims by Holders. Upon receipt by Parent on or before
the last day of the Escrow Period of a certificate of the Shareholders' Agent
(as defined below) (the "Agent's Certificate") setting forth a claim under this
Article IX and specifying in reasonable detail (i) the individual items of such
Damages included in the amount so stated, (ii) the date each such item was paid
or properly accrued or arose, and (iii) the nature of the Parent Indemnifiable
Item to which such item is related, Parent shall, subject to the provisions of
Sections 9.3(b) and 9.7 hereof, deliver to Shareholders' Agent a certified check
or wire transfer payable to the
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Shareholders' Agent, as agent for the Holders,
in the amount of such Damages, whereupon Parent shall have no further liability
to the Holders with respect to the claim set forth in such Agent's Certificate.
9.3 Objections to Claims.
(a) Objections to Claims by Parent. At the time of delivery
of any Officer's Certificate to the Escrow Agent, a duplicate copy of such
Officer's Certificate shall be delivered to the Shareholders' Agent (defined in
Section 9.4 below), and for a period of thirty (30) days after such delivery,
the Escrow Agent shall make no delivery of Parent Capital Stock or other
property pursuant to Section 9.2 hereof unless the Escrow Agent shall have
received written authorization from the Shareholders' Agent to make such
delivery. After the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery of the Parent Capital Stock or other property in the Escrow
Fund in accordance with Section 9.2(a) hereof; provided, that no such payment or
delivery may be made if the Shareholders' Agent shall object in a written
statement specifying in reasonable detail the basis for such objection to the
claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent and to Parent prior to the expiration of such
thirty (30) day period.
(b) Objections to Claims by Holders. Parent shall have a
period of thirty (30) days after the time of delivery of any Agent's Certificate
to Parent to object to any claim made by Holders pursuant to Section 9.2(b)
above, by delivery to the Shareholders' Agent of an objection in a written
statement specifying in reasonable detail the basis for such objection, to the
claim made in the Agent's Certificate.
9.4 Attempt to Resolve Conflicts; Arbitration.
(a) In case (i) the Shareholders' Agent shall object in
writing to any claim or claims by Parent made in any Officer's Certificate or
otherwise in accordance with Section 9.3(a) above, or (ii) Parent shall object
in writing to the Shareholders' Agent within twenty (20) days of receipt of any
claim for indemnification hereunder in accordance with Section 9.3(b) above, the
party receiving such objection shall have twenty (20) days to respond in a
written statement to the objection. If after such twenty (20) day period there
remains a dispute as to any claims, the Shareholders' Agent and Parent shall
attempt in good faith for twenty (20) days to agree upon the rights of the
respective parties with respect to each of such claims. If the Shareholders'
Agent and Parent should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties. If a claim is being made against
the Escrow Fund, such memorandum shall be furnished to the Escrow Agent and the
Escrow Agent shall be entitled to rely on such memorandum and shall distribute
the Parent Capital Stock or other property from the Escrow Fund within ten (10)
days of delivery of such memorandum in accordance with the terms thereof. If a
claim is being made against Parent, Parent shall deliver funds at the time of
delivery of and in accordance with the terms of such memorandum.
(b) If no such agreement can be reached after good faith
negotiation, either Parent or the Shareholders' Agent may, by written notice to
the other, demand binding arbitration of the matter unless the Damages are at
issue in pending litigation with a third party. If the Damages are at issue in
pending litigation, then the arbitration shall not be commenced
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until such amount is ascertained or both parties agree to arbitration; and in
either such event the matter shall be settled by arbitration in accordance with
the procedures set forth on Exhibit O hereto
(c) Application may also be made to a court of competent
jurisdiction for confirmation of any decision or award of the arbitrator, for an
order of the enforcement and for any other remedies which may be necessary to
effectuate such decision or award. The parties hereto hereby consent to the
jurisdiction of the arbitrator and of such court and waive any objection to the
jurisdiction of such arbitrator and court.
(d) If a dispute is submitted for arbitration as provided in
this Section 9.4 with respect to a claim by a Holder Indemnified Party, the
Escrow Agent shall continue to hold Escrow Shares and other assets in the Escrow
Fund having a value (determined in accordance with Section 2.4 of the Escrow
Agreement) sufficient to cover the Damages related to such dispute (the
"Contested Damages") (but only to the extent that there are Escrow Shares or
other assets remaining in the Escrow Fund) until: (i) delivery of a copy of a
settlement agreement executed by Parent and the Shareholders' Agent setting
forth instructions to the Escrow Agent as to the release of such Escrow Shares
that shall be made with respect to the Contested Damages; (ii) delivery of a
copy of the final decision of the arbitrators setting forth instructions to the
Escrow Agent as to the release of Escrow Shares that shall be made with respect
to the Contested Damages; or (iii) receipt of a court order or judgment
directing the Escrow Agent to act with respect to the distribution of any Escrow
Shares. The Escrow Agent shall thereupon release the Escrow Shares from the
Escrow Fund (to the extent Escrow Shares are then held in the Escrow Fund) in
accordance with such settlement agreement, arbitrator's instructions, court
order or judgment, as applicable, whereupon the Holders shall have no further
liability to Parent with respect to the claim determined by such settlement
agreement, arbitrator's instructions or judgment.. If any controversy arises
involving any party to this Agreement (other than the Escrow Agent) concerning
the subject matter of this Agreement, including Contested Damages, the Escrow
Agent will not be required to resolve the controversy.
(e) If a dispute is submitted for arbitration as provided in
this Section 9.4 with respect to a claim by a Parent Indemnified Party, then
within ten (10) days of (i) execution of a copy of a settlement agreement
executed by Parent and the Shareholders' Agent relating to the amount of the
Damages owed to the Holders; (ii) delivery of a copy of the final decision of
the arbitrators setting forth the amount of Damages owed to the Holders or (iii)
receipt of a court order or judgment directing Parent to pay Damages to the
Holders, Parent shall thereupon deliver a certified check or wire transfer to
the Shareholders' Agent payable to the Shareholders' Agent, as agent for the
Holders, in accordance with such settlement agreement, arbitrator's instructions
or judgment, as applicable, whereupon Parent shall have no further liability to
the Holders with respect to the claim determined by such settlement agreement,
arbitrator's instructions or judgment.
(f) A committee comprised of (i) one representative
designated by the holders of Company Common Stock (who initially shall be Xxxxx
X. Xxxxx), (ii) one representative designated by the Company Series A Holders
(who initially shall be Xxxxx X. Xxxxxx), and (iii) one representative
designated by all the holders of Company Capital Stock, acting as a group (who
initially shall be Xxxx X. Xxxxxxx), shall be constituted and appointed as
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agent ("Shareholders' Agent"). The Shareholders' Agent shall act by a majority
vote of its members, for and on behalf of the Holders to give and receive
notices and communications, to authorize delivery to Parent of the Parent
Capital Stock or other property from the Escrow Fund in satisfaction of claims
by Parent, to settle any other claims for indemnification, to object to such
deliveries, to agree to, negotiate, enter into settlements and compromises of,
and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary or
appropriate in the judgment of the Shareholders' Agent for the accomplishment of
the foregoing. Any notices and communications to the Shareholders' Agent shall
be given to each member of the committee constituting the Shareholders' Agent,
and (except for any notices delivered pursuant to Section 2.2(b) hereof) any
notices or communications by the Shareholders' Agent shall be effective if
signed by two (2) of the three (3) members (whether in a single instrument or in
counterparts). A member of the committee constituting the Shareholders' Agent
may be changed by the holders of a majority in interest of the Escrow Fund of
the constituency designating such member, from time to time upon not less than
ten (10) days' prior written notice to Parent. No bond shall be required of the
members of the Shareholders' Agent, and the members of the Shareholders' Agent
shall receive no compensation for their services. Notices or communications to
or from the Shareholders' Agent shall constitute notice to or from each of the
shareholders of the Company. If at any time any constituency is not represented
on the committee which constitutes the Shareholders' Agent, then any action
contemplated to be taken by the Shareholders' Agent hereunder, and any power
granted to the Shareholders' Agent, may be exercised with respect to such
constituency by the vote of the Holders representing a majority of the
beneficial interests of such constituency in the Escrow Fund (in such case, as
used herein "Shareholders' Agent" shall include such Holders as the
representative of such constituency). In the event that any claim, agreement,
negotiation, settlement, compromise or demand for arbitration shall relate
solely to either the Holders of Company Common Stock or the Holders of Company
Series A Preferred, then the Shareholders' Agent shall act with respect to such
claim, agreement, negotiation, settlement, compromise or demand for arbitration
in accordance with the instructions of the committee member designated by the
Holders of Company Common Stock or the Holders of Company Series A Preferred, as
the case may be.
(g) The members of the committee constituting the
Shareholders' Agent shall not be liable for any act done or omitted hereunder as
Shareholders' Agent except in cases of gross negligence or willful misconduct.
The shareholders of the Company shall severally, but not jointly, indemnify the
members of the committee constituting the Shareholders' Agent harmless against
any loss, liability or expense incurred without gross negligence or willful
misconduct on the part of the Shareholders' Agent and arising out of or in
connection with the acceptance or administration of their duties hereunder.
(h) The Shareholders' Agent shall have reasonable access to
information about the Company and the reasonable assistance of the Company's
officers and employees for purposes of performing its duties and exercising her
rights hereunder; provided, that the Shareholders' Agent shall treat
confidentially and not disclose any nonpublic information from or about the
Company to anyone (except on a need to know basis to individuals who agree to
treat such information confidentially).
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9.5 Actions of the Shareholders' Agent. A decision, act, consent or
instruction of the Shareholders' Agent shall constitute a decision of all
shareholders of the Company for whom shares of Parent Capital Stock otherwise
issuable to them are deposited in the Escrow Fund and shall be final, binding
and conclusive upon each such shareholder of the Company, and the Escrow Agent
and Parent may rely upon any decision, act, consent or instruction of the
Shareholders' Agent as being the decision, act, consent or instruction of each
and every such shareholder of the Company. The Escrow Agent and Parent are
hereby relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the Shareholders'
Agent.
9.6 Third-Party Claims.
(a) In the event that a third party asserts or threatens a
claim which Parent believes may result in a demand against the Escrow Fund,
Parent shall notify the Shareholders' Agent of such claim, and the Shareholders'
Agent on behalf of the shareholders of the Company for whom shares of Parent
Capital Stock otherwise issuable or payable to them are deposited in the Escrow
Fund shall be entitled, at such shareholders' expense, to participate in any
defense of such claim. Unless the Shareholders' Agent elects to assume such
defense (with counsel reasonably acceptable to Parent, and, provided, that the
Shareholders' Agent has the reasonable means to put on such a defense), Parent
shall have the right to settle any such claim (with its own counsel); provided,
that Parent may not effect the settlement of any such claim without the consent
of the Shareholders' Agent, which consent shall not be unreasonably withheld. In
the event that the Shareholders' Agent has consented to any such settlement, the
Shareholders' Agent and the former shareholders of the Company shall have no
power or authority to object under Section 9.3 or any other provision of this
Article IX to the amount of any claim by Parent against the Escrow Fund for
indemnity with respect to such settlement.
(b) In the event that a third party asserts or threatens a
claim involving a Parent Indemnifiable Item, Parent shall be entitled to
participate in any defense of such claim. Unless Parent elects to assume such
defense, the Shareholders' Agent shall have the right to settle any such claim
(with counsel reasonably acceptable to Parent); provided, that Shareholders'
Agent may not effect the settlement of any such claim without the consent of the
Parent, which consent shall not be unreasonably withheld.
(c) Notwithstanding any provision of paragraphs (a) and (b)
of this Section 9.6, neither party shall have the right to settle any claim
against the other party without the consent of such other party, which consent
shall not be unreasonably withheld
9.7 Limitations.
(a) The parties hereto understand and agree that the
indemnity obligations under this Article IX shall terminate twelve (12) months
from the Closing Date, except insofar as a claim for indemnification under this
Article IX has been asserted and such claim has not been resolved in accordance
with the terms of the this Agreement, the Escrow Agreement or otherwise;
provided, however, that no party may expand the scope or amount of any such
unresolved claim after the termination of such twelve (12) month period.
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(b) Notwithstanding the foregoing, neither the Parent
Indemnifying Parties nor the Holder Indemnifying Parties shall have any
liability for indemnification under this Article IX unless and until the
aggregate amount of Damages suffered by the Holder Indemnified Parties or the
Parent Indemnified Parties, as the case may be, exceeds $200,000 (the "Threshold
Amount"). The Holder Indemnified Parties or the Parent Indemnified Parties, as
the case may be, shall be indemnified for all Damages in excess of the Threshold
Amount; provided, however, that (i) the indemnification obligations of the
Company and Company Shareholders hereunder shall be limited to an amount equal
to the amount deposited in the Escrow Fund pursuant to Section 2.3 and (ii) the
indemnification obligations of Parent hereunder shall be limited to $2,513,459.
For the purposes of this Article IX, the shares of Parent Capital Stock in the
Escrow Fund shall be deemed to have a value of $2.15 per share. The parties
hereby agree that except (x) as provided in Section 9.7(c) hereof, and (y) for
matters contemplated by Section 9.8 hereof, Parent and the Surviving Corporation
may seek to be made whole for any Damages only from the Escrow Fund and shall
have no other remedy at law or in equity against the Company, the Surviving
Corporation or the Holders other than as set forth in Section 9.7(c).
(c) Notwithstanding any other provision of this Article IX,
the terms of this Article IX shall not apply to any claims arising out of or
resulting from fraud, which shall be actionable by Parent or the Company, as the
case may be, without reference to the provisions of this Article IX.
(d) The liability of Parent and Merger Sub for any breach of
any representation, warranty or covenant if the Merger does not close shall be
limited to the actual costs and expenses (including, without limitation, actual
legal and accounting fees and expenses) incurred by the Company in connection
with the transactions contemplated by this Agreement. The liability of the
Company and the Company Shareholders for any breach of any representation,
warranty or covenant if the Merger does not close shall be limited to the actual
costs and expenses (including, without limitation, actual legal and accounting
fees and expenses) incurred by Parent and Merger Sub in connection with the
transactions contemplated by this Agreement.
(e) Notwithstanding the foregoing, Parent agrees that the
provisions of Section 6.9 hereof may be specifically enforced by the Company in
a court of competent jurisdiction unless the Merger shall have failed to close
(i) as a result of a termination by Parent pursuant to Section 8.1(e) or Section
8.1(f) hereof, or (ii) as the result of a breach of Section 6.14 hereof.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival of Representations, Warranties and Agreements. The
representations and warranties in this Agreement shall terminate twelve (12)
months from the date of the Effective Time or upon the termination of this
Agreement pursuant to Section 8.1, as the case may be. Each party agrees that,
except for the representations and warranties contained in this Agreement, the
Parent Disclosure Schedule, the Company Disclosure Schedule and the other
agreements contemplated by this Agreement, no party hereto has made any other
representations and
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warranties, and each party hereby disclaims any other representations and
warranties made by itself or any of its officers, directors, employees, agents,
financial and legal advisors or other representatives, with respect to execution
and delivery of this Agreement or the Merger contemplated herein,
notwithstanding the delivery or disclosure to any other party or any party's
representatives of any documentation or other information with respect to any
one or more of the foregoing.
10.2 Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses; provided, however, that if the Merger
is consummated, Parent shall pay promptly upon demand the amount of all expenses
incurred by the Company and the Holders prior to the Closing (collectively,
"Company Expenses"), including, without limitation, legal and accounting
expenses up to an amount equal to the difference between (a) $250,000 and (b)
amount of Company Expenses paid by the Company prior to the Closing (the
"Company Expense Fee Cap"); provided, however, that any expenses incurred by the
Company relating to the preparation of a registration statement for Parent
Common Stock shall not be included in the Company Expense Fee Cap. Any Company
Expenses in excess of the Company Expense Fee Cap shall be recoverable by Parent
in accordance with Section 9 hereof.
10.3 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent, to:
Advantix, Inc.
0000 XxxXxxxxx Xxxx., Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxx
Executive Vice President
Chief Financial Officer
with a copy to:
Xxxxxxx, Phleger & Xxxxxxxx LLP
00 Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxx, Esq.
and
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(b) if to the Company, to:
TicketsLive Corporation
000 X. Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxx
Chief Executive Officer
with a copy to
Xxxxxxx, Xxxxxxxx & Kotel
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
and to:
CMG @ Ventures II, LLC
000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxx Xxxxxxx
Xxxxxx X. Xxxxxxxx III
with a copy to
Xxxxxxxx, Xxxxxxx & Xxxxxxx
A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxx, Esq.
and to:
Liberty Ventures I, L.P.
000 Xxxxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Vice President
with a copy to
Xxxxxxxx, Xxxxxxx & Xxxxxxx
A Professional Corporation
000 Xxxxxxx Xxxxxx
00
00
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxx, Esq.
(c) if to the Shareholders' Agent, to:
Xxxxx X. Xxxxx
000 X. Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to
Xxxxxxx, Xxxxxxxx & Kotel
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
and to:
Xxxxx X. Xxxxxx
Liberty Ventures I, L.P.
000 Xxxxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to
Xxxxxxxx, Xxxxxxx & Xxxxxxx
A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxx, Esq.
and to:
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Xxxx X. Xxxxxxx
000 X. Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to
Xxxxxxx, Xxxxxxxx & Kotel
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
10.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
(WITHOUT REFERENCE TO CONFLICT OF LAW PRINCIPLES OTHER THAN THOSE DIRECTING
CALIFORNIA LAW) EXCEPT TO THE EXTENT MANDATORILY GOVERNED BY THE LAWS OF THE
STATE OF DELAWARE OR NEW YORK.
10.5 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the Merger is not affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner to the fullest extent
permitted by applicable law in order that the Merger may be consummated as
originally contemplated to the fullest extent possible.
10.6 Assignment; Binding Effect; Benefit. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties hereto; provided, however, that
Parent may assign its rights, interests and obligations hereunder to any
successor or parent entity of Parent whose shares are registered under Section
12 of the Exchange Act (or will be so registered at the Effective Time). Subject
to the preceding sentence, this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. Notwithstanding anything contained in this Agreement to the
contrary, other than Section 6.3, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective successors and permitted assigns any rights or remedies under
or by reason of this Agreement.
10.7 Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
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10.8 Entire Agreement. This Agreement (including the Exhibits,
Schedules, the Parent Disclosure Schedule and the Company Disclosure Schedule)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision of
this Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
10.9 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to
be executed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
PARENT
ADVANTIX, INC.
By: /s/ W. Xxxxxx Xxxxxx
-------------------------------------
Name: W. Xxxxxx Xxxxxx
Title: President and CEO
MERGER SUB
ADVANTIX ACQUISITION II CORP.
By: /s/ W. Xxxxxx Xxxxxx
-------------------------------------
Name: W. Xxxxxx Xxxxxx
Title: President
COMPANY
TICKETSLIVE CORPORATION
By: /s/ Xxxx Xxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxx
Title: President
[SIGNATURE PAGE TO MERGER AGREEMENT]
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COMPANY SHAREHOLDERS
/s/ Xxxxx X. Xxxxx
----------------------------------------
Xxxxx X. Xxxxx
/s/ Xxx X. Xxxxx
----------------------------------------
Xxx X. Xxxxx
/s/ Xxxxxx X. Xxxxxxxxx
----------------------------------------
Xxxxxx X. Xxxxxxxxx
/s/ Xxxxxxxxxxx X. Xxxxx
----------------------------------------
Xxxxxxxxxxx X. Xxxxx
Pinsky & Pinsky, P.C.
By: /s/ Xxx X. Xxxxxx
-------------------------------------
Name: Xxx X. Xxxxxx
Title: Vice President
CMG @VENTURES II, LLC
By: /s/ Xxx Xxxxxxx
-------------------------------------
Name: Xxx Xxxxxxx
Title: Member
LIBERTY VENTURES I, L.P.
By: Liberty Ventures, Inc.,
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Xxxxx X. Xxxxxx,
Vice President
[SIGNATURE PAGE TO MERGER AGREEMENT]
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PROXY AGENT
/s/ Xxxxx X. Xxxxx
----------------------------------------
Xxxxx X. Xxxxx, as Proxy Agent
[SIGNATURE PAGE TO MERGER AGREEMENT]
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LIST OF EXHIBITS
TO
AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION
BY AND AMONG
ADVANTIX, INC.
ADVANTIX ACQUISITION II, CORP.
TICKETS LIVE CORPORATION
AND
CERTAIN OF ITS SHAREHOLDERS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Secured Promissory Note
Exhibit C Form of Shareholder Voting Agreement
Exhibit D Form of Irrevocable Proxy
Exhibit E Form of Second Amended and Restated Stockholders Agreement
Exhibit F Form of Series A Note
Exhibit G Form of Opinion of Company's counsel
Exhibit H Form of Shareholder Representation Agreement
Exhibit I Form of Optionee Market Stand-Off Agreement
Exhibit J Opinion of Parent's counsel
Exhibit K Form of Third Amended and Restated Investor Rights Agreement
Exhibit L Form of Employment Agreement with Xxxxx Xxxxx
Exhibit M Form of Employment Agreement with Xxxxxx Xxxx
Exhibit N Form of Agreement with Xx Xxxxx
Exhibit O Arbitration Procedures
