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EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CNET, INC.
XXXXXX INTERNATIONAL, INC.
AND
XXXX XXXXXX
JULY 29, 1999
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TABLE OF CONTENTS
Page No.
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ARTICLE I THE MERGER......................................................................................1
SECTION 1.01. The Merger.................................................................................1
SECTION 1.02. Closing; Closing Date; Effective Time......................................................1
SECTION 1.03. Effect of the Merger.......................................................................2
SECTION 1.04. Certificate of Incorporation; Bylaws.......................................................2
SECTION 1.05. Directors and Officers.....................................................................2
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES..............................................2
SECTION 2.01. Consideration; Conversion and Cancellation of Securities...................................2
SECTION 2.02. Exchange and Surrender of Certificates.....................................................3
SECTION 2.03. Other Consideration........................................................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS..............................4
SECTION 3.01. Organization and Qualification.............................................................4
SECTION 3.02. Articles and Bylaws........................................................................4
SECTION 3.03. Capitalization.............................................................................4
SECTION 3.04. Authority..................................................................................5
SECTION 3.05. Subsidiaries and Other Interests...........................................................5
SECTION 3.06. Title to Assets............................................................................6
SECTION 3.07. Condition of Assets........................................................................6
SECTION 3.08. No Conflict; Required Filings and Consents.................................................6
SECTION 3.09. Permits; Compliance........................................................................7
SECTION 3.10. Financial Statements.......................................................................7
SECTION 3.11. Absence of Certain Changes or Event........................................................7
SECTION 3.12. No Undisclosed Liabilities.................................................................8
SECTION 3.13. Absence of Litigation......................................................................8
SECTION 3.14. Taxes......................................................................................9
SECTION 3.15. Employee Matters..........................................................................10
SECTION 3.16. Brokers...................................................................................10
SECTION 3.17. Illegal Payments..........................................................................10
SECTION 3.18. Leased Properties.........................................................................10
SECTION 3.19. Certain Material Contracts................................................................10
SECTION 3.20. Competing Interests.......................................................................11
SECTION 3.21. Material Customers and Suppliers..........................................................12
SECTION 3.22. Intellectual Property.....................................................................12
SECTION 3.23. Investor Representations..................................................................13
SECTION 3.24. Year 2000 Compliance......................................................................14
SECTION 3.25. Insurance.................................................................................14
SECTION 3.26. Employee Benefit Plans....................................................................14
SECTION 3.27. Information Supplied......................................................................17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER........................................................17
SECTION 4.01. Organization and Qualification............................................................17
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SECTION 4.02. Authority.................................................................................17
SECTION 4.03. No Conflict; Required Filings and Consents................................................17
SECTION 4.04. SEC Documents.............................................................................18
SECTION 4.05. Financial Statements......................................................................18
SECTION 4.06. Tax Matters...............................................................................18
SECTION 4.07. Valid Issuance of Buyer Common Stock......................................................18
SECTION 4.08. Brokers...................................................................................19
SECTION 4.09. Absence of Litigation.....................................................................19
SECTION 4.10. Absence of Certain Changes or Events......................................................19
ARTICLE V COVENANTS......................................................................................19
SECTION 5.01. Affirmative Covenants of the Company......................................................19
SECTION 5.02. Negative Covenants of the Company.........................................................20
SECTION 5.03. Restrictive Covenant......................................................................20
SECTION 5.04. Confidential Information..................................................................22
SECTION 5.05. Access and Information....................................................................22
SECTION 5.06. Appropriate Action; Consents; Filings.....................................................23
SECTION 5.07. Tax Treatment.............................................................................23
SECTION 5.08. Public Announcements......................................................................23
SECTION 5.09. Fees, Expenses and Other Payments.........................................................24
SECTION 5.10. Employment Agreement......................................................................24
SECTION 5.11. Option Agreement..........................................................................24
SECTION 5.12. Xxxxxx Name...............................................................................24
SECTION 5.13. Business Location.........................................................................24
SECTION 5.14. Company Liabilities.......................................................................25
SECTION 5.15. Company Financials........................................................................25
ARTICLE VI CLOSING CONDITIONS.............................................................................25
SECTION 6.01. Conditions to Obligations of Buyer........................................................25
SECTION 6.02. Conditions to Obligations of the Company and the Shareholder..............................26
ARTICLE VII INDEMNIFICATION.............................................................................27
SECTION 7.01. Indemnification of Buyer..................................................................27
SECTION 7.02. Survival..................................................................................28
SECTION 7.03. Notice....................................................................................28
SECTION 7.04. Defense of Claims.........................................................................29
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER..............................................................29
SECTION 8.01. Termination...............................................................................29
SECTION 8.02. Effect of Termination.....................................................................30
SECTION 8.03. Amendment.................................................................................30
SECTION 8.04. Waiver....................................................................................30
ARTICLE IX REGISTRATION RIGHTS............................................................................31
SECTION 9.01. Registration Statement....................................................................31
SECTION 9.02. Limitations on Sale.......................................................................31
SECTION 9.03. Information...............................................................................31
SECTION 9.04. Expenses..................................................................................32
SECTION 9.05. Indemnification...........................................................................32
ARTICLE X GENERAL PROVISIONS.............................................................................33
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SECTION 10.01. Notices..................................................................................33
SECTION 10.02. Certain Definitions......................................................................33
SECTION 10.03. Headings.................................................................................34
SECTION 10.04. Severability.............................................................................34
SECTION 10.05. Entire Agreement.........................................................................35
SECTION 10.06. Assignment...............................................................................35
SECTION 10.07. Parties in Interest......................................................................35
SECTION 10.08. Specific Performance.....................................................................35
SECTION 10.09. Failure or Indulgence Not Waiver; Remedies Cumulative....................................35
SECTION 10.10. Further Assurances.......................................................................35
SECTION 10.11. Governing Law; Venue.....................................................................35
SECTION 10.12. Counterparts.............................................................................36
EXHIBITS:
Exhibit A Form of Promissory Note
Exhibit B Form of Employment Agreement
Exhibit C Form of Company Closing Certificate
Exhibit D Form of Legal Opinion of Company's Counsel
Exhibit E Form of Legal Opinion of Buyer's Counsel
Exhibit F Form of Buyer Closing Certificate
SCHEDULES:
3.06(a) Assets
3.06(b) Liens
3.08(a) No Conflict; Required Filings and Consents
3.10(a) Financial Statements
3.10(b) Operating Statistics
3.12 Liabilities
3.14 Taxes
3.15 Employees
3.16 Brokers
3.17 Leased Properties
3.19(a) Materials Contracts
3.19(b) Non-Performance; Breaches
3.19(c) Terms of Material Contracts
3.19(d) Transfer of Material Contracts
3.21 Material Customers and Suppliers
3.22(b) Intellectual Property Registrations
3.22(c) Intellectual Property Royalties
3.24 Year 2000 Compliance
3.25 Insurance
3.26 Employee Benefit Plans
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EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of July 29, 1999 (this
"Agreement"), is by and among CNET, Inc., a Delaware corporation ("Buyer"),
Xxxxxx International, Inc., a Colorado corporation (the "Company"), and Xxxx
Xxxxxx, the sole shareholder of the Company (the "Shareholder").
WHEREAS, Buyer and the Company have determined that the merger of the
Company with and into Buyer ("Merger"), with Buyer surviving, and conversion of
the issued and outstanding shares of common stock of the Company, no par value
(the "Company Common Stock") into the right to receive shares of common stock of
Buyer, $.0001 par value (the "Buyer Common Stock"), on the terms and subject to
the conditions of this Agreement and in accordance with the Colorado Business
Corporation Act ("Colorado Law") and the General Corporation Law of the State of
Delaware ("Delaware Law") would be advantageous and beneficial to their
respective corporations and stockholders;
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization under the provisions of section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"); and
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. On the terms and subject to the conditions
set forth in this Agreement, and in accordance with applicable federal and state
law, at the Effective Time (as defined in Section 1.02), the Company shall be
merged with and into Buyer. As a result of the Merger, the separate corporate
existence of the Company shall cease and Buyer shall continue as the surviving
corporation of the Merger (the "Surviving Corporation"). Certain terms used in
this Agreement (and not otherwise defined) are defined in Section 10.02.
SECTION 1.02. Closing; Closing Date; Effective Time. Unless this
Agreement is terminated pursuant to Section 8.01, and subject to the
satisfaction or waiver of the conditions set forth in Article VI, the
consummation of the Merger and the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Buyer as soon
as practicable (but in any event within five business days) after the
satisfaction or waiver of the conditions set forth in Article VI, or at such
other date, time and place as Buyer and the Company may agree; provided, that
the conditions set forth in Article VI shall have been satisfied or waived at or
prior to such time. The date on which the Closing takes place is referred to
herein as the "Closing Date." As promptly as practicable on the Closing Date,
the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger with the Secretary of State of the State of Delaware, in
such form as required by, and executed in
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accordance with the relevant provisions of, Delaware Law (the date and time of
such filing, or such later date or time agreed upon by Buyer and the Company and
set forth therein, being the "Effective Time"). As promptly as practicable on
the Closing Date, the parties shall also file a certificate of merger with the
Secretary of State of the State of Colorado, in such form as required by, and
executed in accordance with the relevant provisions of, Colorado Law.
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of Colorado Law
and Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges and
powers of the Company and Buyer will vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and the Buyer shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 1.04. Certificate of Incorporation; Bylaws. At the Effective
Time, the Certificate of Incorporation and bylaws of Buyer, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and bylaws of the Surviving Corporation unless and until amended
as provided therein and pursuant to Delaware Law.
SECTION 1.05. Directors and Officers. The directors and officers of
Buyer immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation at the Effective Time, each to hold office
in accordance with the bylaws of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Consideration; Conversion and Cancellation of Securities.
At the Effective Time, by virtue of the Merger and without any action on the
part of Buyer, the Company or their respective stockholders:
(a) Subject to the other provisions of this Article II, each share
of Company Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into 4.6 shares of Buyer Common Stock (the
"Conversion Ratio"), which equal Ten Million Dollars ($10,000,000) divided by
$43.475 (the average closing price of the Buyer Common Stock on the Nasdaq
National Market, as reported in the West Coast Edition of the Wall Street
Journal, for the five trading days immediately prior to (but not including) the
date of this Agreement), divided by 50,000, which is the number of outstanding
shares of Company Common Stock immediately prior to the Effective Time.
(b) All shares of Company Common Stock shall cease to be
outstanding and shall automatically be canceled and retired, and each
certificate previously evidencing the Company Common Stock outstanding
immediately prior to the Effective Time (the "Converted Shares") shall
thereafter represent the right to receive Buyer Common Stock in accordance with
this Article II. The Shareholder shall cease to have any rights with respect to
such Converted
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Shares except as otherwise provided herein or by law. Certificates previously
evidencing Converted Shares shall be exchanged for Buyer Common Stock upon the
surrender of such certificates in accordance with the provisions of Section
2.02, without interest.
SECTION 2.02. Exchange and Surrender of Certificates.
(a) The Shareholder shall be entitled to receive, upon surrender
to Buyer or its transfer agent of certificates previously evidencing Converted
Shares, as soon as practicable after the Closing Date, a certificate
representing the Converted Shares so surrendered, registered in the name of the
Shareholder. Until so surrendered and exchanged, each certificate previously
evidencing Converted Shares shall represent solely the right to receive Buyer
Common Stock.
(b) All shares of Buyer Common Stock issued upon the surrender for
exchange of certificates previously representing Converted Shares in accordance
with the terms hereof (including any adjustments pursuant to Section 2.02(c))
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Converted Shares. At and after the Effective Time, there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of Company Common Stock that was outstanding immediately
prior to the Effective Time. If, after the Effective Time, certificates which
previously evidenced Converted Shares are presented to the Surviving Corporation
for any reason, they shall be canceled and exchanged as provided in this Article
II.
(c) No certificates or scrip evidencing fractional shares of Buyer
Common Stock shall be issued upon the surrender for exchange of certificates,
and such fractional share interests will not entitle the owner thereof to any
rights as a stockholder of Buyer. In lieu of any such fractional shares, the
number of shares of Buyer Common Stock issuable to any Shareholder in connection
with the Merger shall be rounded to the nearest whole share.
(d) Buyer shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any former holder
of Converted Shares such amounts as Buyer (or any affiliate thereof) is required
to deduct and withhold with respect to the making of such payment under the
Code, or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by Buyer, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the former holder of the
Converted Shares in respect of which such deduction and withholding was made by
Buyer.
SECTION 2.03. Other Consideration.
(a) $5,000,000 will be paid to the Shareholder at the Closing by
wire transfer of immediately available funds (to accounts specified in writing
by the Shareholder or the Company to CNET at least two days prior to the
Closing); and
(b) $5,000,000 will be paid in the form of a promissory note
payable to the Shareholder on the two year anniversary of the Closing by wire
transfer of immediately available funds (to accounts specified in writing by the
Shareholder to CNET at least two days prior to
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such date) in the form of Exhibit A attached hereto (the "Promissory Note"). The
Promissory Note will bear seven percent annual compounded interest.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SHAREHOLDER
The Company and the Shareholder hereby jointly and severally represent
and warrant to Buyer that:
SECTION 3.01. Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Colorado, has all requisite power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of the business conducted by it or the ownership or leasing of its
properties makes such qualification necessary. The Company is not required to be
qualified to do business as a foreign corporation in any jurisdiction. There are
no assumed names under which the Company operates.
SECTION 3.02. Articles and Bylaws. The Company has furnished to Buyer
true, complete and correct copies of its Articles of Incorporation and bylaws,
in each case as amended or restated, of the Company. The Company is not in
violation of any of the provisions of its Articles of Incorporation or bylaws.
SECTION 3.03. Capitalization.
(a) The authorized capital stock of the Company consists of
1,000,000 shares of Company Common Stock, of which 50,000 shares are issued and
outstanding. All of the outstanding capital stock of the Company is held of
record and beneficially owned by the Shareholder, free and clear of all security
interests, liens, claims, pledges, agreements, charges, or other encumbrances (a
"Lien") of any nature whatsoever. All of the outstanding capital stock of the
Company is duly authorized, validly issued in compliance with all applicable
laws, and are fully paid and nonassessable and free of preemptive or similar
rights created by statute, the Articles of Incorporation or bylaws of the
Company or any agreement to which the Company is a party or bound.
(b) No shares of capital stock of the Company are reserved for any
purpose or held in treasury by the Company and, there are no outstanding
options, warrants, convertible or exchangeable securities or other rights,
agreements, arrangements or commitments of any character obligating the
Shareholder or the Company, directly or indirectly, to grant, issue, sell,
purchase, acquire or otherwise transfer or deliver any shares of capital stock
or other equity interest in, or any agreement, document, instrument or
obligation convertible or exchangeable therefore, the Company.
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(c) There are no obligations, contingent or otherwise, of the
Company to (i) repurchase, redeem or otherwise acquire any shares of the capital
stock of the Company or (ii) provide material funds to, or make any material
investment in (in the form of a loan, capital contribution or otherwise), or
provide any guarantee with respect to the obligations of, any other person.
There are no agreements, arrangements or commitments of any character
(contingent or otherwise) pursuant to which any person is or may be entitled to
receive any payment based on the revenues or earnings, or calculated in
accordance therewith, of the Company. There are no voting trusts, proxies or
other agreements or understandings to which the Company is a party or by which
the Company is bound with respect to the voting of any shares of capital stock
of the Company.
(d) The Company (i) does not directly or indirectly own, (ii) has
not agreed to purchase or otherwise acquire and (iii) does not hold any interest
convertible into or exchangeable or exercisable for, greater than 1% of the
capital stock (or equivalent equity interest) of any corporation, partnership,
joint venture or other business association or entity.
SECTION 3.04. Authority. The Company has all requisite corporate power
and authority to (i) execute and deliver this Agreement and all other
agreements, certificates and instruments to be executed by the Company in
connection with or pursuant to this Agreement (collectively, the "Company
Documents"); (ii) perform its obligations under the Company Documents and (iii)
to consummate the transactions contemplated by the Company Documents. The
Shareholder has the requisite legal capacity, power and authority to enter into
the Company Documents and to perform his obligations under the Company
Documents, as applicable. The execution, delivery and performance of the Company
Documents by the Company and the Shareholder and the consummation by the Company
and the Shareholder of the transactions contemplated by the Company Documents,
as applicable, have been duly authorized by all necessary action, and no other
proceedings on the part of the Company or the Shareholder are necessary to
authorize the Company Documents or to consummate the transactions contemplated
hereby. This Agreement has been, and at the Closing the other Company Documents
will be, duly executed and delivered by the Company and the Shareholder. This
Agreement is, and, upon execution and delivery by the Company and the
Shareholder, as applicable, at the Closing each of the other Company Documents
will be, a legal, valid and binding obligation of the Company and the
Shareholder enforceable against the Company and the Shareholder in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting the enforcement of creditors' rights generally and subject to general
principles of equity (regardless of whether enforcement is sought in a
proceeding of law or in equity).
SECTION 3.05. Subsidiaries and Other Interests. The Company has no
subsidiaries and does not own any equity or debt interest or any form of
proprietary interest in any individual, corporation, partnership, Governmental
Entity (as defined in Section 3.08) or other entity, or any obligation, right or
option to acquire any such interest.
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SECTION 3.06. Title to Assets.
(a) Set forth in Schedule 3.06(a) is a complete list of all assets
of the Shareholder or the Company used in or associated with the business of the
Company (the "Business").
(b) The Company has good and marketable title to all of the assets
it purports to own, and owns all of such assets free and clear of any
Liabilities (as defined in Section 3.12) and any Liens, other than (i) statutory
liens securing current taxes and other obligations that are not yet delinquent,
(ii) minor imperfections of title and encumbrances that do not materially
detract from or interfere with the present use or value of such properties and
(iii) as set forth on Schedule 3.06(b). The Company holds a valid leasehold
interest in all of the leased assets of the Company.
SECTION 3.07. Condition of Assets. All of the assets of the Company,
including any assets held under leases or licenses, are in good condition and
repair, ordinary wear and tear excepted, and are in good working order and have
been properly and regularly maintained.
SECTION 3.08. No Conflict; Required Filings and Consents.
(a) Except as set forth on Schedule 3.08 (a), the execution and
delivery of this Agreement by the Company and the Shareholder does not, and the
consummation of the transactions contemplated hereby will not (i) conflict with
or violate the Articles of Incorporation or bylaws, in each case as amended or
restated, of the Company, (ii) conflict with or violate any federal, state,
foreign or local law, statute, ordinance, rule, regulation, order, judgment, or
decree (collectively, "Laws") applicable to the Shareholder or the Company or by
which any of their properties or assets is bound or subject or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of any Lien or encumbrance on any of the
properties or assets of the Company pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Shareholder or the Company is a party or
by or to which the Shareholder or the Company or any of their properties or
assets is bound or subject. The Board of Directors of the Company has taken or
caused to be taken all actions necessary under Colorado Law, including approving
the transactions contemplated by this Agreement and taking appropriate actions
under Colorado Law or any other applicable stockholder protection laws, to
ensure that any restrictions on business combinations or the owning or voting of
the capital stock of the Company do not, and will not, apply with respect to or
as a result of the transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by the Company
and the Shareholder does not, and consummation of the transactions contemplated
hereby will not, require the Company or the Shareholder to obtain any consent,
license, permit, approval, waiver, authorization or order of, or to make any
filing with or notification to, any Governmental Entity,
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except for the filing and recordation of appropriate merger documents as
required by Colorado Law and Delaware Law.
SECTION 3.09. Permits; Compliance. The Company does not require any
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted. The Company and its assets and operations are currently and have at
all times been in compliance with all Laws applicable to the Company and its
operations or by or to which any of its assets is bound or subject, including
without limitation all Laws related to environmental protection, employee
benefits, labor and employment and occupational health and safety. The Company
has not received from any Governmental Entity any written notification with
respect to possible violations of Laws.
SECTION 3.10. Financial Statements.
(a) Schedule 3.10(a) includes (i) the balance sheet data of the
Company as of December 31, 1998, and the statements of operations, retained
earnings and cash flows of the Company for the year ended on such date (the
"Year End Financial Statements") and (ii) the unaudited balance sheet of the
Company (the "Latest Balance Sheet") as of June 30, 1999 (the "Latest Balance
Sheet Date"), and the unaudited statements of operations and retained earnings
for the six month period ended on such date. These financial statements have
been prepared from the books and records of the Company, which accurately and
fairly reflect the transactions of, acquisitions and dispositions of assets by,
and incurrence of Liabilities by the Company.
(b) Each of the foregoing financial statements fairly present in
all material respects the financial position of the Company as of the respective
dates thereof and the results of its operations and cash flows for the periods
indicated, except that the interim financial statements are subject to normal
and recurring year-end adjustments, which will not be material individually or
in the aggregate. The Year End Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the applicable period.
(c) Schedule 3.10(c) sets forth certain statistics concerning the
operation of the Company, which are accurate (subject to the margins of error
indicated on such schedule for certain of such statistics).
(d) All accounts receivable reflected in the Latest Balance Sheet
or generated since the Latest Balance Sheet Date arose in the ordinary course of
business and are fully collectible in the ordinary course of business, without
resort to litigation, at the face amount thereof less any reserve reflected in
the Latest Balance Sheet, and will not be subject to counterclaim, set-off or
other reduction.
SECTION 3.11. Absence of Certain Changes or Events. Since the Latest
Balance Sheet Date, the Company has conducted its business only in the ordinary
course and in a manner consistent with past practice and there has not been: (a)
any damage, destruction or loss (whether
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or not covered by insurance) with respect to any material assets of the Company;
(b) any change by the Company in its accounting methods, principles or
practices; (c) any declaration, setting aside or payment of any dividends or
distributions in respect of shares of the capital stock of the Company or any
redemption, purchase or other acquisition by the Company of any of its
securities; (d) any increase in the benefits under, or the establishment or
amendment of, any bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing or other employee benefit plan, or any increase in
the compensation payable or to become payable to directors, officers or
employees of the Company, except for annual bonuses or merit increases in
salaries or wages in the ordinary course of business and consistent with past
practice; (e) any payment or other transfer of assets by the Company to any
Shareholder, other than compensation payments in the ordinary course of business
and consistent with past practice; (f) any revaluation by the Company of any of
its assets, including the writing down or off of notes or accounts receivable,
other than in the ordinary course of business and consistent with past
practices; (g) any entry by the Company into any commitment or transaction
material to the Company including, without limitation, incurring or agreeing to
incur capital expenditures in excess of $10,000; (h) any incurrence of
indebtedness for borrowed money other than trade payables incurred in the
ordinary course of business; (i) the termination of employment (whether
voluntary or involuntary) of any officer or key employee of the Company; or (j)
any change, occurrence or circumstance having or reasonably likely to have,
individually or in the aggregate, a material adverse effect on the business,
operations, assets, financial condition or results of operations of the Company.
SECTION 3.12. No Undisclosed Liabilities. The Company does not have any
direct or indirect debts, liabilities or obligations, whether known or unknown,
absolute, accrued, contingent or otherwise ("Liabilities"), except (a)
Liabilities fully reflected in the Latest Balance Sheet and related financial
statement notations; (b) accounts payable and Liabilities incurred in the
ordinary course of business and consistent with past practice since the Latest
Balance Sheet Date; (c) obligations to be performed in the ordinary course of
business, consistent with past practice, under the Material Contracts (as
defined in Section 3.19) or under agreements not required to be disclosed
pursuant to Section 3.19; and (d) Liabilities described in Schedule 3.12. Except
as set forth on Schedule 3.12, the Company does not and will not have any
obligations for severance costs, vacation pay or sick leave associated with any
employee of the Company, other than obligations that are satisfied prior to the
Effective Time.
SECTION 3.13. Absence of Litigation. There is no claim, action, suit,
litigation, proceeding, arbitration or investigation of any kind, at law or in
equity (including actions or proceedings seeking injunctive relief), pending or,
to the Company's knowledge, threatened against the Company or any assets or
rights of the Company. The Company is not subject to any continuing order of,
consent decree, settlement agreement or other similar written agreement with,
or, continuing investigation by, any Governmental Entity, or any judgment,
order, writ, injunction, decree or award of any Government Entity or arbitrator,
including, without limitation, cease-and-desist or other orders.
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SECTION 3.14. Taxes.
(a) All returns and reports ("Tax Returns") of or with respect to
any Tax which is required to be filed on or before the Closing Date (taking into
account extensions of filing dates) by or with respect to the Company have been
or will be duly and timely filed. All items of income, gain, loss, deduction and
credit or other items required to be included in each such Tax Return have been
or will be so included and all information provided in each such Tax Return is
true, correct and complete. All Taxes which have become or will become due with
respect to the period covered by each such Tax Return have been or will be
timely paid in full, other than any Taxes for which adequate reserves have been
established on the Latest Balance Sheet. All withholding Tax requirements
imposed on or with respect to the Company have been or will be satisfied in full
in all respects. Except as described on Schedule 3.14, no penalty, interest or
other charge is or will become due with respect to the late filing of any such
Tax Return or late payment of any such Tax.
(b) There are no Tax Returns of or with respect to the Company
with extended or waived statutes of limitations that have not been audited by
the applicable governmental authority.
(c) There is not in force any extension of time with respect to
the due date for the filing of any Tax Return of or with respect to the Company
or any waiver or agreement for any extension of time for the assessment,
collection or payment of any Tax of or with respect to the Company.
(d) The Company has previously delivered to Buyer true and
complete copies of each written Tax allocation or sharing agreement and a true
and complete description of each unwritten Tax allocation or sharing arrangement
affecting the Company, if any.
(e) There are no pending audits, actions, proceedings,
investigations, disputes or claims with respect to or against the Company for or
with respect to any Taxes of the Company; no assessment, deficiency or
adjustment has been assessed or proposed with respect to any Tax Return of or
with respect to the Company; and there is no reasonable basis on which any claim
for material Taxes can be asserted against the Company.
(f) Except for statutory liens for current Taxes not yet due, no
liens for Taxes exist upon the assets of any of the Company.
(g) The Company will not be required to include any amount in
income for any taxable period beginning after the Closing Date as a result of a
change in accounting method for any taxable period ending on or before the
Closing Date or pursuant to any agreement with any Tax authority with respect to
any such taxable period.
(h) None of the transactions contemplated by this Agreement will
result in any Tax liability or the recognition of any item of income or gain to
the Company.
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(i) None of the property of the Company is held in an arrangement
for which partnership Tax Returns are being filed, and the Company does not own
any interest in any controlled foreign corporation (as defined in section 957 of
the Code), passive foreign investment company (as defined in section 1296 of the
Code) or other entity the income of which is required to be included in the
income of the Company.
(j) The Company has never been subject to Taxes in any
jurisdiction outside the United States.
SECTION 3.15. Employee Matters. Set forth on Schedule 3.15 is a
complete list of all current employees of the Company, including date of
employment, current title and compensation. The Company has no collective
bargaining, union or labor agreements, contracts or other arrangements with any
group of employees, labor union or employee representative and to the knowledge
of the Company there are no organization efforts currently being made or
threatened by or on behalf of any labor union with respect to employees of the
Company. The Company has not experienced, and the Company does not know or have
reasonable grounds to know of any basis for, any strike, material labor trouble,
work stoppage, slow down or other interference with or impairment of the
Business. The Company has not experienced, and the Company does not know or have
reasonable grounds to know of any basis for any strike, material labor trouble,
work stoppage, slow down or other interference with or impairment of the
Business.
SECTION 3.16. Brokers. Except as set forth on Schedule 3.16, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
SECTION 3.17. Illegal Payments. Neither the Company, the Shareholder
nor any of the their agents or other representatives, or any affiliate or
immediate family member of any of the foregoing has (a) used any funds of the
Company for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity; (b) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (c) made any other unlawful payment.
SECTION 3.18. Leased Properties. Schedule 3.18 sets forth a description
(including the street address) of all real property leased by the Company (the
"Leased Properties"). No premises other than the Leased Properties are used in
the business of the Company.
SECTION 3.19. Certain Material Contracts.
(a) Schedule 3.19(a) lists each agreement and arrangement (whether
written or oral and including all amendments thereto) to which the Company is a
party or a beneficiary or by which the Company is bound that is material,
directly or indirectly, to the business of the Company (collectively, the
"Material Contracts"), including without limitation (i) any licensing,
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advertising, promotion, consulting or services agreements pursuant to which the
Company earns revenue; (ii) any licensing, supply, or services agreements
pursuant which the Company is entitled or obligated to acquire any assets or
services from any person; (iii) any insurance policies; (iv) any employment,
consulting, non-competition, separation, collective bargaining, union or labor
agreements or arrangements; (v) any agreement evidencing, securing, guarantying
or otherwise relating to any indebtedness for which the Company has any
Liability; (vi) any agreement with or for the benefit of the Shareholder, or any
affiliate or family member thereof (which agreements are specifically identified
as such in Schedule 3.19(a)); (vii) any real property leases or any capital or
operating leases or conditional sales agreements relating to vehicles or
equipment; and (viii) any other agreement or arrangement pursuant to which the
Company could be required to make or be entitled to receive aggregate payments
in excess of $10,000. In addition, Schedule 3.19(a) lists the material terms
(including the date on which such agreements terminate) of each of the Company's
contracts with the Company's ten largest customers as measured by revenues for
the twelve months ending on the Latest Balance Sheet Date. The Material
Contracts listed on Schedule 3.19(a) pursuant to which the Company earns revenue
are categorized by amount of annual revenue earned by the Company for each such
Material Contract for the twelve months ending on the Latest Balance Sheet Date.
(b) Except as set forth on Schedule 3.19(b), the Company has
performed in all material respects all of its obligations under each Material
Contract and there exists no breach or default (or event that with notice or
lapse of time would constitute a breach or default) under any Material Contract
on the part of the Company or, to the Company's knowledge, on the part of any
other party thereto, under any Material Contract.
(c) Each Material Contract is valid, binding and in full force and
effect and enforceable in accordance with its respective terms. There has been
no termination or, to the Company's knowledge, threatened termination or notice
of default under any Material Contract. Except as set forth on Schedule 3.19(c),
none of the terms of any Material Contract vary materially from the terms of the
form of data supply license agreement previously provided by the Company to
Buyer.
(d) Except as set forth on Schedule 3.19(d), (i) each Material
Contract will be automatically transferred from the Company to Buyer upon
Closing without any party to a Material Contract providing prior written consent
to such transfer and (ii) such transfer will not result in any party to a
Material Contract having the right to terminate any Material Contract.
SECTION 3.20. Competing Interests. None of the Shareholder, the
Company, nor any director, officer, agent or employee of the Company, or any
affiliate or immediate family member of any of the foregoing (a) owns, directly
or indirectly, an interest in any entity that is a competitor, customer or
supplier of the Company or that otherwise has material business dealings with
the Company or (b) is a party to, or otherwise has any direct or indirect
interest opposed to the Company under, any Material Agreement or other business
relationship or arrangement material to the Company provided that the foregoing
will not apply to any investment in publicly traded securities constituting less
than 1% of the outstanding securities in such class.
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SECTION 3.21. Material Customers and Suppliers. Indicated on Schedule
3.19(a) are the Company's thirty largest online customers and ten largest print
customers as measured by revenues for the twelve months ending on the Latest
Balance Sheet Date (collectively, the "Material Customers"), and the amount of
revenues attributable to each Material Customer during the twelve months ending
on the Latest Balance Sheet. Also indicated on Schedule 3.19(a) is a complete
list of the Company's six largest suppliers (the "Material Suppliers") by dollar
volume of supplied goods and/or services for the twelve months ending on the
Latest Balance Sheet Date. Except as set forth in Schedule 3.21, none of the
Material Customers or Material Suppliers has threatened to, or notified the
Company or any of the Sellers of any intention to, terminate or materially alter
its relationship with the Company, and there has been no material dispute with a
Material Customer or Material Supplier since January 1, 1998.
SECTION 3.22. Intellectual Property.
(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) artwork, photographs, editorial
copy and materials, formats and designs, including without limitation all
content currently or previously displayed through Internet sites operated by the
Company; (v) 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
the Company) 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) Except as set forth on Schedule 3.22(b), there are no
registrations or applications for registration of any Intellectual Property or
any licenses (to or from the Company) with respect to any registered
Intellectual Property.
(c) The Company owns or has the right to use pursuant to Material
Contracts all Intellectual Property used by the Company in connection with or
necessary to the operation of its business, without infringing on or otherwise
acting adversely to the rights or claimed rights of any person. Except as set
forth on Schedule 3.22(c), the Company is not obligated to pay any royalty or
other consideration to any person in connection with the use of any such
Intellectual Property. Schedule 3.22(c) also lists the dollar amount that the
Company is obligated to pay
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pursuant to any royalty or any other consideration the Company is obligated to
pay to any person in connection with the use of any such Intellectual Property.
(d) No claim has been asserted against the Company to the effect
that the use of any Intellectual Property by the Company infringes the rights of
any person. To the Company's knowledge, no other person is currently infringing
upon the rights of the Company with respect to the Company's Intellectual
Property.
(e) The Intellectual Property owned by the Company as of the
Closing are sufficient as of the Closing Date for the uses of the business
conducted by the Company. The Company has obtained all licenses, royalties and
consents necessary to enable Buyer to use the Intellectual Property after the
Closing in the manner contemplated by this Agreement.
SECTION 3.23. Investor Representations.
(a) The Shareholder understands that the Buyer Common Stock to be
issued to him in the Merger has not been registered under the Securities Act of
1933, as amended (the "Securities Act") in reliance upon the exemption provided
by Section 4(2) of the Securities Act for transactions by an issuer not
involving a public offering and will constitute "restricted securities" under
the Securities Act. Consequently, the Shareholder will be able to resell such
Buyer Common Stock only (i) pursuant to an effective registration statement
covering such resale or (ii) pursuant to an exemption from registration, such as
the exemption provided under rule 144 under the Securities Act ("Rule 144").
(b) The Shareholder (i) has a preexisting personal or business
relationship with the Company, (ii) by reason of the Shareholder's business or
financial experience or the business or financial experience of the
Shareholder's professional advisors who are unaffiliated with and who are not
compensated by Buyer or any affiliate or selling agent of Buyer, directly or
indirectly, could be reasonably assumed to have the capacity to protect such
Shareholder's interests in connection with this Agreement, and (iii) is
acquiring the Buyer Common Stock for investment for his account, not as nominee
or agent, and not with a view to the resale or distribution of any part thereof
in a manner that would violate the registration provisions of the Securities Act
or any other applicable securities laws.
(c) The Shareholder acknowledges receipt of the SEC Documents (as
defined in Section 4.04) and acknowledges that he has been given the opportunity
to ask questions of representatives of Buyer and to receive reasonable
additional information to the extent requested in connection with his evaluation
of an investment in the Buyer Common Stock.
(d) The Shareholder acknowledges that the Buyer Common Stock will
bear a restrictive legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
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AMENDED, OR ANY STATE SECURITIES LAWS, AND THE HOLDER HEREOF CANNOT
MAKE ANY SALE, ASSIGNMENT, OR OTHER TRANSFER OF SUCH SECURITIES WITHOUT
REGISTRATION UNDER OR EXEMPTION FROM SUCH ACTS AND LAWS. THE ISSUER MAY
REQUIRE EVIDENCE OF SUCH REGISTRATION OR EXEMPTION PRIOR TO ANY SUCH
TRANSFER."
SECTION 3.24. Year 2000 Compliance. All hardware, firmware, software
and computer systems of the Company and, to the Company's knowledge, of the
Company's material customers and material suppliers are, or will be by December
1, 1999, Year 2000 Compliant (as defined below) and shall continue to function
in accordance with their intended purpose without material error or material
interruption as a result of the transition to the year 2000. Schedule 3.24
includes a reasonable estimate of the additional costs, if any, that the Company
will incur to become Year 2000 Compliant. As used herein, "Year 2000 Compliant"
means, with respect to any entity, that the hardware, firmware, software and
computer systems of such entity (i) will completely and accurately address,
produce, store and calculate data involving dates before, on and after January
1, 2000 and will not produce abnormally ending or incorrect results involving
such dates as used in any forward or regression dated based functions; and (ii)
will provide that date-related functionalities and data fields include the
indication of century and millennium and will perform calculations that involve
a four-digit year.
SECTION 3.25. Insurance. Set forth in Schedule 3.25 is a complete and
accurate list of all primary, excess and umbrella policies, bonds and other
forms of insurance currently owned or held by or on behalf of and/or providing
insurance coverage to the Company and its businesses, properties and assets (and
its directors, officers, salespersons, agents or employees). All such policies
are in full force and effect. The Company has not received a notice of default
under any such policy and has not received written notice of any pending or
threatened termination or cancellation, coverage limitation or reduction, or
material premium increase with respect to any such policy. Schedule 3.25 also
sets forth a complete and accurate summary of all of the self-insurance coverage
provided by the Company. No letters of credit have been posted and no cash has
been restricted to support any reserves for insurance. The Company's insurance
policies are issued by insurers of recognized responsibility and insure the
Company and its business, properties and assets against such losses and risks,
and in such amounts, as are customary in the case of corporations of established
reputation engaged in the same or similar businesses and similarly situated.
SECTION 3.26. Employee Benefit Plans.
(a) Set forth in Schedule 3.26 attached is a complete and correct
list of all "Employee Benefit Plans" (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), all plans or
policies providing for "fringe benefits" (including but not limited to vacation,
paid holidays, personal leave, employee discounts, educational benefits or
similar programs), and each other bonus, incentive compensation, deferred
compensation, profit sharing, stock, severance, retirement, health, life,
disability, group insurance, employment, stock option, stock purchase, stock
appreciation right,
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supplemental unemployment, layoff, consulting, or any other similar plan,
agreement, policy or understanding (whether written or oral, qualified or
nonqualified, currently effective or terminated), and any trust, escrow or other
agreement related thereto, which (i) is or has been established, maintained or
contributed to by the Company or any ERISA Affiliate or with respect to which
the Company or any ERISA Affiliate has any liability, or (ii) provides benefits,
or describes policies or procedures applicable, to any officer, employee,
director, former officer, former employee or former director of the Company or
any ERISA Affiliate, or any dependent thereof, regardless of whether funded
(each, an "Employee Plan," and collectively, the "Employee Plans"). The term
"ERISA Affiliate" shall mean any corporation, trade or business the employees of
which, together with the employees of the Company, are required to be treated as
employed by a single employer under the provisions of ERISA or Code Section 414.
(b) With respect to each "Employee Benefit Plan" that is or has
been at any time within six years prior to the Closing maintained or contributed
to, by the Company or any ERISA Affiliate, or with respect to which the Company
or any ERISA Affiliate has or has had liability at any time within six years
prior to the Closing (the "Controlled Group Plans"):
(i) there is no Controlled Group Plan that is a "defined
benefit plan" (as defined in Section 3(35) of ERISA); a "multiemployer
plan" or a "multiple employer plan" (as such terms are defined in
Sections 3(37)(A) and 3(40)(A) of ERISA);
(ii) there are no material unfunded liabilities, and each
Controlled Group Plan could be terminated as of the Closing with no
liability to Buyer, the Shareholder or any ERISA Affiliate;
(iii) no withdrawal liability, within the meaning of ERISA
Section 4201 has been incurred that has not been satisfied; no
liability to the PBGC has been incurred by any ERISA Affiliate or the
Sellers, which liability has not been satisfied; no accumulated funding
deficiency, whether or not waived, within the meaning of Section 302 of
ERISA or Code Section 412 has been incurred; and all contributions to
such Controlled Group Plans required by ERISA Section 302 and Code
Section 412 have been timely made;
(iv) each Controlled Group Plan has been operated in
compliance with ERISA, applicable tax qualification requirements and
all other applicable laws;
(v) each Controlled Group Plan intended to qualify under
Code Section 401(a) (a) satisfied in form the requirements of such
section except to the extent amendments are not required by law to be
made until after the Closing; (b) has received a ruling or
determination letter that such Controlled Group Plan qualifies under
Internal Revenue Code Section 401(a); and (c) nothing has occurred in
operation and/or form since the date of such determination letter that
may adversely affect the qualification of such Controlled Group Plan;
(vi) there is no Controlled Group Plan that is subject to
Title IV of ERISA or the funding requirements of Code Section 412; and
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(vii) as to any Controlled Group plan intended to qualify
under Code Section 401, there has been no termination or partial
termination of the Controlled Group Plan within the meaning of Section
411(d)(3) of the Code.
(c) With respect to each Employee Benefit Plan, the Shareholder
has furnished to Buyer true, correct and complete copies of (i) the plan
documents (including amendments and summary plan descriptions); (ii) the most
recent determination letter received from the Internal Revenue Service; (iii)
the annual reports (Form 5500) required to be filed for the three most recent
plan years of each such Employee Benefit Plan; (iv) all related trust
agreements, insurance contracts or other funding agreements which implement such
Employee Benefit Plan; and (v) all other documents, records or other materials
related thereto reasonably requested by Buyer.
(d) Except as set forth on Schedule 3.26 and to the extent of
coverage required under Code Section 4980B, no written or oral representations
have been made to any employee or officer or former employee or officer of the
Company promising or guaranteeing any coverage under any "employee welfare
benefit plan" (as defined in ERISA Section 3(1)) for any period of time beyond
the end of the current plan year.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) accelerate the time of payment or vesting, or increase
the amount of compensation (including amounts due under an Employee Benefit
Plan) due to any employee, officer, former employee or former officer of any
Buyer; (ii) require the Company to make a larger contribution to, or pay greater
benefits or provide owner rights under, any Employee Benefit Plan than it
otherwise would, or (iii) create or give rise to any additional vested rights or
serve as credits under any Employee Benefit Plan.
(f) No condition exists that would subject the Buyer, any ERISA
Affiliate or the Company to any excise tax, penalty tax or fine related to any
Employee Benefit Plan, including, but not limited to a violation of Section
406(a) or (b) of ERISA or any "prohibited transaction" (as defined in Code
Section 4975(c)(1)).
(g) There are no agreements or Employee Benefit Plan provisions
which will or may provide payments of money or other property, acceleration of
benefits, or provisions of other rights to any officer, employee, shareholder,
independent contractor or highly compensated individual, or other "disqualified
individual" within the meaning of Code Section 280G(c) which will be "parachute
payments" under Code Section 280G that are nondeductible to the Company or
subject to tax under Code Section 4999.
(h) Other than routine claims for benefits, there are no actions,
suits, claims, audits, or investigations pending or, to the Shareholder's
knowledge, threatened against, or with respect to, any of the Employee Benefit
Plans or their assets; and all contributions required to be made to the Employee
Benefit Plans have been made timely.
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(i) Each Employee Benefit Plan is in compliance with the
applicable requirements for reporting and disclosure to participants under ERISA
with respect to that Employee Benefit Plan and all required annual returns and
other reports and disclosures that each such Employee Benefit Plan is required
to file or furnish to governmental agencies, Employee Benefit Plan participants,
or Benefit Plan beneficiaries have been filed or furnished in accordance with
applicable law in a timely manner.
(j) All contributions and payments with respect to each Employee
Benefit Plan required pursuant to the terms of each Employee Benefit Plan, the
Code, ERISA or other applicable law have been made on a timely basis.
SECTION 3.27. Information Supplied. Without limiting any of the
representations and warranties contained herein, no written representation or
written warranty of the Company or the Shareholder and no statement by the
Company or the Shareholder contained in the Schedules to this Agreement contains
any untrue statement of material fact, or omits to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which such statements were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company and the Shareholder
that:
SECTION 4.01. Organization and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under Delaware Law and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of the business conducted by it or the ownership or leasing of its
properties makes such qualification necessary.
SECTION 4.02. Authority. Buyer has all requisite 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 by Buyer and the consummation by Buyer of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action of Buyer and no other corporate proceedings on the part of
Buyer are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Buyer and constitutes the legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms.
SECTION 4.03. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Buyer does
not, and the consummation of the transactions contemplated hereby will not (i)
conflict with or violate the certificate of incorporation or bylaws, in each
case as amended or restated, of Buyer, (ii) conflict
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with or violate any Laws applicable to Buyer or by which any of its properties
or assets is bound or subject, or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Buyer is a
party or by or to which Buyer or any of its properties is bound or subject.
(b) The execution and delivery of this Agreement by Buyer does
not, and the consummation of the transactions contemplated hereby will not,
require Buyer to obtain any consent, license, permit, approval, waiver,
authorization or order of, or to make any filing with or notification to, any
Governmental Entities, except for the filing and recordation of appropriate
merger documents as required by Colorado Law or Delaware Law and except for any
required filings under or related to federal or state securities laws or
regulations.
SECTION 4.04. SEC Documents. Buyer has filed all forms, reports and
documents required to be filed by Buyer with the SEC as of the date hereof and
Buyer has delivered to the Company and the Shareholder a true and complete copy
of Buyer's Annual Report on Form 10-K/A for the year ended December 31, 1998,
its quarterly reports on Form 10-Q for the quarter ended March 31, 1999, and its
definitive proxy statement for its annual meeting of stockholders held in 1999
(together, the "SEC Documents"). As of their respective dates, the SEC Documents
complied in all material respects with the applicable requirements of the
Exchange Act and the rules and regulations of the SEC thereunder, and none of
the SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
SECTION 4.05. Financial Statements. The financial statements of Buyer,
including the notes thereto, included in the SEC Documents (the "Buyer Financial
Statements") present fairly, in all material respects, the consolidated
financial position of Buyer as of their respective dates and the results of
Buyer's operations and cash flows for the respective periods, complied as to
form in all material respects with generally accepted accounting principles and
with the published rules and regulations of the SEC with respect thereto, and
have been prepared in accordance with United States generally accepted
accounting principles applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto). The Buyer Financial Statements fairly present the consolidated
financial condition and operating results of Buyer and its subsidiaries at the
dates and during the periods indicated therein (subject, in the case of
unaudited statements, to normal, recurring year-end adjustments). There has been
no material change in Buyer accounting policies except as described in the notes
to the Buyer Financial Statements.
SECTION 4.06. Tax Matters. Neither Buyer nor, to the knowledge of
Buyer, any of its affiliates has taken or agreed to take any action that would
prevent the Merger from constituting a reorganization qualifying under the
provisions of section 368(a) of the Code.
SECTION 4.07. Valid Issuance of Buyer Common Stock. The shares of Buyer
Common Stock to be issued pursuant to the Merger have been duly authorized and
reserved for
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issuance and, when issued in accordance with the terms of this Agreement will be
validly issued, fully paid, and non-assessable and not subject to any preemptive
rights and issued in compliance with all applicable federal or state securities
laws. The authorized, issued and outstanding capitalization of Buyer is as set
forth in the SEC Documents as of the dates of the financial statements or other
information included in the SEC Documents.
SECTION 4.08. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Buyer.
SECTION 4.09. Absence of Litigation. There is no action, suit,
proceeding, claim, arbitration or investigation pending, or as to which Buyer
has received written notice, which seeks to enjoin, alter or materially delay
any of the transactions contemplated by this Agreement.
SECTION 4.10. Absence of Certain Changes or Events. Since the date of
Buyer Financial Statements included in the SEC Documents, there has not been any
change, occurrence or circumstance having or reasonably likely to have,
individually or in the aggregate, a material and adverse effect on the financial
condition of Buyer; provided, however, that any occurrences directly
attributable to conditions affecting the economy in general or the Buyer's
industry in general or fluctuations in the stock market shall not be taken into
account in determining whether there has been or would be an occurrence having a
material adverse effect with respect to the Buyer.
ARTICLE V
COVENANTS
SECTION 5.01. Affirmative Covenants of the Company. The Company hereby
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by Buyer,
the Company will:
(a) operate its business only in the usual and ordinary course
consistent with past practices;
(b) use commercially reasonable efforts to preserve substantially
intact its business organization, maintain its Material Contracts, and
Intellectual Property and other material rights, retain the services of its
respective officers and key employees and maintain its relationships with its
material customers and suppliers;
(c) maintain and keep its assets in as good repair and condition
as at present, ordinary wear and tear excepted;
(d) maintain and keep in full force and effect insurance
comparable in amount and scope of coverage to that currently in effect; and
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(e) from the date of this Agreement and to the Effective Time,
promptly supplement or amend the Schedules to this Agreement with respect to any
matter that arises or that is required to be set forth or listed in the
Schedules or is necessary to complete or correct any information in the
Schedules; provided, that for purposes of determining the rights and obligations
of the parties hereunder (other than the obligation of the Company under this
Section 5.01(e)), any such supplemental or amended disclosure will not be deemed
to have been disclosed to Buyer unless Buyer otherwise expressly consents in
writing.
SECTION 5.02. Negative Covenants of the Company. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by Buyer,
from the date of this Agreement until the Effective Time, the Company will not
do any of the following:
(a) amend or otherwise modify any of the Material Contracts;
(b) (i) effect any reorganization or recapitalization; (ii) issue
any capital stock or any option, warrant or similar agreement with respect to
its capital stock; (iii) split, combine or reclassify any 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 (iv)
adopt or propose to adopt any amendments to its Articles of Incorporation or
bylaws;
(c) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any of its assets, except for dispositions of inventories
and of assets in the ordinary course of business and consistent with past
practice;
(d) settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy;
(e) take any action that would result in a breach (as of the
Closing) of any of the representations and warranties set forth in Section 3.11;
(f) pay or agree to pay any dividend, distribution, or other
payment to the Shareholder;
(g) pay or agree to pay any bonus, incentive compensation, or
similar payment to any of its employees or increase the compensation of the
Shareholder or any other employee;
(h) make any material expenditure or commitment except in the
ordinary course of business consistent with past practice; or
(i) agree in writing or otherwise to do any of the foregoing.
SECTION 5.03. Restrictive Covenant. The Shareholder acknowledges that
he was a beneficial owner of the goodwill of the Company. In consideration of
the purchase of all of the Shareholder's stock in the Company and the delivery
of Confidential Information to the
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Shareholder, the Shareholder hereby agrees that, for a period of three years
from the Closing Date, the Shareholder will not (except in the course of
performing authorized duties as an employee of Buyer), directly or indirectly,
either as an employee, partner, owner, director, adviser or employee or in any
other capacity:
(a) engage in any business that involves (i) (x) operating an
internet site or providing data services to an internet site related to
financial news, tools, features, data or other information or (y) any business
that competes with the business of Buyer (collectively, a "Competing Business")
in any location, or (ii) the creation of content or complementary services for,
or the sale of advertising for, such a Competing Business in any location.
(b) directly or indirectly solicit or attempt to solicit any
customer or potential customer of Buyer to purchase advertising or other goods
or services that are competitive with those offered by Buyer from any person or
entity other than Buyer; or
(c) recruit or solicit for employment any person who is, or within
the twelve month period preceding the date of such activity was, an employee of
Buyer.
Notwithstanding the foregoing, the Shareholder may own, directly or
indirectly, solely as an investment, up to one percent (1%) of any class of
publicly traded securities of any entity that owns a Competing Business.
(d) Should the Shareholder violate paragraph (a) above, the
Shareholder and Buyer agree that any financial benefits whatsoever received by
the Shareholder from the Competing Business shall be turned over to Buyer for a
period of twelve (12) months after the commencement of participation in such
Competing Business.
(e) The Shareholder represents to Buyer that he is willing and
able to engage in businesses that are not Competing Businesses hereunder and
that enforcement of the restrictions set forth in this Section 5.03 would not be
unduly burdensome to him. Buyer and the Shareholder acknowledge and agree that
the restrictions set forth this Section 5.03 are reasonable as to time,
geographic area and scope of activity and do not impose a greater restraint than
is necessary to protect the legitimate business interests of Buyer. The
Shareholder acknowledges that Buyer has an international presence and a global
market and therefore has need of a worldwide geographic restriction.
(f) Should the Shareholder violate paragraph (b) above, the
Shareholder and Buyer agree that all of the revenues from such customer
collected by or owed to the Shareholder, or any entity for which the Shareholder
is employed or in any way associated with, shall be turned over to Buyer for a
period of twelve (12) months after the date of the solicitation.
(g) Should the Shareholder violate paragraph (c) above, the
Shareholder and Buyer agree that the Shareholder shall pay to Buyer the salary
of such person for a period of twelve (12) months after the date of the
solicitation.
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If the provisions of this Section 5.03 below are found by a court
of competent jurisdiction to contain limitations as to time, geographic 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 the legitimate business interests of Buyer.
SECTION 5.04. Confidential Information.
(a) The assets of the Company include certain commercially
valuable technical and non-technical confidential or proprietary information of
the Company (collectively, "Confidential Information"). Confidential Information
means all information used by the Company in connection with operating its
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 Company's 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 Company's
business; and (iii) information concerning traffic at the Company's Internet
sites and financial information concerning the operation of the Company's
business.
(b) The Shareholder acknowledges and agrees that, following the
Closing, the Confidential Information will be the sole and exclusive property of
the Surviving Corporation. Following the Closing, the Shareholder will not,
directly or indirectly, use any Confidential Information for his own benefit or
disclose any Confidential Information to any person (except in the course of
performing authorized duties for Buyer or the Surviving Corporation). At Buyer's
request after the Closing, the Shareholder will promptly deliver to Buyer or the
Surviving Corporation 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 possession or under his control.
SECTION 5.05. Access and Information.
(a) The Company shall (i) afford to Buyer and its officers,
directors, employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, the "Buyer Representatives") reasonable access at
reasonable times, upon reasonable prior notice, to the officers, employees,
agents, properties, offices and other facilities of the Company and to the books
and records thereof, (ii) furnish promptly to Buyer and the Buyer
Representatives such information concerning the business, properties, contracts,
records and personnel of the Company (including, without limitation, financial,
operating and other data and information) as may be reasonably requested, from
time to time, by Buyer, and (iii) authorize Buyer to contact and obtain relevant
information from the Company's accountants, material customers and suppliers and
any governmental agencies having dealings with the Company.
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(b) No investigation by the parties hereto made heretofore or
hereafter shall affect the representations and warranties of the parties which
are herein contained and each such representation and warranty shall survive
such investigation.
SECTION 5.06. Appropriate Action; Consents; Filings.
(a) Each of Buyer, the Shareholder and the Company shall use (and
shall cause each of their respective subsidiaries to use, as applicable) all
reasonable efforts to (i) take, or cause to be taken, all appropriate action,
and do, or cause to be done, all things necessary, proper or advisable under
applicable Law or otherwise to consummate and make effective the transactions
contemplated by this Agreement, and (ii) obtain from any Governmental Entities
or other third parties any consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained or made by Buyer or the Company
or any of their subsidiaries or affiliates, as applicable, in connection with
the authorization, execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, including, without limitation, the
Merger. The Shareholder, the Company and Buyer shall furnish all information
required for any application or other filing to be made pursuant to the rules
and regulations of any applicable Law in connection with the transactions
contemplated by this Agreement.
(b) Each of Buyer, the Shareholder and the Company shall give (or
shall cause their respective subsidiaries and affiliates, as applicable, to
give) any notices to third parties, and use (and cause their respective
subsidiaries and affiliates, as applicable, to use) all reasonable efforts to
obtain any third party consents (i) necessary, proper or advisable to consummate
the transactions contemplated by this Agreement or (ii) otherwise required under
any Material Contracts, or other agreements in connection with, or in order to
allow the Company to continue to be entitled to the benefits thereof following,
the consummation of the transactions contemplated hereby. In the event that any
party shall fail to obtain any third party consent described above and the
parties agree to consummate the Merger without such consent, such party shall
use commercially reasonable efforts, and shall take any such actions reasonably
requested by the other parties, to limit the adverse effect upon the Company and
Buyer, their respective subsidiaries, and their respective businesses resulting,
or which could reasonably be expected to result after the Effective Time, from
the failure to obtain such consent.
SECTION 5.07. Tax Treatment. Each party hereto shall use all reasonable
efforts to cause the Merger to qualify, and shall not take, and shall use all
reasonable efforts to prevent any affiliate of such party from taking, any
actions which could prevent the Merger from qualifying as a reorganization under
the provisions of section 368(a) of the Code.
SECTION 5.08. Public Announcements. Prior to the Closing, the Company
and the Shareholder will not issue a press release or make any statement to the
general public concerning such transaction or the absence thereof without the
express prior written consent of Buyer and Buyer will not issue a press release
or make any statement to the general public concerning such transaction or the
absence thereof without the express prior written consent of the Company;
provided, however, that Buyer may issue a press release or make any statement to
the general public concerning such transaction or the absence thereof without
the express prior
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written consent of the Company as, in the advice of Buyer's counsel, is required
by law. Upon Closing, Buyer will issue a press release and shall use
commercially reasonable efforts to furnish such release or statement to the
Company at least 24 hours in advance of issuance.
SECTION 5.09. Fees, Expenses and Other Payments. Transaction costs and
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by the Company and the Shareholder in connection with
or related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby will be
paid for in accordance with the terms of the Agreement Regarding Company
Expenses entered into as of the date hereof. Transaction costs and expenses
(including, without limitation, all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to a party hereto and its
affiliates) incurred by Buyer in connection with or related to the
authorization, preparation, negotiation, execution and performance of this
Agreement and the transactions contemplated hereby will be paid by Buyer. To the
extent any accounts payable that would be reflected on a balance sheet of the
Company prepared as of the Closing Date in accordance with generally accepted
accounting principles, consistently applied, exceed $50,000, such excess will be
paid by the Shareholder to Buyer through a reduction in the purchase price paid
to the Shareholder at Closing pursuant to Section 2.03(a) hereof; provided,
however, that accounts payable shall not include "Credit Card Liabilities,"
"Other Current Liabilities" or "Long Term Liabilities" as reflected in each of
these line items of the Company's balance sheet.
SECTION 5.10. Employment Agreement. At the Closing, the Surviving
Corporation will enter into an employment agreement with Xxxx Xxxxxx in
substantially the form of Exhibit A attached hereto.
SECTION 5.11. Option Agreement. Buyer will grant the Shareholder 25,000
incentive stock options upon the Shareholder joining Buyer as a full-time
employee. The options will be issued pursuant to Buyer's standard employee
option plan with all the customary terms, with an exercise price equal to the
fair market value of Buyer's Common Stock on the date of the grant.
SECTION 5.12. Xxxxxx Name. Following the Closing, the Surviving
Corporation shall cease using the "Xxxxxx" name and will use commercially
reasonable efforts to advise the Company's suppliers and customers of the new
name under which the business of the Company shall be conducted. Notwithstanding
the foregoing, the Surviving Corporation may use the "Xxxxxx" name for a period
of one year from the Closing Date.
SECTION 5.13. Business Location. For a period of three years from the
Closing Date, Buyer agrees and covenants to maintain the Company's offices and
operations within a 20-mile radius of the Company's current location in Boulder,
Colorado; provided, however, that the provisions of this Section 5.13 may be
waived in writing by the Shareholder or, if the Shareholder is not an employee
of the Surviving Corporation at that time, the then current head of the
Surviving Corporation's operations in Colorado.
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SECTION 5.14. Company Liabilities. Buyer agrees and covenants to use
commercially reasonable efforts to satisfy, or have Shareholder's guarantees or
personal assets removed from, outstanding Company liabilities after the Closing.
SECTION 5.15. Company Financials. The Shareholder acknowledges that the
Buyer may be required to file the Company's financial statements with the U.S.
Securities and Exchange Commission and the Shareholder agrees to use
commercially reasonable efforts to assist Buyer in obtaining any necessary
consents and take any other necessary actions to permit Buyer to make such
filings. Ernst & Young LLP has substantially completed an audit of the Company's
Year End Financial Statements. After the Closing, the Surviving Corporation and
the Shareholder will use commercially reasonable efforts to have Ernst & Young
LLP complete such audit. All expenses incurred by the Surviving Corporation in
connection with the completion of such audit will then become a trade payable of
the Surviving Corporation. In the event Ernst & Young LLP declines to complete
such audit, Ernst & Young charges relating to the incomplete audit will become
the full responsibility of the Shareholder.
ARTICLE VI
CLOSING CONDITIONS
SECTION 6.01. Conditions to Obligations of Buyer. The obligations of
Buyer to effect the Merger and the other transactions contemplated hereby are
also subject to the satisfaction at or prior to the Closing Date of the
following conditions, any or all of which may be waived in writing by Buyer, in
whole or in part:
(a) Each of the representations and warranties of the Company and
the Shareholder contained in this Agreement shall be true and correct in all
material respects as of the Closing Date as though made on and as of the Closing
Date (except to the extent such representations and warranties specifically
relate to an earlier date, in which case such representations and warranties
shall be true and correct in all material respects as of such earlier date).
Buyer shall have received a certificate signed by the President of the Company,
dated the Closing Date, to such effect.
(b) Each of the Company and the Shareholder shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date. Buyer shall have received a certificate signed by the President of
the Company, dated the Closing Date, to such effect.
(c) Since the Latest Balance Sheet Date, 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.
(d) Buyer shall have received a closing certificate signed by the
President of the Company substantially in the form of Exhibit C attached hereto.
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(e) No Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and which has
the effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger (an "Order"); and no such Governmental Entity or third party shall
have initiated or threatened to initiate any proceeding seeking an Order.
(f) Counsel to the Company shall have delivered to Buyer its
written opinion substantially in the form of Exhibit D attached hereto.
(g) Each of the Company and the Shareholder shall have obtained
each consent and approval necessary in order that the transactions contemplated
hereby do not constitute a material breach or violation of, or result in a right
of termination or acceleration of any encumbrance on any material portion of the
Company's properties or assets, any Material Contract, material arrangement or
understanding.
(h) The total Liabilities of the Company of the type that would be
reflected in a balance sheet of the Company prepared as of the Closing Date in
accordance with generally accepted accounting principles shall not exceed
$175,000.
(i) All proceedings taken by the Company and all instruments
executed and delivered by the Company and the Shareholder, as applicable, on or
prior to the Closing Date in connection with the transactions herein
contemplated shall be reasonably satisfactory in form and substance to Buyer.
(j) Buyer has completed its due diligence investigation of the
Company, including legal, operational, financial and technical matters, and the
results of such investigation are satisfactory to Buyer in its sole discretion.
(k) Buyer's Board of Directors has approved the execution and
delivery of this Agreement, the Merger and the transactions contemplated hereby.
(l) The Shareholder shall have delivered to Buyer the executed
employment agreement described in Section 5.10 of this Agreement.
SECTION 6.02. Conditions to Obligations of the Company and the
Shareholder. The obligation of the Company and the Shareholder to effect the
Merger and the other transactions contemplated hereby is also subject to the
satisfaction at or prior to the Closing Date of the following conditions, any or
all of which may be waived in writing by the Company and the Shareholder, in
whole or in part:
(a) Each of the representations and warranties of Buyer contained
in this Agreement shall be true and correct in all material respects as of the
Closing Date as though made on and as of the Closing Date (except to the extent
such representations and warranties
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specifically relate to an earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of such earlier
date). The Company shall have received a certificate signed by an executive
officer of Buyer, dated the Closing Date, to such effect.
(b) Buyer shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date. The Company
shall have received a certificate of the President of the Buyer, dated the
Closing Date, to that effect.
(c) No Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Order which has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger; and no such Governmental Entity or third party shall
have initiated or threatened to initiate any proceeding seeking an Order.
(d) Counsel to Buyer shall have delivered to the Company its
written opinion substantially in the form of Exhibit E attached hereto.
(e) All proceedings taken by Buyer and all instruments executed
and delivered by Buyer on or prior to the Closing Date in connection with the
transactions herein contemplated shall be reasonably satisfactory in form and
substance to the Company.
(f) The Company shall have received a closing certificate signed
by an executive officer of Buyer substantially in the form of Exhibit F attached
hereto.
(g) The Company and Shareholder have completed their due diligence
investigation of Buyer, including legal, operational, financial and technical
matters, and the results of such investigation are satisfactory to the Company
and the Shareholder, in their respective sole discretions.
(h) The Company's Board of Directors has approved the execution
and delivery of this Agreement, the Merger and the transactions contemplated
hereby.
(i) The Shareholder has approved the execution and delivery of
this Agreement, the Merger and the transactions contemplated hereby.
(j) Buyer shall have executed and delivered to the Company the
Promissory Note.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Indemnification of Buyer. Notwithstanding any
investigation by Buyer or the Buyer Representatives, the Shareholder will
indemnify and hold Buyer, its
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subsidiaries and their respective affiliates, directors, officers, employees and
agents (collectively, the "Buyer Indemnified Parties") 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 Buyer Indemnified Party may suffer or incur as a result of
or relating to:
(a) the breach of any representation or warranty made by the
Company or the Shareholder in this Agreement or pursuant hereto or any
allegation by a third party that, if true, would constitute such a breach; or
(b) the breach of any covenant or agreement of the Company or the
Shareholder under this Agreement or any allegation by a third party that, if
true, would constitute such a breach;
provided that, except with respect to the breach or the alleged breach of the
representations and warranties set forth in Sections 3.03 and 3.06, for which
the limitation contained in (ii) below shall not apply, (i) the Buyer
Indemnified Parties will not be entitled to indemnification under paragraph (a)
of this Section 7.01 unless the aggregate amount of all Losses for which
indemnification is sought by the Buyer Indemnified Parties pursuant to such
paragraph exceeds $50,000, in which case the Buyer Indemnified Parties will be
entitled to indemnification for the full amount of all such Losses; and (ii) the
Buyer Indemnified Parties will not be entitled to indemnification under
paragraph (a) of this Section 7.01 in an aggregate amount exceeding $8,000,000.
SECTION 7.02. Survival. The Buyer Indemnified Parties' rights to
indemnification under paragraph (a) or (b) of Section 7.01 will survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein for a period of two years after the Closing
Date; provided that (a) the representations and warranties set forth in Sections
3.03 and 3.06 will survive indefinitely; (b) if the violation of any
representation or warranty would constitute a violation of any statute, law,
ordinance, decree, order, rule or regulation of any Governmental Entity, such
representation or warranty will survive until thirty calendar days after the
expiration of the statute of limitations applicable to such violation; (c) the
representations and warranties set forth in Section 3.14 will survive until
thirty calendar days after the expiration of the statute of limitations
applicable to such violation; and (d) any representation or warranty, the
violation of which is made the basis of a claim for indemnification pursuant to
Section 7.01(a), will survive until such claim is finally resolved if the Buyer
Indemnified Parties notifies the Shareholder of such claim in reasonable detail
prior to the date on which such representation or warranty would otherwise
expire hereunder. No claim for indemnification pursuant to Section 7.01 based on
the breach or alleged breach of a representation or warranty may be asserted by
the Buyer Indemnified Parties after the date on which such representation or
warranty expires hereunder.
SECTION 7.03. Notice. The Buyer Indemnified Parties entitled to receive
indemnification under this Article VII agree to give prompt written notice to
the Shareholder upon the occurrence of any indemnifiable Loss or the assertion
of any claim or the
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commencement of any action or proceeding in respect of which such a Loss may
reasonably be expected to occur (a "Claim"), but the Buyer Indemnified Parties'
failure to give such notice will not affect their rights to indemnification
under this Article VII, except to the extent that the Shareholder is materially
prejudiced thereby. Such written notice will include a reference to the event or
events forming the basis of such Loss or Claim and the amount involved, unless
such amount is uncertain or contingent, in which event the Buyer Indemnified
Parties will give a later written notice when the amount becomes fixed.
SECTION 7.04. Defense of Claims. The Shareholder may elect to assume
and control the defense of any Claim, including the employment of counsel
reasonably satisfactory to the Buyer Indemnified Parties and the payment of
expenses related thereto, if (a) the Shareholder acknowledges his obligation to
indemnify the Buyer Indemnified Parties for any Losses resulting from such Claim
and provide reasonable evidence to the Buyer Indemnified Parties of his
financial ability to satisfy such obligation; (b) the Claim does not seek to
impose any liability or obligation on the Buyer Indemnified Parties other than
for money damages; and (c) the Claim does not relate to the Buyer Indemnified
Parties' relationship with their customers or employees. If such conditions are
satisfied and the Shareholder elects to assume and control the defense of a
Claim, then (i) the Shareholder will not be liable for any settlement of such
Claim effected without the consent of the Shareholder, which consent will not be
unreasonably withheld; (ii) the Shareholder may settle such Claim without the
consent of the Buyer Indemnified Parties; and (iii) the Buyer Indemnified
Parties may employ separate counsel and participate in the defense thereof, but
the Buyer Indemnified Parties will be responsible for the fees and expenses of
such counsel unless (A) the Shareholder has failed to adequately assume the
defense of such Claim or to employ counsel with respect thereto or (B) a
conflict of interest exists between the interests of the Buyer Indemnified
Parties and the interests represented by the Shareholder that requires
representation by separate counsel, in which case the fees and expenses of such
separate counsel will be paid by the Shareholder. If such conditions are not
satisfied, the Buyer Indemnified Parties may assume and control the defense of
the Claim; provided that the Buyer Indemnified Parties may not settle any such
Claim without the consent of the Shareholder, which consent will not be
unreasonably withheld, and further provided that the Shareholder is given a
reasonable opportunity to participate in such defense (at the Shareholder's
expense).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, as follows:
(a) by mutual consent of Buyer and the Company;
(b) by Buyer, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Sections 6.01(a) or (b) would
be incapable of being satisfied by August 15, 1999;
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provided that, in any case, a willful breach shall be deemed to cause such
conditions to be incapable of being satisfied for purposes of this Section
8.01(b);
(c) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Buyer set forth in this Agreement, or if
any representation or warranty of Buyer shall have become untrue, in either case
such that the conditions set forth in Sections 6.02(a) or (b) would be incapable
of being satisfied by August 15, 1999; provided that, in any case, a willful
material breach shall be deemed to cause such conditions to be incapable of
being satisfied for purposes of this Section 8.01(c);
(d) by either Buyer or the Company, if there shall be any Order
that is final and nonappealable preventing the consummation of the Merger,
except if the party relying on such Order to terminate this Agreement has not
complied with its obligations under Section 5.05 of this Agreement;
(e) by either Buyer or the Company, if the Merger shall not have
been consummated before August 15, 1999.
The right of any party hereto to terminate this Agreement pursuant to this
Section 8.01 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers, directors,
representatives or agents, whether prior to or after the execution of this
Agreement.
SECTION 8.02. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void, there shall be no liability on the part of the parties to the other
parties and all rights and obligations of any party hereto shall cease, except
that nothing herein shall relieve any party of any liability for any breach of
such party's representations, warranties, covenants or agreements contained in
this Agreement.
SECTION 8.03. Amendment. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time, Buyer,
on the one hand, and the Company, on the other hand, may (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 by the other party with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party to be bound thereby.
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ARTICLE IX
REGISTRATION RIGHTS
SECTION 9.01. Registration Statement. Within thirty (30) days of the
Closing Date, Buyer will prepare and file with the SEC, pursuant to the
Securities Act, a registration statement on Form S-3 (the "Registration
Statement") covering the resale of all of the Buyer Common Stock issued to the
Shareholder in the Merger (collectively, the "Registered Shares") in a
continuous offering. Buyer will use commercially reasonable efforts to cause the
Registration Statement to become effective as soon as practicable thereafter and
to remain effective until the earlier of (i) the date that all of the Registered
Shares have been sold by the Shareholder or (ii) the first anniversary of the
Closing. The Shareholder will not sell any Registered Shares under the
Registration Statement unless, at the time of sale, the Registration Statement
(and the most recently filed post effective amendment thereto, if any) has been
declared effective. The period of time during which the Registration Statement
is effective is referred to as the "Registration Period."
SECTION 9.02. Limitations on Sale.
(a) The Shareholder will notify Buyer two business days prior to
selling any Registered Shares pursuant to the Registration Statement. If, upon
receipt of such a notice, Buyer certifies to the Shareholder in writing that (i)
due to a change in circumstances or a pending transaction, the Registration
Statement contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (ii) the public disclosure required to correct such
misstatement or omission would be impracticable or injurious to Buyer, then the
Shareholder will refrain from selling any Registered Shares pursuant to the
Registration Statement for the period of time requested by Buyer (a "Blackout
Period"). Buyer may impose no more than four Blackout Periods, which may not
exceed 45 calendar days each and may not exceed 90 calendar days in the
aggregate. Buyer will use reasonable efforts to minimize the time period during
which the Shareholder are required to refrain from selling under this paragraph.
(b) In addition to the foregoing restrictions, the Shareholder
will not sell, transfer or otherwise dispose of any shares of Buyer Common Stock
or otherwise reduce his risk of loss with respect to any of the Buyer Common
Stock issued to him in the Merger until Buyer has publicly released earnings
covering at least 30 days of combined operations of the Surviving Corporation.
Buyer will use commercially reasonable efforts to release such earnings as soon
as reasonably practicable after the Closing; provided that Buyer will not be
required to publicly release earnings for a period other than a full calendar
quarter.
SECTION 9.03. Information. The Shareholder will furnish to Buyer, at
Buyer's reasonable request, such information regarding the ownership of
Registered Shares by the Shareholder and the intended method of disposition
thereof as is required in connection with the preparation of a registration
statement covering the Registered Shares.
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SECTION 9.04. Expenses. Buyer will bear all expenses arising or
incurred in connection with any registration of the Registered Shares hereunder,
including without limitation registration fees, printing expenses and Buyer's
accounting and legal fees and expenses; provided that the Shareholder will bear
the expense of any underwriting fees, discounts or commissions applicable to its
sale of the Registered Shares and the fees and expenses of any separate legal
counsel or accounting firm engaged by the Shareholder.
SECTION 9.05. Indemnification.
(a) Buyer agrees to indemnify the Shareholder and each underwriter
and selling broker of the Registered Shares registered hereunder and their
respective officers and directors and each person or entity, if any, who
controls any of the foregoing within the meaning of Section 15 of the Securities
Act and their respective successors against all Losses arising out of or
relating to any untrue statement (or alleged untrue statement) of a material
fact contained in the Registration Statement or any prospectus included therein
or incident thereto or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and agrees to reimburse the Shareholder and such other
persons for any legal and other expenses reasonably incurred by them in
connection with investigating or defending any claim or action related to such a
Loss; provided, however, that Buyer will not be liable in any such case if and
to the extent that (i) such statement or omission was made in reliance upon
information (including, without limitation, written negative responses to
inquiries) furnished to Buyer in writing by the Shareholder expressly for use in
the Registration Statement or such a prospectus or (ii) the Shareholder fails to
deliver or cause to be delivered a copy of the final prospectus relating to such
offering (as then amended or supplemented) to the person asserting such claim
and such final prospectus would have cured the defect giving rise to such Loss.
(b) The Shareholder will indemnify Buyer and the respective
officers and directors and each person or entity, if any, who controls any of
the foregoing within the meaning of Section 15 of the Securities Act and their
respective successors against all Losses arising out of or relating to any
untrue statement (or alleged untrue statement) of a material fact contained in
the Registration Statement or any prospectus included therein or incident
thereto or any omission (or alleged omission) to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, and will reimburse Buyer and such other persons for any legal and
any other expenses reasonably incurred by them in connection with investigating
or defending any claim or action related to such a Loss; provided, however, that
this subparagraph (b) shall apply only in the case of and to the extent
specified in clauses (i) and (ii) of the preceding paragraph.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to any of the two preceding paragraphs, the
indemnified and indemnifying parties shall comply with the notice and defense of
claims provisions of Sections 7.03 and 7.04 with respect to such proceeding.
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ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given upon receipt, if delivered personally or by overnight delivery service or
if mailed by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like changes of address) or sent by
electronic transmission:
(a) If to Buyer, to:
CNET, Inc.
000 Xxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx & Xxxx, L.L.P.
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: R. Xxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
(b) If to the Shareholder, to:
0000 Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx
with a copy to:
Xxxxxxxxxx, Black and Xxxx LLC
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Xx.
Facsimile: (000) 000-0000
SECTION 10.02. Certain Definitions. For the purposes of this Agreement,
the term:
(a) "affiliate" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person.
(b) "business day" means any day other than a day on which banks
in the State of Delaware are authorized or obligated to be closed.
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(c) "control" (including the terms "controlled," "controlled by,"
and "under common control with") means the possession, directly or indirectly,
or as trustee or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock or as
trustee or executor, by contract or credit arrangement or otherwise.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(e) "knowledge" of or "known" by a person, with respect to any
matter in question, means (i) in the case of the Company, if any director or
executive officer of the Company has actual knowledge of such matter or would
have knowledge of such matter following due inquiry, and (ii) in the case of
Buyer, if any director or executive officer of Buyer has actual knowledge of
such matter or would have knowledge of such matter following due inquiry.
(f) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as used
in Section 13(d) of the Exchange Act).
(g) "Securities Act" means the Securities Act of 1933, as amended.
(h) "Tax" or "Taxes" means any and all taxes, charges, fees,
levies, assessments, duties or other amounts payable to any federal, state,
local or foreign taxing authority or agency, including, without limitation, (i)
income, franchise, profits, gross receipts, minimum, alternative minimum,
estimated, ad valorem, value added, sales, use, service, real or personal
property, capital stock, license, payroll, withholding, disability, employment,
social security, workers compensation, unemployment compensation, utility,
severance, excise, stamp, windfall profits, transfer and gains taxes, (ii)
customs, duties, imposts, charges, levies or other similar assessments of any
kind, and (iii) interest, penalties and additions to tax imposed with respect
thereto.
SECTION 10.03. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement Section references herein are, unless the
context otherwise requires, references to sections of this Agreement.
SECTION 10.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon 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
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possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
SECTION 10.05. Entire Agreement. This Agreement (together with the
Exhibits and the Schedules to this Agreement) constitutes the entire agreement
of the parties, and supersede all prior agreements and undertakings, both
written and oral, among the parties or between any of them, with respect to the
subject matter hereof.
SECTION 10.06. Assignment. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 10.07. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, except as expressly provided herein.
SECTION 10.08. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder.
SECTION 10.09. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive to, and not exclusive
of, any rights or remedies otherwise available.
SECTION 10.10. Further Assurances. Each party hereto agrees to execute
any and all documents and to perform such other acts as may be necessary or
expedient to further the purposes of this Agreement and the transactions
contemplated hereby.
SECTION 10.11. Governing Law; Venue. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW AND EXCEPT TO THE EXTENT THAT COLORADO LAW MANDATORILY
PROVIDES. THE PARTIES AGREE THAT VENUE FOR ANY ACTION BROUGHT TO ENFORCE THIS
AGREEMENT SHALL BE A COURT OF COMPETENT JURISDICTION IN SAN FRANCISCO,
CALIFORNIA. THE PREVAILING PARTY IN ANY SUCH ACTION SHALL BE ENTITLED TO RECOVER
ALL EXPENSES INCURRED IN CONNECTION WITH SUCH ACTION, INCLUDING, WITHOUT
LIMITATION, COSTS OF INVESTIGATION, ATTORNEYS' FEES, EXPENSES OF PREPARATION FOR
PROCEEDINGS, AND ALL OTHER EXPENSES ASSOCIATED WITH ENFORCEMENT OF THIS
AGREEMENT.
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SECTION 10.12. Counterparts. This Agreement may be executed in multiple
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
CNET, INC.
By: /s/ XXXXXX X. XXXXXX
-------------------------------------
Xxxxxx X. Xxxxxx
Vice Chairman
XXXXXX INTERNATIONAL, INC.
By: /s/ XXXX XXXXXX
-------------------------------------
Xxxx Xxxxxx
President
SHAREHOLDER:
/s/ XXXX XXXXXX
----------------------------------------
Xxxx Xxxxxx
