1
EXHIBIT 2.3
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is entered into as of
December 18, 1998, by and among CNET, Inc., a Delaware corporation ("Buyer"),
Jenesys LLC, a Washington limited liability company ("Seller"), and, for the
limited purposes specified on the signature page hereto, Xxxxx Xxxxxxx
("Xxxxxxx").
WHEREAS, Seller operates the XxxXxxxx.xxx Internet site, which is
accessible from xxxx://xxx.xxxxxxxx.xxx (the "Site"), as well as the related
email newsletter (collectively with the Site, the "Business");
WHEREAS, Seller's assets used in the operation of the Business include
both the assets described on attached Schedule A (the "Included Assets") and the
assets described on attached Schedule B (the "Excluded Assets"); and
WHEREAS, Buyer desires to acquire, and Seller desires to sell, the
Included Assets on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, Buyer and Seller hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale. At the Closing (as defined in Section 1.4),
Seller agrees to sell, assign and transfer the Included Assets to Buyer, and
Buyer agrees to purchase the Included Assets from Seller, on the terms and
subject to the conditions set forth in this Agreement. The Excluded Assets are
not being sold to Buyer.
1.2 Assumed Liabilities. It is understood and agreed that Buyer will
not assume, and Seller will retain following the Closing, any direct or indirect
debts, obligations or liabilities of Seller or the Business or binding upon the
Assets of any nature, whether absolute, accrued, contingent, liquidated or
otherwise, and whether due or to become due, asserted or unasserted, known or
unknown (collectively, "Liabilities"), except for the following specific
liabilities (the "Assumed Liabilities"):
(a) obligations to be performed after the Closing under the
Assumed Contracts identified in Schedule 2.9, but excluding any Liabilities
under an Assumed Contract that result from any breach or default (or event that
with notice or lapse of time would constitute a breach or default) by Seller
under an Assumed Contract.
1.3 Purchase Price. As consideration in full for the purchase of the
Included Assets, Buyer will assume the Assumed Liabilities and make cash
payments to Seller in the aggregate amount of $11,500,000 (collectively, the
"Purchase Price"). The Purchase Price will be payable as follows:
1
2
(a) Buyer will pay $5,750,000 of the Purchase Price at the Closing
(the "Closing Cash Payment") by wire transfer of immediately available funds to
accounts specified in writing by Seller to Buyer at least two business days
prior to the Closing); and
(b) Buyer will pay $5,750,000 of the Purchase Price (the "Deferred
Payment") 18 months after the Closing (or, if such day is not a business day, on
the next succeeding business day) by wire transfer of immediately available
funds (to an account specified in writing by Seller to Buyer at least two
business days prior to the payment date).
1.4 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will occur on the fifth business day after all of the
conditions set forth in Article V have been satisfied or waived or on such
earlier date as Buyer and Seller may mutually agree (the "Closing Date").
1.5 Closing Deliveries. At the Closing:
(a) Buyer will pay the Closing Cash Payment to Seller by wire
transfer, in accordance with Section 1.3(a);
(b) Seller will execute and deliver to Buyer a Xxxx of Sale
conveying the Included Assets to Buyer, substantially in the form attached as
Exhibit A (the "Xxxx of Sale");
(c) Seller will complete and deliver to Buyer all forms and other
documents required by Network Solutions, Inc. ("InterNIC") or otherwise
necessary to transfer to Buyer (or Buyer's designee) registered ownership of the
Internet domain names included within the Included Assets (the "Names"); and
(d) To the extent not previously delivered, Seller will deliver to
Buyer (or otherwise make available) the originals or copies of all of the disks,
files, proprietary information and other data relating to the Included Assets,
together with an accounts receivable history report for current customers of the
Business.
1.6 Pre-Closing Deliveries. At Buyer's request following the date
hereof, Seller will transmit or deliver to Buyer an electronic copy of all files
and other information necessary or advisable to allow Buyer to prepare to host
the Site on Buyer's own servers, with the same functionality and features
currently offered through the Site, immediately upon the Closing, including
without limitation all original graphics, file record data, layout templates and
other Intellectual Property included within the Included Assets. Seller will
also forward all file submission email received after the date hereof and prior
to the Closing to an email address designated by Buyer. Buyer will not begin
hosting the Site at a publicly accessible address until after the Closing. If
this Agreement is terminated prior to the Closing, Buyer will destroy all of its
copies of such information, or return such information to Seller.
1.7 Further Assurances. After the Closing, Seller will execute and
deliver to Buyer, without further consideration, but at Buyer's sole expense,
such additional instruments of conveyance and transfer as Buyer may reasonably
request in order more effectively to convey and transfer the operation of the
Business and the Included Assets to Buyer or to assist Buyer in reducing to
possession any of the Included Assets or exercising rights with respect thereto.
2
3
1.8 Allocation of Purchase Price. Buyer and Seller agree that, for all
purposes relevant to the calculation of federal or state income taxes, the
Purchase Price will be allocated among the Included Assets in the manner
described in Schedule 1.8. Buyer and Seller each agree to file Internal Revenue
Service Form 8594, Asset Allocation Statement, consistent with the allocation
described in Schedule 1.8.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer (which representations
and warranties will survive the transactions contemplated hereby) as follows:
2.1 Organization. Seller is a limited liability company duly organized,
validly existing and in good standing under the laws of Washington, and has full
limited liability company power to own its properties and to operate the
Business as presently operated.
2.2 Authority. Seller has all necessary right, power and authority to
execute, deliver and perform under this Agreement, the Xxxx of Sale and the
other documents required to be executed and delivered by Seller hereunder (the
"Seller Documents"). This Agreement has been duly executed and delivered by
Seller and constitutes the legal, valid and binding agreement of Seller,
enforceable against Seller in accordance with its terms. Upon execution and
delivery at the Closing, the other Seller Documents will have been duly executed
and delivered by Seller and will constitute the legal, valid and binding
agreement of Seller, enforceable against Seller in accordance with their terms.
2.3 Included Assets. Except for the specific items enumerated on
Schedule B, the Included Assets include all tangible and intangible assets used
by Seller or Xxxxxxx in the conduct of the Business. Either Seller or Xxxxxxx is
registered with InterNIC as the administrative contact for each of the Names,
and the Included Assets include all rights granted by InterNIC to Seller or
Xxxxxxx with respect to the use of the Names. Seller has good and marketable
title to all of the Included Assets and owns all of the Included Assets free and
clear of any Liabilities, liens, claims, security interests, encumbrances or
contingencies of any nature (collectively, "Liens"), other than statutory Liens
securing current taxes and other obligations that are not yet delinquent, to the
extent such Liens could arise after the Closing. The execution and delivery of
the Xxxx of Sale by Seller at the Closing will convey to and vest in Buyer good
and marketable title to the Included Assets, free and clear of any Liens except
those described in clause (i) of the preceding sentence. With respect to any
Included Assets held by Seller under leases included within the Assumed
Contracts, the foregoing representations concerning title are limited to
Seller's leasehold interest in such Assets.
2.4 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
governmental or quasi-governmental agency, authority, commission, board or other
body (collectively, a "Governmental Body") is required on the part of Seller or
any of its owners in connection with the transfer of any of the Included Assets
to Buyer or any of the other transactions contemplated by this Agreement.
3
4
2.5 No Violation. Except as disclosed in Schedule 2.5, neither the
execution and delivery of this Agreement, nor the consummation of the
transaction contemplated hereby, will require consent under, conflict with or
result in the breach of any term or provision of, or violate or constitute a
default under, or result in the creation of any lien on the pursuant to, or
relieve any Person of any obligation under, or give any Person the right to
terminate or accelerate any obligation under, any agreement, instrument, permit,
license, law or regulation to which Seller is a party or by which Seller or any
of the Included Assets is in any way bound or obligated. For purposes of this
Agreement, "Person" means any individual, corporation, partnership, limited
liability company, Governmental Body or other entity.
2.6 Financial and Operational Data.
(a) Attached as Schedule 2.6(a) is certain unaudited financial
information concerning the Business, including a list of advertising revenues
received by the Business for the six months ending October 31, 1998, and an
agreed upon procedures report prepared by Xxxxxx Xxxxxxxx LLP with respect to
such advertising revenues (the "Schedule of Advertising Revenues"). The Schedule
of Advertising Revenues is accurate and presents fairly the information set
forth therein and does not contain any items of a special or nonrecurring
nature, except as expressly stated therein. The Schedule of Advertising Revenues
has been prepared from the books and records of Seller.
(b) Since June 1, 1998, except as specifically contemplated by this
Agreement and except for cash distributions to Seller's equity owners, there has
not been: (i) any material adverse change in the condition (financial or
otherwise), results of operations, business, Site traffic, prospects, assets or
Liabilities of the Business; (ii) any change by Seller in its accounting
methods, principles or practices; (iii) any sale, assignment or transfer of any
assets of the Business, except in the ordinary course of business and consistent
with past practice; (iv) any waiver by Seller of any material rights related to
the Business or the Included Assets; (v) any other transaction, agreement or
commitment affecting the Business or the Included Assets, except in the ordinary
course of business and consistent with past practice; or (vi) any agreement or
understanding to do or resulting in any of the foregoing.
(c) Schedule 2.6(c) sets forth certain statistics concerning the
operations of the Business, which are accurate (subject to the margins of error
indicated in such schedule for certain of such statistics). The summary of
traffic for the Site included in Schedule 2.6(c) accurately and fairly reflects
traffic for the Site during the periods indicated, and, to Seller's knowledge,
there is no reason why traffic for the Site during such periods would be
unrepresentative or atypical in any material respect. Seller has delivered to
Buyer accurate and complete copies of the computer log files that correspond to
the summary of traffic set forth in Schedule 2.6(c).
(d) To Seller's knowledge, Seller has no Liabilities related to or
arising out of the Business or the Included Assets except for (i) the Assumed
Liabilities; and (ii) performance obligations under the Excluded Contracts.
2.7 Actions. There are currently no pending or, to Seller's knowledge,
threatened lawsuits or proceedings against or relating to Seller or the Business
or to which any of the Included Assets is subject. None of Seller, the Business
nor any of the Included Assets is subject to or bound by any judgment, order,
writ, injunction or decree.
4
5
2.8 Compliance with Law. In connection with the Business, and to
Seller's knowledge, Seller is currently complying with and has at all times
complied with, and the Site and the use, operation and maintenance of the
Included Assets comply with and have at all times complied with, all applicable
statutes, laws, ordinances, decrees, orders, rules and regulations, including
without limitation all laws and regulations relating to taxes, required licenses
and permits, communications decency, obscenity, occupational health and safety,
employment and labor matters and environmental protection.
2.9 Material Agreements. There are no agreements binding upon Seller,
the Business or the Included Assets that are related to the Business other than
the Assumed Contracts and the Excluded Contracts described on Schedule 2.9
(collectively, the "Material Agreements"). Seller has delivered to Buyer a copy
of each written Material Agreement and a written summary of each oral Material
Agreement. Seller has performed in all material respects all of its respective
obligations under each Material Agreement, and there exists no material breach
or default (or event that with notice or lapse of time would constitute a
material breach or default) under any Material Agreement. To Seller's knowledge,
each Assumed Contract is valid, binding and in full force and effect and
enforceable in accordance with its terms. There has been no termination or
threatened termination or notice of default under any Assumed Contract. To the
extent indicated in Schedule 2.9, the Excluded Contracts will be terminated at
or prior to the Closing at Seller's sole cost and expense.
2.10 Intellectual Property Rights.
(a) For purposes of this Agreement, "Intellectual Property" means
all (i) patents, copyrights and copyrightable works, trademarks, service marks,
trade names, service names, brand names, logos, trade dress, Internet domain
names and all goodwill symbolized thereby and appurtenant thereto; (ii) trade
secrets, inventions, technology, know-how, proprietary information, research
material, specifications, surveys, designs, drawings and processes; (iii)
computer software and related documentation, including without limitation
operating software, network software, firmware, middleware, design software,
design tools, management information systems, systems documentation and
instructions, databases and the tangible objects in which the foregoing rights
are embodied (collectively, "Software"); (iv) content of the Site, artwork,
photographs, editorial copy and materials, formats and designs, including
without limitation all content currently or previously displayed or offered for
downloading through the Site; (v) email addresses of newsletter subscribers,
customer, partner, prospect and marketing lists, market research data, sales
data and traffic and user data; (vi) registrations, applications, recordings,
common law rights, "moral" rights of authors, licenses (to or from Seller) and
other agreements relating to any of the foregoing; (vii) rights to obtain
renewals, reissues, extensions, continuations, divisions or equivalent
extensions of legal protection pertaining to the foregoing; and (viii) claims,
causes of action or other rights at law or in equity arising out of or relating
to any infringement, misappropriation, distortion, dilution or other
unauthorized use or conduct in derogation of the foregoing occurring prior to
the Closing.
(b) The Included Assets do not include any registrations or
applications for registration of any Intellectual Property or any licenses (to
or from Seller) with respect to any registered Intellectual Property.
5
6
(c) Except as otherwise provided in Section 2.12 below, Seller owns
or has the right to use pursuant to Assumed Contracts all Intellectual Property
used by Seller in connection with or necessary to the operation of the Business,
without infringing on or otherwise acting adversely to the rights or claimed
rights of any Person, and all of Seller's rights in such Intellectual Property
are included in the Included Assets. Seller is not obligated to pay any royalty
or other consideration to any Person in connection with the use of any such
Intellectual Property.
(d) No claim has been asserted against Seller to the effect that
the use of any Intellectual Property by Seller infringes the rights of any
Person. To Seller's knowledge, no other Person is infringing the rights of
Seller with respect to the Intellectual Property used in the Business.
2.11 Affiliate Transactions and Competing Interests.
(a) Set forth in Schedule 2.11(a) is a complete list of all
equipment, services and other items of value provided to the Business by other
divisions of Seller or by any "affiliate" of Seller within the meaning of Rule
144 under the Securities Act of 1933, as amended (an "Affiliate").
(b) Except as described in Schedule 2.11(b), neither Seller nor any
of its Affiliates (i) owns, directly or indirectly, an interest in any Person
that is a competitor, customer or supplier of the Business or that otherwise has
material business dealings with the Business or (ii) is a party to, or otherwise
has any direct or indirect interest opposed to Seller under, any Material
Agreement or other business relationship or arrangement material to the
Business.
2.12 Microsoft. Attached as Schedule 2.12 is an accurate summary of all
written, verbal or electronic communications between Microsoft Corporation or
any of its affiliates or agents ("Microsoft"), on the one hand, and Seller or
Xxxxxxx, on the other hand, related to (a) the use by Seller of any of the
Names, (b) any assertion by Microsoft of rights in or to any of the Names, as
well as copies of any such written or electronic communications, or (c)
discussions regarding Microsoft's grant of a license to Seller to use certain of
the Names. The only Names as to which Microsoft has asserted any potential
claims or rights in such communications are "xxxxxxx00.xxx", "xxxxxxx00.xxx",
"xxxxxxx00.xxx", "xxxxxxx00.xxx" and "xxxxxxx00.xxx" (the "Disputed Names").
Notwithstanding Section 2.7, Section 2.10 or any other provision of this
Agreement to the contrary, except for the two preceding sentences and Section
2.13 below, Seller and Xxxxxxx make no representation or warranty hereunder, and
have no indemnification obligations hereunder, with respect to any rights that
Microsoft may have in or to the Disputed Names or with respect to any Liens that
Microsoft may have asserted in the past or may assert in the future regarding
the Disputed Names.
2.13 No Misrepresentations. Seller has disclosed to Buyer all facts and
information known to it that a reasonable person would believe to be material to
a purchase of the Included Assets. The representations and warranties made by
Seller in this Agreement are true, complete and correct in all material respects
and, to Seller's knowledge, do not contain any untrue statement of a material
fact or omit to state any material fact necessary to make any such
representation or warranty, under the circumstances in which it is made, not
misleading.
6
7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller (which representations and
warranties will survive the transactions contemplated hereby) as follows:
3.1 Good Standing. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
3.2 Authority. The execution, delivery and performance of this
Agreement have been authorized by all necessary action on the part of Buyer.
This Agreement has been duly executed and delivered by Buyer and constitutes the
legal, valid and binding agreement of Buyer, enforceable against Buyer in
accordance with its terms.
3.3 No Violation. Neither the execution or delivery of this Agreement
by Buyer nor the consummation by Buyer of the transactions contemplated hereby
will require any consent under, or conflict with result in the breach of any
terms or provisions of, or violate or constitute a default under any agreement,
instrument, permit, license, law or regulation to which Buyer is a party or by
which Buyer is a party or by which Buyer is in any way bound or obligated.
ARTICLE IV
COVENANTS AND AGREEMENTS
4.1 Conduct of Business. Prior to the Closing, unless Buyer otherwise
consents in writing, Seller will: (a) operate the Business in the ordinary
course of business and consistent with past practices, and use commercially
reasonable efforts to preserve the goodwill associated with the Business and the
Included Assets; (b) except as specifically contemplated by this Agreement, not
engage in any transaction related to the Business or the Included Assets that is
outside the ordinary course of business, including without limitation by making
any material expenditure, investment or commitment, entering into or modifying
the terms of any material agreement or arrangement or transferring any interest
in the Included Assets; and (c) maintain books of account, computer log files
and other records in the usual, regular and ordinary manner and consistent with
past practices.
4.2 Access and Information. Prior to the Closing, Seller will permit
Buyer and its representatives to have reasonable access, during normal business
hours, to all assets, properties, books, records and documents relating to the
Business and the Included Assets and will furnish to Buyer such information,
financial records, computer files and other documents relating to the Business
and the Included Assets as Buyer may reasonably request, provided that Buyer
will exercise its right of access in a manner that does not materially interfere
with or interrupt the operation of the Business. Seller will permit Buyer and
its representatives reasonable access to Seller's officers, employees,
accountants, customers and suppliers for consultation or verification of any
information obtained by Buyer and will instruct such persons to cooperate with
Buyer and its representatives in such consultations and in verifying such
information.
7
8
4.3 No Shop. Each of Seller and Xxxxxxx hereby covenants and agrees
that (a) it will not, and will not permit any of its Affiliates to, initiate,
solicit or encourage (including by way of furnishing information or assistance),
or take any other action to facilitate, any inquiries or the making of any
proposal relating to, or that may reasonably be expected to lead to, any sale of
the Included Assets or the Business or any portion thereof, whether by merger,
stock sale, asset sale or otherwise (a "Competing Transaction"), or enter into
discussions or negotiate with any Person in furtherance of such inquiries or to
obtain a Competing Transaction, or endorse or agree to endorse any Competing
Transaction, or authorize or permit any of the officers, directors or employees
of Seller or any investment banker, financial advisor, attorney, accountant or
other representative retained by Seller, Xxxxxxx or any of their Affiliates to
take any such action, and (b) Seller and Xxxxxxx shall promptly notify Buyer of
all relevant terms of any such inquiries and proposals received by it or any of
its Affiliates or by any such officer, director, investment banker, financial
advisor, attorney, accountant or other representative relating to any of such
matters, and if such inquiry or proposal is in writing, Seller or Xxxxxxx shall
promptly deliver or cause to be delivered to Buyer a copy of such inquiry or
proposal.
4.4 Publicity. Prior to the Closing, except as otherwise required by
law, neither Seller, Xxxxxxx nor Buyer (directly or through agents) will
disclose the existence or terms of this Agreement or the transactions
contemplated hereby to, or otherwise engage in any written, verbal or electronic
communications concerning the transactions contemplated hereby with, any Person
(including without limitation any communication with Microsoft concerning the
use of the Disputed Names or any communication with advertising customers of the
Site concerning the proposed transactions), unless the other party consents in
advance to the text of any written or electronic communication or the nature,
content and purpose of any verbal communication, which consent will not be
unreasonably withheld. Following the Closing, neither Seller, Xxxxxxx nor Buyer
will publicize derogatory comments concerning the operation of the Site by the
other party or parties.
4.5 Employees. Prior to the Closing, Buyer will notify Seller in
writing of those employees of the Business to whom Buyer will offer employment
following the Closing. Any such employees who accept employment with Buyer on
the terms offered are referred to as the "Transferred Employees." Seller (and
not Buyer) will be solely responsible for and will discharge in full in a due
and timely manner any Liabilities related to or resulting from (a) the
employment of the Transferred Employees prior to the Closing, and (b) the
employment, termination of employment or reassignment of any employees of the
Business other than the Transferred Employees.
4.6 Discharge of Retained Liabilities. Following the Closing, Seller
will fully pay or otherwise discharge in full, prior to the due date therefor
and otherwise in accordance with the terms thereof, all Liabilities of Seller
related to the Business other than the Assumed Liabilities.
4.7 Fulfillment of Conditions by Seller. Seller will not intentionally
take any action that is reasonably likely to cause the conditions on the
obligations of the parties to effect the transactions contemplated hereby not to
be fulfilled, including without limitation by taking any action that would cause
the representations and warranties of Seller herein not to be true and correct
as of the Closing. Seller will take all commercially reasonable actions within
its power to
8
9
cause to be fulfilled the conditions precedent to Buyer's obligations to
consummate the transactions contemplated hereby.
4.8 Fulfillment of Conditions by Buyer. Buyer will not intentionally
take any action that is reasonably likely to cause the conditions on the
obligations of the parties to effect the transactions contemplated hereby not to
be fulfilled, including without limitation by taking any action that would cause
the representations and warranties of Buyer herein not to be true and correct as
of the Closing. Buyer will take all commercially reasonable actions within its
power to cause to be fulfilled the conditions precedent to the obligations of
Seller to consummate the transactions contemplated hereby.
4.9 Closing Costs. Buyer will pay all transaction costs and expenses
(including legal and accounting fees) that it incurs in connection with the
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby. Seller will pay all transaction costs and expenses
(including legal and accounting fees) that Seller incurs in connection with the
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby, and Seller will pay all transfer taxes associated with the
sale of the Included Assets to Buyer.
4.10 Post-Closing Email. Following the Closing, Buyer will forward, at
its expense, email received by the Site at the email addresses listed on
Schedule 4.10 (the "Specified Addresses") to the corresponding forwarding
addresses specified in Schedule 4.10 (the "Forwarding Addresses") in accordance
with this paragraph. For the first week following the Closing, Buyer will
forward email from the Specified Addresses to the corresponding Forwarding
Addresses without any autoreply prompt or notification to the sender of the
recipient's new email address. From the second week after the Closing until
three months after the Closing, Buyer will forward email from the Specified
Addresses to the corresponding Forwarding Addresses and provide an autoreply
message notifying the sender of the recipient's new address. During the fourth
month following the Closing, Buyer will not be obligated to forward email from
the Specified Addresses but will provide an autoreply message notifying the
sender that the intended recipient no longer maintains a mailbox at such
address. After the fourth month following the Closing, Buyer will have no
obligation to forward email from the Specified Addresses or to notify the sender
that the intended recipient no longer maintains a mailbox at such address.
Notwithstanding the foregoing, (a) with respect to persons providing transition
services after the Closing pursuant to Section 6.4, Buyer agrees to implement
the foregoing procedures commencing on the date that such persons are no longer
providing such transition services, rather than from the date of the Closing,
(b) Buyer will be entitled to inspect any email addressed to the Specified
Addresses and will have no obligation to forward email messages that reasonably
appear to relate to solely to the Business, and (c) at Buyer's request, Seller
will obtain an agreement from each individual who receives email at the
Forwarding Addresses to return to Buyer any email that relates to the Business.
4.11 Collection of Accounts Receivable.
(a) All accounts receivable arising (before or after the Closing)
out of the operation of the Business by Seller prior to the Closing Date are
referred to as the "Seller's
9
10
Receivables." All accounts receivable arising out of the operation of the
Business by Buyer on or after the Closing Date are referred to as "Buyer's
Receivables." Unless the parties agree on another allocation method with respect
to a particular account receivable, accounts that cover a time period both
before and after the Closing Date will be allocated between Seller's Receivables
and Buyer's Receivables based on the number of days before and after the Closing
Date.
(b) For a period of 120 days following the Closing (the "Collection
Period"), Buyer (and not Seller) will attempt to collect Seller's Receivables,
on behalf of Seller, in good faith in a manner consistent with that used in
attempting to collect Buyer's other accounts receivable and in compliance with
applicable law. Payments from each account debtor in respect of Seller's
Receivables and in respect of Buyer's Receivables will be applied as instructed
by the account debtor or, if no such instructions are provided, in the order in
which the accounts were created. Neither party will, nor will it permit any of
its employees or agents to, request that any account debtor issue any
instruction with respect to the application of its payments. At least once each
month during the Collection Period, Buyer will pay to Seller any amounts
collected by Buyer in respect of Seller's Receivables. If Seller receives any
payment in respect of Seller's Receivables, Seller will promptly notify Buyer
thereof, and if Seller receives any payment in respect of Buyer's Receivables,
Seller will promptly (and in any event within 15 days) pay over the amount
collected to Buyer. Following the Collection Period, Seller shall have the right
to collect any previously uncollected Seller's Receivables using any
commercially reasonable and lawful means.
4.12 CD-ROM Business. Immediately following the Closing, Seller will
discontinue the CD-ROM distribution business currently described on the Site
(the "CD-ROM Business") and discharge any Liabilities related to or arising out
of the operation of the CD-ROM Business; provided that, during the 30 days after
the Closing, Seller may liquidate the inventory of CD-ROMs held by Seller at the
Closing.
ARTICLE V
CLOSING CONDITIONS
5.1 Conditions to Obligations of Buyer. The obligations of Buyer under
this Agreement are subject to the satisfaction at or prior to the Closing of the
following conditions, but compliance with any such conditions may be waived by
Buyer:
(a) All representations and warranties of Seller contained in this
Agreement are true and correct in all material respects at and as of the Closing
with the same effect as though such representations and warranties were made at
and as of the Closing.
(b) Seller has performed and complied in all material respects with
all the covenants and agreements required by this Agreement to be performed or
complied with by them at or prior to the Closing.
(c) Between the date of this Agreement and the Closing, there has
not occurred any material adverse change in the condition (financial or
otherwise), results of operations, business, Site traffic, prospects, assets or
Liabilities of the Business.
10
11
(d) Seller has delivered to Buyer a closing certificate,
substantially in the form of Exhibit B hereto.
(e) Seller has entered into an agreement with Microsoft, on terms
satisfactory to Buyer and assignable to Buyer hereunder, pursuant to which (i)
Microsoft will acquire ownership of the Disputed Names in return for an
agreement to promote the Site on certain of Microsoft's Internet sites, and (ii)
Buyer will be entitled to use the Names "xxxxxxx00.xxx" and "xxxxxxx00.xxx" in
connection with the Business for a specified period of time.
(f) Buyer has received all contractual and governmental consents
and approvals necessary in connection with the consummation of the transactions
described herein.
(g) Seller has delivered to Buyer executed UCC-3 termination
statements or other releases satisfactory to Buyer to evidence the release of
any Liens on the Included Assets other than statutory Liens securing current
taxes and other obligations that are not yet delinquent, to the extent such
Liens could arise after the Closing.
(h) Seller has delivered to Buyer a legal opinion of Seller's
counsel, substantially in the form of Exhibit C hereto.
5.2 Conditions to Obligations of Seller. The obligations of Seller
under this Agreement are subject to the satisfaction at or prior to the Closing
of the following conditions, but compliance with any such conditions may be
waived by Seller:
(a) All representations and warranties of Buyer contained in this
Agreement are true and correct in all material respects at and as of the Closing
with the same effect as though such representations and warranties were made at
and as of the Closing.
(b) Buyer has performed and complied in all material respects with
the covenants and agreements required by this Agreement to be performed or
complied with by it at or prior to the Closing.
(c) Microsoft has not taken or threatened to take legal action
against or sought or threatened to seek to enforce legal or equitable remedies
against Seller or Xxxxxxx, and Seller and Xxxxxxx have received all contractual
and governmental consents and approvals necessary in connection with the
consummation of the transactions described herein; provided that Seller will not
be relieved of its obligations hereunder pursuant to this paragraph unless it
reasonably believes that such legal action or enforcement (giving effect to any
agreement, arrangement or understanding between Seller or Xxxxxxx and Microsoft)
or the failure to obtain such consent or approval could result in material
losses or damage to Seller or to Xxxxxxx.
(d) Buyer has delivered to Seller a legal opinion of Buyer's
counsel, substantially in the form of Exhibit D hereto.
11
12
ARTICLE VI
CONFIDENTIALITY AND NONCOMPETITION
6.1 Confidential Information.
(a) The Included Assets include certain commercially valuable
technical and non-technical confidential or proprietary information of Seller
(collectively, "Confidential Information"). Confidential Information means all
information used by Seller in connection with operating the Business that is not
generally known to others in similar areas of business, including without
limitation (i) trade secrets, software, work product, processes, analyses and
know-how related to the architecture and operation of the Business or the
submission, collection or organization of its contents; (ii) customer and
prospect lists and other marketing, advertising, pricing, strategic and business
plans and information related to the Business; and (iii) information concerning
Site traffic and financial information concerning the operation of the Business.
(b) Prior to the Closing, the confidentiality and nondisclosure
provisions of the existing Nondisclosure Agreement between Buyer and Seller,
dated as of October 16, 1998, will remain in full force and effect and will
apply to the Confidential Information, notwithstanding the execution of this
Agreement. Upon termination of this Agreement for any reason, Buyer shall
promptly return to Seller all Confidential Information, including copies
thereof, and destroy any notes, compilations, analyses or other material that
incorporates or otherwise includes such Confidential Information. Buyer further
agrees that for a period of one year following any termination of this Agreement
(if the contemplated acquisition is not consummated), Buyer will not, directly
or indirectly, without the prior written consent of Seller in each instance,
knowingly recruit, interview or solicit for employment any person who is an
employee of Seller at such time.
(c) Seller and Xxxxxxx acknowledge and agree that, following the
Closing, the Confidential Information will be the sole and exclusive property of
Buyer. Following the Closing, neither Seller nor Xxxxxxx will, directly or
indirectly, use any Confidential Information for its own benefit or disclose any
Confidential Information to any third party (except in the course of performing
authorized duties for Buyer). At Buyer's request after the Closing, Seller and
Xxxxxxx will promptly deliver to Buyer all documents, computer disks and other
computer storage devices, computer printouts, manuals and other papers and
materials (including all copies thereof in whatever form) containing or
incorporating any Confidential Information that are in his or her possession or
under his or her control.
6.2 Non-Competition. For a period of two years following the Closing,
neither Seller nor Xxxxxxx will, directly or indirectly, (a) engage in any
business involved in offering files for downloading from the Internet, as an
owner, employee, director, officer, consultant or in any other capacity except
by or through Buyer or its successors or assigns or (b) knowingly recruit,
interview or solicit for employment any person who is an employee of Buyer at
such time. Notwithstanding the foregoing, (i) Seller or Xxxxxxx may own less
than 5% of the equity interests in any entity, even if such entity is engaged in
a competing business, so long as Xxxxxxx has no personal involvement in the
management or operations of such entity; and (ii) this Section 6.2 specifically
excludes, and does not prohibit Seller's or Xxxxxxx' participation in the
specific businesses described in Schedule 6.2.
12
13
6.3 Enforcement.
(a) Seller and Xxxxxxx represent to Buyer that they are willing and
able to engage in businesses that do not involve any Competitive Business and
that enforcement of the restrictions set forth in Section 6.2 would not be
unduly burdensome to them. Seller and Xxxxxxx acknowledge and agree that the
restrictions set forth in Section 6.2 are reasonable as to time, geographic area
and scope of activity and do not impose a greater restraint than is necessary to
protect Buyer's legitimate business interests.
(b) If the provisions of Section 6.2 are found by a court of
competent jurisdiction to contain limitations as to time, geographical area or
scope of activity that are not reasonable or not necessary to protect the
legitimate business interests of Buyer, then such court is hereby directed to
reform such provisions to the minimum extent necessary to cause the limitations
contained therein as to time, geographical area and scope of activity to be
reasonable and to impose a restraint that is not greater than necessary to
protect Buyer's legitimate business interests.
(c) Seller and Buyer acknowledge and agree that each would be
irreparably harmed by any violation by the other of Section 6.1 or Section 6.2
and that, in addition to all other rights or remedies available at law or in
equity, Seller or Buyer will be entitled to injunctive and other equitable
relief to prevent or enjoin any such violation.
6.4 Transition Services.
(a) Seller and Xxxxxxx will provide to Buyer the services described
in Schedule 6.4 (the "Services"). The parties intend the Services to be
sufficient for Buyer to continue operating the Business in a manner consistent
with Seller's past practice and to be substantially equivalent in terms of
quality, depth and scope to the corresponding services previously provided by
Seller and Xxxxxxx to the Business during the twelve months preceding the date
hereof. To the extent that Seller currently uses Excluded Assets and employees
other than the Transferred Employees to provide such Services, Seller will
continue to make such Excluded Assets and employees (or suitable replacement
employees) available in connection with providing the Services hereunder. Seller
and Xxxxxxx will perform the Services exercising the same degree of care as they
exercise in performing the same or similar services for their own account, with
priority equal to that provided to their own businesses and those of their
affiliates and other divisions. Seller will also provide Buyer with access to
records of the Business and reasonable consultation and assistance as necessary
to coordinate the physical transfer of the records of the Business to Buyer and
to facilitate the transition of the Services to Buyer's own systems or to third
parties designated by Buyer.
(b) Each of the Services will be provided for the term specified
for such Service in Schedule 6.4; provided that Buyer may terminate any of the
Services at any time by giving five days written notice of termination to
Seller.
(c) In exchange for the Services, Buyer will pay Seller at the
rates indicated for each Service in Schedule 6.4. Unless otherwise indicated in
Schedule 6.4 with respect to a
13
14
particular type of Service or otherwise agreed by Buyer in advance with respect
to a particular expense, Seller will be responsible for all out of pocket costs
and expenses incurred in connection with performing the Services.
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated and abandoned (a) at any time prior to the Closing by
mutual written consent of Buyer and Seller; or (b) by either Buyer or Seller if
the Closing has not occurred by the close of business on January 22, 1999. Any
termination pursuant to (b) above will be without prejudice to any right that
any party may have hereunder against the other party for any misrepresentation
or breach of warranty or covenant under this Agreement.
7.2 Indemnification.
(a) Seller agrees to indemnify, defend and hold Buyer and its
directors, officers, employees and agents harmless from any and all liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
court costs and reasonable attorneys' fees (collectively, "Losses"), that any
such person may suffer or incur as a result of or relating to (i) the breach or
inaccuracy, or any allegation by a third party of facts that would constitute a
breach or inaccuracy, of any of the representations, warranties or agreements
made by Seller in this Agreement or any attachment hereto, or (ii) any Liability
of Seller, other than the Assumed Liabilities, that exists at or prior to the
Closing or that arises out of facts existing at or prior to the Closing or
content displayed on the Site prior to the Closing, including without limitation
any Liabilities related to outstanding litigation involving Seller or the
Business. Buyer's sole recourse in connection with any claim under this Section
7.2(a) shall be to offset such claim against the Deferred Payment; provided that
such limitation will not apply to any claim with respect to Losses arising out
of a Known Liability. For such purposes, "Known Liability" means any Liability
(other than an Assumed Liability) that is (A) liquidated and known by Seller or
Xxxxxxx to exist at the Closing or (B) not liquidated but known by Seller or
Xxxxxxx to exist at the Closing and as to which Seller has not fully informed
Buyer prior to the Closing of all known material facts related to such
Liability.
(b) Buyer will have the burden of proof in establishing any claim
for indemnification under Section 7.2(a) and any right to offset such claim
against the Deferred Payment. The amount that Buyer is entitled to offset with
respect to a particular indemnification claim (an "Offset Amount") will be
limited to the maximum Loss that could reasonably be expected to result from
such claim. If Buyer and Seller cannot agree on the Offset Amount for a
particular indemnification claim within 30 days after Buyer asserts such
indemnification claim against Seller, the Offset Amount will be determined
through binding arbitration as provided in Section 7.2(e) below. If it is
ultimately determined that the Offset Amount exceeds the actual Loss resulting
from such claim, then Buyer will promptly pay the amount of such excess to
Seller, together with interest on such excess from the 18-month anniversary of
Closing to the date of payment, at an interest rate equal to the average prime
rate over such period, as determined by the prime rate quoted in the Wall Street
Journal Money Rates column.
14
15
(c) Buyer agrees to indemnify, defend and hold Seller harmless from
any and all Losses that Seller may suffer or incur as a result of or relating to
(a) the breach or inaccuracy, or any allegation by a third party of facts that
would constitute a breach or inaccuracy, of any of the representations,
warranties or agreements made by Buyer in this Agreement or pursuant hereto, (b)
any Liability incurred by Buyer or arising out of the operation of the Business
after the Closing, (c) any Liability described in Schedule 7.2(c), or (d) the
Assumed Liabilities.
(d) Each party's rights to indemnification pursuant to this Section
7.2 and any other rights to recover for a breach of representation or warranty
hereunder, will survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby only for 18 months
following the Closing; provided that (i) any claim with respect to such rights
will survive until such claim is finally resolved if the party asserting such
claim notifies the other party of such claim in reasonable detail prior to the
end of such 18 month period; and (ii) the limitation set forth in this paragraph
will not apply to any claim under Section 7.2(a) with respect to Losses arising
out of a Known Liability.
(e) If arbitration is required to determine the Offset Amount as
described in Section 7.2(a) above, the Offset Amount shall be determined by
binding arbitration as described in this Section 7.2(e). The 30th day after
Buyer asserts an indemnification claim is referred to as the "Arbitration
Commencement Date".
(i) Within 15 days after the Arbitration Commencement Date,
each party shall provide the other party with written notice (a
"Notice") of its determination of the Offset Amount. The matter
shall then be submitted for decision to an arbitrator. The
arbitrator shall be an independent third party knowledgeable in
the Business, who is acceptable to both Buyer and Seller. If the
parties cannot agree on an arbitrator, then an arbitrator shall be
appointed by the director (or the equivalent) of the San Francisco
office of the American Arbitration Association upon the
application of either party.
(ii) Within 30 days after the selection of the arbitrator
pursuant to the preceding paragraph, the arbitrator shall
determine the Offset Amount by selecting either the figure stated
in Seller's Notice or the figure stated in Buyer's Notice. The
arbitrator shall have no power to average such amounts or to
designate an Offset Amount other than that specified in either
Seller's Notice or Buyer's Notice.
(iii) Both parties may submit any information to the
arbitrator for his or her consideration, with copies to the other
party. The arbitrator shall have the right to consult experts and
competent authorities for factual information or evidence
pertaining to the determination. The arbitrator shall render his
or her decision by written notice to each party. The determination
of the arbitrator will be final and binding upon Seller and Buyer.
The cost of the arbitration will be paid by Buyer if the Offset
Amount determined by arbitration is that specified in Seller's
Notice, and by Seller if the Offset Amount determined by
arbitration is that specified in Buyer's Notice.
7.3 Assignment. The rights and obligations of the parties under this
Agreement may not be assigned by any party, except that Buyer may assign its
rights and obligations hereunder to
15
16
any wholly-owned subsidiary of Buyer, provided that such assignment will not
relieve Buyer of any liabilities hereunder or under any documents to be executed
pursuant to this Agreement.
7.4 Notices. All notices that are required or may be given pursuant to
this Agreement must be in writing and delivered personally, by a recognized
courier service, by a recognized overnight delivery service, by telecopy or by
United States mail, postage prepaid, to the parties at the following addresses
(or to such other address as any party may specify in a notice delivered in
accordance with this Section):
If to Buyer, with copies to:
CNET, Inc. Xxxxxx & Xxxx, L.L.P.
150 Chestnut 0000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000 Xxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxx Attention: Xxx X. Xxxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
If to Seller with copies to:
Xxxxx Xxxxxxx Alston, Courtnage, Xxxxxxx
22785 X.X. 00xx Xxxxxx & Xxxxxxxx XXX
Xxxxxxxx, XX 00000 0000 Xxxxxx Xxxxxx, Xxxxx 0000
Telecopy: (000) 000-0000 Xxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Read
Telecopy: (000) 000-0000
Any such notice or other communication will be deemed to have been
given and received (whether actually received or not) on the day it is
personally delivered or delivered by courier or overnight delivery service or
sent by telecopy or, if mailed, when actually received.
7.5 Attorneys' Fees and Costs. If attorneys' fees or other costs are
incurred to secure performance of any obligations hereunder, or to establish
damages for the breach thereof or to obtain any other appropriate relief,
whether by way of prosecution or defense, the prevailing party will be entitled
to recover reasonable attorneys' fees and costs incurred in connection therewith
7.6 Counterparts. This Agreement may be executed in one or more
counterparts for the convenience of the parties hereto, all of which together
will constitute one and the same instrument.
7.7 Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) contains the entire understanding of the parties relating to
the subject matter hereof and supersedes all prior written or oral and all
contemporaneous oral agreements and understandings relating to the subject
matter hereof. This Agreement cannot be modified or amended except in writing
signed by the party against whom enforcement is sought.
16
17
7.8 Governing Law/Venue. This Agreement will be governed by and
construed and interpreted in accordance with the substantive laws of the State
of Washington, without giving effect to any conflicts of law rule or principle
that might require the application of the laws of another jurisdiction. Venue
for any dispute hereunder shall be in King County, Washington; provided that any
arbitration pursuant to Section 7.2(e) shall be conducted in the location of the
arbitrator.
7.9 Knowledge. As used in this Agreement, a matter is "known" to a
party or within such party's "knowledge" if any executive officer of such party
has actual knowledge of such matter or would reasonably be expected to have
actual knowledge of such matter following reasonable inquiry of the appropriate
employees and agents of such party.
IN WITNESS OF, the parties hereto have executed this Agreement as of
the date first above written.
CNET, INC.
/s/ XXXXXXX X. XXXXXXX
-----------------------------------------
Chief Financial Officer
Date: 12-18-98
JENESYS LLC
/s/ XXXXX XXXXXXX
-----------------------------------------
Xxxxx Xxxxxxx, Member
Date: 12-18-98
This Agreement has been executed by Xxxxx Xxxxxxx, in his individual
capacity, solely for the purpose of evidencing his agreement to the terms of
Sections 2.12, 4.3, 4.4, 6.1, 6.2, 6.3, 6.4 and (to the extent applicable to the
enforcement and interpretation of the foregoing sections) Sections 7.3 through
7.8.
/s/ XXXXX XXXXXXX
--------------------------
Xxxxx Xxxxxxx
Date: 12-18-98
17
18
SCHEDULE A
INCLUDED ASSETS
The "Included Assets" mean all of the following properties and assets
of Seller:
(a) the following Internet domain names: xxxxxxxx.xxx and xxxxxxx.xxx;
(b) all of Seller's rights in the following Internet domain names:
xxxxxxx00.xxx, xxxxxxx00.xxx, xxxxxxx00.xxx, xxxxxxx00.xxx, and xxxxxxx00.xxx;
(c) all of Seller's rights and obligations under the Assumed Contracts
identified in Schedule 2.9; and
(d) all of Seller's rights in and to any Intellectual Property used in
connection with or arising out of the Business.
18
19
SCHEDULE B
EXCLUDED ASSETS
The following items are specifically excluded from the Included Assets:
1. Cash on hand of Seller at the Closing and all bank accounts of
Seller.
2. All office supplies, computer equipment and other equipment and
furnishings used in connection with the Site, which has an aggregate fair market
value of less than $10,000 (the "Excluded Equipment"):
3. Rights in third party software generally available to the public,
such as word-processing and spreadsheet software, to the extent loaded on the
Excluded Equipment identified above.
4. The personal online home page and online resume of Xxxxx Xxxxxxx.
5. Seller's rights and obligations under the Excluded Contracts
identified in Schedule 2.9.
6. Seller's rights in the name "Jenesys."
7. The Seller's Receivables (as defined in Section 4.11).
In addition to the specifically enumerated items above, all assets other than
the Included Assets used in connection with or arising out of the Business are
excluded from the Included Assets.
19
20
SCHEDULES
1.8 Allocation of Purchase Price
2.5 Consents
2.6(a) Schedule of Advertising Revenues
2.6(c) Operating Statistics
2.9 Material Agreements
2.11(a) Equipment and Services Provided by Affiliates
2.11(b) Affiliate Relationships
2.12 Microsoft Communications
4.10 Post-Closing Email
6.2 Permitted Businesses
6.4 Transition Services
7.2(c) Indemnified Liabilities
