SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported): July 31, 1996
EAGLE RIVER INTERACTIVE, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-28004 84-1320277
(State or other jurisdiction (Commission (IRS
Employer
of incorporation) File Number)
Identification No.)
1060 West Beaver Creek Boulevard, Avon Colorado 81620
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (970) 845-
8300
N/A
(Former name or former address, if changed since last
report.)
Item 2. Acquisition or Disposition of Assets.
On July 31, 1996, the Registrant completed the merger (the
"Merger") of a wholly-owned subsidiary of the Registrant ("Sub")
with and into Mastering Computers, Inc., an Arizona corporation
("Mastering Computers"). Mastering Computers is a provider of
Microsoft Windows operating system training solutions for
professional computer support personnel.
The Merger was effected pursuant to the Agreement and Plan of
Merger dated as of July 31, 1996 (the "Agreement and Plan of
Merger") by and among Registrant, Sub and Mastering Computers and
the Supplemental Agreement dated as of July 31, 1996 (the
"Supplemental Agreement") by and among Registrant, Sub, Mastering
Computers and Thomas R. Graunke, as the sole stockholder of
Mastering Computers (the "Mastering Stockholder"). As a result
of the Merger, Mastering Computers became a wholly-owned
subsidiary of the Registrant. The Registrant is accounting for
the Merger as a pooling of interests. The Mastering Stockholder
is the brother of Terence M. Graunke, the Chairman of the Board,
President and Chief Executive Officer of the Registrant.
In the Merger, the Registrant issued an aggregate of 1,175,000
shares of its common stock, par value $.001 per share (the
"Common Stock"), to the Mastering Stockholder in exchange for all
of the outstanding shares of capital stock of Mastering
Computers. The amount of consideration paid by the Registrant
was determined based on arms-length negotiations.
The Supplemental Agreement contains certain representations,
warranties and indemnification provisions relating to the
Mastering Stockholder and the Registrant. In connection with the
Merger, the Registrant and the Mastering Stockholder entered into
a Stock Pledge Agreement dated as of July 31, 1996 (the "Pledge
Agreement") pursuant to which the Mastering Stockholder pledged
117,500 shares of Common Stock to the Registrant as security for
his indemnification obligations under the Supplemental Agreement.
So long as a claim for indemnification does not arise, the
Mastering Stockholder will be entitled to vote the shares, to
receive dividends or other distributions and to exercise all
other rights and powers relating thereto not inconsistent with
the Pledge Agreement. Certain shares will be released from the
Pledge Agreement on the date of the next auditor's report on the
Registrant's consolidated financial statements that include the
date of the Merger. The remaining shares will be released as the
Registrant and the Mastering Stockholder reasonably determine
that such shares will not be necessary to satisfy any specific
claims for indemnification that thereafter
may be asserted by the Registrant during the remainder of the
indemnification period, as specified in the Supplemental
Agreement.
In addition, the Supplemental Agreement includes the agreement of
the Mastering Stockholder not to transfer the shares of Common
Stock received in connection with the Merger until such time as
financial statements that include at least 30 days of post-merger
combined operations of Mastering Computers and the Registrant
after the Merger have been publicly reported.
The shares of Common Stock issued to the Mastering Stockholder in
connection with the Merger were not registered under the
Securities Act of 1933. The Registrant has granted the Mastering
Stockholder and permitted
successors and assigns certain registration rights pursuant to a
Registration Rights Agreement between the Registrant and the
Mastering Stockholder dated as of July 31, 1996 (the
"Registration Rights Agreement"). Pursuant to the Registration
Rights Agreement, the holders of a majority of the shares of
Common Stock issued in connection with the Merger may request, on
any two occasions on or after March 22, 1997, registration on
Form S-3 or any similar short-form registration, if available, of
all or part of the 1,175,000 shares issued in the Merger.
Notwithstanding the preceding sentence, only one of such requests
may be made prior to July 31, 1997 and if such a request is made
prior to July 31, 1997, the Registrant is obligated to register
no more than 117,500 of such shares in connection therewith. The
Registrant has agreed to use its best efforts to take such steps
as are necessary to make a short-form registration available. If
the Registrant is not able to fulfill such obligation, such
holders may request at any time on or after March 22, 1997 that
the Registrant register such shares on Form S-1 or any similar
long-form registration (such short-form or long-form
registrations being referred to herein as a "Demand
Registration"). The Registration Rights Agreement also grants
the holders of the shares of Common Stock issued in connection
with the Merger the right to include up to 235,000 of such shares
whenever securities of the Registrant are to be registered under
the Securities Act (other than on Form S-8 or Form S-4) (a
"Piggyback Registration"). The holders are entitled to request
only one Piggyback Registration, provided that if the entire
235,000 shares are not included in such Piggyback Registration,
the holders are entitled to additional Piggyback Registrations
until a cumulative tot
al of 235,000 of such shares are registered. The Registrant has
agreed to pay the expenses of registrations under the
Registration Rights Agreement, which exclude underwriting
discounts and commissions and fees and expenses of counsel
retained by such holders.
In connection with the Merger, the Registrant assumed certain
options to purchase capital stock of Mastering Computers that had
been granted to certain employees of Mastering Computers. Such
options were converted into options to purchase an aggregate of
approximately 191,280 shares of Common Stock. In addition, the
Registrant entered into an Employment and
Noncompetition Agreement dated as of July 31, 1996 with Thomas R.
Graunke (the "Employment Agreement").
The foregoing is qualified in its entirety by reference to the
Merger Agreement, the Supplemental Agreement, the Pledge
Agreement, the Registration Rights Agreement and the Employment
Agreement, copies of which are filed herewith as Exhibits 99.1,
99.2, 99.3, 99.4 and 99.5, respectively, and incorporated herein
by reference.
Copies of the Press Releases issued by the Registrant on July 31
and August 1, 1996, respectively, with respect to the Merger, are
filed herewith as Exhibits 99.6 and 99.7, respectively, and
incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired:
It is not practical at this time for the Registrant to
provide the financial statements that are required with respect
to Mastering Computers at this time. Such financial statements
will be filed in an amendment to this Current Report on Form 8-K
as soon as practicable, but not later than October 14, 1996.
(b) Pro forma financial information:
It is not practical at this time for the Registrant to provide
the pro forma financial statements that would be required
pursuant to Article 11 of Regulation S-X to reflect the estimated
impact of the Merger on the historical financial statements of
the Registrant. Such pro forma financial statements will be
filed in an amendment to this Current Report on Form 8-K as soon
as practicable, but not later than October 14, 1996.
(c) Exhibits:
99.1 Agreement and Plan of Merger dated as of July 31,
1996 by and among Eagle River Interactive, Inc., Ute Creek
Acquisition Corp. and Mastering Computers, Inc.
99.2 Supplemental Agreement dated as of July 31, 1996
by and among Eagle River Interactive, Inc., Ute Creek Acquisition
Corp., Mastering Computers, Inc. and Thomas R. Graunke.
99.3 Stock Pledge Agreement dated as of July 31, 1996
between Eagle River Interactive, Inc. and Thomas R. Graunke.
99.4 Registration Rights Agreement dated as of July 31,
1996 between Eagle River Interactive, Inc. and Thomas R. Graunke.
99.5 Employment and Noncompetition Agreement dated as
of July 31, 1996 between Eagle River Interactive, Inc. and Thomas
R. Graunke.
99.6 Press release issued by the Registrant on July 31,
1996 with respect to the Merger.
99.7 Press release issued by the Registrant on August
1, 1996 with respect to the Merger.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
EAGLE RIVER INTERACTIVE, INC.
Date: August 14, 1996
By: /s/ Marc Pinto
Marc Pinto
Executive Vice President,
Chief Financial Officer
EXHIBIT INDEX
The following Exhibits are filed herewith:
Exhibit Page
99.1 Agreement and Plan of Merger dated as of July 31,
1996 by and among Eagle River Interactive, Inc., Ute Creek
Acquisition Corp. and Mastering Computers, Inc.
99.2 Supplemental Agreement dated as of July 31, 1996
by and among Eagle River Interactive, Inc., Ute Creek Acquisition
Corp., Mastering Computers, Inc. and Thomas R. Graunke.
99.3 Stock Pledge Agreement dated as of July 31, 1996
between Eagle River Interactive, Inc. and Thomas R. Graunke.
99.4 Registration Rights Agreement dated as of July 31,
1996 between Eagle River Interactive, Inc. and Thomas R. Graunke.
99.5 Employment and Noncompetition Agreement dated as
of July 31, 1996 between Eagle River Interactive, Inc. and Thomas
R. Graunke.
99.6 Press release issued by the Registrant on July 31,
1996 with respect to the Merger.
99.7 Press release issued by the Registrant on August
1, 1996 with respect to the Merger.
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Merger Agreement")
is made as of July 31, 1996 by and among Eagle River Interactive,
Inc., a Delaware corporation ("Parent"), Ute Creek Acquisition
Corp., an Arizona corporation and wholly-owned subsidiary of
Parent ("Sub"), and Mastering Computers, Inc., an Arizona
corporation (the "Company") (Sub and the Company are hereinafter
collectively referred to as the "Constituent Corporations").
W I T N E S S E T H :
WHEREAS, the authorized capital of the Company consists
of 1000 shares of Common Stock, no par value ("Company Common
Stock"), of which 100 shares are outstanding;
WHEREAS, all of the outstanding shares of Company
Common Stock are owned beneficially and of record by Thomas R.
Graunke ("Stockholder");
WHEREAS, the authorized capital of Sub consists of 100
shares of common stock, no par value ("Sub Common Stock"), all of
which are outstanding and owned beneficially and of record by
Parent;
WHEREAS, the respective Boards of Directors of each
Constituent Corporation and of Parent have adopted this Merger
Agreement;
WHEREAS, the Board of Directors of the Company has
recommended the Merger (as hereinafter defined) and has directed
that this Merger Agreement be submitted to Stockholder for
approval;
WHEREAS, the Constituent Corporations, Parent and
Stockholder are concurrently entering into a Supplemental
Agreement (the "Supplemental Agreement") which, among other
things, sets forth certain covenants, agreements, representations
and warranties with respect to the Merger and the transactions
contemplated hereby, and pursuant to which Stockholder has agreed
to approve this Merger Agreement and has waived any and all
rights that he might otherwise have to demand appraisal for his
shares of Company Common Stock in accordance with Chapter 13 of
the Arizona Business Corporation Act (the "ABCA");
WHEREAS, Parent and Stockholder are concurrently
entering into a Stock Pledge Agreement pursuant to which
Stockholder has agreed to secure a portion of obligations under
the Supplemental Agreement to Parent and the Company;
WHEREAS, the approval of the Merger Agreement by the
stockholders of Parent is not required; and
WHEREAS, Parent, as the sole stockholder of Sub, has
approved this Merger Agreement on behalf of Sub.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the
conditions hereof and of the Supplemental Agreement, and in
accordance with the ABCA, Sub shall be merged (the "Merger") with
and into the Company at the Effective Time (as hereinafter
defined). Following the Merger, the separate corporate existence
of Sub shall cease, and the Company shall continue as the
surviving corporation (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Sub in
accordance with the ABCA.
1.2 Effective Time. As promptly as practicable after
the satisfaction or, if permissible, waiver of the conditions set
forth in Article VI of the Supplemental Agreement, the parties
hereto shall cause the Merger to be consummated by filing
Articles of Merger (the "Articles of Merger") with respect
thereto with the Arizona Corporation Commission pursuant to
Section 10-120 of the ABCA. The Merger shall become effective at
the time the Articles of Merger are so filed, as indicated by the
endorsement thereon of the Arizona Corporation Commission (such
time, the "Effective Time").
1.3 Effects of the Merger. The Merger shall have the
effects set forth in Section 10-1106 of the ABCA. Without
limiting the generality of the foregoing, and subject thereto, at
the Effective Time, except as otherwise provided herein, all of
the property, rights, privileges, powers and franchises of Sub
and the Company shall vest in Surviving Corporation, and all
debts, liabilities and duties of Sub and the Company shall become
the debts, liabilities and duties of Surviving Corporation. From
and after the Effective Time, Surviving Corporation shall be a
wholly-owned subsidiary of Parent.
1.4 Articles of Incorporation and By-laws of Surviving
Corporation; Officers and Directors. The Articles of
Incorporation of the Company shall be the Articles of
Incorporation of Surviving Corporation until thereafter changed
or amended; the By-laws of Sub shall be the By-laws of Surviving
Corporation until thereafter changed or amended. From and after
the Effective Time, until their successors are duly elected or
appointed and qualified, the directors and officers of Surviving
Corporation shall be as follows:
DIRECTORS
Terence M. Graunke
Thomas R. Graunke
Marc Pinto
OFFICERS
Name Office
Terence M. Graunke Chief Executive Officer
Thomas R. Graunke President
Marc Pinto Secretary and Treasurer
John Harbottle Assistant
Secretary
1.5 Effect on Company Common Stock. As of the
Effective Time, by virtue of the Merger and without any action on
the part of any stockholder of either of the Constituent
Corporations:
(a) Each issued and outstanding share of Sub Common
Stock shall be converted into one share of common stock, no par
value, of Surviving Corporation. Each certificate of Sub
evidencing ownership of any such shares of Sub Common Stock shall
continue to evidence ownership of the same number of shares of
common stock of Surviving Corporation.
(b) Each share of Company Common Stock that is held in
the treasury of the Company shall be cancelled and no
consideration shall be delivered in exchange therefor.
(c) All shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time shall be
converted, in the aggregate, into 1,175,000 shares of validly
issued, fully paid and nonassessable shares of common stock,
$.001 par value, of Parent ("Parent Common Stock"), provided,
however, that, if the the average closing transaction price per
share of Parent Common Stock on the Nasdaq National Market for
the period from and including July 1, 1996 through and including
the third trading day prior to the Closing Date (as defined in
the Supplemental Agreement) is less than $14.50 or greater than
$24.50, then all shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time shall be
converted, in the aggregate, into that number of validly issued,
fully paid and nonassessable shares of Parent Common Stock equal
to $19,093,750 divided by such average (such shares of Parent
Common Stock, the "Merger Consideration"). Each holder of
Company Common Stock immediately prior to the Effective Time
shall be entitled hereunder to receive in respect of such shares
of Company Common Stock only such holder's pro-rata portion of
the Merger Consideration as is attributable to such holder's
shares of Company Common Stock so held (such pro-rata portion to
equal the percentage which the aggregate number of shares of
Company Common Stock held by such holder immediately prior to the
Effective Time represents of the aggregate number of shares of
Company Common Stock outstanding immediately prior to the
Effective Time).
(d) All shares of Company Common Stock (other than
shares of Company Common Stock to be cancelled in accordance with
Section 1.5(b)), when so converted as provided in Section 1.5(c),
shall no longer be outstanding and shall automatically be
cancelled and retired and each holder of a certificate
theretofore representing any such shares shall cease to have any
rights with respect thereto, except the right to receive, upon
the surrender of such certificate in accordance with Section 1.6,
the portion of the Merger Consideration attributable to such
shares.
1.6 Parent to Make Certificates Available; Dividends.
(a) Parent shall make available to Sub, on the date of
the Effective Time, certificates representing the Merger
Consideration. Upon surrender by a holder of certificates
representing immediately prior to the Effective Time outstanding
shares of Company Common Stock ("Certificates") to Surviving
Corporation, properly endorsed or accompanied by appropriate
stock powers and otherwise in proper form for transfer, together
with such other transmittal letters, documents and instruments as
Parent or the transfer agent for the Parent Common Stock may
reasonably request, each in form reasonably acceptable to Parent
or such transfer agent, Surviving Corporation shall promptly
deliver certificates for the shares of Parent Common Stock that
such holder shall be entitled under Section 1.5(c).
(b) If the Merger Consideration (or any portion
thereof) is to be delivered to a person other than the person in
whose name the Certificates surrendered in exchange therefor are
registered, it shall be a condition to the payment of the Merger
Consideration (or portion thereof) that the Certificates so
surrendered shall be properly endorsed or accompanied by
appropriate stock powers and otherwise in proper form for
transfer, that such transfer otherwise be proper and that the
person requesting such transfer pay to Surviving Corporation any
transfer or other taxes payable by reason of the foregoing or
establish to the satisfaction of Surviving Corporation that such
taxes have been paid or are not required to be paid. For
purposes of this Merger Agreement, the term "person" means any
individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust,
unincorporated organization or any court, government (federal,
state, local or foreign), department, commission, board, bureau,
agency, official or other regulatory, administrative or
governmental authority.
(c) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such Certificate to be lost, stolen or
destroyed, Surviving Corporation will deliver or cause to be
delivered in exchange for such lost, stolen or destroyed
Certificate, with respect to the shares of Company Common Stock
represented thereby, certificates for any portion of the Merger
Consideration deliverable in respect thereof as determined in
accordance with this Article I. No bond shall be required in
connection therewith.
(d) No dividends or other distributions, if any, that
are declared on or after the Effective Time on Parent Common
Stock or are payable to the holders of record thereof on or after
the Effective Time will be paid to persons entitled by reason of
the Merger to receive certificates representing shares of Parent
Common Stock, nor shall such persons be entitled to vote such
shares of Parent Common Stock, until such persons surrender their
Certificates, as provided in this Article I. Subject to the
effect of applicable law, there shall be paid to the record
holder of the certificates representing such shares of Parent
Common Stock (i) at the time of such surrender or as promptly as
practicable thereafter, the amount of any dividends or other
distributions theretofore paid with respect to shares of Parent
Common Stock and having a record date on or after the Effective
Time and a payment date prior to such surrender and (ii) at the
appropriate payment date, the amount of dividends or other
distributions, if any, payable with respect to shares of Parent
Common Stock and having a record date on or after the Effective
Time but prior to surrender and a payment date subsequent to
surrender. In no event shall the person entitled to receive any
such dividends or other distributions be entitled to receive
interest on such dividends or other distributions.
1.7 No Fractional Securities. No certificates
representing fractional shares of Parent Common Stock shall be
issued upon the surrender for exchange of Certificates pursuant
to this Article I, and no Parent dividend or other distribution,
stock split or interest shall relate to any fractional security,
and such fractional interests shall not entitle the owner thereof
to vote or to any rights of a security holder of Parent. In lieu
of any fractional share, each holder of Company Common Stock who
would otherwise have been entitled to a fraction of a share of
Parent Common Stock upon surrender of Certificates for exchange
pursuant to this Article I will be paid an amount in cash
(without interest and rounded to the nearest whole cent)
determined by multiplying the Current Market Price of a share of
Parent Common Stock as of the date immediately preceding the
Closing Date by the fractional share interest to which such
holder would otherwise be entitled. As soon as practicable after
the determination of the amount of cash to be paid to former
stockholders of Company in lieu of any fractional interests,
Parent shall make such cash available to Surviving Corporation,
which in turn shall make available in accordance with this Merger
Agreement such amounts to such former stockholders.
1.8 No Further Ownership Rights in Company Common
Stock. The Merger Consideration paid or payable upon the
surrender for exchange of Certificates in accordance with the
terms hereof shall be deemed to have been paid or be payable in
full satisfaction of all rights of ownership, including voting
rights, pertaining to the shares of Company Common Stock.
1.9 Closing of Company Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be
closed and no transfer of shares of Company Common Stock shall
thereafter be made. If, after the Effective Time, Certificates
are presented to Surviving Corporation, they shall be cancelled
and exchanged as provided in this Article I.
1.10 Further Assurances. If, at any time after the
Effective Time, Surviving Corporation shall consider or be
advised that any deeds, bills of sale, assignments or assurances
or any other acts or things are necessary, desirable or proper
(a) to vest, perfect or confirm, of record or otherwise, in
Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises,
properties or assets of either of the Constituent Corporations,
or (b) otherwise to carry out the purposes of this Merger
Agreement, Surviving Corporation and its proper officers and
directors or their designees shall be authorized to execute and
deliver, in the name and on behalf of either of the Constituent
Corporations, all such deeds, bills of sale, assignments and
assurances and do, in the name and on behalf of each of the
Constituent Corporations, all such other acts and things
necessary, desirable or proper to vest, perfect or confirm its
right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such
Constituent Corporation and otherwise to carry out the purposes
of this Merger Agreement.
ARTICLE II
CONDITIONS AND TERMINATION
2.1 Conditions. The obligations of each Constituent
Corporation under this Merger Agreement are subject to the
condition that, prior to the Effective Time, each of the
conditions to its obligations contained in Article VI of the
Supplemental Agreement shall have been satisfied or waived.
2.2 Waiver. The Board of Directors or a duly
authorized officer of a Constituent Corporation may, on behalf of
such corporation, waive or extend the time for performance of any
condition to its obligations under the Supplemental Agreement.
2.3 Termination. Notwithstanding the adoption of this
Merger Agreement by the Board of Directors, and its approval by
the stockholders of each Constituent Corporation, this Merger
Agreement may be terminated and the Merger abandoned prior to the
Effective Time by:
(a) The mutual consent of the Constituent
Corporations;
(b) Either Constituent Corporation if the Merger has
not become effective by August 31, 1996 (or such later date as
shall be mutually agreed to in writing by the Constituent
Corporations); provided, that the party seeking termination is
not in default or breach of the Supplemental Agreement;
(c) By the Company in the event of a breach by Parent
of any of its representations, warranties or covenants contained
in the Supplemental Agreement, which breach is not cured by
Parent within 10 business days after written notice of such
breach;
(d) By Sub in the event of a breach by the Company or
Stockholder of any of their respective representations,
warranties and covenants contained in the Supplemental Agreement,
which breach is not cured by the Company or Stockholder within
10 business days after written notice of such breach; or
(e) If the Supplemental Agreement is terminated in
accordance with its terms.
ARTICLE III
GENERAL
3.1 Partial Invalidity. Wherever possible each
provision of this Merger Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if
any provision of this Merger Agreement shall be prohibited by or
be invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provisions of this Merger Agreement.
3.2 Successors and Assigns. This Merger Agreement
shall not be assignable prior to the Effective Time by either
Constituent Corporation without the written consent of the other,
but, if assigned with such consent, shall inure to the benefit of
and be binding upon the successor or assign of the assigning
Constituent Corporation before the Effective Time and thereafter
upon Surviving Corporation.
3.3 Interpretation. This Merger Agreement shall be
governed by the laws of the State of Arizona and may be executed
in two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the
same instrument. The headings of the several articles and
sections herein are for convenience of reference only and shall
not be a part of or affect the meaning or interpretation of this
Merger Agreement.
IN WITNESS WHEREOF, the undersigned have caused this
Merger Agreement to be executed by their respective officers
thereunto duly authorized, all as of the date first above
written.
EAGLE RIVER INTERACTIVE, INC.
By: /s/ Marc Pinto
Marc Pinto
Executive Vice President,
Chief Financial Officer
UTE CREEK ACQUISITION CORP.
By: /s/Marc Pinto
Marc Pinto
President
MASTERING COMPUTERS, INC.
By:/s/ Thomas R. Graunke
Thomas R. Graunke
President and Chief Executive
Officer
SUPPLEMENTAL AGREEMENT DATED AS OF JULY 31, 1996
BY AND AMONG
EAGLE RIVER INTERACTIVE, INC. UTE CREEK ACQUISITION CORP.,
MASTERING COMPUTERS, INC. and
THOMAS R. GRAUNKE,
THE SOLE STOCKHOLDER OF MASTERING COMPUTERS, INC.
TABLE OF CONTENTS
ARTICLE I THE MERGER 2
1.1. The Merger 2
1.2. Filing of Articles of Merger. 2
1.3. Closing 2
1.4. Merger Consideration. 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT 3
2.1. Organization of Parent 3
2.2. Sub 3
2.3. Authorization 3
2.4. Non-Contravention 4
2.5. Valid Shares. 5
2.6. Pooling of Interests; Reorganization. 5
2.7. Hart-Scott-Rodino 5
2.8. Charter Documents 5
2.9. Financial Statement; Undisclosed Liabilities 5
2.10. Conduct in the Ordinary Course of Business 6
2.11. Public Documents 6
2.12. Capitalization 6
ARTICLE III REPRESENTATIONS AND WARRANTIESOF THE COMPANY AND
STOCKHOLDER 7
3.1. Organization 7
3.2. Subsidiaries and Investments 7
3.3. Capital Stock of the Company 7
3.4. Authorization 8
3.5. Non-Contravention 9
3.6. Financial Statements 10
3.7. Operations Since Balance Sheet Date 11
3.8. No Undisclosed Liabilities 13
3.9. Taxes 13
3.10. Availability of Assets and Legality of Use 15
3.11. Governmental Permits 16
3.12. Real Property 16
3.13. Real Property Leases 16
3.14. Condemnation 17
3.15. Personal Property 17
3.16. Personal Property Leases 17
3.17. Intellectual Property; Software 17
3.18. Accounts Receivable 20
3.19. Title to Assets 20
3.20. Employees and Related Agreements; ERISA. 21
3.21. Employee Relations. 23
3.22. Contracts 24
3.23. Status of Contracts 25
3.24. No Violation, Litigation or Regulatory Action 25
3.25. Insurance 26
3.26. Environmental Protection 28
3.27. Customers and Suppliers 28
3.28. Stockholder's Assets 28
3.29. No Finder 29
3.30. Transactions with Affiliates 29
3.31. Pooling of Interests; Reorganization. 29
3.32. State Anti-takeover Law. 30
3.33. Books and Records 30
3.34. No Violation of Law 30
3.35. Disclosure 31
ARTICLE IV REPRESENTATIONS AND WARRANTIES OFSTOCKHOLDER 31
4.1. Authority 31
4.2. Non-Contravention; Required Consents 31
4.3. Ownership of Company Common Stock 32
4.4. Investment Representations. 32
4.5. Hart-Scott-Rodino 33
ARTICLE V ADDITIONAL AGREEMENTS OF THE PARTIES 33
5.1. Ordinary Course 33
5.2. Access Prior to Closing; Certain Notices 34
5.3. Regulatory and Other Authorizations 34
5.4. Company Financial Statements 35
5.5. Delivery of Documents 35
5.6. Employees; Certain Benefits and Arrangements 35
5.7. Continued Relationships 36
5.8. Transfer of Company Common Stock. 36
5.9. Agreement to Vote for the Merger; Waiver of
Appraisal Rights. 36
5.10. Compliance with the Securities Act; Pooling of
Interests 37
5.11. Preserve Accuracy of Representations and
Warranties 38
5.12. Pooling of Interests; Reorganization 38
5.13. Notification by the Parties of Certain Matters 39
5.14. Necessary Actions 39
5.15. Further Assurances 39
ARTICLE VI CONDITIONS TO CLOSING 39
6.1. Conditions to Each Party's Obligation to Close 39
6.2. The Company's and Stockholder's Conditions to
Close 40
6.3. Parent's Conditions to Close 44
ARTICLE VII THE CLOSING 48
7.1. Deliveries by the Company and Stockholder 48
7.2. Parent's Deliveries 48
ARTICLE VIII INDEMNIFICATION 49
8.1. Indemnification by Stockholder 49
8.2. Indemnification by Parent 52
8.3. Limitations On Indemnity by Stockholder. 53
8.4. Additional Limitations and Other Agreements 53
8.5. Notice of Claims 54
8.6. Third Party Claims 55
8.7. Exclusive Remedy. 56
ARTICLE IX TERMINATION 56
9.1. Termination 56
9.2. Effect of Termination 57
ARTICLE X RESTRICTIONS ON TRANSFERABILITY OF
SECURITIES;COMPLIANCE WITH SECURITIES ACT
57
10.1. Restrictions on Transferability 57
10.2. Restrictive Legend 57
10.3. Notice of Proposed Transfers 58
ARTICLE XI MISCELLANEOUS 58
11.1. Expenses 58
11.2. Notices 59
11.3. Assignment 61
11.4. Interpretation 61
11.5. Counterparts 61
11.6. Amendment 61
11.7. Entire Agreement 61
11.8. Binding Effect 61
11.9. Survival 61
11.10. Severability 62
11.11. Third Parties 62
11.12. Waivers 62
11.13. Governing Law 62
11.14. Public Announcements 62
11.15. Confidentiality. 63
11.16. Definitions 63
EXHIBITS
A Form of Agreement and Plan of Merger
B Form of Registration Rights Agreement
C Form of Pledge Agreement
D Form of Employment Agreement
E Form of Company Affiliate Letter
F Form of Parent Affiliate Letter
G Form of Resignation
SUPPLEMENTAL AGREEMENT
This Supplemental Agreement ("Supplemental Agreement")
is made as of July 31, 1996 by and among Eagle River Interactive,
Inc., a Delaware corporation ("Parent"), Ute Creek Acquisition
Corp., an Arizona corporation and wholly-owned subsidiary of
Parent ("Sub"), Mastering Computers, Inc., an Arizona corporation
(the "Company") and Thomas R. Graunke, the sole stockholder of
the Company ("Stockholder").
W I T N E S S E T H :
WHEREAS, concurrently with the execution and delivery
of this Supplemental Agreement, Parent, Sub and the Company are
entering into an Agreement and Plan of Merger (the "Merger
Agreement"), in the form of Exhibit A hereto;
WHEREAS, the respective Boards of Directors of Parent,
Sub and the Company have approved and declared advisable the
merger of Sub with and into the Company upon the terms and
subject to the conditions set forth herein and in the Merger
Agreement and in accordance with the Arizona Business Corporation
Act (the "ABCA"), whereby all shares of Common Stock, no par
value, of the Company ("Company Common Stock") issued and
outstanding immediately prior to the Effective Time (as defined
in the Merger Agreement), except shares cancelled in accordance
with Section 1.5(b) of the Merger Agreement, will be converted
into shares of validly issued, fully paid and nonassessable
shares of common stock, $.001 par value, of Parent ("Parent
Common Stock");
WHEREAS, the respective Boards of Directors of Parent
and the Company have determined that such merger is in
furtherance of and consistent with their respective long-term
business strategies and is fair to and in the best interests of
their respective stockholders;
WHEREAS, in order to encourage the parties thereto to
enter into the Merger Agreement and the parties hereto to enter
into this Supplemental Agreement: (i) Parent and Stockholder
have agreed to enter into a Registration Rights Agreement (the
"Registration Rights Agreement"), in the form of Exhibit B
hereto, (ii) Parent and Stockholder have agreed to enter into a
Stock Pledge Agreement (the "Pledge Agreement"), in the form of
Exhibit C hereto and (iii) Parent has agreed to enter into an
employment agreement with Stockholder, in the form of Exhibit D
hereto (the "Employment Agreement" and together with the
Registration Rights Agreement and the Pledge Agreement, the
"Ancillary Agreements").
WHEREAS, for federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be
recorded for accounting purposes as a pooling of interests.
NOW, THEREFORE, in consideration of the premises,
representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Upon the terms and subject to the
conditions set forth herein and in the Merger Agreement and in
accordance with the ABCA, Sub shall be merged (the "Merger") with
and into the Company at the Effective Time. Following the
Merger, the separate corporate existence of Sub shall cease, and
the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the
rights and obligations of Sub in accordance with the ABCA.
1.2. Filing of Articles of Merger. As promptly as
practicable after the satisfaction or, if permissible, waiver of
the conditions set forth in Article VI hereof, the Company,
Parent and Sub shall cause the Merger to be consummated by filing
Articles of Merger ("Articles of Merger") with respect thereto
with the Arizona Corporation Commission pursuant to Section 10-
120 of the ABCA.
1.3. Closing. The closing of the Merger (the
"Closing") shall take place on July 31, 1996 or on such other
date as Parent and the Company may agree. The time and date on
which the Closing is actually held is sometimes referred to
herein as the "Closing Date."
1.4. Merger Consideration. Subject to the provisions
of Article I of the Merger Agreement, as of the Effective Time,
all shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted, in
the aggregate, into 1,175,000 shares of validly issued, fully
paid and nonassessable shares of Parent Common Stock, provided,
however, that, if the average closing transaction price per share
of Parent Common Stock on the Nasdaq National Market for the
period from and including July 1, 1996 through and including the
third trading day prior to the Closing Date, is less than $14.50
or greater than $24.50, then all shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time
shall be converted, in the aggregate, into that number of validly
issued, fully paid and nonassessable shares of Parent Common
Stock equal to $19,093,750 divided by such average (such shares
of Parent Common Stock, the "Merger Consideration"). Cash will
be delivered in lieu of fractional shares of Parent Common Stock
pursuant to Section 1.7 of the Merger Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company and
Stockholder as follows:
2.1. Organization of Parent. Parent is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate
power and authority to own or lease and operate or use its assets
and to carry on its business as now conducted.
2.2. Sub. Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Arizona. Sub has not conducted any business activities prior
to the date hereof, other than the negotiation and execution of
this Supplemental Agreement and the Merger Agreement. All
outstanding shares of capital stock of Sub are owned,
beneficially and of record, by Parent.
2.3. Authorization. (a) Parent has the requisite
power and authority to enter into this Supplemental Agreement,
the Merger Agreement and the Ancillary Agreements to which it is
a party (the "Parent Ancillary Agreements") and to consummate the
transactions contemplated hereby and thereby and to comply with
the terms, conditions and provisions hereof and thereof. The
execution, delivery and performance by Parent of this
Supplemental Agreement, the Merger Agreement and the Parent
Ancillary Agreements and the actions to be taken by Parent
contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of
Parent and no other corporate proceedings on the part of Parent
are necessary with respect hereto or thereto. Each of this
Supplemental Agreement and the Merger Agreement constitutes and,
when executed and delivered by Parent, each of the Parent
Ancillary Agreements will constitute (assuming their due and
valid authorization, execution and delivery by the other parties
thereto and their validity and binding effect upon the other
parties thereto), the valid and binding obligation of Parent,
enforceable in accordance with its terms, except to the extent
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar
laws now or hereafter in effect relating to the enforcement of
creditors' rights and by the effect of general principles of
equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
(b) Sub has the requisite power and authority to enter
into this Supplemental Agreement and the Merger Agreement and to
consummate the transactions contemplated hereby and thereby and
to comply with the terms, conditions and provisions hereof and
thereof. The execution, delivery and performance by Sub of this
Supplemental Agreement and the Merger Agreement and the actions
to be taken by Sub contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the
part of Sub and no other corporate proceedings on the part of Sub
are necessary with respect hereto or thereto. Each of this
Supplemental Agreement and the Merger Agreement (assuming their
due and valid authorization, execution and delivery by the other
parties thereto and their validity and binding effect upon the
other parties thereto) constitutes the valid and binding
obligation of Sub, enforceable in accordance with its terms,
except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or
other similar laws now or hereafter in effect relating to the
enforcement of creditors' rights and by the effect of general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
2.4. Non-Contravention. Neither the execution or
delivery of this Supplemental Agreement, the Merger Agreement and
in the case of Parent, the Parent Ancillary Agreements, nor the
consummation of the transactions contemplated hereby or thereby,
by Parent or Sub will: (a) conflict with or result in the breach
of any term or provision of, or constitute a default or give rise
to any right of termination, cancellation or acceleration under
the Certificate of Incorporation or Bylaws of Parent, the
Articles of Incorporation or Bylaws of Sub, or any material
agreement (including, without limitation, any loan agreements or
promissory note), indenture or instrument to which Parent or Sub
is a party or by which either is bound; (b) violate any order,
writ, injunction, decree, statute, rule or regulation applicable
to Parent or Sub; or (c) require on the part of Parent or Sub, as
of the date hereof, the approval, consent, waiver, authorization
or act of, or the making by Parent or Sub of any declaration,
filing or registration with, any third party or any Governmental
Body, except: (i) for the filing of the Articles of Merger with
the Arizona Corporation Commission and the publication thereof as
required by the ABCA, (ii) as set forth in Schedule 2.4 to the
letter dated and delivered to the Company and Stockholder on the
date hereof (the "Parent Disclosure Letter"), which relates to
this Supplemental Agreement and is designated therein as being
the Parent Disclosure Letter, and (iii) for such other consents,
orders, authorizations, registrations, declarations and filings
the failure of which to obtain or make could not, individually or
in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent and would not materially impair the
ability of Parent or Sub to perform their respective obligations
under this Supplemental Agreement, the Merger Agreement and, in
the case of Parent, the Parent Ancillary Agreements, or prevent
the consummation of any of the transactions contemplated hereby
or thereby.
2.5. Valid Shares. All of the shares of Parent
Common Stock issuable at the Effective Time in accordance with
the Merger Agreement will be, when so issued, duly authorized,
validly issued, fully paid and nonassessable and free of
preemptive rights. Each share of Parent Common Stock issuable at
the Effective Time in accordance with the Merger Agreement will
have associated with it one Series B Preferred Share Purchase
Right of Parent (a "Parent Right"). The terms of the Parent
Rights are set forth in the Rights Agreement between Parent and
Harris Trust and Savings Bank, as Rights Agent (the "Parent
Rights Agreement").
2.6. Pooling of Interests; Reorganization. To the
knowledge of Parent after due investigation, neither Parent nor
any of its Subsidiaries has (i) taken any action or failed to
take any action which action or failure would jeopardize the
treatment of the Merger as a pooling of interests for accounting
purposes or (ii) taken any action or failed to take any action
which action or failure would jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368(a)
of the Code.
2.7. Hart-Scott-Rodino. Parent is its own "ultimate
parent entity" (as defined in 16 C.F.R. 801.1(a)(3) (1995)).
The "Person" (as defined in 16 C.F.R. 801.1(a)(1) (1995)) of
which Parent is included does not have "annual net sales" (as
defined in 16 C.F.R. 801.11 (1995)) or "total assets" (as
defined in 16 C.F.R. 801.11 (1995)) of $100 million or more.
2.8. Charter Documents. Parent has furnished to the
Company true and complete copies of the Certificate of
Incorporation and the Bylaws of Parent as amended and in effect
on the date hereof.
2.9. Financial Statement; Undisclosed Liabilities.
True and complete copies of (a) the audited financial statements
of Parent as of December 31, 1994 and December 31, 1995 and for
each of the years then ended, together with all related notes and
schedules thereto, accompanied by the reports thereon of Arthur
Andersen LLP, independent public accountants, and (b) the
unaudited financial statements of Parent as included in Parent's
Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1996 and for the three months then ended, together with all
related notes and schedules thereto, if any (collectively, the
"Parent Financial Statements"), have been delivered to the
Company. The Parent Financial Statements were prepared in
accordance with generally accepted accounting principles applied
on a consistent basis, are true and correct and present fairly
the financial condition and the results of operations and cash
flows of Parent as of the dates and for the periods indicated.
Except as disclosed in the Parent Securities Filings (as
hereinafter defined), there are no material liabilities of Parent
other than liabilities reflected or reserved against on the
balance sheet of Parent as of March 31, 1996.
2.10. Conduct in the Ordinary Course of Business.
Except as disclosed in the Parent Securities Filings, since March
31, 1996, the business of Parent has been conducted in all
material respects in the ordinary course and consistent with past
practice. Without limiting the generality of the foregoing,
since March 31, 1996, Parent has not, except in the ordinary
course of business consistent with past practice: (a) written
down or written up (or failed to write down or write up as would
be required by generally accepted accounting principles) the
valued of any material assets or revalued any material assets of
Parent; (b) made any material change in any method of accounting
or accounting practice or policy used by Parent; or (c) made any
material loan to, guaranteed any indebtedness of or otherwise
incurred any indebtedness on behalf of any officer, director or
stockholder of Parent. Except as disclosed in the Parent
Securities Filings, since March 31, 1996, there has been no event
or occurrence that would, or is reasonably likely to, result in a
Material Adverse Effect with respect to Parent.
2.11. Public Documents. Parent has filed all
reports, registration statements, and all amendments thereto
required to be made thereto that Parent was required by law or
regulation to file with the Securities and Exchange Commission
(the "SEC"). Parent has furnished to the Company true, complete
and correct copies of Parent's Registration Statement on Form S-
1, Registration No. 333-702, including the Prospectus dated March
21, 1996, Parent's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1996 and any other filings of Parent
under the Securities Exchange Act of 1934 since March 31, 1996
(collectively, the "Parent Securities Filings"). As of their
respective dates, the Parent Securities Filings complied in all
material respects with all applicable rules and regulations of
the SEC. The Parent Securities Filings did not, as of the
respective dates thereof, contain any untrue statement of a
material fact or omit to state any material fact necessary to
make the statements therein in light of the circumstances in
which they were made not misleading.
2.12. Capitalization. The authorized capital stock
of Parent consists of 30,000,000 shares of Parent Common Stock
and 2,000,000 shares of preferred stock, $.001 par value, of
which 300,000 shares have been designated as "Series B
Participating Preferred Stock"). At the close of business on
July 16, 1996, 12,027,632 shares of Parent Common Stock were
issued and outstanding and no shares of preferred stock of Parent
were issued and outstanding. All of the outstanding shares of
capital stock of Parent are duly authorized, validly issued,
fully paid and nonassessable, and were issued by Parent in
compliance with applicable federal and state securities laws.
Except as set forth in or contemplated by the Parent Securities
Filings, there are no outstanding subscriptions, options,
warrants, preemptive or other rights or other arrangements or
commitments obligating Parent to issue any shares of its capital
stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND STOCKHOLDER
The Company and Stockholder, severally and not jointly,
represent and warrant to Parent as follows:
3.1. Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Arizona. The Company is duly qualified to
transact business as a foreign corporation and is in good
standing in each of the jurisdictions listed in Schedule 3.1 to
the letter dated and delivered to Parent on the date hereof (the
"Company Disclosure Letter"), which relates to this Supplemental
Agreement and is designated therein as being the Company
Disclosure Letter, which are the only jurisdictions in which the
ownership or leasing of its assets or the conduct of its business
requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect on the
Company, and no other jurisdiction has demanded, requested or
otherwise indicated that the Company is required so to qualify.
The Company has the requisite corporate power and authority to
own or lease and operate or use its assets and to carry on its
business as now conducted. True and complete copies of the
Articles of Incorporation and all amendments thereto, the Bylaws,
as amended, the minute books and stock transfer records, of the
Company, have been delivered or made available to Parent by the
Company.
3.2. Subsidiaries and Investments. The Company does
not, directly or indirectly, (a) own, of record or beneficially,
or own or hold the right to acquire, any outstanding voting or
equity securities or other voting or equity interests in any
corporation, partnership, joint venture or other entity or
(b) otherwise control any such corporation, partnership, joint
venture or other entity.
3.3. Capital Stock of the Company. (a) The
authorized capital of the Company consists of 1000 shares of
Company Common Stock, of which 100 have been issued and are
outstanding, none are held as treasury shares and, except as set
forth in Schedule 3.3 to the Company Disclosure Letter, none is
reserved for any purpose. Except as provided in this
Supplemental Agreement and the Merger Agreement, and except as
set forth in Schedule 3.3 to the Company Disclosure Letter, there
are no agreements, arrangements, options, warrants, calls, rights
or commitments of any character relating to the issuance, sale,
purchase or redemption of any shares of capital stock or other
equity interest of the Company, whether on conversion of other
securities or otherwise. Each of the outstanding shares of
capital stock of the Company has been duly authorized and is
validly issued, fully paid and non-assessable. None of the
outstanding shares of capital stock of the Company has been
issued in violation of, or is subject to, any preemptive or
subscription rights. Except as set forth in this Supplemental
Agreement and the Merger Agreement and in Schedule 3.3 to the
Company Disclosure Letter, the Company is not a party to, or
otherwise has any knowledge of the current existence of, any
stockholder agreement, voting trust agreement or any other
similar contract, agreement, arrangement, commitment, plan or
understanding restricting or otherwise relating to the voting,
dividend, ownership or transfer rights of any shares of capital
stock of the Company.
(b) Except as set forth in Schedule 3.3 to the Company
Disclosure Letter and except pursuant to applicable laws, there
are no restrictions, including but not limited to self-imposed re
strictions, on the retained earnings of the Company or on the
ability of the Company to declare and pay dividends.
(c) All of the issued and outstanding shares of
Company Common Stock are held, beneficially and of record, by
Stockholder. The outstanding shares of Company Common Stock are
held free and clear of all Encumbrances created by the Company
and such shares are beneficially owned by Stockholder free and
clear of all Encumbrances.
(d) Schedule 3.3 to the Company Disclosure Letter sets
forth a true and complete list of the name and address of each of
the holders of record of options to purchase capital stock of the
Company and, with respect to each option: (i) the holder of such
option, (ii) its date of grant and date of expiration, (iii) the
number of shares issuable upon exercise thereof, (iv) the per
share exercise price, (v) the vesting schedule or schedule of
exercisability, (vi) a summary of terms relating to acceleration
of exercisability or termination prior to its expiration date and
(vii) a summary of any other material terms.
3.4. Authorization. The Board of Directors of the
Company has declared the Merger advisable and has duly resolved
to recommend that the Merger and the Merger Agreement be approved
by Stockholder. The Company has the requisite power and
authority to enter into this Supplemental Agreement and the
Merger Agreement and to consummate the transactions contemplated
hereby and thereby and to comply with the terms, conditions and
provisions hereof and thereof. The execution, delivery and
performance by the Company of this Supplemental Agreement and the
Merger Agreement and the actions to be taken by the Company
contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the
Board of Directors of the Company. The affirmative vote of a
majority of the votes that holders of the outstanding shares of
Company Common Stock are entitled to cast is the only vote of the
holders of any class or series of the Company's capital stock
necessary to approve the Merger and the Merger Agreement and the
transactions contemplated thereby. Each of this Supplemental
Agreement and Merger Agreement constitutes (assuming their due
and valid authorization, execution and delivery by the other
parties thereto and their validity and binding effect upon the
other parties thereto), the valid and binding obligation of the
Company, enforceable in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar
laws now or hereafter in effect relating to the enforcement of
creditors' rights and by the effect of general principles of
equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
3.5. Non-Contravention. Neither the execution or
delivery of this Supplemental Agreement or the Merger Agreement,
nor the consummation of the transactions contemplated hereby or
thereby, by the Company will: (a) except as set forth in Schedule
3.5 to the Company Disclosure Letter, conflict with or result in
the breach of any term or provision of, or constitute a default
or give rise to any right of termination, cancellation or
acceleration under the Articles of Incorporation or Bylaws of the
Company, or any material agreement (including, without
limitation, any loan agreements or promissory note), indenture or
instrument to which the Company is a party or by which the
Company is bound; (b) except as set forth in Schedule 3.5 to the
Company Disclosure Letter, result in the creation or imposition
of any Encumbrance on any of the property of the Company;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company; or (d) require on the part
of the Company or Stockholder, as of the date hereof, the
approval, consent, waiver, authorization or act of, or the making
by the Company or Stockholder of any declaration, filing or
registration with, any third party or any Governmental Body,
except: (i) for the filing of the Articles of Merger with the
Arizona Corporation Commission and the publication thereof as
required by the ABCA, (ii) as set forth in Schedule 3.5 to the
Company Disclosure Letter and (iii) for such other consents,
orders, authorizations, registrations, declarations and filings
the failure of which to obtain or make could not, individually or
in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company and would not materially impair the
ability of the Company and Stockholder to perform their
respective obligations under this Supplemental Agreement, the
Merger Agreement and, in the case of Stockholder, under the
Ancillary Agreements to which Stockholder is a party, or prevent
the consummation of any of the transactions contemplated hereby
or thereby.
3.6. Financial Statements. Schedule 3.6 to the
Company Disclosure Letter contains (a) the audited balance sheet
of the Company as of December 31, 1994 and the related audited
statements of operations, shareholder's equity and cash flows for
the year ended December 31, 1994, together with all related notes
and schedules to such financial statements, accompanied by the
report thereon of Arthur Andersen LLP, independent public
accountants (collectively, the "Company Financial Statements"),
(b) the unaudited balance sheet of the Company and statements of
operations, shareholder's equity and cash flows for the year
ended December 31, 1993, together with all related notes and
schedules thereto (the "Company 1993 Unaudited Financial
Statements"), (c) the unaudited balance sheet of the Company and
statements of operations, shareholder's equity and cash flows for
the year ended December 31, 1995, together with all related notes
and schedules thereto (the "Company 1995 Unaudited Financial
Statements") and (d) the unaudited balance sheet (the "Balance
Sheet") of the Company as of June 30, 1996 (the "Balance Sheet
Date") and the related unaudited statements of operations and
cash flows for the six-month period then ended, together with all
related notes and schedules to such financial statements
(collectively, the "Company Interim Financial Statements").
Except as set forth on Schedule 3.6 to the Company Disclosure
Letter, the Company Financial Statements were prepared in
accordance with generally accepted accounting principles applied
on a consistent basis except as may be noted therein, are true
and correct and present fairly the financial condition and the
results of operations and cash flows of the Company as of the
dates and for the periods indicated. Except as set forth in
Schedule 3.6 to the Company Disclosure Letter, the Company 1993
Unaudited Financial Statements were prepared in accordance with
generally accepted accounting principles applied on a basis
consistent with the Company Financial Statements except as may be
noted therein, are true and correct and present fairly the
results of operations and cash flows of the Company for the
period indicated and, when the Company 1993 Unaudited Financial
Statements are audited, such audit will yield no substantial
deviations from the information contained in the Company 1993
Unaudited Financial Statements. Except as set forth in Schedule
3.6 to the Company Disclosure Letter, the Company 1995 Unaudited
Financial Statements were prepared in accordance with generally
accepted accounting principles applied on a basis consistent with
the Company Financial Statements except as may be noted therein,
are true and correct and present fairly the results of operations
and cash flows of the Company for the period indicated and,
except as set forth in Schedule 3.6 to the Company Disclosure
Letter, when the Company 1995 Unaudited Financial Statements are
audited, such audit will yield no substantial deviations from the
information contained in the Company 1995 Unaudited Financial
Statements. Except as set forth in Schedule 3.6 to the Company
Disclosure Letter, the Company Interim Financial Statements were
prepared in accordance with generally accepted accounting
principles applied on a basis consistent with the Company
Financial Statements except as may be noted therein, are true and
correct and present fairly the financial condition and results of
operations and cash flows of the Company as of the Balance Sheet
Date and for the six-month period then ended, subject to normal
year-end audit adjustments.
3.7. Operations Since Balance Sheet Date. (a) Except
as set forth on Schedule 3.7 to the Company Disclosure Letter,
since the Balance Sheet Date, there has been:
(i) no Material Adverse Change with respect to
the Company, and no fact or condition exists or is
contemplated or threatened which could reasonably be
expected to cause such a Material Adverse Change in the
future; and
(ii) no damage, destruction, loss or claim made
or filed against the Company (whether or not covered by
insurance) or condemnation or other taking which has or
could reasonably be expected to have a Material Adverse
Effect on the Company.
(b) Except as set forth in Schedule 3.7 to the Company
Disclosure Letter, since the Balance Sheet Date, the Business has
been conducted only in the ordinary course and in conformity with
past practice. Without limiting the generality of the foregoing,
since the Balance Sheet Date, except as set forth in Schedule 3.7
to the Company Disclosure Letter, other than in the ordinary
course of business consistent with past practice, the Company has
not:
(i) sold, leased (as lessor), transferred or
otherwise disposed of (including any transfers from the
Company to any of its Affiliates), or mortgaged or pledged,
or imposed or suffered to be imposed any Encumbrance (other
than Permitted Encumbrances) on, any of the assets reflected
on the Balance Sheet or any assets acquired after the
Balance Sheet Date;
(ii) cancelled any debts to or claims held by it
(including the settlement of any claims or litigation), or
waived any rights of material value;
(iii) created, incurred, assumed or guaranteed any
indebtedness for borrowed money or entered into, as lessee,
any capitalized leases (as defined in Statement of Financial
Accounting Standards No. 13);
(iv) accelerated or delayed collection of any note or
account receivable to a date prior to or beyond the date
such collection would have occurred in the ordinary course
of business consistent with past practice;
(v) accelerated or delayed payment of any account
payable or other liability of it in advance or beyond its
due date or the date when such liability would have been
paid in the ordinary course of business consistent with past
practice;
(vi) allowed the levels of raw materials, supplies,
work-in-process, finished goods or other materials included
in its inventory to vary in any material respect from levels
customarily maintained;
(vii) granted any bonus or other special compensation
or increased the compensation or benefits
payable or to become payable to any directors, officers or
employees except, in the case of employees, for increases in
the normal course of operations consistent with past
compensation practice or instituted any increase in or
otherwise amended any profit sharing, bonus, incentive,
deferred compensation, insurance, pension, retirement,
medical, hospital, disability, welfare or other employee
benefit plan except for increases required by law;
(viii) sold, assigned or transferred any Intellectual
Property or Software or other similar intangible assets, or
disclosed any proprietary or confidential information to any
Person (other than Parent, its Affiliates and agents);
(ix) extended credit or permitted any change in
credit practices or in the method of maintaining books,
accounts or business records;
(x) declared, set aside or paid any dividend or made
any other distribution (whether in cash, stock or other
property) in respect of any Company Common Stock or other
securities of the Company;
(xi) purchased, redeemed, called for purchase or
redemption or otherwise acquired any shares of Company
Common Stock or any other securities of the Company;
(xii) made any write-down of the value of any
inventory or write-offs as uncollectible of any notes or
accounts receivable;
(xiii) made capital expenditures involving
aggregate payments in excess of $25,000;
(xiv) except as otherwise contemplated herein, entered
into any transaction other than in the ordinary course of
business or any transaction (not involving purchases and
sales of inventory) including commitments for expenditures
in excess of $25,000;
(xv) made any changes in the accounting methods or
practices followed by the Company from those applied in the
preparation of the Company Financial Statements and the
Company Interim Financial Statements; or
(xvi) agreed or committed to do or authorized any
of the foregoing.
3.8. No Undisclosed Liabilities. Except as set forth
on Schedule 3.8 to the Company Disclosure Letter, the Company is
not subject to any liability (including, without limitation, unas
serted claims, whether known or unknown), whether absolute,
contingent, accrued or otherwise, which is not shown or which is
in excess of amounts shown or reserved for in the Balance Sheet,
other than liabilities of the same nature as those set forth in
the Balance Sheet and the notes thereto and reasonably incurred
in the ordinary course of its business consistent with past
practice after the Balance Sheet Date.
3.9. Taxes. (a) Except as set forth in Schedule 3.9
to the Company Disclosure Letter:
(i) all Tax Returns, required to be filed by or on
behalf of the Company prior to the Closing Date have been or
will be timely filed and such Tax Returns as so filed are or
will be complete and accurate and disclose all Taxes
required to be paid for the periods covered thereby;
(ii) no extension of time in which to file any such Tax
Returns is in effect or has been requested;
(iii) all Taxes for which the Company is liable
relating to any period ending on or prior to the Closing
Date shall have been paid or, if not yet due and payable,
properly accrued for as of the Closing Date;
(iv) all Taxes for which the Company is liable for
periods beginning before and ending on or after the Closing
Date have been paid as required by law in a timely manner
or, if not yet due and payable, have been properly accrued
for;
(v) all Taxes which the Company is required by law to
withhold or to collect for payment have been duly withheld
and collected, and have been paid or will be paid to the
proper Governmental Body;
(vi) there are no Tax liens (except for liens relating
to current Taxes not yet due) on any property of the Company
and no basis exists for any such liens;
(vii) no audit of any kind has been conducted with
respect to any Tax Return by an appropriate Taxing
authority;
(viii) all deficiencies which have been asserted as a
result of such examinations have been fully paid or finally
settled, and no issue has been raised in any such
examination which, by application of similar principles,
reasonably would be expected to result in assertion of a
deficiency for any other year not so examined;
(ix) the Company has not executed or entered into a
closing agreement pursuant to Section 7121 of the Code, or
any predecessor provision or any similar provision of state,
local or foreign law;
(x) there are no outstanding agreements or waivers
extending the statutes of limitations with respect to the
assessment of any Tax and no such agreements or waivers have
been requested;
(xi) the Company has not incurred any liability with
respect to Taxes based upon income, operations, purchases,
sales, payroll, licenses, compensation, business, capital
stock or surplus, properties or assets except in the
ordinary course of business, or any liabilities for interest
or penalties with respect to the foregoing; and
(xii) there is no action, suit, investigation, audit,
claim or assessment pending or proposed or threatened with
respect to Taxes of the Company and no basis exists
therefor.
(b) Except as set forth in Schedule 3.9 to the Company
Disclosure Letter, as a result of the Merger, none of the
Company, Surviving Corporation or Parent will be obligated to
make a payment to an individual employed by the Company that
would be a "parachute payment" to a "disqualified individual" as
those terms are defined in Section 280G of the Code, without
regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
(c) For any taxable period as to which the relevant
statute of limitations will not have expired as of the Closing
Date, the Company has not been a member of an affiliated group
(as defined in Section 1504(a) of the Code without regard to the
limitations contained in Section 1504(b) of the Code) or filed
Tax Returns with a group of corporations filing a combined,
consolidated or unitary income Tax Return.
(d) The Company has made a valid election under
Section 1362 of the Code to be treated as an "S corporation" and
has at all times since the date it was organized qualified as an
"S corporation" for purposes of Subchapter S of the Code.
(e) Except as set forth in Schedule 3.9 to the Company
Disclosure Letter, with respect to all states which for state tax
purposes allow a corporation to be treated as an "S corporation"
or similar entity entitled to special tax treatment, all
elections for such treatment have been properly and validly made
in such states and the Company has maintained compliance at all
times with all applicable qualifications and filing procedures
for such treatment.
(f) The Company will not be subject to tax under
Section 1374 of the Code with respect to the transactions
contemplated by the Merger Agreement and this Supplemental
Agreement.
3.10. Availability of Assets and Legality of Use.
Except as set forth in Schedule 3.10 to the Company Disclosure
Letter, the assets owned or leased by the Company or which the
Company is entitled to use under license or other agreements,
constitute all the assets used by the Company in the conduct of
the Business (including, but not limited to, all books, records,
hardware, computers, data processing systems and Software), and
the tangible assets owned or leased by the Company are in good
condition (subject to normal wear and tear) and serviceable
condition and are suitable for the uses for which they are
intended. Schedule 3.10 to the Company Disclosure Letter also
sets forth a description of all material services provided by
Stockholder or any of his Affiliates to the Company utilizing
either (i) assets not owned by the Company as of the Effective
Time or (ii) Persons not listed in Schedule 3.20(d) to the
Company Disclosure Letter, and the manner in which the costs of
providing such services have been charged to the Company. Except
as set forth on Schedule 3.10 to the Company Disclosure Letter,
(a) to the Company's and Stockholder's knowledge, all such assets
and their uses conform in all material respects to all applicable
laws, regulations, rules, ordinances, codes, licenses, franchises
and permits (including, without limitation, all electrical,
building, zoning, environmental and occupational safety and
health Requirements of Law), and (b) no written notice of any
existing violation of any of such matters relating to such assets
or their use has been received by the Company or Stockholder.
3.11. Governmental Permits. The Company owns, holds
or possesses all licenses, franchises, permits, privileges,
immunities, approvals and other authorizations from a
Governmental Body which are necessary to entitle it to own or
lease, operate and use its assets and to carry on and conduct the
Business substantially as currently conducted (herein
collectively called "Governmental Permits"), except where the
failure to own, hold or possess any such Governmental Permit
would not have a Material Adverse Effect on the Company.
Schedule 3.11 to the Company Disclosure Letter sets forth a list
of each Governmental Permit, except for such incidental licenses,
permits and other authorizations which would be readily
obtainable by any qualified applicant without undue burden in the
event of any lapse, termination, cancellation or forfeiture
thereof. Complete and correct copies of all of the Governmental
Permits have been delivered or made available to Parent by the
Company.
Except as set forth in Schedule 3.11 to the Company
Disclosure Letter, (i) the Company has fulfilled and performed
its obligations under each of the Governmental Permits, and no
event has occurred or condition or state of facts exists which
constitutes or, after notice or lapse of time or both, would
constitute a breach or default under any such Governmental Permit
or which permits or, after notice or lapse of time or both, would
permit revocation or termination of any such Governmental Permit,
or which might adversely affect the rights of the Company under
any such Governmental Permit; (ii) no notice of cancellation, of
default or of any dispute concerning any Governmental Permit, or
of any event, condition or state of facts described in the
preceding clause, has been received by, or is known to, the
Company or Stockholder; and (iii) each of the Governmental
Permits is valid, subsisting and in full force and effect and
will continue in full force and effect after the Effective Time,
in each case without (x) the occurrence of any breach, default or
forfeiture of rights thereunder, or (y) the consent, approval, or
act of, or the making of any filing with, any Governmental Body.
3.12. Real Property. The Company does not own any
real property and there does not exist any option or right to
purchase held by the Company to acquire any real property.
3.13. Real Property Leases. Schedule 3.13 to the
Company Disclosure Letter sets forth a list of each lease or
similar agreement (with each such listed lease or similar
agreement attached thereto) under which the Company is lessee of,
or holds or operates, any real property owned by any third party.
Except as set forth on Schedule 3.13 to the Company Disclosure
Letter, there are no subleases, tenancies or other rights of
occupancy affecting all or any part of such leases. The Company
has the right to quiet enjoyment of the premises described in any
lease identified on such Schedule for the full term of each such
lease or similar agreement (and any renewal option related
thereto) relating thereto, and the leasehold or other interest of
the Company therein is not subject or subordinate to any
Encumbrance held by Persons claiming by, through or under the
Company, except for Permitted Encumbrances.
3.14. Condemnation. To the knowledge of the Company
and Stockholder, neither the whole nor any part of any real
property listed on Schedule 3.13 to the Company Disclosure Letter
is subject to any pending suit for condemnation or other taking
by any public authority and, to the knowledge of the Company and
Stockholder, no such condemnation or other taking is threatened
or contemplated.
3.15. Personal Property. Schedule 3.15 to the Company
Disclosure Letter contains a list as of June 30, 1996 of all
machinery, equipment, vehicles, furniture and other personal
property owned by the Company having an original cost of $20,000
or more.
3.16. Personal Property Leases. Schedule 3.16 to the
Company Disclosure Letter contains a list of each lease or other
agreement or right, whether written or oral, under which the
Company is lessee of, or holds or operates, any machinery,
equipment, vehicle or other tangible personal property owned by a
third party, except for any such lease, agreement or right that
is terminable by the Company without penalty or payment on notice
of 30 days or less, or which involves the payment by the Company
of rentals of less than $25,000 per year. A true and complete
copy of each lease listed on Schedule 3.16 to the Company
Disclosure Letter has been delivered to Parent.
3.17. Intellectual Property; Software. (a)
Schedule 3.17 to the Company Disclosure Letter contains a list of
all Copyrights, Patent Rights and Trademarks (including all
assumed or fictitious names currently used or used within the
past five years by the Company) owned by, licensed to or used by
the Company.
(b) Schedule 3.17 to the Company Disclosure Letter
contains a list of all Software owned by, licensed to or used by
the Company provided, that Schedule 3.17 to the Company
Disclosure Letter does not list Software that is available in
consumer retail stores and subject to "shrink-wrap" license
agreements.
(c) Schedule 3.17 to the Company Disclosure Letter
contains a list of all agreements, contracts, licenses,
sublicenses, assignments and indemnities which relate to (i) any
Copyrights, Patent Rights or Trademarks listed in Schedule 3.17
to the Company Disclosure Letter, (ii) any Trade Secrets owned
by, licensed to or used by the Company or (iii) any Software
listed in Schedule 3.17 to the Company Disclosure Letter.
(d) Except as disclosed in Schedule 3.17 to the
Company Disclosure Letter, the Company either: (i) owns the
entire right, title and interest in and to the Intellectual
Property and Software listed in Schedule 3.17 to the Company
Disclosure Letter, free and clear of any Encumbrance; or (ii) has
the perpetual, royalty-free right to use the same.
(e) Except as disclosed in Schedule 3.17 to the Company
Disclosure Letter: (i) all registrations for Copyrights, Patent
Rights and Trademarks identified in Schedule 3.17 to the Company
Disclosure Letter as being owned by the Company are valid and in
force, and all applications to register any unregistered
Copyrights, Patent Rights and Trademarks so identified are
pending and in good standing, all without challenge of any kind;
(ii) the Intellectual Property owned by the Company is valid and
enforceable; (iii) the Company has the sole and exclusive right
to bring actions for infringement or unauthorized use of the
Intellectual Property and Software owned by it, and to the
knowledge of the Company and Stockholder, there is no basis for
any such action; (iv) the Company has taken all actions
reasonably necessary to protect, and where necessary register,
its Copyrights, Trademarks, Software, Patent Rights or Trade
Secrets; and (v) the Company is not in breach of any agreement
affecting Intellectual Property or Software. Correct and
complete copies of: (x) registrations for all registered
Copyrights, Patent Rights and Trademarks identified in Schedule
3.17 to the Company Disclosure Letter as being owned by the
Company; and (y) all pending applications to register
unregistered Copyrights, Patent Rights and Trademarks identified
in Schedule 3.17 to the Company Disclosure Letter as being owned
by the Company (together with any subsequent correspondence or
filings relating to the foregoing) have been delivered or made
available to Parent by the Company.
(f) Except as set forth in Schedule 3.17 to the
Company Disclosure Letter: (i) no infringement of any
Intellectual Property of any Person has occurred or results in
any way from the operations of the Business; (ii) the Company has
not received any claim of any infringement of any Intellectual
Property of any other Person in respect of the operations of the
Business; (iii) the Company has not received any claim of
invalidity of any Copyright, Trademark, Patent Right, Trade
Secret or Software against the Company; (iv) no proceedings are
pending, or to the knowledge of the Company or Stockholder
threatened which challenge the validity, ownership or use of any
Intellectual Property or Software used by the Company; (v)
neither the Company nor Stockholder has had notice of, or
knowledge of any basis for, a claim against the Company that the
operations, activities, products, Software, equipment, machinery
or processes of the Business infringe any Intellectual Property
of any other Person; and (vi) no violation of any Software
license agreement (including "shrink-wrap" license agreements
relating to Software that is available in consumer retail stores)
has occurred or results in any way from the operations of the
Business.
(g) Except as disclosed in Schedule 3.17 to the
Company Disclosure Letter:
(i) the Software owned by, licensed to or used by the
Company (excluding Software that is available in consumer
retail stores and subject to "shrink-wrap" license
agreements) is not subject to any transfer, assignment,
site, equipment, or other operational limitations;
(ii) the Company has maintained and protected the
Software that it owns (the "Owned Software") with
appropriate confidentiality and non-disclosure agreements
and such other measures as are necessary to protect the
proprietary, trade secret or confidential information
contained therein;
(iii) the Owned Software has been registered or is
eligible for protection and registration under applicable
copyright law and has not been forfeited to the public
domain;
(iv) the Company has copies of all releases or separate
versions of the Owned Software so that the same may be
subject to registration in the United States Copyright
Office;
(v) the Company has complete and exclusive right, title
and interest in and to the Owned Software;
(vi) the Company has developed the Owned Software
through its own efforts and for its own account without the
aid or use of any consultants, agents, independent
contractors or Persons (other than Persons that are
employees of the Company);
(vii) the Owned Software does not infringe any
Intellectual Property of any other Person;
(viii) any Owned Software includes the source code;
(ix) there are no agreements or arrangements in effect
with respect to the marketing, distribution, licensing or
promotion of the Owned Software by any other Person;
(x) the Owned Software complies with all applicable
Requirements of Laws relating to the export or reexport of
the same; and
(xi) the Owned Software may be exported or reexported
to all countries without the necessity of any license, other
than to those countries specified as prohibited destinations
pursuant to applicable regulations of the U.S. Department of
Commerce and/or the United States State Department.
(h) Except as disclosed in Schedule 3.17 to the
Company Disclosure Letter, all employees, agents, consultants or
contractors who have contributed to or participated in the
creation or development of any copyrightable, patentable or trade
secret material on behalf of the Company or any predecessor in
interest thereto either: (i) is a party to a "work-for-hire"
agreement under which the Company is deemed to be the original
owner/author of all property rights therein; or (ii) has executed
an assignment or an agreement to assign in favor of the Company
(or such predecessor in interest, as applicable) of all right,
title and interest in such material.
3.18. Accounts Receivable. All accounts receivable of
the Company have arisen from bona fide transactions by the
Company in the ordinary course of its business. All accounts
receivable reflected in the Balance Sheet are good and
collectible in the ordinary course of business at the aggregate
recorded amounts thereof, net of any applicable allowance for
doubtful accounts reflected in the Balance Sheet; and all
accounts receivable to be reflected on the books and records of
the Company as of the Effective Time, taken as a whole, will be
good and collectible in the ordinary course of business at the
aggregate recorded amounts thereof, net of any applicable
allowance for doubtful accounts, which allowances will be
determined on a basis consistent with the basis used in
determining the allowances for doubtful accounts reflected in the
Balance Sheet.
3.19. Title to Assets. Except as set forth on Schedule
3.19 to the Company Disclosure Letter, the Company has
good title to all of its tangible assets reflected on the Balance
Sheet or thereafter acquired (except those sold or otherwise
disposed of in the ordinary course of business consistent with
past practice), free and clear of all Encumbrances except Per
mitted Encumbrances.
3.20. Employees and Related Agreements; ERISA.
(a) Compensation Arrangements. Schedule 3.20(a) to
the Company Disclosure Letter sets forth a true and complete list
of each of the following to which the Company is a party or by
which it is bound or pursuant to which it may be required to make
any payment at any time:
(i) other than for the plans set forth in Schedule
3.20(b) to the Company Disclosure Letter, each retirement,
savings, thrift, deferred compensation, severance, stock
ownership, stock purchase, stock option, performance, bonus,
incentive, vacation or holiday pay, hospitalization or other
medical, disability, life or other insurance, or other
welfare, retiree welfare or benefit plan, policy, trust,
understanding or arrangement of any kind, whether written or
oral (the "Non-ERISA Plans"); and
(ii) other than the Non-ERISA Plans and other than
those described in Section 3.20(b), each employee collective
bargaining agreement and each agreement, commitment,
understanding, plan, policy or arrangement of any kind,
whether written or oral, with or for the benefit of any
current or former officer, director, employee or consultant
(including, without limitation, each employment,
compensation, deferred compensation, severance, supplemental
pension, life insurance, termination or consulting agreement
or arrangement and any agreements or arrangements associated
with a change in control) (the "Compensation Commitments").
True and complete copies of all written Non-ERISA Plans and
Compensation Commitments and of all related insurance and annuity
policies and contracts and other documents with respect to each
Non-ERISA Plan and Compensation Commitment have been delivered or
made available to Parent by the Company. Schedule 3.20(a) to the
Company Disclosure Letter contains a true and complete
description of all oral Non-ERISA Plans and Compensation
Commitments. Except as set forth in Schedule 3.20(a) to the
Company Disclosure Letter, no payments will be triggered as a
result of the transactions contemplated by this Supplemental
Agreement or the Merger Agreement for which Parent or the Company
will bear any liability. The termination of employment of any
employee of the Company after the Closing will not require the
payment pursuant to any Non-ERISA Plan or any Compensation
Commitment of any amount which would not be deductible under
Section 280G of the Code.
(b) Company Plans.
(i) Schedule 3.20(b) to the Company Disclosure Letter
sets forth a true and complete list of each "employee
pension benefit plan" (as such term is defined in Section
3(2) of ERISA) and each "employee welfare benefit plan" (as
such term is defined in Section 3(1) of ERISA) covering any
employee or former employee of the Company (the "Welfare
Plans") (collectively the "Plans"). Except as disclosed on
Schedule 3.20(b) to the Company Disclosure Letter: (A) the
Company has never maintained any employee pension benefit
plan, and (B) the Company has never been required to
contribute to any "multiemployer plan" (as such term is
defined in Section 3(37) of ERISA).
(ii) The Company has delivered or made available to
Parent, with respect to each Plan, correct and complete
copies, where applicable, of (A) all Plan documents and
amendments, trust agreements and insurance and annuity
contracts and policies, (B) the most recent Internal Revenue
Service determination letter, (C) the Annual Reports (Form
5500 Series) and accompanying schedules, as filed, for the
most recently completed Plan year, and (D) the current and
most recent summary plan description.
(iii) Except as set forth in Schedule 3.20(b) to the
Company Disclosure Letter, each Plan which is intended to
qualify under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue
Service that such Plan is so qualified under the Code as
amended to the date hereof; and to the knowledge of the
Company and Stockholder, no circumstance exists which might
cause such Plan to cease being so qualified.
(c) Compliance With Law; Controlled Group Liabilities.
Each Plan complies, and has been administered to comply, in all
material respects with all requirements of law and regulations
applicable thereto, and there has been no notice issued by any
governmental authority questioning or challenging such
compliance. There are no actions, suits or claims (other than
routine claims for benefits) pending or, to the Company's or
Stockholder's knowledge, threatened involving such Plans or the
assets of such Plans. The Company has no obligations under any
of the Welfare Plans or otherwise to provide health or death
benefits to or in respect of former employees, except as
specifically required by the continuation requirements of Part 6
of Title I of ERISA. The Company has no material liability of
any kind whatsoever, whether direct, indirect, contingent or
otherwise, on account of (i) any violation of the health care
requirements of Part 6 of Title I of ERISA or Section 4980B of
the Code, (ii) under Section 502(i) or Section 502(l) of ERISA or
Section 4975 of the Code, (iii) under Section 302 of ERISA or
Section 412 of the Code or (iv) under Title IV of ERISA.
(d) Schedule 3.20(d) to the Company Disclosure Letter
contains: (i) a list of all employees or commission salespersons
of the Company as of July 12, 1996; (ii) the current annual base
compensation (excluding commissions and bonuses) of, and a
description of the fringe benefits (other than those generally
available to employees of the Company) provided by the Company to
any such employees or salespersons; (iii) a list of all former
employees or commission salespersons of the Company who have
terminated their relationship with the Company since July 12,
1995 and (iv) a list of all present employees or commission
salespersons of the Company whose current annual compensation
(including base compensation, commissions and bonuses) is at
least $30,000 and who have given notice of their intention to
terminate their relationship with the Company. The Company has
not paid any commissions or bonuses except pursuant to its
commissions and bonus plans, copies of which have been delivered
to Parent.
(e) Except as set forth in Schedule 3.20(e) to the
Company Disclosure Letter, (i) to the knowledge of the Company
and Stockholder, the Company is not involved in any transaction
or other situation with any employee, officer, director or
Affiliate of the Company which may be generally characterized as
a "conflict of interest", including, but not limited to, direct
or indirect interests in the business of competitors, suppliers
or customers of the Company, and (ii) there are no situations
with respect to the Business which involved or involve (A) the
use of any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political
activity, (B) the making of any direct or indirect unlawful
payments to government officials or others from corporate funds
or the establishment or maintenance of any unlawful or unrecorded
funds, (C) the violation of any of the provisions of The Foreign
Corrupt Practices Act of 1977, or any rules or regulations
promulgated thereunder, (D) the receipt of any illegal discounts
or rebates or any other violation of the antitrust laws or (E) to
the knowledge of the Company and Stockholder, any investigation
by the SEC or any Governmental Body.
3.21. Employee Relations. Except as set forth in
Schedule 3.21 to the Company Disclosure Letter, the Company has
complied with all applicable laws, rules and regulations which
relate to prices, wages, hours, discrimination in employment and
collective bargaining and is not liable for any arrears of wages
or any taxes or penalties for failure to comply with any of the
foregoing. The Company is in compliance with the requirements of
the Workers Adjustment and Retraining Notification Act and has no
liabilities pursuant thereto. The Company believes that its
relations with its employees are satisfactory. The Company is
not a party to, or affected by or threatened with, any dispute or
controversy with a union or with respect to unionization or
collective bargaining. The Company is not materially affected by
any dispute or controversy with a union or with respect to
unionization or collective bargaining involving any supplier or
customer of the Company. Schedule 3.21 to the Company Disclosure
Letter sets forth a description of any union organizing or
election activities involving any non-union employees of the
Company which have occurred since January 1, 1993 or, to the
knowledge of the Company and Stockholder, are threatened as of
the date hereof.
3.22. Contracts. Except as set forth on Schedule 3.22
to the Company Disclosure Letter or any other Schedule thereto,
the Company is not a party to or bound by:
(a) any contract for the purchase or sale of real
property or any option to purchase or sell real property;
(b) any contract for the sale of goods or services
which the Company reasonably anticipates will involve the
payment of more than $100,000 in 1996 or which extends
beyond December 31, 1997;
(c) any contract which is material to the Company for
the purchase, licensing or development of Intellectual
Property, Software or computer hardware, data or databases;
(d) any consignment, distributor, dealer,
manufacturers representative, sales agency, advertising
representative or advertising or public relations contract
which the Company reasonably anticipates will involve the
payment of more than $25,000 in 1996;
(e) any guarantee of the obligations of customers,
suppliers, officers, directors, employees, Affiliates of the
Company or others;
(f) any agreement which provides for, or relates to,
the incurrence by the Company of debt for borrowed money
(including, without limitation, any interest rate or foreign
currency swap, cap, collar, hedge or insurance agreements,
or options or forwards on such agreements, or other similar
agreements for the purpose of managing the interest rate
and/or foreign exchange risk associated with its financing);
(g) any joint venture, partnership or other
arrangement involving a sharing of profits involving the
Company;
(h) any agreement limiting the ability of the Company
to engage in any business anywhere in the world;
(i) any contract not made in the ordinary course; or
(j) any other contract, agreement, commitment,
understanding or instrument which is material to the Company
or to the Business.
3.23. Status of Contracts. Except as set forth in
Schedule 3.23 to the Company Disclosure Letter or in any other
Schedule thereto, each of the leases, contracts and other
agreements listed in Schedules 3.13, 3.16, 3.17, 3.20 and 3.22 to
the Company Disclosure Letter (collectively, the "Material
Contracts") constitutes a valid and binding obligation of the
Company and is in full force and effect and (except as set forth
in Schedule 3.5 to the Company Disclosure Letter and except for
those Material Contracts which by their terms will expire prior
to the Closing Date or are otherwise terminated prior to the
Closing Date in accordance with the provisions hereof) will
continue in full force and effect thereafter, in each case
without breaching the terms thereof or resulting in the
forfeiture or impairment of any rights thereunder and without the
consent, approval or act of, or the making of any filing with,
any other party. The Company has fulfilled and performed its
obligations under each of the Material Contracts, and the Company
is not in, or, to the knowledge of the Company and Stockholder
alleged to be in, breach or default under, nor is there or is
there, to the knowledge of the Company and Stockholder, alleged
to be any basis for termination of, any of the Material Contracts
and to the knowledge of the Company and Stockholder, no other
party to any of the Material Contracts has breached or defaulted
thereunder, and no event has occurred and no condition or state
of facts exists which, with the passage of time or the giving of
notice or both, would constitute such a default or breach by the
Company or by any such other party. The Company is not currently
renegotiating any of the Material Contracts or paying liquidated
damages in lieu of performance thereunder. None of the Material
Contracts contains terms unduly burdensome to the Company or is
harmful to the Business. Complete and correct copies of each of
the Material Contracts have been delivered or made available to
Parent by the Company.
3.24. No Violation, Litigation or Regulatory Action.
Except as set forth on Schedule 3.24 to the Company Disclosure
Letter:
(a) To the knowledge of the Company and Stockholder,
the Company has complied with all laws, regulations, rules,
writs, injunctions, ordinances, franchises, decrees,
stipulations, awards or orders of any Governmental Body which are
applicable to the Company;
(b) No notice has been served upon the Company by any
Governmental Body or other Person of any violation of any
Requirements of Law or calling attention to the necessity of any
work, repairs, new construction, installation or alteration of
any real or personal property owned, leased or used by the
Company;
(c) There are no lawsuits, claims, suits or
proceedings pending or, to the knowledge of the Company or
Stockholder, threatened against the Company or investigations
pending regarding the Company or the Business nor, to the
knowledge of the Company or Stockholder, is there any basis for
any of the same, and there are no lawsuits, suits or proceedings
pending or contemplated in which the Company is the plaintiff or
claimant; and
(d) There is no action, suit or proceeding pending or,
to the knowledge of the Company or Stockholder, threatened which
questions the legality or propriety of the transactions
contemplated by this Supplemental Agreement, the Merger Agreement
or the Ancillary Agreements.
3.25. Insurance. (a) The Company has delivered to or
made available to Parent:
(i) true and complete copies of all policies of
insurance to which the Company is a party or under which
the Company, or any director of the Company, is or has been
covered at any time preceding the date of this Agreement;
(ii) true and complete copies of all pending
applications for policies of insurance; and
(iii) any statement by the accountant of the Company's
financial statements with regard to the adequacy of coverage
or of the reserves for claims.
(b) Schedule 3.25 to the Company disclosure letter
describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy
of insurance, for the transfer or sharing of any risk by the
Company; and
(iii) all obligations of the Company to third parties
with respect to insurance (including such obligations under
leases and service agreements) and identifies the policy
under which such coverage is provided.
(c) Schedule 3.25 to the Company disclosure letter
sets forth, by year, for the current policy year and each of the
three preceding policy years:
(i) a summary of the loss experience under each policy
in excess of $5,000; and
(ii) a statement describing the loss experience for
all claims that were self-insured, including the number and
aggregate cost of such claims.
(d) Except as set forth on Schedule 3.25 to the
Company disclosure letter:
(i) All policies to which the Company is a party or
that provide coverage to Stockholder, the Company, or any
director or officer of the Company:
(A) to the knowledge of the Company and Stockholder,
are valid, outstanding, and enforceable;
(B) to the knowledge of the Company and Stockholder,
are issued by an insurer that is financially sound
and reputable;
(C) taken together, provide adequate insurance
coverage for the assets and the operations of the
Company for all risks to which the Company is
normally exposed, based on coverages maintained by
similar businesses in similar geographical areas;
(D) are sufficient for compliance with all
Requirements of Law and Contracts to which the
Company is a party or by which it is bound;
(E) will continue in full force and effect
following the consummation of the Effective Time;
and
(F) do not provide for any retrospective premium
adjustment or other experienced-based liability on
the part of the Company.
(ii) To the knowledge of the Company and Stockholder,
neither the Company nor Stockholder has received (A) any
refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance
policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or
able to perform its obligations thereunder in connection
with any policy of the Company;
(iii) The Company has paid all premiums due, and has
otherwise performed all of its obligations, under each policy
to which the Company is a party or that provides coverage to
the Company or any director thereof; and
(iv) To the knowledge of the Company and Stockholder,
the Company has given notice to the insurer of all claims as to
which it has notice that may be insured thereby.
3.26. Environmental Protection. (a) The Company is
in compliance in all material respects with all applicable
federal, state or local statutes, laws, ordinances, codes, rules,
regulations, guidelines or any binding determinations of any
Governmental Body (including consent decrees and administrative
orders) relating to protection of the environment or public or
worker health and safety (collectively, "Environmental Laws").
(b) There has been no Release by the Company of any
Contaminant on, in, under or from any Facility now or previously
owned, operated or leased by the Company that would violate any
Environmental Law and would have a Material Adverse Effect on the
Company.
(c) The Company is not subject to the environmental
liabilities of any third party, whether by contractual agreement
or operation of law.
(d) Schedule 3.26 to the Company Disclosure Letter
sets forth a true and complete list of each Facility previously
owned, operated or leased by the Company.
3.27. Customers and Suppliers. Set forth on Schedule
3.27 to the Company Disclosure Letter is a list of the names and
addresses of the ten largest suppliers (measured by dollar volume
of purchases and sales) of the Company during 1995. The Company
has no customers that account for 1% or more of its sales.
Except as set forth in Schedule 3.27 to the Company Disclosure
Letter, (i) there exists no actual or, to the knowledge of the
Company and Stockholder, threatened termination, cancellation or
limitation of, or any modification or change in, the business
relationship of the Company with any customer or supplier listed
on Schedule 3.27 to the Company Disclosure Letter and (ii) there
exists no present condition or state of facts or circumstances
involving customers, suppliers or sales representatives which the
Company can reasonably foresee would have a Material Adverse
Effect on the Company.
3.28. Stockholder's Assets. Except as set forth on
Schedule 3.28 to the Company Disclosure Letter, neither
Stockholder nor any Affiliate (including spouses, children and
other relatives) of Stockholder or of the Company has, or since
January 1, 1994 has had, any interest in any property (whether
real, personal, or mixed and whether tangible or intangible),
used in or pertaining to the Business.
3.29. No Finder. The Company has not paid or become
obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of the transactions contemplated
by this Supplemental Agreement, the Merger Agreement and the
Ancillary Agreements.
3.30. Transactions with Affiliates. Except as set
forth on Schedule 3.30 to the Company Disclosure Letter, neither
Stockholder nor any Affiliate (including spouses, children and
other relatives) of Stockholder or Company owns, or since January
1, 1994 has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person
that has (i) had business dealings or a material financial
interest in any transaction with the Company other than business
dealings or transactions conducted in the ordinary course with
the Company at substantially prevailing market prices and on
substantially prevailing market terms, or (ii) engaged in
competition with the Company in any market presently served by
the Company. Except as set forth on Schedule 3.30 to the Company
Disclosure Letter, neither Stockholder nor any Affiliate
(including spouses, children and other relatives) of Stockholder
or of the Company is a party to any contract with, or has any
claim or right against, the Company.
3.31. Pooling of Interests; Reorganization. (a) To
the knowledge of the Company and Stockholder, after due
investigation:
(i) the Company is autonomous and has not been a
subsidiary or division of another corporation within two
years before the Merger is expected to be consummated;
(ii) the Company has not changed the equity interest
of its voting capital stock in contemplation of effecting
the Merger;
(iii) except as set forth in Schedule 3.31 to the
Company Disclosure Letter, within the two years immediately
preceding the date of this Supplemental Agreement, the
Company has not issued any capital stock, granted any Person
the right to acquire capital stock, or made any
distributions with respect to Company Common Stock other
than normal distributions of dividends and issuance of stock
options in the normal course of business;
(iv) the Company has not reacquired shares of its
voting capital stock for purposes of the Merger;
(v) except as set forth in Schedule 3.31 to the
Company Disclosure Letter, within the two years immediately
preceding the date of this Supplemental Agreement, the
Company has not redeemed or otherwise acquired any
outstanding shares of its capital stock;
(vi) the Company has not disposed of a significant
portion of its assets during the two years prior to the
Merger in contemplation thereof; and
(vii) the Company has not taken any other action or
failed to take any other action which action or failure
would jeopardize the treatment of the Merger as a pooling of
interests for accounting purposes.
(b) To the knowledge of the Company and Stockholder,
the Company has not taken any action or failed to take any action
which action or failure would jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368(a)
of the Code.
3.32. State Anti-takeover Law. Neither Chapter 23 of
the ABCA nor, to the knowledge of the Company and Stockholder,
any other "fair price" or "control share acquisition" statute or
other similar statute or regulation is applicable to the Merger,
this Supplemental Agreement, the Merger Agreement, the Ancillary
Agreements or the transactions contemplated hereby and thereby.
3.33. Books and Records. Except as set forth in
Schedule 3.33 to the Company Disclosure Letter, the books of
account, minute books, stock record books, and other records of
the Company specifically requested by Parent or its
representatives, all of which have been, or prior to the Closing
Date will be, made available to Parent, are complete and correct
in all material respects. Except as set forth in Schedule 3.33
to the Company Disclosure Letter, the minute books of the Company
contain accurate and complete records of all meetings held of,
and corporate action taken by, the stockholders, the Board of
Directors, and committees of the Board of Directors of the
Company, and no meeting of any such stockholders, Board of
Directors, or committee has been held for which minutes have not
been prepared and are not contained in such minute books. At the
Closing Date, all of those books and records will be in the
possession of the Company.
3.34. No Violation of Law. Stockholder has not been
convicted of any criminal wrongdoing (other than minor traffic
violations) or of violations of any federal or state securities
laws, nor, to the knowledge of Company and Stockholder, has any
employee of the Company ever been so convicted.
3.35. Disclosure. None of the representations or
warranties of the Company or Stockholder contained in this
Supplemental Agreement, none of the information contained in the
Schedules referenced in Article III or Article IV, and none of
the other information or documents furnished to Parent or any of
its representatives by the Company, Stockholder or their
representatives pursuant to the terms of this Supplemental
Agreement, is false or misleading in any material respect or
omits to state a fact herein or therein necessary to make the
statements herein or therein, in light of the circumstances in
which they were made, not misleading in any material respect. To
the knowledge of the Company and Stockholder, there is no fact
which has, or so far as can be foreseen at this time, could
reasonably be expected to have, a Material Adverse Effect with
respect to the Company, which has not been set forth or referred
to in this Supplemental Agreement or such Schedules.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
STOCKHOLDER
Stockholder represents and warrants to Parent as
follows:
4.1. Authority. Stockholder has the legal capacity,
power and authority to enter into this Supplemental Agreement and
each Ancillary Agreement to which Stockholder is a party, to
consummate the transactions contemplated hereby and thereby and
to comply with the terms, conditions and provisions hereof and
thereof. This Supplemental Agreement constitutes and, when
executed and delivered by Stockholder, each Ancillary Agreement
to which Stockholder is a party will constitute (assuming their
due and valid authorization, execution and delivery by the other
parties thereto and their validity and binding effect upon the
other parties thereto), the valid and binding obligation of
Stockholder, enforceable in accordance with their respective
terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws now or hereafter in effect
relating to the enforcement of creditors' rights and by the
effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law).
4.2. Non-Contravention; Required Consents. Except as
set forth in Schedule 4.2 to the letter dated and delivered to
Parent on the date hereof (the "Stockholder Disclosure Letter"),
which relates to this Supplemental Agreement and is designated
therein as being the Stockholder Disclosure Letter, neither the
execution of this Supplemental Agreement or of any Ancillary
Agreement to which Stockholder is a party, by Stockholder, nor
the consummation of the Merger or of the other transactions
contemplated hereby or thereby (a) will result in the breach of
any term or provision of, constitute a default under, or
accelerate or change the performance otherwise required under, or
result in the creation of any Encumbrance upon any Company Common
Stock owned by Stockholder pursuant to, any material agreement
(including without limitation any loan agreement or promissory
note), indenture, instrument, order, law or regulation to which
Stockholder is a party or by which Stockholder is bound or
(b) require the approval, consent, waiver, authorization or act
of, or the making by Stockholder of any declaration, filing or
registration with any third party or any Governmental Body,
except for such approvals, consents, waivers, authorizations,
acts, declarations, filings and registrations the failure of
which to obtain or make could not, individually or in the
aggregate, reasonably be expected to materially impair the
ability of Stockholder to perform his obligations under this
Supplemental Agreement.
4.3. Ownership of Company Common Stock. The
residential address of Stockholder is set forth in Schedule 3.3
to the Company Disclosure Letter. Except for the community
property interest of his spouse, all of the 100 outstanding
shares of Company Common Stock are owned by Stockholder of record
and beneficially, free and clear of all Encumbrances (other than
restrictions under the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations thereunder, and
state securities laws).
4.4. Investment Representations. Stockholder is
acquiring the shares of Parent Common Stock to be received by
Stockholder in the Merger for investment for Stockholder's own
account, not as a nominee or agent, and not with the view to, or
for resale in connection with, any distribution thereof.
Stockholder understands that the shares of Parent Common Stock to
be delivered under Section 1.4 have not been registered under the
Securities Act and are being issued to Stockholder in reliance
upon an exemption therefrom which depends upon, among other
things, the bona fide nature of Stockholder's investment intent
and the accuracy of the Company's and Stockholder's
representations as expressed herein.
Stockholder is an "accredited investor" as such term is
defined in Regulation D promulgated under the Securities Act or
Stockholder has knowledge and experience in financial and
business matters that Stockholder is capable of evaluation the
merits and risks on an investment in Parent Common Stock.
Stockholder agrees to provide such information and execute such
documents as Parent may reasonably request in order to verify the
foregoing. Stockholder acknowledges receipt from Parent of (i)
Parent's Prospectus dated March 21, 1996, which is contained in
Parent's Registration Statement on Form S-1, Registration No. 333-
702, (ii) Parent's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1996, as filed with the SEC, including
the exhibits thereto, and (iii) Parent's Current Report on Form 8
K, dated June 21, 1996, as filed with the SEC, including the
exhibits thereto. Stockholder acknowledges that he has been
provided an opportunity to ask questions and receive answers from
representatives of Parent concerning the terms and conditions of
the offering of Parent Common Stock and to obtain any additional
information which Parent possesses or can acquire without
unreasonable effort or expense that is necessary to verify the
accuracy of any information relating to said offering.
4.5. Hart-Scott-Rodino. Stockholder is the sole
"ultimate parent entity" (as defined in 16 C.F.R. 801.1(a)(3)
(1995)) of Company. The "Person" (as defined in 16 C.F.R.
801.1(a)(1) (1995)) of which Stockholder is included does not
have "annual net sales" (as defined in 16 C.F.R. 801.11 (1995))
or "total assets" (as defined in 16 C.F.R. 801.11 (1995)) of
$100 million or more.
ARTICLE V
ADDITIONAL AGREEMENTS OF THE PARTIES
5.1. Ordinary Course. The Company and Stockholder,
jointly and severally, covenant that prior to the Closing,
without Parent's written consent, the Company and Stockholder
shall not:
(a) take or authorize any of the actions set forth in
Section 3.7(b);
(b) issue or sell any shares of the Company's capital
stock of any class, or issue or sell any securities convertible
into, or options with respect to, or warrants to purchase or
rights to subscribe to, any shares of its capital stock of any
class, or make any commitment to issue or sell any such shares or
securities;
(c) directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the
merits of any unsolicited inquiries or proposals from, any Person
(other than Parent) relating to: (i) the merger or consolidation
of the Company with any Person, (ii) the direct or indirect
acquisition by any Person of any of the assets of the Company
(other than the sale of assets in the ordinary course of business
consistent with past practice, not otherwise prohibited by this
Section 5.1), or (iii) the acquisition of direct or indirect
beneficial ownership or control of the Company or any securities
thereof by any Person; or
(d) agree or commit to do or authorize any of the
foregoing.
5.2. Access Prior to Closing; Certain Notices. (a)
Upon reasonable notice, the Company, each of its directors,
officers, agents and employees, and Stockholder shall afford
Parent and its representatives (including, without limitation,
its independent public accountants, banks or other lenders'
representatives and attorneys) reasonable access during regular
business hours from the date hereof through the Closing to any
and all of the premises, properties, contracts, books, records,
data and personnel of the Company or relating to its operations.
Parent may contact the customers and vendors of the Company upon
prior notice to the Company; provided that the Company shall have
the right to participate in all such contacts. The Company, its
directors, officers, agents and employees, and Stockholder shall
cooperate fully in connection with the foregoing. The Company
and Stockholder shall use their respective best efforts to
provide to Parent such information and documents concerning the
Company as reasonably may be requested and obtained without undue
effort or expense. The Company and Stockholder , on the one
hand, and Parent and Sub, on the other hand, promptly shall
notify the other of any change or event which would reasonably be
expected to have or constitute a Material Adverse Effect or
Material Adverse Change with respect to the Company or Parent, as
the case may be.
(b) The Company covenants that prior to the Closing
the Company will promptly notify Parent of any notice or any
pending, threatened or contemplated lawsuit, claim, suit,
proceeding or investigation by a Governmental Body which, if
existing on the date hereof, would have been disclosable pursuant
to Section 3.24(b) or (c).
5.3. Regulatory and Other Authorizations. (a)
Parent, the Company and Stockholder shall act diligently and
reasonably, and shall cooperate in good faith with each other, to
secure before the Closing Date, each consent, approval or waiver,
in form and substance reasonably satisfactory to the Company or
Parent, required to be obtained to satisfy the conditions set
forth in Article VI; provided that neither the Company,
Stockholder, Parent nor Sub shall have any obligation to pay any
consideration in order to obtain any such consents or approvals.
(b) During the period prior to the Closing Date, the
Company, Parent and Stockholder shall act diligently and
reasonably, and shall cooperate with each other, to secure any
consents and approvals of any Governmental Body required to
satisfy the conditions set forth in Article VI; provided,
however, that the Company shall not make any agreement or
understanding affecting its assets or the Business as a condition
for obtaining any such consents or approvals except with the
prior written consent of Parent.
5.4. Company Financial Statements. The Company shall
promptly provide to Parent copies of any financial statements
prepared with respect to the Company as of a date or for a period
subsequent to that reflected in the Company Interim Financial
Statements.
5.5. Delivery of Documents. Subject to the
satisfaction of the conditions to their respective obligations
contained in Article VI, the parties shall cause the delivery of
the respective documents required to be delivered or caused to be
delivered by them pursuant to Article VII.
5.6. Employees; Certain Benefits and Arrangements.
(a) The Company and Stockholder hereby acknowledge
that after the Closing neither Parent nor the Company, as the
Surviving Corporation, has any obligation to continue the
employment by the Company of any of the employees of the Company,
except the employment of Stockholder pursuant to the Employment
Agreement and except the employment of Marko Rukavina and John
Harbottle pursuant to separate employment agreements.
(b) The Company agrees to use reasonable efforts to
cause Mr. Rukavina to agree to terminate his Compensation
Agreement with the Company dated January 3, 1995, upon payment to
him from the Company of an amount equal to 10% of the net income
of the Company (determined in accordance with such agreement) for
the period from January 1, 1996 through the Closing Date. Parent
agrees that Company shall pay such amount to Mr. Rukavina within
60 days following the Closing Date.
(c) The Company agrees to use reasonable efforts to
cause Mr. Harbottle to agree to an amendment to his letter
agreement with the Company dated January 11, 1996 and statement
of Performance Objectives dated May 6, 1996, providing (i) for
the payment to him from the Company of $13,000, (ii) that Parent
will honor the terms of such agreement from and after the
Effective Time to the extent relating to the loan to Mr.
Harbottle for moving expenses and (iii) for the elimination,
effective as of the Effective Time, of all other obligations of
the Company contained therein. Parent agrees that Company shall
pay such amount to Mr. Harbottle within 60 days following the
Closing Date.
(d) The Company agrees to use reasonable efforts to
terminate, as of the Effective Time, any bonus arrangements with
any of its employees other than as set forth in (b) and (c) above
and other than its compensation and bonus programs for sales
management and sales representatives.
(e) The Company and Stockholder agree to use
reasonable efforts to cause each employee of the Company to enter
into a "Proprietary Rights Agreement" no later than two weeks
after the Closing Date (or demonstrate that such an agreement is
already in effect) which is substantially similar to the
Proprietary Rights Agreement Parent requires its employees to
sign.
5.7. Continued Relationships. After the date hereof
and through the Closing the Company shall use all reasonable
efforts to preserve intact the Business and keep available the
services of its officers and employees and maintain good
relationships with suppliers, advertising and other customers and
others having business relations with the Company.
5.8. Transfer of Company Common Stock. Stockholder
hereby agrees that after the date hereof and through the Closing,
without Parent's written consent, Stockholder will not sell,
transfer, mortgage, pledge, otherwise dispose of or suffer to be
imposed any Encumbrance on any share of Company Common Stock held
by him.
5.9. Agreement to Vote for the Merger; Waiver of
Appraisal Rights. Stockholder hereby agrees that after the date
hereof and through the Closing, at any meeting of the
stockholders of the Company, however called, or in connection
with any written consent of the stockholders of the Company,
Stockholder shall vote (or cause to be voted) all shares of
Company Common Stock held of record (or beneficially) by such
Stockholder:
(a) in favor of the Merger and the adoption of the
Merger Agreement;
(b) against any action or agreement that would result
in a breach of any covenant, representation or warranty, or any
other obligation or agreement, of the Company or Stockholder
under this Supplemental Agreement, the Merger Agreement or the
Ancillary Agreements; or
(c) except as otherwise agreed to in writing in
advance by Parent, against the following actions (other than the
Merger and the transactions contemplated by this Supplemental
Agreement, the Merger Agreement and the Ancillary Agreements):
(i) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination
involving the Company;
(ii) a sale, lease or transfer of a material amount of
assets of the Company, a reorganization, recapitalization,
dissolution or liquidation of the Company;
(iii) any change in the Board of Directors of the
Company;
(iv) any change in the present capitalization of the
Company or any amendment to the Company's Articles of
Incorporation or Bylaws;
(v) any change in the Company's corporate structure or
the Business; or
(vi) any other action that is intended, or that could
reasonably be expected, to impede, interfere with, delay,
postpone or discourage, or adversely affect the contemplated
economic benefits to Parent of, the Merger and the actions
or transactions contemplated by this Supplemental Agreement,
the Merger Agreement or the Parent Ancillary Agreements.
Stockholder further agrees not to enter into any
agreement or understanding with any Person prior to the
termination of this Supplemental Agreement that is in any manner
inconsistent with the covenants of Stockholder set forth in this
Supplemental Agreement.
Stockholder hereby waives such Stockholder's rights of
appraisal under the ABCA with respect to the Merger and any
rights Stockholder may have to pursue a claim against the members
of the Company's Board of Directors for breach of fiduciary duty
in approving the Merger, the Merger Agreement or this
Supplemental Agreement.
5.10. Compliance with the Securities Act; Pooling of
Interests. (a) Stockholder hereby agrees not to (i) sell,
pledge, transfer or otherwise dispose of, or in any other way
reduce Stockholder's risk relative to, any shares of Company
Common Stock or any shares of Parent Common Stock received by
Stockholder in the Merger, except pursuant to an effective
registration statement or in compliance with Rule 144 under the
Securities Act or another exemption from the registration
requirements of the Securities Act or (ii) sell or in any other
way reduce Stockholder's risk relative to any shares of Company
Common Stock or any shares of Parent Common Stock received in the
Merger (within the meaning of Section 201.01 of the SEC's
Financial Reporting Release No. 1) during the period commencing
30 days prior to the Effective Time and ending at such time as
the financial results (including combined sales and net income)
covering at least 30 days of post-Merger operations have been
published, except as permitted by Staff Accounting Bulletin No.
76 issued by the SEC.
(b) Prior to the Effective Time, the Company shall
cause to be prepared and delivered to Parent a list (reasonably
satisfactory to counsel for Parent) identifying each Person other
than Stockholder and who, on the Closing Date, may be deemed to
be an "affiliate" of the Company, as such term is used in
Accounting Series Releases 130 and 135, as amended, of the SEC
(the "Company Affiliates"). The Company agrees to use its
reasonable best efforts to cause each Company Affiliate to
deliver to Parent, on or prior to the Effective Time a written
agreement, in the form of Exhibit E hereto, that such Company
Affiliate will not sell or in any other way reduce such Company
Affiliate's risk relative to any shares of Company Common Stock
or any shares of Parent Common Stock received in the Merger
(within the meaning of Section 201.01 of the SEC's Financial
Reporting Release No. 1) during the period commencing 30 days
prior to the Effective Time and ending at such time as the
financial results (including combined sales and net income)
covering at least 30 days of post-Merger operations have been
published, except as permitted by Staff Accounting Bulletin No.
76 issued by the SEC.
(c) Prior to the Effective Time, Parent shall cause to
be prepared and delivered to the Company a list (reasonably
satisfactory to counsel for the Company) identifying each Person
who, on the Closing Date, may be deemed to be an "affiliate" of
Parent, as such term is used in Accounting Series Releases 130
and 135, as amended, of the SEC (the "Parent Affiliates").
Parent shall use its reasonable best efforts to cause each Parent
Affiliate to deliver to the Company on or prior to the Effective
Time a written agreement, in the form of Exhibit F hereto, that
such Parent Affiliate will not sell, pledge, transfer or
otherwise dispose of, or in any other way reduce such Parent
Affiliate's risk relative to, any shares of Parent Common Stock
or any shares of Company Common Stock during the period
commencing 30 days prior to the Effective Time and ending at such
time as the financial results (including combined sales and net
income) covering at least 30 days of post-Merger operations have
been published, except as permitted by Staff Accounting Bulletin
No. 76 issued by the SEC.
5.11. Preserve Accuracy of Representations and
Warranties. Between the date hereof and the Closing Date, each
of the parties hereto shall refrain from taking any action which
would render any of its or his representations or warranties
contained in Article II, III, or IV of this Supplemental
Agreement inaccurate as of the Closing Date. Each party shall
promptly notify the others of any action, suit or proceeding that
shall be instituted or threatened against such party to restrain,
prohibit or otherwise challenge the legality of any transaction
contemplated by this Supplemental Agreement, the Merger Agreement
or the Ancillary Agreements.
5.12. Pooling of Interests; Reorganization. During
the period from the date of this Supplemental Agreement through
the Effective Time, unless the other parties hereto shall
otherwise agree in writing, none of Parent or any of its
Subsidiaries or the Company shall (i) knowingly take or fail to
take any action which action or failure would jeopardize the
treatment of the Merger as a pooling of interests for accounting
purposes or (ii) knowingly take or fail to take any action which
action or failure would jeopardize qualification of the Merger as
a reorganization within the meaning of Section 368(a) of the
Code.
5.13. Notification by the Parties of Certain Matters.
(a) During the period prior to the Closing Date, the
Company will promptly advise Parent in writing of (i) any notice
or other communication from any third party alleging that the
consent of such third party is or may be required in connection
with the transactions contemplated by this Supplemental
Agreement, the Merger Agreement and the Ancillary Agreements, and
(ii) any default by the Company or Stockholder under this
Supplemental Agreement or event which, with notice or lapse of
time or both, would become such a default on or prior to the
Closing Date.
(b) During the period prior to the Closing Date,
Parent will promptly advise the Company and Stockholder in
writing of (i) any notice or other communication from any third
party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this
Supplemental Agreement, the Merger Agreement and the Ancillary
Agreements, and (ii) any default by Parent under this
Supplemental Agreement or event which, with notice or lapse of
time or both, would become such a default on or prior to the
Closing Date.
5.14. Necessary Actions. Parent, Sub, the Company and
Stockholder shall use all reasonable efforts to effect the Merger
as promptly as possible after the date hereof.
5.15. Further Assurances. At any time and from time
to time at or after the Closing, the parties agree to cooperate
with each other, to execute and deliver such other documents,
instruments of transfer or assignment, files, books and records
and do all such further acts and things as may be reasonably
required to carry out the transactions contemplated hereby.
ARTICLE VI
CONDITIONS TO CLOSING
6.1. Conditions to Each Party's Obligation to Close.
The respective obligations of each party hereto under this
Supplemental Agreement are subject to the satisfaction at or
prior to the Closing of each of the following conditions, but
compliance with any or all of such conditions may be waived, in
writing, by the parties hereto:
(a) There shall not have been instituted or be
pending, or threatened, any suit, action or proceeding by any
Governmental Body as a result of this Supplemental Agreement, the
Merger Agreement, the Ancillary Agreements or any of the
transactions contemplated hereby or thereby which, if such
Governmental Body were to prevail, would reasonably be expected
to have a Material Adverse Effect on Parent or the Company (as
the Surviving Corporation).
(b) All authorizations, consents, orders, declarations
or approvals of, or filings with, or terminations or expirations
of waiting periods imposed by, any Governmental Body, which the
failure to obtain, make or occur would have the effect of making
the Merger or any of the transactions contemplated hereby illegal
or would have a Material Adverse Effect on Parent or the Company
(as the Surviving Corporation), assuming the Merger had taken
place, shall have been obtained, shall have been made or shall
have occurred.
(c) No court or other Governmental Body having
jurisdiction over the Company or Parent, or any of their
respective Subsidiaries, shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary
or permanent) which is then in effect and has the effect of
making the Merger or any of the transactions contemplated hereby
illegal.
6.2. The Company's and Stockholder's Conditions to
Close. The obligations of the Company and Stockholder under this
Supplemental Agreement are subject to the satisfaction at or
prior to the Closing of each of the following conditions, but
compliance with any or all of such conditions may be waived, in
writing, by the Company and Stockholder:
(a) Parent and Sub shall have performed in all
material respects each of their respective agreements contained
in this Supplemental Agreement or the Merger Agreement required
to be performed at or prior to the Effective Time (other than
those contained in Section 5.5), each of the representations and
warranties of Parent and Sub contained in this Supplemental
Agreement that is qualified by materiality shall be true and
correct at and as of the Effective Time as if made at and as of
the Effective Time and each of such representations and
warranties that is not so qualified shall be true and correct in
all material respects at and as of the Effective Time as if made
at and as of the Effective Time, in each case except to the
extent that they expressly relate to an earlier time or as
contemplated or permitted by this Supplemental Agreement; and the
Company shall have received a certificate signed on behalf of
Parent by its Chief Executive Officer or its Chief Financial
Officer to such effect.
(b) The Company shall have received an opinion of
Arthur Andersen LLP, in form and substance reasonably
satisfactory to the Company, dated the Effective Time,
substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which
are consistent with the state of facts existing as of the
Effective Time, for federal income tax purposes:
(i) The Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the
Company, Sub and Parent will each be a party to such
reorganization within the meaning of Section 368(b) of the
Code;
(ii) No gain or loss will be recognized by Parent or
the Company as a result of the Merger;
(iii) No gain or loss will be recognized by
Stockholder upon the exchange of his shares of Company
Common Stock solely for shares of Parent Common Stock
pursuant to the Merger, except with respect to cash, if any,
received in lieu of fractional shares of Parent Common
Stock;
(iv) The aggregate tax basis of the shares of Parent
Common Stock received solely in exchange for shares of
Company Common Stock pursuant to the Merger (including
fractional shares of Parent Common Stock for which cash is
received) will be the same as the aggregate tax basis of the
shares of Company Common Stock exchanged therefor;
(v) The holding period for shares of Parent Common
Stock received in exchange for shares of Company Common
Stock pursuant to the Merger will include the holding period
of the shares of Company Common Stock exchanged therefor,
provided such shares of Company Common Stock were held as
capital assets by Stockholder at the Effective Time; and
(vi) In the event that Stockholder receives cash in
lieu of a fractional share of Parent Common stock,
Stockholder will recognize gain or loss equal to the
difference, if any, between Stockholder's tax basis in such
fractional share (as described in clause (iv) above) and the
amount of cash received.
In rendering such opinion, Arthur Andersen LLP may
receive and rely upon representations contained in a certificate
of the Company, a certificate of Parent and a certificate from
Stockholder.
(c) The Company shall have received an opinion from
Sidley & Austin, dated the Effective Time, substantially to the
effect that:
(i) Parent is duly incorporated, validly existing and
in good standing under the laws of the State of Delaware;
(ii) Parent has corporate power and authority to enter
into this Supplemental Agreement, the Merger Agreement and
the Parent Ancillary Agreements, and to consummate the
transactions contemplated hereby and thereby and to comply
with the terms, conditions and provisions hereof and
thereof;
(iii) The execution, delivery and performance by
Parent of this Supplemental Agreement, the Merger Agreement
and the Parent Ancillary Agreements, and the actions to be
taken by Parent contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate
action on the part of Parent and no other corporate
proceedings on the part of Parent are necessary with respect
hereto or thereto;
(iv) The execution, delivery and performance by Parent
of this Supplemental Agreement, the Merger Agreement, the
Registration Rights Agreement and the Pledge Agreement will
not violate the Certificate of Incorporation or Bylaws of
Parent;
(v) The shares of Parent Common Stock being issued
pursuant to the Merger Agreement are duly authorized, and,
when issued in accordance with the terms of the Merger
Agreement will be validly issued, fully paid and
nonassessable; and
(vi) The Parent Rights associated with the shares of
Parent Common Stock being issued pursuant to the Merger
Agreement will be legally issued when such Parent Rights are
issued in accordance with the terms of the Parent Rights
Agreement and such shares of Parent Common Stock have been
validly issued as set forth in clause (v) above.
In rendering such opinion, Sidley & Austin may rely as
to matters of fact upon the representations contained herein and
in certificates of officers of Parent delivered to such counsel
and certificates of public officials. Such opinion may state
that it is limited to the General Corporation Law of the State of
Delaware and the federal laws of the United States of America.
(d) The Company shall have received an opinion from
Osborn Maledon, P.A., dated the Effective Time, substantially to
the effect that:
(i) Each of this Supplemental Agreement, the Merger
Agreement, the Registration Rights Agreement and the Pledge
Agreement (assuming their due and valid authorization,
execution and delivery by the other parties thereto and
their validity and binding effect upon the other parties
thereto) constitutes the valid and binding obligation of
Parent, enforceable in accordance with its terms, except to
the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer
or other similar laws now or hereafter in effect relating to
the enforcement of creditors' rights and by the effect of
general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law);
(ii) Sub is duly incorporated, validly existing and in
good standing under the laws of the State of Arizona;
(iii) Sub has corporate power and authority to enter
into this Supplemental Agreement and the Merger Agreement,
and to consummate the transactions contemplated hereby and
thereby and to comply with the terms, conditions and
provisions hereof and thereof;
(iv) The execution, delivery and performance by Sub of
this Supplemental Agreement and the Merger Agreement, and
the actions to be taken by Sub contemplated hereby and
thereby have been duly and validly authorized by all
necessary corporate action on the part of Sub and no other
corporate proceedings on the part of Sub are necessary with
respect hereto or thereto; and
(v) Each of this Supplemental Agreement and the Merger
Agreement (assuming their due and valid authorization,
execution and delivery by the other parties thereto and
their validity and binding effect upon the other parties
thereto) constitutes the valid and binding obligation of
Sub, enforceable in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer
or other similar laws now or hereafter in effect relating to
the enforcement of creditors' rights and by the effect of
general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law).
In rendering such opinion, Osborn Maledon, P.A. may
rely as to matters of fact upon the representations contained
herein and in certificates of officers of Parent and Sub
delivered to such counsel and certificates of public officials.
Such opinion may state that it is limited to the laws of the
State of Arizona and the federal laws of the United States of
America.
(e) Parent shall have obtained the approval, consent,
waiver, authorization or act of each Person set forth in Schedule
2.4 to the Parent Disclosure Letter (other than the Governmental
Bodies referred to in Section 6.1(c)) whose approval, consent,
waiver, authorization or act shall be required in connection with
the transactions contemplated hereby, except where the failure to
obtain the same would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect on Parent or
the Company (as the Surviving Corporation).
(f) The Company shall have received the written
agreements from the Parent Affiliates described in Section
5.10(c).
(g) Since the date of this Supplemental Agreement,
there shall have been no Material Adverse Change with respect to
Parent; and the Company shall have received a certificate signed
on behalf of Parent by its Chief Executive Officer or its Chief
Financial Officer to such effect.
(h) The parties thereto shall have entered into the
Ancillary Agreements.
6.3. Parent's Conditions to Close. The obligations
of Parent under this Supplemental Agreement are subject to the
satisfaction at or prior to the Closing of each of the following
conditions, but compliance with any or all of any such conditions
may be waived, in writing, by Parent:
(a) The Company and Stockholder shall have performed
in all material respects each of their respective agreements
contained in this Supplemental Agreement or the Merger Agreement
required to be performed at or prior to the Effective Time (other
than those contained in Section 5.5), each of the representations
and warranties of the Company and Stockholder contained in this
Supplemental Agreement that is qualified by materiality shall be
true and correct at and as of the Effective Time as if made at
and as of the Effective Time and each of such representations and
warranties that is not so qualified shall be true and correct in
all material respects at and as of the Effective Time as if made
at and as of the Effective Time, in each case except to the
extent that they expressly relate to an earlier time or as
contemplated or permitted by this Supplemental Agreement; and
Parent shall have received (i) a certificate signed on behalf of
Parent by its Chief Executive Officer or its Chief Financial
Officer to such effect and (ii) a certificate signed by
Stockholder to such effect.
(b) Parent shall have received the opinion of Arthur
Andersen LLP described in Section 6.2(b).
(c) Parent shall have received an opinion from
Fennemore Craig, P.C., dated the Effective Time, substantially to
the effect that:
(i) The Company is duly incorporated, validly existing
and in good standing under the laws of the State of Arizona;
(ii) The authorized capital stock of the Company is as
set forth in Section 3.3 to the Supplemental Agreement; each
of the outstanding shares of capital stock of the Company
has been duly authorized and is validly issued, fully paid
and non-assessable; none of the outstanding shares of
capital stock of the Company has been issued in violation
of, or is subject to, any preemptive or subscription rights;
(iii) The Company has corporate power and authority to
enter into this Supplemental Agreement and the Merger
Agreement, and to consummate the transactions contemplated
hereby and thereby and to comply with the terms, conditions
and provisions hereof and thereof;
(iv) The execution, delivery and performance by the
Company of this Supplemental Agreement and the Merger
Agreement, and the actions to be taken by the Company
contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of
the Company and no other corporate proceedings on the part
of the Company are necessary with respect hereto or thereto;
(v) Each of this Supplemental Agreement and the Merger
Agreement (assuming their due and valid authorization,
execution and delivery by the other parties thereto and
their validity and binding effect upon the other parties
thereto) constitutes the valid and binding obligation of the
Company, enforceable in accordance with its terms, except to
the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer
or other similar laws now or hereafter in effect relating to
the enforcement of creditors' rights and by the effect of
general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law);
(vi) The execution and performance by the Company of
this Supplemental Agreement and the Merger Agreement will
not violate the articles of incorporation or bylaws of the
Company;
(vii) Except for the community property interest of
his spouse, all of the outstanding shares of Company Common
Stock are owned by Stockholder of record and, to the
knowledge of such counsel, beneficially, free and clear of
all Encumbrances (other than restrictions under the
Securities Act and the rules and regulations thereunder, and
state securities laws);
(viii) Stockholder has the power and authority to
enter into this Supplemental Agreement and each Ancillary
Agreement to which Stockholder is a party, to consummate the
transactions contemplated hereby and thereby and to comply
with the terms, conditions and provisions hereof and
thereof; and
(ix) Each of this Supplemental Agreement, the
Registration Rights Agreement and the Pledge Agreement
constitutes (assuming their due and valid authorization,
execution and delivery by the other parties thereto and
their validity and binding effect upon the other parties
thereto), the valid and binding obligation of Stockholder,
enforceable in accordance with their respective terms,
except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws now or hereafter
in effect relating to the enforcement of creditors' rights
and by the effect of general principles of equity
(regardless of whether enforceability is considered in a
proceeding in equity or at law).
In rendering such opinion, Fennemore Craig may rely as
to matters of fact upon the representations contained herein and
in certificates of officers of the Company delivered to such
counsel and certificates of public officials. Such opinion may
state that it is limited to the laws of the State of Arizona and
the federal laws of the United States of America.
(d) The Company or Stockholder, as the case may be,
shall have obtained the approval, consent, waiver, authorization
or act of each Person set forth in Schedule 3.5 to the Company
Disclosure Letter and in Schedule 4.2 to the Stockholder
Disclosure Letter (other than the Governmental Bodies referred to
in Section 6.1(c)) whose approval, consent, waiver, authorization
or act shall be required in connection with the transactions
contemplated hereby, except where the failure to obtain the same
would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on Parent or the
Company (as the Surviving Corporation).
(e) Parent shall have received the written agreements
from the Company Affiliates described in Section 5.10(b).
(f) Parent shall have received an opinion of Salomon
Brothers Inc in form and substance reasonably satisfactory to
Parent, that, based on such procedures as were deemed relevant,
the Merger Consideration to be paid to Stockholder is fair, from
a financial point of view, to Parent.
(g) Parent shall have received an opinion of Arthur
Andersen LLP in form and substance reasonably satisfactory to
Parent, that, based on such procedures as were deemed relevant,
the Merger will qualify as a pooling of interests under generally
accepted accounting principles.
(h) Since the Balance Sheet Date, there shall have
been no Material Adverse Change with respect to the Company; and
Parent shall have received a certificate signed on behalf of the
Company by its Chief Executive Officer or its Chief Financial
Officer to such effect.
(i) No stockholder of the Company shall have exercised
rights of appraisal under the ABCA with respect to the Merger;
and Parent shall have received a certificate signed on behalf of
the Company by its Chief Executive Officer or its Chief Financial
Officer to such effect.
(j) The parties thereto shall have entered into the
Ancillary Agreements.
(k) Each holder of an option to purchase capital stock
of the Company set forth on Schedule 3.3 to the Company
Disclosure Letter shall have entered into an agreement with the
Company pursuant to which such holder shall have agreed that as
of the Effective Time, in lieu of capital stock of the Company,
each such option held by such holder shall become exercisable for
that number of shares of Parent Common Stock equal to the number
of shares of capital stock of the Company subject to such option
immediately prior to the Effective Time multiplied by the
Conversion Ratio and rounded down to the nearest whole number,
with a per share purchase price equal to the per share purchase
price for shares of capital stock of the Company subject to such
option immediately prior to the Effective Time divided by the
Conversion Ratio and rounded up to the nearest whole cent.
(l) Mr. Rukavina shall have agreed to terminate his
Compensation Agreement with the Company dated January 3, 1995,
upon payment to him from the Company of an amount equal to 10% of
the net income of the Company (determined in accordance with such
agreement) for the period from January 1, 1996 through the
Closing Date.
(m) Mr. Harbottle shall have agreed to an amendment to
his letter agreement with the Company dated January 11, 1996 and
statement of Performance Objectives dated May 6, 1996, providing
(i) for the payment to him from the Company of $13,000, (ii) that
Parent will honor the terms of such agreement from and after the
Effective Time to the extent relating to the loan to Mr.
Harbottle for moving expenses and (iii) for the elimination,
effective as of the Effective Time, of all other obligations of
the Company contained therein.
(n) The bonus arrangements described in Section 5.6(d)
shall have been terminated and Parent shall have a received a
certificate signed on behalf of the Company by its Chief
Executive Officer or its Chief Financial Officer to such effect.
(o) Parent shall have received resignations, effective
as of the Effective Time, of each director and officer of the
Company in the form of Exhibit G hereto.
ARTICLE VII
THE CLOSING
7.1. Deliveries by the Company and Stockholder. At
the Closing, the Company and Stockholder shall deliver the
following to Parent:
(a) Certificate of good standing of the Company issued
as of a recent date by the Arizona Corporation Commission;
(b) Company's Articles of Incorporation certified as
of a recent date by the Arizona Corporation Commission;
(c) Certificates of good standing of the Company
issued as of a recent date by the appropriate agency in each of
the jurisdictions listed in Schedule 3.1 to the Company
Disclosure Letter; and
(d) Certificate of the Secretary of the Company, dated
the Closing Date, in form and substance reasonably satisfactory
to Parent, as to (i) no amendments to the Articles of
Incorporation of the Company since a specified date, (ii) the
Bylaws of the Company, (iii) the resolutions of the Board of
Directors and Stockholder authorizing the execution and delivery
of this Supplemental Agreement and the Merger Agreement and
approving the Merger and other transactions contemplated by this
Supplemental Agreement and the Merger Agreement, and (iv)
incumbency and signatures of the officers of the Company
executing this Supplemental Agreement and the Merger Agreement.
7.2. Parent's Deliveries. At the Closing, Parent and
Sub shall deliver the following to the Company and Stockholder:
(a) Certificate of good standing of Parent issued as
of a recent date by the Secretary of State of the State of
Delaware;
(b) Parent's Certificate of Incorporation certified as
of a recent date by the Secretary of State of the State of
Delaware;
(c) Certificate of the Secretary of Parent, dated the
Closing Date, in form and substance reasonably satisfactory to
the Company, as to (i) no amendments to the Certificate of
Incorporation of Parent since a specified date, (ii) the Bylaws
of Parent, (iii) the resolutions of the Board of Directors of
Parent authorizing the execution and delivery of this
Supplemental Agreement, the Merger Agreement and the Parent
Ancillary Agreements and approving the Merger and other
transactions contemplated by this Supplemental Agreement, the
Merger Agreement and the Parent Ancillary Agreements, and (iv)
incumbency and signatures of the officers of Parent executing
this Supplemental Agreement, the Merger Agreement and the Parent
Ancillary Agreements;
(d) Certificate of good standing of Sub issued as of a
recent date by the Arizona Corporation Commission;
(e) Sub's Articles of Incorporation certified as of a
recent date by Arizona Corporation Commission; and
(f) Certificate of the Secretary of Sub, dated the
Closing Date, in form and substance reasonably satisfactory to
the Company, as to (i) no amendments to the Articles of
Incorporation of Sub since a specified date, (ii) the Bylaws of
Sub, (iii) the resolutions of the Board of Directors and
stockholders of Sub authorizing the execution and delivery of
this Supplemental Agreement and the Merger Agreement and
approving the Merger and other transactions contemplated by this
Supplemental Agreement and the Merger Agreement, and (iv)
incumbency and signatures of the officers of Sub executing this
Supplemental Agreement and the Merger Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1. Indemnification by Stockholder. Stockholder
agrees to indemnify and hold harmless (in accordance with the
provisions of and subject to the limitations set forth in Section
8.3) Parent and the Company, as the Surviving Corporation, from
and against any and all Losses and Expenses incurred by Parent or
the Company in connection with or arising from:
(a) any breach by the Company or Stockholder of, or
other failure by the Company or Stockholder to perform, any of
their respective covenants contained in this Supplemental
Agreement or in any certificate or other document delivered by or
on behalf of the Company or Stockholder pursuant to this
Supplemental Agreement;
(b) any breach of any warranty or the inaccuracy of
any representation of the Company or Stockholder contained in
this Supplemental Agreement or any certificate or other document
delivered by or on behalf of the Company or Stockholder pursuant
to this Supplemental Agreement;
(c) any and all stock transfer Taxes, real estate
transfer or gains Taxes, sales Taxes, or other similar Taxes
imposed by the State of Arizona or any political subdivision
thereof, as a result of the transactions contemplated by this
Supplemental Agreement;
(d) the civil lawsuit filed in Federal District Court
in the District of New Jersey captioned Systems Techniques, Inc.
d/b/a/ Data-Tech Institute v. Mark Yeager, Michael Ferry, Frank
Nevelos and Mastering Computers, Inc. and described in Schedule
3.7 to the Company Disclosure Letter;
(e) any liability or obligation of the Company in
respect of sales and use Taxes in any jurisdiction in which the
Company conducted training seminars prior to the Effective Time
but did not otherwise collect sales and use Taxes with respect to
such seminars;
(f) any breach of any warranty or the inaccuracy of
any representation of the Company or Stockholder contained in
Section 3.9(d) or 3.9(e), in each case relating to any tax period
for which the applicable statute of limitations has not expired;
and
(g) any liability or obligation of the Company arising
under the United States Fair Labor Standards Act or similar state
laws which relate to overtime wages to employees for any period
prior to the Effective Time,
provided, however, that Stockholder shall not be required to
indemnify and hold harmless Parent and the Company under this
Section 8.1 with respect to any Loss or Expense incurred by
Parent or the Company as a result of any breach or matter
described in paragraphs (b) through (g) of this Section 8.1, or,
to the extent relating to any failure to perform or comply prior
to the Closing Date, paragraph (a) of this Section 8.1, until the
Loss or Expense with respect to each such breach or matter
arising thereunder exceeds $50,000 (the "Threshold Amount"), and
then only for the amount by which such Loss or Expense exceeds
the Threshold Amount; provided, that, at such time as the
aggregate of all such deductible Losses and Expenses
("deductible" including, for purposes hereof, any and all amounts
less than or equal to $50,000 per claim) equals $115,000 (the
"Aggregate Deductible"), Stockholder shall thereafter be liable
for all Loss and Expenses without regard to the Threshold Amount.
For purposes of calculating whether the Aggregate Deductible has
been reached, it is understood that such amount includes Loss and
Expense for each breach or matter up to and including the
Threshold Amount, but excludes Loss and Expenses in excess of the
Threshold Amount for any individual breach or matter. However,
the foregoing Threshold Amount and Aggregate Deductible will not
apply to any breach of any of the Company's or Stockholder's
representations and warranties of which the Company or the
Stockholder had actual (as opposed to constructive) knowledge on
the date on which such representation and warranty is made or any
intentional breach by the Company or Stockholder of any covenant
or obligation. Stockholder acknowledges and agrees that the
obligation to indemnify and hold harmless pursuant to this
Section 8.1 is an obligation solely of Stockholder and that, from
and after the Closing, Stockholder shall not have any right of
contribution from the Company, its successors, or any assigns of
any of them in respect of the obligations of Stockholder under
this Section 8.1 and that the right to recover from Stockholder
shall not require Parent to seek any recovery from the Company in
respect of any Loss or Expense.
The indemnification provided for in this Section 8.1
shall be the only available remedy to Parent under this
Supplemental Agreement and the Merger Agreement after the
Effective Time and, except as set forth in the next sentence,
shall terminate on the first anniversary of the Closing Date (and
no claims shall be made by Parent under this Section 8.1
thereafter). Indemnification by Stockholder as to:
(A) any Audit Claims, as to which the
indemnification provided for in this Section
8.1 shall terminate on the Audit Report Date;
(B) any Loss or Expense as to which
indemnification is provided for in Section 8.1(d) or
8.1(f) (and without regard to whether such Loss or
Expense is an Audit Claim), as to which the obligation
of Stockholder shall continue until the earlier of the
(i) sixth anniversary of the Effective Time or (ii)
expiration of any applicable statute of limitations;
(C) any Loss or Expense as to which
indemnification is provided for in Section 8.1(e) of 8.1(g) (and
without regard to whether such Loss or Expense is an Audit
Claim), as to which the obligation of Stockholder shall continue
until the third anniversary of the Effective Time; or
(D) any Loss or Expense as to which
Parent has notified Stockholder in accordance with the
requirements of Section 8.5 on or
prior to the date such indemnification would otherwise
terminate in accordance with this Section 8.1, as to
which the obligation of Stockholder shall continue
until the liability of Stockholder shall have been
determined pursuant to this Article VIII, and Parent
shall have been reimbursed in accordance with and to
the extent contemplated by the provisions of Section
8.3 for the full amount of such Loss and Expense, if
any, incurred by Parent.
8.2. Indemnification by Parent. Parent agrees to
indemnify and hold harmless Stockholder from and against any and
all Losses and Expenses incurred by Stockholder in connection
with or arising from:
(a) any breach by Parent of, or other failure by
Parent to perform, any of its covenants contained in this
Supplemental Agreement or in any certificate or other document
delivered by or on behalf of Parent pursuant to this Supplemental
Agreement; and
(b) any breach of any warranty or the inaccuracy of
any representation of Parent contained in this Supplemental
Agreement or any certificate or other document delivered by or on
behalf of Parent or Sub pursuant to this Supplemental Agreement.
Stockholder acknowledges that any settlement by Parent
for any Loss and Expense under this Section 8.2 shall be made in
shares of Parent Common Stock (valued at the Current Market Price
of Parent Common Stock on the Closing Date).
The indemnification provided for in this Section 8.2
shall be the only available remedy to Stockholder under this
Supplemental Agreement and the Merger Agreement after the
Effective Time and shall terminate on the first anniversary of
the Closing Date (and no claims shall be made by Stockholder
under this Section 8.2 thereafter), except that the
indemnification by Parent shall continue as to any Loss or
Expense as to which Stockholder has notified Parent in accordance
with the requirements of Section 8.5 on or prior to the date such
indemnification would otherwise terminate in accordance with this
Section 8.2, as to which the obligation of Parent shall continue
until the liability of Parent shall have been determined pursuant
to this Article VIII, and Stockholder shall have been reimbursed
in accordance with and to the extent contemplated by the
provisions of Section 8.3 for the full amount of such Loss and
Expense, if any, incurred by Stockholder.
8.3. Limitations On Indemnity by Stockholder. Parent
acknowledges and agrees that the obligations of Stockholder at
any particular time pursuant to Section 8.1 to indemnify and hold
harmless Parent shall be limited in that Parent's and Surviving
Corporation's sole and exclusive recourse for any such liability,
whether in contract, tort, or otherwise, shall be limited first
to the shares of Parent Common Stock received by Stockholder
pursuant to the Merger (valued at the Current Market Price of
Parent Common Stock on the Closing Date) together with all
dividends paid or declared with respect to such shares of Parent
Common Stock; and then, with respect to any of those shares which
Stockholder has sold, the amount of gross cash proceeds (before
any sales commissions) from the sale thereof, together with all
dividends paid with respect to such stock prior to its sale by
Stockholder. In furtherance of the foregoing, Parent and
Stockholder are entering into the Pledge Agreement pursuant to
which Stockholder has agreed to secure a portion of his
obligations pursuant to Section 8.1. In addition, Parent
acknowledges and agrees that Stockholder shall have no obligation
to indemnify Parent or Surviving Corporation unless the Loss or
Expense exceeds any reserve therefor on the Balance Sheet, and
then only to the extent of such excess.
8.4. Additional Limitations and Other Agreements.
(a) An indemnifying party shall have no obligation to
pay indemnification for any Loss or Expense to the extent that
recovery for such Loss or Expense is actually paid to the
indemnified party under any policy of insurance. To the extent
that an indemnified party is subsequently paid by an insurance
company for any Loss or Expense with respect to which payment was
previously received by the indemnified party hereunder, the
indemnified party shall promptly, upon receipt of the insurance
proceeds, reimburse the indemnifying party from the insurance
proceeds in an amount up to the indemnifying party's prior
payment to the indemnified party with respect to such Loss or
Expense.
(b) With respect to each claim for indemnification for
any Loss or Expense as to which Parent has notified Stockholder
in accordance with the requirements of Section 8.5 on or prior to
the date such indemnification would otherwise terminate in accord
ance with Section 8.1, Parent and Stockholder agree to use
reasonable efforts to determine the liability of Stockholder, if
any, and Stockholder agrees to use reasonable efforts to
reimburse Parent in accordance with and to the extent
contemplated by this Article VIII, in each case, no later than
the first anniversary of the Closing Date.
(c) With respect to each claim for indemnification for
any Loss or Expense as to which Stockholder has notified Parent
in accordance with the requirements of Section 8.5 on or prior to
the date such indemnification would otherwise terminate in accord
ance with Section 8.2, Parent and Stockholder agree to use
reasonable efforts to determine the liability of Parent, if any,
and Parent agrees to use reasonable efforts to reimburse
Stockholder in accordance with and to the extent contemplated by
this Article VIII, in each case, no later than the first
anniversary of the Closing Date.
8.5. Notice of Claims. (a) If Parent believes that
it or the Company has suffered or incurred any Loss or incurred
any Expense, Parent shall so notify Stockholder promptly in
writing describing such Loss or Expense, the amount thereof, if
known, and the method of computation of such Loss or Expense, all
with reasonable particularity and containing a reference to the
provisions of this Supplemental Agreement or other agreement,
instrument or certificate delivered pursuant hereto in respect of
which such Loss or Expense shall have occurred. If any action at
law or suit in equity is instituted by or against a third party
with respect to which Parent intends to claim any liability or
expense as Loss or Expense under this Article VIII, Parent shall
promptly notify Stockholder of such action or suit.
(b) If Stockholder believes that he has suffered or
incurred any Loss or incurred any Expense, Stockholder shall so
notify Parent promptly in writing describing such Loss or
Expense, the amount thereof, if known, and the method of
computation of such Loss or Expense, all with reasonable
particularity and containing a reference to the provisions of
this Supplemental Agreement or other agreement, instrument or
certificate delivered pursuant hereto in respect of which such
Loss or Expense shall have occurred. If any action at law or
suit in equity is instituted by or against a third party with
respect to which Stockholder intends to claim any liability or
expense as Loss or Expense under this Article VIII, Stockholder
shall promptly notify Parent of such action or suit.
(c) The amount to which an indemnified person shall be
entitled under this Article VIII shall be determined: (i) by the
written agreement between the indemnified person and the
indemnifying party; (ii) by a final judgment or decree of any
court of competent jurisdiction; or (iii) by any other means to
which the indemnified person and the indemnifying party shall
agree. The judgment or decree of a court shall be deemed final
when the time for appeal, if any, shall have expired and no
appeal shall have been taken or when all appeals taken have been
finally determined. The indemnified person shall have the burden
of proof in establishing the amount of the Loss and Expense
suffered by it.
(d) Notwithstanding the foregoing, the failure of any
party hereto to give any notice described in this Section 8.5
shall not relieve any party hereto of its obligations hereunder,
except to the extent such failure shall have prejudiced such
party.
8.6. Third Party Claims. (a) Subject to Section
8.6(b), any person indemnified under this Article VIII shall have
the right to conduct and control, through counsel of its
choosing, any third party claim, action, suit, proceeding,
investigation or other claim giving rise to a claim for
indemnification hereunder (a "Third Party Claim") and the person
indemnified may compromise or settle the same, provided that the
indemnified person shall give the indemnifying party at least 10
days' advance notice of any proposed compromise or settlement.
The indemnified person shall permit the indemnifying party to
participate in the defense of any Third Party Claim through
counsel chosen by it, provided that the fees and expenses of such
counsel shall be borne by the indemnifying party. Subject to
Section 8.6(b), any compromise or settlement with respect to a
claim for money damages effected after the indemnifying party by
notice to the indemnified person shall have disapproved such
compromise or settlement shall discharge the indemnifying party
from liability with respect to the subject matter thereof, and no
amount in respect thereof shall be claimed as Loss or Expense
under this Article VIII.
(b) If the remedy sought in any Third Party Claim is
solely money damages and will have no continuing effect on the
business, reputation or future business prospects of any
indemnified person, the indemnifying party shall have 15 business
days after receipt of the notice referred to in the last sentence
of Section 8.5(a) to notify the indemnified person that it elects
to conduct and control such Third Party Claim. If the
indemnifying party gives the foregoing notice, the indemnifying
party shall have the right to undertake, conduct and control,
through counsel of its own choosing and at the sole expense of
the indemnifying party, the conduct and settlement of such Third
Party Claim, and the indemnified person shall cooperate with the
indemnifying party in connection therewith; provided that (x) the
indemnifying party shall not thereby permit to exist any
Encumbrance or other adverse charge upon any asset of any
indemnified person; (y) the indemnifying party shall permit the
indemnified person to participate in such conduct or settlement
through counsel chosen by the indemnified person, but the fees
and expenses of such counsel shall be borne by the indemnified
person except as provided in clause (z) below; and (z) the
indemnifying party shall agree promptly to reimburse to the
extent required under this Article VIII the indemnified person
for the full amount of any Loss arising from or relating to such
Third Party Claim and all related Expense incurred by the
indemnified person, except fees and expenses of counsel for the
indemnified person incurred after the assumption of the conduct
and control of such Third Party Claim by the indemnifying party.
So long as the indemnifying party is contesting any such Third
Party Claim in good faith, the indemnified person shall not pay
or settle any such Third Party Claim. Notwithstanding the
foregoing, the indemnified person shall have the right to pay or
settle any such Third Party Claim, provided that in such event
the indemnified person shall waive any right to indemnity there
for by the indemnifying party, and no amount in respect thereof
shall be claimed as Loss or Expense under this Article VIII.
8.7. Exclusive Remedy. Parent, the Company and
Stockholder acknowledge and agree that, from and after the
Closing, their sole and exclusive remedy with respect to any and
all claims relating to the subject matter of this Supplemental
Agreement and the Merger Agreement shall be pursuant to the
indemnification provisions set forth in this Article VIII.
ARTICLE IX
TERMINATION
9.1. Termination. This Supplemental Agreement shall
be terminated automatically in the event the Merger Agreement is
terminated in accordance with its terms. Anything contained in
this Supplemental Agreement to the contrary notwithstanding, this
Supplemental Agreement may also be terminated at any time prior
to the Closing Date:
(a) By the mutual consent of the Company and Parent;
(b) By the Company or Parent if the Closing shall not
have occurred by August 31, 1996 (or such later date as shall be
mutually agreed to in writing by the Company, Stockholder and
Parent); provided that the party seeking termination is not in
default or breach of this Supplemental Agreement;
(c) By the Company in the event of a breach by Parent
of any of its representations, warranties or covenants contained
in this Supplemental Agreement, which breach is not cured by
Parent within 10 business days after written notice of such
breach;
(d) By Parent in the event of a breach by the Company
or Stockholder of any of their respective representations,
warranties and covenants contained in this Supplemental
Agreement, which breach is not cured by the Company or
Stockholder within 10 business days after written notice of such
breach; or
(e) By Parent if the number of shares of Parent Common
Stock to be included in the Merger Consideration would constitute
15% or more of the then outstanding shares of Parent Common
Stock.
9.2. Effect of Termination. In the event of the
termination of this Supplemental Agreement pursuant to the
preceding Section of this Supplemental Agreement, all further
obligations of the parties under this Supplemental Agreement and
the Merger Agreement shall be terminated without further
liability of any party or its stockholders, directors or officers
to the other parties, provided that nothing herein shall relieve
any party from liability for its breach of this Supplemental
Agreement or the Merger Agreement.
ARTICLE X
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT
10.1. Restrictions on Transferability. The Shares of
Parent Common Stock acquired by Stockholder in connection with
the Merger shall not be sold, assigned, transferred or pledged
except upon the conditions specified in this Article X, which
conditions are intended, among other things, to ensure compliance
with the provisions of the Securities Act. Stockholder will
cause each proposed purchaser, assignee, transferee or pledgee of
such shares of Parent Common Stock to agree to take and hold such
shares of Parent Common Stock subject to the provisions and upon
the conditions specified in this Article X.
10.2. Restrictive Legend. Each certificate
representing shares of Parent Common Stock acquired by
Stockholder in connection with the Merger and any other
securities issued in respect of such shares of Parent Common
Stock upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall be stamped or
otherwise imprinted with a legend in the following form (in
addition to any legend required under applicable state securities
laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE. SUCH SHARES MAY NOT BE
SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS EAGLE RIVER INTERACTIVE, INC.
RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR
EAGLE RIVER INTERACTIVE, INC.) REASONABLY ACCEPTABLE TO
EAGLE RIVER INTERACTIVE, INC. STATING THAT SUCH SALE OR
TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SAID ACT AND THE SECURITIES LAWS OF
ANY APPLICABLE STATE. NOTWITHSTANDING THE FOREGOING, IN NO
EVENT MAY THE SHARES REPRESENTED BY THIS CERTIFICATE BE
ASSIGNED, TRANSFERRED OR PLEDGED UNTIL EAGLE RIVER
INTERACTIVE, INC. HAS PUBLISHED FINANCIAL RESULTS (INCLUDING
COMBINED SALES AND NET INCOME) COVERING AT LEAST 30 DAYS OF
OPERATIONS SINCE [INSERT EFFECTIVE DATE].
The Company and Stockholder consent to Parent making a
notation on its records and giving instructions to any transfer
agent of such shares of Parent Common Stock in order to implement
the restrictions on transfer established in this Section 10.2 and
Section 10.3.
10.3. Notice of Proposed Transfers. (a) The holder of
each certificate representing shares of Parent Common Stock
required to bear the legend set forth in Section 10.2
("Restricted Securities") by acceptance thereof agrees to comply
in all respects with any provisions of this Section 10.3
applicable to such Restricted Securities. At least two days
prior to any proposed sale, assignment, transfer or pledge of any
Restricted Securities (other than a transfer not involving a
change in beneficial ownership), unless there is in effect a
registration statement under the Securities Act covering the
proposed transfer, the holder thereof shall give written notice
to Parent of such holder's intention to effect such transfer,
sale, assignment or pledge. Each such notice shall describe the
manner and circumstances of the proposed transfer, sale,
assignment or pledge in sufficient detail and, if reasonably
requested, shall be accompanied, at such holder's expense, by a
written opinion of legal counsel (such opinion to be reasonably
satisfactory to Parent), addressed to Parent, to the effect that
the proposed transfer of the Restricted Securities may be
effected without registration under the Securities Act. Each
certificate evidencing the Restricted Securities transferred as
above provided shall bear, except if such transfer is made in
compliance with Rule 144 of the Securities Act, the appropriate
restrictive legend set forth in Section 10.2, except that such
certificate shall not bear such restrictive legend if in the
opinion of counsel for such holder and Parent such legend is not
required in order to establish compliance with any provisions of
the Securities Act.
ARTICLE XI
MISCELLANEOUS
11.1. Expenses. Except as otherwise expressly
provided in this Supplemental Agreement, each party hereto will
bear its respective expenses incurred in connection with the
negotiation, preparation and execution of this Supplemental
Agreement, the Merger Agreement, the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby,
including all fees and expenses of agents, representatives,
counsel, and accountants. In the event that the Merger is
consummated, the Surviving Corporation shall be responsible for
all of Parent's expenses (including fees and expenses of legal
counsel and independent accountants) incurred in connection with
the negotiation, preparation and execution of this Supplemental
Agreement, the Merger Agreement, the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby.
In the event that the Merger is consummated, the Surviving
Corporation shall be responsible for up to an aggregate of
$50,025 of the Company's and Stockholder's expenses (including
fees and expenses of legal counsel and independent accountants)
incurred in connection with the negotiation, preparation and
execution of this Supplemental Agreement, the Merger Agreement,
the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby, including, without limitation,
the delivery of the opinion required by Section 6.2(b) and
Section 6.3(b), and Stockholder shall be responsible for any of
such expenses in excess of $50,025, except that Parent shall pay
all fees of Arthur Andersen LLP relating to the delivery of the
opinion required by Section 6.2(b) and 6.3(b) in excess of
$6,000. In the event that the Merger is not consummated, the
Company shall be responsible for all of the expenses of the
Company and Stockholder (including fees and expenses of legal
counsel and independent accountants) incurred in connection with
the negotiation, preparation and execution of this Supplemental
Agreement, the Merger Agreement, the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby
11.2. Notices. Any notices or other communications
required under this Supplemental Agreement shall be in writing,
shall be deemed to have been given when delivered in person, by
telex or telecopier, when delivered to a recognized next business
day courier, or, if mailed, when deposited in the United States
mail, first class, registered or certified, return receipt
requested, with proper postage prepaid, addressed as follows or
to such other address as notice shall have been given pursuant
hereto:
If to Stockholder or the Company (prior to Closing),
to:
Mastering Computers, Inc.
11000 North Scottsdale Road Suite 260
Scottsdale, Arizona 85254 Attention: Thomas
R. Graunke Telecopy: (602) 998-6998
with a copy to:
Fennemore Craig, P.C.
Two North Central Avenue Suite 2200
Phoenix, Arizona 85004 Attention: Janet W.
Lord Telecopy: (602) 257-8527
If to Stockholder (after Closing), to:
Thomas R. Graunke
10568 East Laurel Lane Scottsdale, Arizona
85259 Telecopy: (602) 451-9167
with a copy to:
Fennemore Craig, P.C.
Two North Central Avenue
Suite 2200
Phoenix, Arizona 85004 Attention: Janet W.
Lord Telecopy: (602) 257-8527
If to Parent, Sub or the Company (after the Closing),
to:
Eagle River Interactive, Inc.
1060 West Beaver Creek
Boulevard
Avon, Colorado 81620
Attention: Marc Pinto
Telecopy: (970) 845-3016
with copies to:
Eagle River Interactive, Inc.
1701 N. Market Street
Suite 400
Dallas, Texas 75202
Attention: Fred McCallister
Telecopy: (214) 571-4011
and:
Sidley & Austin
One First National Plaza Chicago, Illinois
60603 Attention: Larry A. Barden Telecopy:
(312) 853-7036
11.3. Assignment. No party may assign any of its
rights under this Supplemental Agreement, prior to the Effective
Time, without the prior consent of the other parties, which
consent will not be unreasonably withheld, except that Parent may
assign any of its rights hereunder to any present or future
Subsidiary of Parent. Following the Effective Time, any party
may assign any of its rights hereunder. No assignment shall
relieve any party of its obligations hereunder.
11.4. Interpretation. The article and section
headings contained in this Supplemental Agreement are for
reference purposes only and shall not in any way affect the
meaning or interpretation of this Supplemental Agreement.
Whenever the context may require, any pronoun used herein shall
include the corresponding masculine, feminine or neuter forms.
11.5. Counterparts. This Supplemental Agreement may
be executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which together shall
constitute one and the same instrument; and shall become binding
when two or more counterparts have been signed by each of the
parties hereto and delivered to each of Parent, Sub, Stockholder
and the Company.
11.6. Amendment. This Supplemental Agreement may not
be amended, modified or supplemented except by a writing signed
by an authorized representative of each of the parties hereto.
11.7. Entire Agreement. This Supplemental Agreement
and the Merger Agreement (including the Parent Disclosure Letter,
the Company Disclosure Letter and the Stockholder Disclosure
Letter and the Exhibits attached hereto) constitute the entire
agreement and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the
subject matter hereof.
11.8. Binding Effect. This Supplemental Agreement
shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, personal representatives,
successors and permitted assigns.
11.9. Survival. The covenants, agreements,
indemnities, representations and warranties of the Company,
Stockholder or Parent made in or pursuant to this Supplemental
Agreement shall survive the Closing notwithstanding any
investigation made or information obtained by or on behalf of any
party; provided, however, that, each representation and warranty
of the Company, Stockholder or Parent contained herein or in any
certificate delivered with respect to such representation or
warranty shall survive until indemnification for breach of such
representation or warranty is no longer available pursuant to
Section 8.1 or 8.2, as the case may be. Except as otherwise
expressly provided in Article VIII, no claim shall be made for
breach of any representation or warranty contained herein or in
any certificate delivered with respect to such representation or
warranty under this Supplemental Agreement after the date on
which such representation or warranty shall terminate as set
forth in this Section.
11.10. Severability. Wherever possible, each
provision hereof shall be interpreted in such manner as to be
effective and valid under applicable law, but in case any one or
more of the provisions contained herein shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective in the jurisdiction involved to
the extent, but only to the extent, of such invalidity,
illegality or unenforceability without invalidating the remainder
of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would
be unreasonable.
11.11. Third Parties. Nothing contained in this
Supplemental Agreement or in any instrument or document executed
by any party in connection with the transactions contemplated
hereby shall create any rights in, or be deemed to have been
executed for the benefit of, any Person that is not a party
hereto or a successor or permitted assign of such a party.
11.12. Waivers. Any term or provision of this
Supplemental Agreement may be waived, or the time for its
performance may be extended, by the party or parties entitled to
the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Supplemental
Agreement if, as to any party, it is authorized in writing by an
authorized representative of such party. The failure of any
party hereto to enforce at any time any provision of this
Supplemental Agreement shall not be construed to be a waiver of
such provision, nor in any way to affect the validity of this
Supplemental Agreement or any part hereof or the right of any
party thereafter to enforce each and every such provision. No
waiver of any breach of this Supplemental Agreement shall be held
to constitute a waiver of any other or subsequent breach.
11.13. Governing Law. This Supplemental Agreement
shall be governed by and construed in accordance with the
internal laws (as opposed to the conflicts of law provisions) of
the State of Arizona.
11.14. Public Announcements. Any public
announcement or similar publicity with respect to this
Supplemental Agreement, the Merger Agreement, the Ancillary
Agreements or the transactions contemplated hereby and thereby
will be issued, if at all, at such time and in such manner as
Parent determines. The Company, Stockholder and Parent will
consult with each other concerning the means by which the
Company's employees, customers, and suppliers and others having
dealings with the Company will be informed of the transactions
contemplated hereby, and Parent will have the right to be
present for any such communication.
11.15. Confidentiality. Between the date of this
Supplemental Agreement and the Closing Date, Parent, the Company
and Stockholder will maintain in confidence, and will cause
their respective directors, officers, employees, agents, and
advisors to maintain in confidence, and not use to the detriment
of another party or the Company any written, oral, or other
information obtained in confidence from another party or the
Company in connection with this Supplemental Agreement or the
transactions contemplated hereby, unless (a) such information is
already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available
through no fault of such party, (b) the use of such information
is necessary or appropriate in making any filing or obtaining
any valuation, consent or approval required for the consummation
of the transactions contemplated hereby, or (c) the furnishing or
use of such information is required by or necessary or
appropriate in connection with legal proceedings.
If the transactions contemplated hereby are not
consummated, each party will return or destroy as much of such
written information as the appropriate party may reasonably
request.
11.16. Definitions. In this Supplemental Agreement,
the following terms have the meanings specified or referred to in
this Section 11.14 and shall be equally applicable to both the
singular and plural forms.
"Affiliate" shall mean: any Person (a) that directly
or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person
involved, including, without limitation, officers and directors,
(b) that directly or beneficially owns or holds 5% or more of any
equity interest in the Person involved, or (c) 5% or more of
whose voting securities (or in the case of a Person which is not
a corporation, 5% or more of any equity interest) is owned
directly or beneficially by the Person involved. As used herein,
the term "control" shall mean possession, directly or indirectly,
of the power to direct or cause the direction of the management
or policies of a Person whether through ownership of securities,
by contract or otherwise.
"ABCA" has the meaning specified in the second recital
clause.
"Ancillary Agreements" has the meaning specified in the
fourth recital clause.
"Articles of Merger" has the meaning specified in
Section 1.2.
"Audit Claim" means a claim with respect to a breach of
any warranty or inaccuracy of any representation contained in
Section 3.1, 3.2, 3.3, 3.7, 3.8, 3.9(a), 3.12, 3.13, 3.15, 3.16,
3.18 or 3.33.
"Audit Report Date" means the date of the report of
Parent's independent auditor issued with respect to the first
audit of Parent's consolidated financial statements covering a
period which includes the Closing Date, which shall not be later
than March 30, 1997.
"Balance Sheet" has the meaning specified in
Section 3.6.
"Balance Sheet Date" has the meaning specified in
Section 3.6.
"Business" means the businesses engaged in by the
Company as of the date of this Supplemental Agreement.
"Closing" has the meaning specified in Section 1.3.
"Closing Date" has the meaning specified in
Section 1.3.
"Code" has the meaning specified in the fifth recital
clause.
"Company Affiliates" has the meaning specified in
Section 5.10.
"Company Common Stock" has the meaning specified in the
second recital clause.
"Company Disclosure Letter" has the meaning specified
in Section 3.1.
"Company Financial Statements" has the meaning
specified in Section 3.6.
"Company Interim Financial Statements" has the meaning
specified in Section 3.6.
"Compensation Commitments" has the meaning specified in
Section 3.20.
"Contaminant" means any waste, pollutant, hazardous
substance, toxic substance, hazardous waste, medical waste,
special waste, asbestos, petroleum or petroleum-derived sub
stance, radioactive material or waste, or any constituent of any
such substance or waste and including, without limitation, any
substance which any Governmental Body or lawful representative
thereof requires to be controlled, removed, monitored,
encapsulated or remediated or otherwise addressed for the
purposes of protection of the environment or public or worker
health and safety.
"Conversion Ratio" means that number equal to the
number of shares of Parent Common Stock included in the Merger
Consideration divided by the number of shares of Company Common
Stock outstanding immediately prior to the Effective Time.
"Copyrights" means United States and foreign
copyrights, copyrightable works (including compilations), mask
works, whether registered or unregistered, and pending
applications to register the same.
"Current Market Price" means, with respect to a share
of Parent Common Stock, as of any date of determination, the per
share closing transaction price of a share of Parent Common Stock
on The Nasdaq National Market (as reported in the Wall Street
Journal) for such date (or, if such date is not a trading date,
as of the most recent trading date).
"Effective Time" has the meaning specified in the
second recital clause.
"Employment Agreement" has the meaning specified in the
fourth recital clause.
"Encumbrance" means any lien, claim, charge, security
interest, mortgage, pledge, easement, conditional sale or other
title retention agreement, defect in title, covenant or other
restriction of any kind.
"Environmental Laws" has the meaning specified in
Section 3.26.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Affiliate" means (a) any corporation which at,
or at any time before, the Closing Date is or was a member of the
same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Company or any predecessor of
the Company; (b) any partnership, trade or business (whether or
not incorporated) which at, or at any time before, the Closing
Date is or was under common control (within meaning of Section
414(c) of the Code) with the Company; and (c) any entity, which
at, or at any time before, the Closing Date is or was a member of
the same affiliated service group (within the meaning of Section
414(m) of the Code) as either the Company or any predecessor of
the Company, any corporation described in clause (a) or any
partnership, trade or business described in clause (b).
"Expenses" means any and all reasonable expenses
incurred in connection with investigating, defending or asserting
any claim, action, suit or proceeding incident to any matter
indemnified against hereunder (including, without limitation,
court filing fees, court costs, arbitration fees or costs,
witness fees, and reasonable fees and disbursements of legal
counsel, investigators, consultants, expert witnesses,
accountants and other professionals), but with respect to
Stockholder's indemnification obligations under Article VIII,
only to the extent the same exceed any reserve therefor on the
Balance Sheet.
"Facility" means any real property, plant, building,
facility, structure, underground storage tank, or other real
estate owned, used, leased or operated by the Company.
"Governmental Permits" has the meaning specified in
Section 3.11.
"Governmental Body" means any court, government
(federal, state, local or foreign), department, commission,
board, bureau, agency, official or other regulatory,
administrative or governmental authority.
"Intellectual Property" means Copyrights, Patent
Rights, Trademarks and Trade Secrets, and publicity and privacy
rights.
"knowledge." As used in this Supplemental Agreement,
an individual, will be deemed to have "knowledge" of a
particular fact or other matter if: (a) such individual is
actually aware of such fact or other matter; or (b) a prudent
individual could be expected to discover or otherwise become
aware of such fact or other matter in the course of conducting a
reasonable investigation concerning the existence of such fact or
other matter.
A Person (other than an individual) will be deemed to
have "knowledge" of a particular fact or other matter if any
individual who is serving, or who has at any time served, as a
director, officer, partner, executor, or trustee of such Person
(or in any similar capacity) has, or at any time had, knowledge
of such fact or other matter.
"Losses" means any and all losses, costs, obligations,
liabilities, settlement payments, awards, judgments, fines,
penalties, damages, expenses, deficiencies or other charges, but
with respect to Stockholder's indemnification obligations under
Article VIII, only to the extent the same exceed any reserve
therefor on the Balance Sheet.
"Material Adverse Change" or "Material Adverse Effect"
means, when used with respect to Parent or the Company, as the
case may be, any change or effect that is or could reasonably be
expected (so far as can be foreseen at the time) to be materially
adverse to the business, properties, assets, liabilities,
condition (financial or otherwise), results of operations or
prospects of Parent and its Subsidiaries taken as a whole, or the
Company, as the case may be.
"Material Contracts" has the meaning specified in
Section 3.23.
"Merger" has the meaning specified in Section 1.1.
"Merger Agreement" has the meaning specified in the
first recital clause.
"Merger Consideration" has the meaning specified in
Section 1.4 of this Supplemental Agreement.
"Non-ERISA Plans" has the meaning specified in Section
3.20.
"Owned Software" has the meaning specified in Section
3.17.
"Parent Affiliates" has the meaning specified in
Section 5.10.
"Parent Ancillary Agreements" has the meaning specified
in Section 2.3.
"Parent Common Stock" has the meaning specified in the
second recital clause.
"Parent Disclosure Letter" has the meaning specified in
Section 2.4.
"Parent Right" has the meaning specified in Section
2.5.
"Parent Rights Agreement" has the meaning specified in
Section 2.5.
"Patent Rights" means United States and foreign
patents, patent applications, continuations, continuations-in
part, divisions, reissues, patent disclosures, inventions
(whether or not patentable or reduced to practice) or
improvements thereto.
"Permitted Encumbrances" means: (a) encumbrances for
taxes or assessments or other governmental charges which are not
yet due and payable; (b) materialmen's, merchants', carriers',
worker's, repairer's, or other similar Encumbrances arising in
the ordinary course of business which are not yet due or payable;
and (c) purchase money security interests.
"Person" means any individual, corporation, partner
ship, joint venture, limited liability company, association,
joint-stock company, trust, unincorporated organization or
Governmental Body.
"Plans" has the meaning specified in Section 3.20.
"Pledge Agreement" has the meaning specified in the
fourth recital clause.
"Registration Rights Agreement" has the meaning
specified in the fourth recital clause.
"Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment or
into or out of any Facility of any Contaminant, including the
movement of Contaminants through or in the air, soil, surface
water, groundwater or Facility.
"Requirements of Law" means any federal, state or local
law, rule or regulation, Governmental Permit or other binding
determination of any Governmental Body.
"Restricted Securities" has the meaning specified in Section
10.3.
"SEC" has the meaning specified in Section 2.11.
"Securities Act" has the meaning specified in Section
4.3.
"Software" means computer software programs and
software systems, including, without limitation, all data,
databases, compilations, tool sets, compilers, higher level or
"proprietary" languages, related documentation and materials,
whether in source code, object code or human readable form.
"Stockholder Disclosure Letter" has the meaning
specified in Section 4.2.
"Subsidiary" means any corporation, partnership, joint
venture or other legal entity of which Parent or the Company, as
the case may be (either alone or through or together with any
other Subsidiary), owns, directly or indirectly, 50% or more of
the capital stock or other equity interests the holders of which
are generally entitled to vote for the election of the board of
directors or other governing body of such corporation,
partnership, joint venture or other legal entity.
"Surviving Corporation" has the meaning specified in
Section 1.1.
"Tax" (and, with correlative meaning, "Taxes" and
"Taxable") means (a) any federal, state, local or foreign income,
gross receipts, windfall profits, severance, property,
production, sales, use, license, excise, franchise, employment,
payroll, withholding, alternative or add-on minimum, ad valorem,
transfer, excise, stamp or environmental tax, or any other tax,
custom, duty, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest or penalty,
addition to tax or additional amount imposed by any Governmental
Body; and (b) liability of the Company for the payment of amounts
with respect to payments of a type described in clause (a) as a
result of being a member of an affiliated, consolidated, combined
or unitary group, or as a result of any obligation of the Company
under any Tax sharing arrangement or Tax indemnity arrangement.
"Tax Returns" means any return, report or similar
statement required to be filed with respect to any Taxes
(including any attached schedules), including, without
limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.
"Third Party Claims" has the meaning specified in
Section 8.6.
"Trademarks" means United States, state and foreign
trademarks, service marks, logos, trade dress and trade names
(including all assumed or fictitious names), whether registered
or unregistered, and pending applications to register the
foregoing.
"Trade Secrets" means confidential ideas and
information, trade secrets, know-how, concepts, methods,
processes, formulae, reports, data, customer lists, mailing
lists, business plans, or other proprietary information.
"Welfare Plans" has the meaning specified in Section
3.20.
IN WITNESS WHEREOF, the undersigned have caused this
Supplemental Agreement to be executed by their respective
officers thereunto duly authorized, all as of the date first
above written.
EAGLE RIVER INTERACTIVE, INC.
By: /s/ Marc Pinto
Marc Pinto
Executive Vice President,
Chief Financial Officer
UTE CREEK ACQUISITION CORP.
By: /s/ Marc Pinto
Marc Pinto
President
MASTERING COMPUTERS, INC.
By: /s/ Thomas R. Graunke
Thomas R. Graunke
President
STOCKHOLDER
By: /s/ Thomas R. Graunke
Thomas R. Graunke
THE UNDERSIGNED, being the spouse of Stockholder, does
hereby represent and warrant that any and all interest of the
undersigned, including any community property interest, in the
Company Common Stock of Stockholder or the Parent Common Stock to
be received by Stockholder as contemplated by this Supplemental
Agreement shall be bound hereby.
By: /s/ Kimberly A. Graunke
Kimberly A. Graunke
Exhibit E
[Form of Letter for Affiliates of the Company]
July 31, 1995
Eagle River Interactive, Inc.
1060 West Beaver Creek Boulevard
Avon, Colorado 81620
Ladies and Gentlemen:
I am aware that as of the date of this letter I may be
deemed to be an "affiliate" of Mastering Computers, Inc. (the
"Company"), as the term "affiliate" is used in Accounting Series
Releases 130 and 135, as amended, of the Securities and Exchange
Commission (the "SEC"). Pursuant to the terms of the Agreement
and Plan of Merger dated as of July 31, 1996 (the "Merger
Agreement") by and among Eagle River Interactive, Inc.
("Parent"), Ute Creek Acquisition Corp. ("Sub") and the Company,
and the Supplemental Agreement dated as of July 31, 1996 (the
"Supplemental Agreement") by and among Parent, Sub, the Company
and Thomas R. Graunke, Sub will be merged with and into the
Company, with the Company surviving as a wholly-owned subsidiary
of Parent. Capitalized terms not defined herein have the
respective meanings specified in the Supplemental Agreement.
I represent and warrant to, and covenant with, Parent,
that I have not and shall not sell, pledge, transfer or otherwise
dispose of, or in any other way reduce my risk relative to, any
shares of Parent Common Stock or any shares of Company Common
Stock during the period commencing 30 days prior to the Effective
Time and ending at such time as the financial results (including
combined sales and net income) covering at least 30 days of post
Merger operations have been published, except as permitted by
Staff Accounting Bulletin No. 76 issued by the SEC.
Very truly yours,
[name]
Accepted this ___ day of August, 1996, by
Eagle River Interactive, Inc.
By: __________________
Name:
Title:
Exhibit F
[Form of Letter for Affiliates of Parent]
[Date of Closing]
[Mastering Computer's, Inc. Address]
Ladies and Gentlemen:
I am aware that as of the date of this letter I may be
deemed to be an "affiliate" of Eagle River Interactive, Inc.
("Parent"), as the term "affiliate" is used in Accounting Series
Releases 130 and 135, as amended, of the Securities and Exchange
Commission (the "SEC"). Pursuant to the terms of the Agreement
and Plan of Merger dated as of [ ], 1996 (the "Merger
Agreement") by and among Parent, Ute Creek Acquisition Corp.
("Sub"), and Mastering Computers, Inc. (the "Company") and the
Supplemental Agreement dated as of [ ], 1996 (the
"Supplemental Agreement") by and among Parent, Sub, the Company
and Thomas R. Graunke, Sub will be merged with and into the
Company, with the Company surviving as a wholly-owned subsidiary
of Parent. Capitalized terms not defined herein have the
respective meanings specified in the Supplemental Agreement.
I represent and warrant to, and covenant with, the
Company, that I have not and shall not sell, pledge, transfer or
otherwise dispose of, or in any other way reduce my risk relative
to, any shares of Parent Common Stock or any shares of Company
Common Stock during the period commencing 30 days prior to the
Effective Time and ending at such time as the financial results
(including combined sales and net income) covering at least 30
days of post-Merger operations have been published, except as
permitted by Staff Accounting Bulletin No. 76 issued by the SEC.
Very truly yours,
[name]
Accepted this ___ day of August, 1996, by
[the Company]
By: __________________
Name:
Title:
Exhibit G
[Form of Resignation]
November __, 1995
To the Board of Directors of
[ ]
Ladies and Gentlemen:
I hereby resign from my position[s] as [insert titles
of offices] [and a director] of [ ] (the "Company"),
such resignation to be effective concurrently with the
consummation of the merger of [ ] with and into the
Company pursuant to the terms and conditions of the Agreement and
Plan of Merger dated [ ] among Eagle River Interactive,
Inc., Ute Creek Acquisition Corp. and the Company.
Very truly yours,
______________________________
Name:
STOCK PLEDGE AGREEMENT
This Stock Pledge Agreement ("Pledge Agreement") is
made as of July 31, 1996 between Eagle River Interactive, Inc., a
Delaware corporation ("Parent"), and Thomas R. Graunke
("Pledgor").
W I T N E S S E T H :
WHEREAS, pursuant to the Agreement and Plan of Merger
of even date herewith (the "Merger Agreement") by and among
Parent, Ute Creek Acquisition Corp., an Arizona corporation and
wholly-owned subsidiary of Parent ("Sub"), and Mastering
Computers, Inc., an Arizona corporation (the "Company"), Sub will
merge (the "Merger") with and into the Company, and Pledgor, as
the sole stockholder of the Company, will exchange all of the
outstanding shares of Common Stock, no par value, of the Company
("Company Common Stock") for shares of Common Stock, $.001 par
value, of Parent ("Parent Common Stock");
WHEREAS, pursuant to the Supplemental Agreement of even
date herewith (the "Supplemental Agreement") by and among Parent,
Sub, the Company and Pledgor, Pledgor has agreed to indemnify,
and hold harmless Parent and the Company, as the surviving
corporation in the Merger, from and against certain Losses and
Expenses (each as defined in the Supplemental Agreement);
WHEREAS, Pledgor has agreed to secure a portion of the
foregoing indemnification obligations to Parent and the Company
in the form of a pledge to Parent of an aggregate of 117,500
shares of Parent Common Stock (the "Pledged Stock"), according to
the terms and conditions of this Pledge Agreement; and
WHEREAS, execution and delivery of this Pledge
Agreement is a condition precedent to the consummation by Parent
of the transactions contemplated by the Merger Agreement and the
Supplemental Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants contained herein, Pledgor and Parent, intending to be
legally bound, agree as follows:
1. Definitions. Unless the context otherwise
requires, all capitalized terms used but not expressly defined
herein shall have the meanings, if any, given to them in the
Supplemental Agreement or, if they are not defined in the
Supplemental Agreement but are defined in the Uniform Commercial
Code, as presently in effect in the State of Arizona (the "UCC"),
they shall have the same meaning herein as in the UCC.
2. Pledge of the Pledged Stock; Power of Attorney.
(a) To induce Parent to consummate the transactions
contemplated by the Merger Agreement and the Supplemental
Agreement, and as security for the indemnification obligations of
Pledgor pursuant to the Supplemental Agreement (hereinafter, the
"Obligations"), Pledgor hereby pledges, hypothecates, assigns,
transfers and sets over unto Parent, and grants a lien and
security interest to Parent, in the Pledged Stock. Pledgor has
delivered to Parent, in its capacity as pledgee, original stock
certificates accompanied by guaranteed stock powers duly signed
by Pledgor (the "Stock Certificates") representing all of the
Pledged Stock.
(b) Parent shall not have any obligation with respect
to the Stock Certificates (and the Pledged Stock represented
thereby) or any other property held or received by it hereunder
except to use reasonable care in the custody and preservation
thereof to the extent required by law. If Parent for any reason
cannot produce the Pledged Stock Certificates representing
Pledged Stock that it is obligated to return to Pledgor, Parent
shall be obligated to have such certificates reissued and to
execute any indemnity or bond that may be required in connection
therewith.
(c) Parent, or its agents, shall hold the Stock
Certificates until the earlier of the return of the Pledged Stock
pursuant to Section 6 or the occurrence of a Liquidated Claim
for Indemnification (as defined below), upon which latter event
Pledgor hereby constitutes and irrevocably appoints Parent (and
any officer or agent of Parent, with full power of substitution
and revocation) as Pledgor's true and lawful attorneys-in-fact,
which appointment is coupled with an interest, in Pledgor's stead
and in his or in Parent's name, to (i) transfer the Required
Shares (as defined below) on the books of Parent, in whole or in
part, to the name of Parent or such other Person as Parent may
designate; and (ii) take possession of and endorse any one or
more checks, drafts, bills of exchange, money orders or any other
documents received on account of such Pledged Stock.
(d) The powers of attorney granted pursuant to this
Pledge Agreement and all authority hereby conferred are granted
and conferred solely to protect Parent's interest in the Pledged
Stock and shall not impose any duty upon the attorney-in-fact to
exercise such powers. Such powers of attorney shall be
irrevocable prior to the payment in full and satisfaction of the
Obligations relating to the Claims for Indemnification and shall
not be terminated prior thereto or affected by any act of
Pledgor, or by operation of law, and if Pledgor should die or
become legally incapacitated, such attorney-in-fact shall
nevertheless be fully authorized to act under such powers of
attorney as if such event had not occurred and regardless of
notice thereof.
(e) Each transferee of the beneficial ownership of the
Pledged Stock by the acceptance of such a transfer shall be
deemed to have irrevocably appointed Parent with full power of
substitution and revocation, such transferee's true and lawful
attorney-in-fact in such transferee's name and otherwise to do
any and all acts permitted to, and to exercise any and all powers
herein conferred upon, such attorney-in-fact.
3. Voting Rights, Dividends, Etc.
(a)(i) So long as Parent shall not have notified
Pledgor of a Claim for Indemnification, Pledgor shall be
entitled to exercise any and all voting and consensual
rights and powers relating or pertaining to the Pledged
Stock or any part thereof for any purpose not inconsistent
with the terms of this Pledge Agreement.
(ii) So long as Parent shall not have notified Pledgor
of a Claim for Indemnification, Pledgor shall be entitled to
receive and retain any and all ordinary cash dividends and
interest payable on the Pledged Stock, but any and all stock
and liquidating dividends, distributions in property,
returns of capital or other distributions made on or in
respect of the Pledged Stock, whether resulting from a
subdivision, combination or reclassification of the
outstanding capital stock of any issuer thereof or received
in exchange for Pledged Stock or any part thereof or as a
result of any merger, consolidation, acquisition or other
exchange of assets to which any such issuer may be a party
or otherwise, and any and all cash and other property
received in payment of the principal of or in redemption of
or in exchange for any Pledged Stock (either at maturity,
upon call for redemption or otherwise) shall be and become
part of the Pledged Stock and, if received by Pledgor, shall
be held in trust for the benefit of Parent and shall
immediately be delivered to Parent or its designated agent
(accompanied by proper instruments of assignment and/or
stock powers executed by Pledgor in accordance with Parent's
instructions) to be subject to the terms of this Pledge
Agreement.
(iii) Parent shall execute and deliver (or cause to be
executed and delivered) to Pledgor all such proxies, powers
of attorney, dividend orders, interest coupons and other
instruments as Pledgor may reasonably request and at
Pledgor's expense for the purpose of enabling Pledgor to
exercise the voting and consensual rights and powers which
he is entitled to exercise pursuant to subsection (i) above
and to receive the dividends and interest payments which he
is authorized to receive and retain pursuant to subsection
(ii) above.
(b) Upon the giving by Parent of the notice referred
to in Section 3(a)(i), all rights of Pledgor to exercise the
voting and consensual rights and powers which he is entitled to
exercise pursuant to Section 3(a)(i) shall cease, and upon the
giving by Parent of the notice referred to in Section 3(a)(ii),
all rights of Pledgor to receive the dividends and interest
payments which he is authorized to receive and retain pursuant to
Section 3(a)(ii) shall cease; but, in each case, only as to the
Required Shares.
4. Covenants of Pledgor. Pledgor agrees that until
the earlier of the expiration of the Indemnification Period (as
defined in Section 7) or the return of the Pledged Stock pursuant
to Section 6, he will defend the Pledged Stock against the claims
and demands of all Persons other than Parent claiming by or
through Pledgor and promptly pay all taxes, assessments, and
charges upon the Pledged Stock, and not sign (or permit to be
signed) any documents creating or perfecting a lien upon or
security interest in any of the Pledged Stock except in favor of
Parent, or otherwise create, suffer, or permit to exist any liens
or security interests upon any Pledged Stock other than in favor
of Parent.
5. Adjustments of Capital Stock; Application of
Dividends. In the event that during the term of this Pledge
Agreement any stock dividend, reclassification, readjustment or
other change is declared or made in the capital structure of
Parent or if any shares of the Pledged Stock are exchanged or
converted, or if stock or liquidating dividends or other
distributions of cash or other assets or properties are made, in
respect of, in redemption of, in exchange for or in payment of
principal of the Pledged Stock (whether resulting from a
subdivision, combination or reclassification of the outstanding
capital stock, any merger, consolidation, acquisition or other
exchange of assets or securities, any conversion, call or
redemption, or otherwise), all new, substituted and additional
shares or other securities issued by reason of any such change or
acquisition shall immediately be delivered by Pledgor to Parent
and shall be deemed to be part of the Pledged Stock under the
terms of this Pledge Agreement in the same manner as the shares
of the Pledged Stock originally pledged hereunder. If a Claim
for Indemnification has occurred, all cash dividends or other
property received by or payable to Pledgor by reason of Pledgor's
ownership of the Required Shares shall immediately be delivered
by Pledgor to Parent, to be held by Parent as additional
collateral.
6. Return of Pledged Stock. Upon the expiration of
the Indemnification Period, Parent shall cause to be transferred
and delivered to Pledgor all of the remaining shares of Pledged
Stock and any money, property and rights received by Pledgor
pursuant hereto, to the extent Parent has not taken, sold or
otherwise realized upon the same pursuant to its rights
hereunder. In addition, Parent shall, after the Audit Report
Date (as defined in the Supplemental Agreement), so transfer and
deliver such number of shares of Pledged Stock and any such
money, property and rights to Pledgor as Parent and Stockholder
reasonably determine shall not be necessary to satisfy any claims
for Indemnification that may thereafter be asserted by Parent
during the remainder of the Indemnification Period. Thereafter,
Parent shall release such additional number of shares of Pledged
Stock and any such money, property and rights to Pledgor as
Parent and Stockholder reasonably determine shall not be
necessary to satisfy any claims for Indemnification that may
thereafter be asserted by Parent during the remainder of the
Indemnification Period.
7. Claim for Indemnification. A "Claim for
Indemnification" for purposes of this Pledge Agreement shall mean
a claim by Parent or the Company against Pledgor under the
indemnification provisions of Section 8.1 of the Supplemental
Agreement as to which Parent or the Company has given notice to
Pledgor on or prior to the termination of the indemnification
obligations in Section 8.1 of the Supplemental Agreement (the
"Indemnification Period"). Promptly upon the discovery by Parent
or the Company of a Claim for Indemnification, Parent shall
deliver written notice to Pledgor specifying the known facts
relating to each claim and the amount or estimated amount
thereof. Upon final resolution of a Claim for Indemnification,
either by way of agreement among the parties or a final
adjudication of a court, such claim will become a Liquidated
Claim for Indemnification. Until a Claim for Indemnification has
become a Liquidated Claim for Indemnification as set forth above,
Parent shall be entitled to retain so much of the Pledged Stock
as may be necessary to pay the full amount of the estimated
amount of the indemnity claims specified in the notice of the
claim (based on the Current Market Price of Parent Common Stock
(as defined in the Supplemental Agreement) on the date hereof),
and Parent shall refrain from exercising or in any way acting on
the authority of the stock powers signed by Pledgor and delivered
with the Pledged Stock.
8. Remedies on Default.
(a) Upon the occurrence of a Liquidated Claim for
Indemnification, Pledgor shall, in the aggregate, at the option
of Parent, automatically and without further action by Pledgor,
Parent or any third party, forfeit in favor of Parent all of its
rights, title and interest in and to the number of shares of
Pledged Stock having a fair market value (based on the Current
Market Price of Parent Common Stock on the date hereof), together
with any dividends paid thereon (the "Required Shares"). Should
all of the Pledged Stock have been sold and the proceeds of such
sale substituted therefor, as contemplated by Section 12, Pledgor
shall, upon the occurrence of a Liquidated Claim for
Indemnification, forfeit to Parent the proceeds of sale of such
shares.
(b) In addition, Parent may exercise any and all
rights and remedies afforded to Parent, as a secured party in
possession of collateral or otherwise, under any and all
provisions of applicable law, including, but not limited to, the
UCC.
(c) Pledgor expressly waives protest, notice,
presentment, dishonor and demand of any kind.
(d) Parent shall collect the cash proceeds received
from any sale or other disposition and shall apply the full
proceeds in accordance with the provisions of this Pledge
Agreement.
(e) Notwithstanding the foregoing, none of the
provisions of this Section 8 shall confer on Parent any rights or
privileges that are not permissible under applicable law.
(f) In connection with the provisions of this Pledge
Agreement, Pledgor from time to time promptly shall execute and
deliver, or cause to be executed and delivered, to Parent such
reasonable documents and instruments, shall join in such notices
and shall take, or cause to be taken, such other reasonable and
lawful action as Parent shall deem necessary or desirable to
enable it to exercise any of the rights with respect to the
Pledged Stock granted to it pursuant to this Pledge Agreement.
9. Expenses. All expenses (including fees and
disbursements of counsel) incurred by the prevailing party in
connection with any litigation arising out of this Pledge
Agreement shall be borne by the non-prevailing party or parties.
10. Further Assurances. Pledgor agrees to do such
further acts and things and to execute and deliver such
additional documents as Parent from time to time may reasonably
request in connection with the administration or enforcement of
this Pledge Agreement, whether related to the Pledged Stock or
any part thereof, to evidence, confirm, perfect or protect any
security interest granted or required to have been granted
hereunder or in order to better assure and confirm unto Parent
its rights, powers and remedies hereunder. Pledgor hereby
consents and agrees that the issuers of the Pledged Stock or any
registrar or transfer agent for any of the Pledged Stock shall be
entitled to accept the provisions hereof and determination of any
Claim for Indemnification as provided herein as conclusive
evidence of the right of Parent to effect any transfer pursuant
hereto, notwithstanding any notice or direction to the contrary
heretofore or hereafter given by Pledgor or any other Person to
any of such issuers or to any such registrar or transfer agent.
11. Representations and Warranties. To induce Parent
to enter into this Pledge Agreement, Pledgor represents and
warrants to Parent that:
(a) Neither the execution or delivery of this Pledge
Agreement, nor the consummation of the transactions contemplated
hereby, nor the compliance with or performance of the terms and
conditions of this Pledge Agreement by Pledgor is prevented by,
limited by, conflicts with or will result in the breach or
violation of or a default under the terms, conditions or
provisions of (i) any mortgage, security agreement, indenture,
evidence of indebtedness, loan or financing agreement,
partnership agreement, or other material agreement or instrument
to which he is a party or by which he is bound or (ii) any
provision of law, any order of any court or administrative agency
or any rule or regulation applicable to him or his business; and
(b) This Pledge Agreement and all documents and
instruments executed or to be executed in connection herewith
constitute the valid and binding obligations of Pledgor,
enforceable in accordance with their respective terms.
12. Sale of Pledged Stock, Etc. Pledgor covenants and
agrees, that, from the date hereof and until the expiration of
the Indemnification Period, he (a) shall not sell, transfer,
exchange or otherwise dispose or agree to dispose of all or any
portion of the Pledged Stock without duly pledging to Parent
substitute collateral acceptable to Parent in its sole discretion
and, without first obtaining the written consent of Parent to
such transfer and substitution, provided that Pledgor may at any
time, without such prior written consent, direct Parent to sell
the Pledged Stock for cash, and substitute for any Pledged Stock
the gross cash proceeds (before any sales commissions) of the
sale thereof; (b) shall not further pledge, assign or deliver a
security interest in the Pledged Stock, or amend, modify,
supplement or waive any provisions of any portion of the Pledged
Stock; and (c) shall not suffer or permit any lien or encumbrance
to be created upon or with respect to any of the Pledged Stock.
13. Litigation Respecting Pledged Stock. In the event
any action, suit or other proceeding at law, in equity, in
arbitration or before any other authority involving or affecting
the Pledged Stock is contemplated by Pledgor, Pledgor shall give
Parent prior notice thereof.
14. Miscellaneous.
(a) Entire Agreement. Except for the Supplemental
Agreement, this Pledge Agreement supersedes all other
representations, agreements and understandings, oral or
otherwise, between the parties with respect to the matters
contained herein.
(b) Severability. Wherever possible, each provision
hereof shall be interpreted in such manner as to be effective and
valid under applicable law, but in case any one or more of the
provisions contained herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such provision
shall be ineffective in the jurisdiction involved to the extent,
but only to the extent, of such invalidity, illegality or
unenforceability without invalidating the remainder of such
invalid, illegal or unenforceable provision or provisions or any
other provisions hereof, unless such a construction would be
unreasonable.
(c) Survival of Representations, Etc. All
representations, warranties, covenants and other agreements made
herein shall survive the execution and delivery of this Pledge
Agreement and shall continue in full force and effect until the
earlier of the return to Pledgor of all Pledged Stock in
accordance with Section 6 or the full payment and satisfaction of
all Losses and Expenses pursuant to Section 8.1 of the
Supplemental Agreement. Neither the exercise nor the failure to
exercise any of Parent's rights hereunder will constitute an
election of remedies or limit Parent in any manner in the
enforcement of any other remedies that may be available to it,
under the Supplemental Agreement or otherwise.
(d) Cumulative Remedies, Waivers and Amendment. The
rights and remedies herein provided to Parent are cumulative and
not exclusive of any rights or remedies provided by law. Any
term or provision of this Pledge Agreement may be waived, or the
time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be
validly and sufficiently authorized for the purposes of this
Pledge Agreement if, as to any party, it is authorized in writing
by an authorized representative of such party. The failure of
any party hereto to enforce at any time any provision of this
Pledge Agreement shall not be construed to be a waiver of such
provision, nor in any way to affect the validity of this Pledge
Agreement or any part hereof or the right of any party thereafter
to enforce each and every such provision. No waiver of any
breach of this Pledge Agreement shall be held to constitute a
waiver of any other or subsequent breach. No notice to or demand
on a party in any case shall entitle such party to any other or
further notice or demand in the same, similar or other
circumstances. Any right or power of Parent hereunder respecting
the Pledged Stock and any other property or money held hereunder
may at the option of Parent be exercised as to all or any part of
the same and the term the "Pledged Stock" wherever used herein,
unless the context clearly requires otherwise, shall be deemed to
mean (and shall be read as) the "Pledged Stock and any other
property or money held hereunder or any part thereof." This
Pledge Agreement shall not be amended nor shall any right
hereunder be deemed waived except by a written agreement
expressly setting forth the amendment or waiver and signed by the
party against whom or which such amendment or waiver is sought to
be charged.
(e) Notices. Any notices or other communications
required under this Pledge Agreement shall be in writing, shall
be deemed to have been given when delivered in person, by telex
or telecopier, when delivered to a recognized next business day
courier, or, if mailed, when deposited in the United States mail,
first class, registered or certified, return receipt requested,
with proper postage prepaid, addressed as follows or to such
other address as notice shall have been given pursuant hereto:
If to Pledgor:
Thomas R. Graunke
10568 East Laurel Lane
Scottsdale, Arizona 85259
Telecopy: (602) 451-9167
With a copy to:
Fennemore Craig, P.C.
Two North Central Avenue
Suite 2200
Phoenix, Arizona 85004
Attention: Janet W. Lord
Telecopy: (602) 257-8527
If to Parent:
Eagle River Interactive, Inc.
1060 West Beaver Creek Boulevard
Avon, Colorado 81620
Attention: Marc Pinto
Telecopy: (970) 845-3016
with copies to:
Eagle River Interactive, Inc.
1701 N. Market Street
Suite 400
Dallas, Texas 75202
Attention: Fred McCallister
Telecopy: (214) 571-4011
and:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Larry A. Barden
Telecopy: (312) 853-7036
(f) Successors. This Pledge Agreement shall, upon
execution and delivery by Pledgor, become effective and shall be
binding upon and inure to the benefit of Pledgor, Parent and
their respective successors, and assigns, except that Pledgor may
not transfer or assign any of its rights or interests hereunder
without the consent of Parent.
(g) Interpretation. The section headings contained in
this Pledge Agreement are for reference purposes only and shall
not in any way affect the meaning or interpretation of this
Supplemental Agreement. Whenever the context may require, any
pronoun used herein shall include the corresponding masculine,
feminine or neuter forms.
(h) Counterparts. This Pledge Agreement may be
executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which together shall
constitute one and the same instrument; and shall become binding
when two or more counterparts have been signed by each of the
parties hereto and delivered to each of Parent and Pledgor.
(i) Construction. This Pledge Agreement and any
document or instrument executed in connection herewith shall be
governed by and construed in accordance with the internal laws
(as opposed to the conflicts of laws provisions) of the State of
Arizona, and shall be deemed to have been executed in the State
of Arizona.
IN WITNESS WHEREOF, Pledgor and Parent have caused this
Pledge Agreement to be executed as of the day and year first
above written.
PLEDGOR
By: /s/ Thomas R. Graunke
Thomas R. Graunke
EAGLE RIVER INTERACTIVE, INC.
By: /s/ Marc Pinto
Marc Pinto
Executive Vice President,
Chief Financial Officer
THE UNDERSIGNED, being the spouse of Pledgor, does
hereby represent and warrant that any and all interest of the
undersigned, including any community property interest, in the
Parent Common Stock subject to this Pledge Agreement shall be
bound hereby.
By: /s/ Kimberly A. Gruanke
Kimberly A. Graunke
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is
made as of July 31, 1996 between Eagle River Interactive, Inc., a
Delaware corporation (the "Company"), and Thomas R. Graunke
("Stockholder").
W I T N E S S E T H:
WHEREAS, pursuant to the Agreement and Plan of Merger
dated as of July 31, 1996 (the "Merger Agreement") by and among
the Company, Ute Creek Acquisition Corp., an Arizona corporation
and wholly-owned subsidiary of the Company ("Sub"), and Mastering
Computers, Inc., an Arizona corporation ("Ute Creek"), and the
Supplemental Agreement dated as of July 31, 1996 (the
"Supplemental Agreement") by and among the Company, Sub, Ute
Creek and Stockholder, as the sole stockholder of Ute Creek, Sub
will merge with and into Ute Creek and all of the issued and
outstanding common stock of Ute Creek will be converted into
shares of the Company's Common Stock (the "Merger Shares").
WHEREAS, it is a condition to Ute Creek's obligations
under the Supplemental Agreement that the Company grant certain
securities registration rights to Stockholder.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. In addition to the capitalized terms
defined elsewhere in this Agreement, the following capitalized
terms shall have the following meanings when used in this
Agreement:
"Commission" means the Securities and Exchange
Commission.
"Common Stock" means the Common Stock, par value $.001
per share, of the Company.
"Holders" means Stockholder, as the holder of
Registrable Shares, or successors or assigns of Stockholder or
subsequent holders contemplated by Section 10.
"Merger Anniversary Date" means July 31, 1997.
"Person" means a natural person, a partnership, a
corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated
organization or other entity, or a governmental entity or any
department, agency or political subdivision thereof.
"Registrable Shares" means, at any time, (a) with
respect to any Demand Registration (as defined in Section 2)
requested prior to the Merger Anniversary Date, up to an
aggregate of 10% of the Merger Shares owned by the Holders at the
time of such Demand Registration (reduced, but not below zero, by
any number of Merger Shares the Holders shall have previously
sold pursuant any Piggyback Registration), (b) with respect to
any Demand Registration requested on or after the Merger
Anniversary Date, the Merger Shares and (c) with respect to any
Piggyback Registration (as defined in Section 3), up to an
aggregate of 235,000 Merger Shares and, in each case, any shares
of Common Stock issued or issuable as a dividend or other
distribution with respect to or in replacement of such shares;
provided, however, that Registrable Shares shall not include any
shares the sale of which has been registered pursuant to the
Securities Act or which have been sold to the public pursuant to
Rule 144 of the Commission under the Securities Act and, provided
further, the Company shall have no obligation under Section 2 and
3 to register any Registrable Shares of a Holder if the Company
shall deliver to the Holders requesting such registration an
opinion of counsel reasonably satisfactory to such Holders and
their counsel to the effect that the proposed sale or disposition
of all of the Registrable Shares for which registration was
requested does not require registration under the Securities Act
for a sale or disposition in a single public sale, and offers to
remove any and all legends restricting transfer from the
certificates evidencing such Registrable Shares. For purposes of
this Agreement, a Person will be deemed to be a holder of
Registrable Shares whenever such Person has the right to acquire
such Registrable Shares, whether or not such acquisition has
actually been effected.
"Registration Expenses" has the meaning ascribed to it
in Section 5.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Exchange Act" means the Securities Exchange
Act of 1934, as amended.
"Subsidiary" means any Person of which securities or
other ownership interests representing more than fifty percent
(50%) of the ordinary voting power of which are, at the time as
of which any such determination is being made, owned or
controlled by the Company or one or more subsidiaries of the
Company or by the Company and one or more subsidiaries of the
Company.
2. Demand Registration.
(a) Requests for Registration.
(i) The Holder or Holders of a majority of the
Registrable Shares may request at any time on or after March
22, 1997 (the "Determination Date") registration under the
Securities Act of all or part of their then Registrable
Shares on Form S-3 or any similar short-form registration
("Short-Form Registration"), if available; provided, that,
in the event that the Company breaches its undertaking set
forth in paragraph (d) of this Section 2, the Holder or
Holders of a majority of the then Registrable Shares may
request at any time on or after the Determination Date that
such registration be made on Form S-1 or any similar long-
form registration.
(ii) Within ten days after receipt of any request
pursuant to this Section 2(a), the Company will give written
notice of such request to all other holders of then
Registrable Shares and will include in such registration all
then Registrable Shares with respect to which the Company
has received written requests for inclusion therein within
21 days after the Company's notice has been given. All
registrations requested pursuant to this Section 2(a) are
referred to herein as "Demand Registrations."
(b) Demand Registrations. The Holders of Registrable
Shares will be entitled to request only two (2) Demand
Registrations in the aggregate; provided, however, that only one
(1) such Demand Registration may be requested prior to the Merger
Anniversary Date. The Company will pay all Registration
Expenses, for such Demand Registrations, whether or not such
registrations become effective. The Company will use reasonable
efforts to make Demand Registration available for the sale of
Registrable Shares.
(c) Restrictions on Registrations. The Company may
postpone for a reasonable period not to exceed 60 days the filing
or the effectiveness of a registration statement for a Demand
Registration if the Board of Directors of the Company determines
reasonably and in good faith that such filing would (i) require a
disclosure of a material fact that would have a material adverse
effect on the Company or any plan by the Company or any of its
Subsidiaries to engage in any financing, acquisition of assets
(other than in the ordinary course of business) or any merger,
consolidation, tender offer or other significant transaction; or
(ii) preclude pooling of interests accounting treatment for a
pending or contemplated acquisition by the Company; provided,
however, that the Company shall not have postponed pursuant to
this Section 2(c) the filing of any other Demand Registration
statement otherwise required to be prepared and filed pursuant to
this Section 2 during the 12 month period ended on the date of
the relevant request pursuant to Section 2(a)(i).
(d) Representation Regarding Timely Filing;
Undertaking to Use Reasonable Efforts. The Company hereby
represents that, as of the date hereof, it has timely filed all
reports required to be filed by it under the Securities Exchange
Act, and is otherwise eligible to use Form S-3 but for the fact
that it will not have been subject to the requirements of
Section 12 of the Securities Exchange Act for twelve calendar
months until March 22, 1997. The Company undertakes to use
reasonable efforts between the date hereof and the Determination
Date to take such steps as are necessary to make Short-Form
Registration available to the Holders of Registrable Shares as
provided in Section 2(a)(i).
3. Piggyback Registrations.
(a) Right to Piggyback. Whenever securities of the
Company are to be registered under the Securities Act (other than
pursuant to a Demand Registration and other than pursuant to a
registration statement on Form S-4 or Form S-8) and the
registration form to be used may be used for the registration of
Registrable Shares (a "Piggyback Registration"), the Company will
give prompt written notice (and in any event within five business
days after its receipt of notice of any exercise of demand
registration rights by holders of the Company's securities other
than the Registrable Shares (the "Other Holders")) to all Holders
of Registrable Shares of its intention to effect such a
registration and will include in such registration all
Registrable Shares (up to a maximum of 235,000 Registrable
Shares, pro rata among the Holders of Registrable Shares as set
forth below and subject to the underwriter's cutbacks set forth
below and subject to the provisions of the immediately succeeding
proviso) with respect to which the Company has received written
requests for inclusion therein 21 days after the Company's notice
has been given; provided, however, that notwithstanding anything
contained herein to the contrary, the right of any Holder to
effect a Piggyback Registration and include Registrable Shares in
such registration shall be subject to receipt from:
(i) each holder of the Company's securities (other than
Registrable Shares) that is entitled on the date hereof to
registration rights with respect to any securities of the
Company held by it (each such holder, an "Existing Holder")
that is then registering for sale any of its securities, of
the prior written consent of such Existing Holder to the
inclusion in such registration of the Registrable Shares or
any portion thereof, it being understood that the delivery
or withholding of such consent shall be in the sole
discretion of each such Existing Holder;
(ii) the managing underwriters for the offering
contemplated by such registration, of the prior written
consent of such managing underwriters to the inclusion in
such registration of the Registrable Shares or any portion
thereof, it being understood that the delivery or
withholding of such consent shall be in the sole discretion
of such managing underwriters; and
(iii) each other person to whom the Company has a
contractual obligation to obtain consent with respect to the
inclusion in such registration of the Registrable Shares, or
any portion thereof, of the prior written consent of such
person to the inclusion in such registration of the
Registrable Shares or any portion thereof, it being
understood that the delivery or withholding of such consent
shall be in accordance with the terms of the contract giving
rise to such obligation.
The Holders shall be entitled to request only one (1) Piggyback
Registration, provided that if the entire 235,000 Registrable
Shares are not registered in such Piggyback Registration, the
Holders shall be entitled to additional Piggyback Registrations
until a cumulative total of 235,000 Registrable Shares are
registered in such Piggyback Registrations. The Company shall
have the absolute right to withdraw or cease to prepare or file
any registration statement for any offering referred to in this
Section 3(a) without any obligation or liability to any Holder.
(b) Priority on Piggyback Registrations. If the
managing underwriters of a Piggyback Registration advise the
Company in writing that in their opinion the number of securities
requested to be included in such registration creates a
substantial risk that the price per share of Common Stock will be
reduced, the Company will include in such registration (i) first,
the securities the Company proposes to sell or any securities an
Existing Holder proposes to sell and (ii) second, the Registrable
Shares and other securities requested to be included in such
registration which in the opinion of such underwriters can be
sold in such offering without creating such a risk, allocated
among the Holders of such Registrable Shares as a group and the
holders of such other securities on a pro rata basis. The shares
permitted to be included by the Holders of Registrable Shares
shall be allocated pro rata among the Holders of Registrable
Shares on the basis of the number of Registrable Shares owned by
such holders, with further successive pro rata allocations among
the Holders if any such holder has requested the registration of
less than all of the Registrable Shares such person is entitled
to register.
4. Registration Procedures. Whenever the Holders of
Registrable Shares have requested that any Registrable Shares be
registered pursuant to the terms of this Agreement, the Company
will use reasonable efforts to effect the registration and the
sale of such Registrable Shares in accordance with the intended
method of disposition thereof, and pursuant thereto the Company
will as expeditiously as possible:
(a) prepare and file with the Commission a
registration statement on the appropriate form with respect to
such Registrable Shares and use reasonable efforts to cause such
registration statement to become effective as soon as practicable
after such filing, unless during such period the average trading
volume of the Common Stock on the Nasdaq Stock Market shall for
any week be less than 100,000 shares, excluding block trades
effected other than in "broker's transactions" within the meaning
of Rule 144 (each such week a "Shortfall Week"), in which event
such period shall be extended by an additional week for each
Shortfall Week;
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement until
such time as the Registrable Shares registered thereunder have
been disposed of in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration
statement, but in no event shall the Company be required to
maintain such registration statement effective for a period in
excess of three months;
(c) furnish to each seller of such Registrable Shares
and the underwriters of the securities being registered such
number of copies of such registration statement, each amendment
and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus)
and such other documents as such seller or underwriters may
reasonably request in order to facilitate the disposition of the
Registrable Shares owned by such seller or the sale of such
securities by such underwriters;
(d) use reasonable efforts to register or qualify such
Registrable Shares under the securities laws of states as any
seller reasonably requests and do any and all other acts and
things which may be necessary or desirable to enable such seller
to consummate the public sale or other disposition in such
jurisdictions of the Registrable Shares owned by such seller
(provided, however, that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this
subparagraph or (ii) consent to general service of process in any
such jurisdiction);
(e) cause all such Registrable Shares to be listed on
The Nasdaq Stock Market;
(f) provide a transfer agent or registrar for all such
Registrable Shares not later than the effective date of such
registration statement;
(g) enter into such customary agreements (including
underwriting agreements) and take all such other actions as the
Holder or Holders of a majority of the Registrable Shares being
sold or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable
Shares;
(h) make available for inspection by each seller of
such Registrable Shares, any underwriter participating in any
disposition pursuant to such registration statement, and any
attorney, accountant or other agent designated by any such seller
or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in
connection with such registration statement;
(i) notify each seller of such Registrable Shares,
promptly after it shall receive notice thereof, of the time when
such registration statement has become effective or a supplement
to any prospectus forming a part of such registration statement
has been filed;
(j) notify each seller of such Registrable Shares of
any request by the Commission for the amending or supplementing
of such registration statement or prospectus or for additional
information;
(k) prepare and promptly file with the Commission and
promptly notify each seller of such Registrable Shares of the
filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the
Securities Act, any event shall have occurred as the result of
which any such prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances in which they were
made, not misleading; and
(l) advise each seller of such Registrable Shares,
promptly after it shall receive notice or obtain knowledge
thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement or
the initiation or threatening of any proceeding for such purpose
and promptly use all reasonable efforts to prevent the issuance
of any stop order or to obtain its withdrawal if such stop order
should be issued.
5. Registration Expenses. All expenses incident to
the Company's performance of or compliance with this Agreement,
including, but not limited to, all registration and filing fees,
fees and expenses and compliance with federal, state and foreign
securities laws, printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for the Company,
the fees and disbursements of the Company's independent certified
public accountants, the fees and disbursements of counsel for the
underwriters (but only to the extent related to blue sky
compliance) and the fees and disbursements of other Persons
retained by the Company (other than the underwriters) (all such
expenses, but excluding discounts and commissions attributable to
the Registrable Shares included in such registration, being
herein called "Registration Expenses"), will be borne by the
Company. In addition, the Company will pay its internal expenses
(including, but not limited to, all salaries and expenses of its
officers and employees performing legal or accounting duties),
the expense of any annual audit or quarterly review, the expense
of any liability insurance obtained by the Company and the
expenses and fees for listing the securities to be registered on
each applicable securities exchange or association. The Company
will not be liable for any fees and expenses of counsel, if any,
retained by the Holders of Registrable Shares in connection with
any registration statement in which Registrable Shares are
included.
6. Compliance with Rule 144. At the request of any
Holder who proposes to sell securities in compliance with Rule
144 promulgated by the Commission, the Company will (i) forthwith
furnish to such Holder a written statement of compliance with the
filing requirements of the Commission as set forth in Rule 144 as
such rule may be amended from time to time and (ii) make
available to the public and such Holder such information as will
enable such Holder to make sales pursuant to Rule 144.
7. Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten
unless such Person (a) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by
the Person or Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, lock-up agreements, underwriting
agreements and other documents required under the terms of such
underwriting arrangements. The Company will have the right to
select the managing underwriters to administer any offering of
the Company's securities by the Holders of Registrable
Securities.
8. Remedies. Any Person having rights under any
provision of this Agreement will be entitled to enforce such
rights specifically, to recover damages caused by reason of any
breach of any provision of this Agreement and to exercise all
other rights granted by law.
9. Amendments and Waivers. Except as otherwise
expressly provided herein, the provisions of this Agreement may
be amended or waived at any time only by the written agreement of
the Company and the Holders of a majority of the Registrable
Shares. Any waiver, permit, consent or approval of any kind or
character on the part of any such Holders of any provision or
condition of this Agreement must be made in writing and shall be
effective only to the extent specifically set forth in writing.
Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each Holder of Registrable Shares
and the Company. Each Holder acknowledges that by operation of
this paragraph the Holders of a majority of the Registrable
Securities, acting in conjunction with the Company, will have the
right and power to diminish or eliminate all rights pursuant to
this Agreement.
10. Successors and Assigns. Except as otherwise
expressly provided herein, all covenants and agreements contained
in this Agreement by or on behalf of any of the parties hereto
will bind and inure to the benefit of the respective successors
and assigns of the parties hereto, whether so expressed or not.
In addition and whether or not any express assignment has been
made, the provisions of this Agreement which are for the benefit
of purchasers or holders of Registrable Shares are also for the
benefit of, and enforceable by, any subsequent holder of
Registrable Shares who consents in writing to be bound by this
Agreement.
11. Final Agreement. This Agreement constitutes the
final agreement of the parties concerning the matters referred to
herein, and supersedes all prior agreements and understandings.
12. Severability. Whenever possible, each provision
of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating
the remainder of this Agreement.
13. Descriptive Headings. The descriptive headings of
this Agreement are inserted for convenience of reference only and
do not constitute a part of and shall not be utilized in
interpreting this Agreement.
14. Notices. All notices, consents, waivers, and
other communications under this Agreement must be in writing and
will be deemed to have been duly given when (a) delivered by hand
(with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is
mailed by certified mail, return receipt requested, (c) received
by the addressee, if sent by certified mail, return receipt
requested, or (d) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt
requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate by notice to the
other parties):
If to Stockholder:
Thomas R. Graunke
10568 East Laurel Lane
Scottsdale, Arizona 85259
Telecopy: (602) 451-9167
With a copy to:
Fennemore Craig, P.C.
Two North Central Avenue
Suite 2200
Phoenix, Arizona 85004
Attention: Janet W. Lord
Telecopy: (602) 257-8527
If to the Company:
Eagle River Interactive, Inc.
1060 West Beaver Creek Boulevard
Avon, Colorado 81620
Attention: Marc Pinto
Telecopy: (970) 845-3016
with copies to:
Eagle River Interactive, Inc.
1701 N. Market Street
Suite 400
Dallas, Texas 75202
Attention: Fred McCallister
Telecopy: (214) 571-4011
and:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Larry A. Barden
Telecopy: (312) 853-7036
15. Governing Law. The validity, meaning and effect
of this Agreement shall be determined in accordance with the laws
of the State of Delaware applicable to contracts made and to be
performed in that state.
16. Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed and
delivered shall be deemed an original, and such counterparts
together shall constitute one instrument. Each party shall
receive a duplicate original of the counterpart copy or copies
executed by it and the Company.
17. Termination. This Agreement may be terminated at
any time by a written instrument signed by the parties hereto.
Unless sooner terminated in accordance with the preceding
sentence, this Agreement shall terminate in its entirety on such
date as there shall be no Registrable Shares outstanding,
provided that any shares of Common Stock previously subject to
this Agreement shall not be Registrable Shares following the sale
of any such shares in the offering registered pursuant to this
Agreement.
IN WITNESS WHEREOF, each of the Company and Stockholder
has executed this Registration Rights Agreement as of the date
first set forth above.
EAGLE RIVER INTERACTIVE, INC.
By: /s/ Marc Pinto
Marc Pinto
Executive Vice President,
Chief Financial Officer
STOCKHOLDER:
By: /s/ Thomas R. Graunke
Thomas R. Graunke
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This Employment and Noncompetition Agreement
("Agreement") is made and entered into this 31st day of July,
1996 by and between Eagle River Interactive, Inc., a Delaware
corporation (the "Company"), and Thomas R. Graunke ("Employee").
W I T N E S S E T H:
WHEREAS, pursuant to the Agreement and Plan of Merger
dated as of July 31, 1996 (the "Merger Agreement"), by and among
the Company, Ute Creek Acquisition Corp., an Arizona corporation
and wholly-owned subsidiary of Company ("Sub"), and Mastering
Computers, Inc., an Arizona corporation ("Mastering Computers"),
and the Supplemental Agreement dated as of July 31, 1996 (the
"Supplemental Agreement") among the Company, Sub, Mastering
Computers and Employee, as sole stockholder of Mastering
Computers, Sub will merge with and into Mastering Computers and
each issued and outstanding share of common stock of Mastering
Computers will be converted into shares of Common Stock, par
value $.001 per share, of the Company (the "Common Stock"); and;
WHEREAS, as a result of the consummation of the merger
contemplated by the Merger Agreement and the Supplemental
Agreement, Mastering Computers will become a wholly-owned
subsidiary of the Company;
WHEREAS, Employee is currently the sole stockholder and
the President of Mastering Computers;
WHEREAS, it is a condition to the Company's obligations
under the Supplemental Agreement that Employee agree to render
services to the Company and agree not to compete with the
Company, on the terms and subject to the conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises and
the mutual agreements, provisions and covenants contained in this
Agreement, the Company and Employee hereby agree as follows:
1. Employment.
(a) Title and Duties of Employee. Subject to all of
the terms and conditions herein provided, during the Employment
Period (as defined below) the Company hereby agrees to employ
Employee as an Executive Vice President of the Company and to
cause Employee to also be employed as the President of the
Company's Mastering Computers subsidiary. Employee shall report
to the CEO of the Company or such other person as may be
designated by the CEO of the Company. Employee shall be
responsible for all duties designated by such executive officer
of the Company. Employee shall at all times be subject to and
shall observe and carry out such rules, regulations, policies,
directions and restrictions as may be established from time to
time by the Company. Employee's title and responsibilities shall
be subject to change from time to time at the direction of the
CEO or the Board of Directors of the Company, within the
limitations set forth in this Section 1(a).
(b) Performance. Throughout the period of Employee's
employment hereunder, Employee shall devote Employee's full
normal business time, attention, knowledge and skills faithfully,
diligently and to the best of Employee's ability, to the active
performance of Employee's duties and responsibilities hereunder,
and shall do such traveling as may reasonably be required in
connection with the performance of such duties and
responsibilities. Employee shall not be required to relocate
outside the Phoenix, Arizona metropolitan area during the first
18 months of the Employment Period (as hereinafter defined).
2. Term of Employment.
The term of Employee's employment with the Company
pursuant to this Agreement shall be for a period of four years,
commencing on the date hereof and ending on the earlier of the
day immediately preceding the fourth anniversary of the date
hereof or the date of termination of Employee's employment with
the Company pursuant to Section 5 (the "Employment Period").
3. Compensation and Benefits.
(a) Base Salary. As compensation for the services to
be rendered by Employee hereunder, the Company shall pay to
Employee during the Employment Period a base salary of $200,000
per year (the "Base Salary"), payable in periodic installments
(but in no event less frequently than monthly) in accordance with
the standard payroll practices of the Company in effect from time
to time. Employee's Base Salary shall be reviewed on a merit
basis on the first anniversary date of this Agreement, provided,
however, that Employee's annual salary during the Employment
Period shall not be less than the Base Salary.
(b) Incentive Bonus. For the period ending December
31, 1996, Employee shall be eligible to receive an incentive
bonus, payable in cash, equal in amount to the amount of
incentive bonus Employee would have received during 1996 as an
Executive Vice-President of the Company participating in Tier I
of the Company's current incentive bonus plan for executive
officers; provided, however, that such bonus shall be prorated to
give effect only to the portion of 1996 that Employee is actually
employed by the Company. Employee acknowledges that the Company,
in connection with the operation of such plan, may determine not
to give effect to any portion of the Company's consolidated
revenue that is attributable to companies acquired by the Company
for periods prior to the date of their respective acquisitions.
Employee confirms that he is not entering into this Agreement in
reliance on the Company, in connection with the operation of such
plan, giving effect to any portion of the Company's 1996
consolidated revenue attributable to (i) Mastering Computers for
periods prior to the date hereof, or (ii) any other company
acquired by the Company during 1996 for periods prior to the
effective date of such acquisition. After 1996 and during the
remaining term of this Agreement, Employee shall be entitled to
participate in the Company's then existing bonus plan, if any, to
the same extent as similarly situated senior executive officers
of the Company.
(c) Expenses. The Company shall reimburse Employee,
upon presentment by Employee to the Company of appropriate
receipts and vouchers, for any reasonable business expenses
incurred by Employee in connection with the performance of his
duties and responsibilities hereunder. In the event that any of
Employee's business-related air travel is made on a noncommercial
airline or airplane, the Company shall reimburse Employee for
expenses incurred by Employee in connection with such air travel
at the comparable commercial airline first class air travel rate
for the same route.
(d) Fringe Benefits. The Company shall make available
to Employee, throughout the Employment Period, access to such
fringe benefits and benefit plans as may presently be in effect
or which may hereafter be adopted by the Company for the benefit
of its employees generally or employees in comparable positions
in the Company; provided, however, that nothing contained in this
paragraph shall be construed to obligate the Company to provide
Employee with any specified benefit, but only to extend benefits
to Employee on a basis reasonably comparable to those made
available to employees generally or employees in such comparable
positions.
(e) Automobile and Entertainment Expense Allowance.
During the Employment Period, the Company shall provide Employee
with a monthly automobile and entertainment expense allowance,
payable in cash on or before the first day of each month during
the Employment Period in the following respective amounts: for
the first eight months of the Employment Period, in the amount of
$1,750 per month; thereafter, in the amount of $1,000 per month.
(f) Stock Options. The Company shall grant to
Employee, as the date hereof, options to purchase 255,000 shares
of Common Stock, such options to (i) be granted at an exercise
price equal to the closing sale price per share of the Common
Stock as reported on the Nasdaq National Market on the day
hereof, (ii) vest over a four-year period at a rate of 25% per
year and (iii) be issued pursuant to, and subject to the terms
and conditions of, the Eagle River Interactive, Inc. 1995
Executive Stock Option Plan. Any further grant to Employee of
stock options in 1996 shall be in the sole discretion of the
Compensation Committee of the Board of Directors of the Company.
In connection with regular grants by the Company of stock options
in 1997 or in any subsequent year during the Employment Period,
Employee will receive options with respect to such number of
shares of Common Stock and upon such other terms as the
Compensation Committee of the Board of Directors of the Company
shall determine, provided that Employee shall receive stock
options with respect to that number of shares of Common Stock and
upon such terms as are then granted to similarly situated senior
executive officers of the Company.
(g) Severance Pay.
(i) In the event that Employee's employment with the
Company is terminated by the Company without cause pursuant
to Section 5(c) before the first anniversary of the date
hereof, the Company shall pay to Employee, in a lump sum
cash payment made within 15 days of such termination,
severance pay equal to the product of the Base Salary
multiplied by 2.
(ii) In the event that (A) Employee's employment with
the Company is terminated by the Company without cause
pursuant to Section 5(c) on or after the first anniversary
of the date hereof but before the third anniversary of the
date hereof or (B) Employee's employment with the Company is
terminated by Employee for "Good Reason" pursuant to
Section 5(d) on or before the third anniversary of the date
hereof, the Company shall pay to the Employee, in 24 semi
monthly installments, severance pay equal in the aggregate
to 12 months' Base Salary or, in the event that such
termination occurs after the third anniversary of the date
hereof, in semi-monthly installments through the remainder
of the Employment Period, an aggregate amount equal to the
amount of Base Salary that would otherwise have been paid
from the date of such termination through the remainder of
the Employment Period, absent such termination.
(iii) The obligation of the Company to make the
payments set forth in this Section 3(g) shall be subject to
the condition set forth in Section 12(h).
4. Vacation.
Throughout the period of Employee's employment
hereunder, Employee shall be entitled to take vacation in
accordance with the Company's "Paid Time Off" policy as in effect
from time to time, giving full credit for such time as Employee
was an employee of Mastering Computers (including five days
carryover vacation time from such prior employment).
5. Termination.
(a) Cause. This Agreement and the Employment Period
may be terminated by the Company, at any time at the option of
the Company, for cause (as such term is hereinafter defined),
effective immediately upon the giving of written notice of
termination to Employee; provided, however, that no such
termination shall affect the obligations of Employee under
Section 6. Notwithstanding any provision of this Employment
Agreement to the contrary, from and after the date of any such
termination, Employee shall be entitled to receive only the
amount of Base Salary contemplated by Section 3(a) which shall
have accrued and be unpaid for the portion of the Employment
Period through the date of such termination, any then
unreimbursed expenses under Section 3(c) and the benefits, if
any, under the Company's employee benefit plans to the extent
Employee's benefits thereunder have vested on the date of
termination, with all such compensation to be paid (and expenses
reimbursed) at the time and in the manner that they would
otherwise have been paid (or reimbursed) to Employee during the
normal course of his employment hereunder. As used herein, the
term "for cause" shall mean and be limited to: (i) any felony
criminal conviction other than for minor traffic violations; (ii)
the failure of Employee to perform the duties provided in Section
1 or comply with the rules, regulations, policies, directions and
restrictions generally applicable to employees in similar
positions as may be established from time to time by the Company,
and which failure to so comply shall continue after the
expiration of the ten-day period commencing with written notice
from the Company; (iii) the inability of the Employee to perform
the essential functions of his employment position due to a
disability of Employee that cannot be reasonably accommodated by
the Company, (iv) any illegal use of narcotics or other illegal
substances, (v) any embezzlement or misappropriation of corporate
funds, (vi) any conduct that is materially detrimental to the
reputation of the Company or any affiliate thereof or that
constitutes a violation of any contractual, statutory or common
law duty of loyalty to the Company or any affiliate thereof or
(vii) any other material breach of this Agreement by Employee
which shall continue after the expiration of the ten-day period
commencing with written notice from the Company.
(b) Death of Employee. This Agreement and the
Employment Period shall terminate automatically upon the death of
Employee. In the event of such termination, the estate of
Employee shall be entitled to receive only the amount of Base
Salary contemplated by Section 3(a) which shall have accrued and
be unpaid for the portion of the Employment Period through the
date of death, any then unreimbursed expenses under Section 3(c)
and the benefits, if any, under the Company's employee benefit
plans to the extent Employee's benefits thereunder have vested on
the date of termination, with all such compensation to be paid
(and expenses reimbursed) at the time and in the manner that they
would otherwise have been paid (or reimbursed) to Employee during
the normal course of his employment hereunder.
(c) Termination Without Cause. This Agreement and the
Employment Period may be terminated by either party without cause
by giving written notice of termination at least thirty (30) days
prior to the effective date of such termination. In the event
that Employee so elects to terminate his employment with the
Company hereunder (other than pursuant to Section 5(d)), the
Employment Period shall terminate on such date as selected by
Employee for such termination, and, notwithstanding any provision
of this Employment Agreement to the contrary, from and after such
date of termination, Employee shall be entitled to receive only
the amount of Base Salary contemplated by Section 3(a) which
shall have accrued and be unpaid for the portion of the
Employment Period through the date of such termination, any then
unreimbursed expenses under Section 3(c) and the benefits, if
any, under the Company's employee benefit plans to the extent
Employee's benefits thereunder have vested on the date of
termination, with all such compensation to be paid (and expenses
reimbursed) at the time and in the manner that they would
otherwise have been paid (or reimbursed) to Employee during the
normal course of his employment hereunder. In the event that the
Company elects to terminate this Agreement and the Employment
Period without cause, then, from and after such date of
termination, Employee shall be entitled to receive only the
severance payments in the amount and to the extent set forth in
Section 3(g), any then unreimbursed expenses under Section 3(c)
and the benefits, if any, under the Company's employee benefit
plans to the extent Employee's benefits thereunder have vested on
the date of termination. Notwithstanding anything contained
herein to the contrary, no such termination shall affect the
obligations of Employee under Section 6.
(d) Termination by Employee for Good Reason. This
Agreement and the Employment Period may be terminated by Employee
for "Good Reason" on or before the termination date hereof.
"Good Reason", as used herein, means (i) a material adverse
change in the duties and responsibilities of Employee in effect
on the date hereof, (ii) Employee is required to report to
someone other than the CEO of the Company or another executive of
the Company who shall have been hired by the Company after the
date hereof after seeking the advice of or other input from
Employee or (iii) a substantive change is made in the Company's
bonus plan in which Employee participates (specifically excluding
stock option plans), the effect of which change is to materially
reduce Employee's economic incentive under such plan. In the
event that Employee elects to terminate his employment with the
Company pursuant to this Section 5(d), from and after such date
of termination, Employee shall be entitled to receive only the
severance payments in the amount and to the extent set forth in
Section 3(g), any then unreimbursed expenses under Section 3(c)
and the benefits, if any, under the Company's employee benefit
plans to the extent Employee's benefits thereunder have vested on
the date of termination. Notwithstanding anything contained
herein to the contrary, no such termination shall affect the
obligations of Employee under Section 6.
6. Restrictive Covenant.
As conditions of his employment and in consideration of
his employment and the Company's acquisition of Mastering
Computers, Employee covenants and agrees as follows:
(a) that, during his employment with the Company, he
will devote his full normal business time, services and attention
and best efforts to the performance of his duties and to the
promotion of the business and interests of the Company and its
affiliates;
(b) that, during his employment with the Company, and
for a period of 18 months after, he shall not, directly or
indirectly, own, manage, control, promote, finance, participate
in, consult with, render services for or on behalf of, or in any
manner engage in a business in the Territory with accounts or
product lines which are competitive with accounts or product
lines that are existing or reasonably contemplated by the Company
or any of its affiliates at the time such employment ends;
provided, that nothing herein shall prohibit Employee from being
a passive owner of not more than 1% of the outstanding stock of
any class of a corporation which is publicly traded, so long as
Employee has no active participation in the business of such
corporation;
(c) that, during his employment with the Company and
for a period of 18 months thereafter, he will make full and
complete disclosure of the existence of this Agreement and the
content of this Section 6 to all prospective employers with whom
he may discuss possible employment;
(d) that he will refrain from any disparagement,
direct or indirect, through innuendo or otherwise, of the Company
or any of its employees, agents, officers, directors,
stockholders or affiliates;
(e) that, during the Employment Period, he will not,
without the prior written consent in each case of the CEO and/or
Board of Directors of the Company: (i) participate actively in
any other business interests or investments which would conflict
with his responsibilities under this Agreement or (ii) borrow
money from, or lend to, customers (except those commercial
institutions whose business it is to lend money) or individuals
or firms from which the Company, or any affiliate or subsidiary
of the Company, buys services, materials, equipment or supplies,
or with whom the Company, or any affiliate or subsidiary of the
Company, does business;
(f) that, during the Employment Period, he will not,
without the prior written consent in each case of the CEO and/or
Board of Directors of the Company: (i) exchange goods, products
or services of the Company or its affiliates in return for goods,
products or services of any individual or firm or (ii) accept
gifts or favors from any outside organization or agency which, in
each case, individually or collectively, are not ordinary or
customary and would be likely cause undue influence in his
selection of goods, products or services for the Company or its
affiliates;
(g) that, after the termination of his employment, he
will not secure, or attempt to secure, from any employee or
former employee of the Company or any affiliate of the Company,
any confidential information relating to the Company or any
affiliate of the Company or its business operations; and
(h) that, during his employment with the Company and
for a period of 18 months thereafter, he will not solicit or
otherwise encourage any employee, agent or customer of the
Company or any of its affiliates to cease or terminate their
relationship with the Company or its affiliates.
Employee represents and warrants to the Company that,
notwithstanding the operation of the covenants contained in this
Section 6, upon the termination of his employment hereunder,
Employee will be able to obtain employment for the purpose of
earning a livelihood. For purposes of this Section 6,
"Territory" means the United States of America, its Territories
and possessions, Canada, and any other country in the world in
which the Company or any of its subsidiaries conducted business
activities during the Employment Period or, at the time of
termination or expiration of the Employment Period, contemplates
conducting business activities.
7. Employee Proprietary Rights Agreement.
Employee agrees to execute, contemporaneously herewith
or at such later time as Company shall request, Company's
standard "Employee Proprietary Rights Agreement" (the
"Proprietary Rights Agreement").
8. Severability.
If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope
or application to given circumstances, such provision shall
thereupon be deemed modified only to the extent necessary to
render the same valid, or not applicable to the given
circumstances, or excised from this Agreement, as the situation
may require, and this Agreement shall be construed and enforced
as if such provision had been included herein as so modified in
scope or application, or had not been included herein, as the
case may be. Should this Agreement, or any one or more of its
provisions hereof, be held to be invalid, illegal or
unenforceable within any governmental jurisdiction or subdivision
thereof, this Agreement or any such provision or provisions shall
not as a consequence thereof be deemed to be invalid, illegal or
unenforceable in any other governmental jurisdiction or
subdivision thereof. The existence of any claim or cause of
action which Employee may have against the Company shall not
constitute a defense or bar to the enforcement of any of the
provisions of this Agreement and shall be pursued through
separate court action by Employee.
9. Remedies.
Employee hereby acknowledges that the Company would
suffer irreparable injury if the provisions of Section 6, above,
which shall survive the termination of the Agreement, were
breached and that the Company's remedies at law would be
inadequate in the event of such breach. Accordingly, Employee
hereby agrees that any such breach or threatened breach may, in
addition to any and all other available remedies, be
preliminarily enjoined by the Company without bond or other
security and without having to prove the inadequacy of the
available remedies at law. In the event of any litigation under
this Agreement, the prevailing party shall be entitled to collect
all costs and expenses of any proceeding, including reasonable
attorneys' fees, whether incurred at the pre-trial, trial or
appellate level, as determined by the court hearing the matter.
10. Non-Assignability.
In light of the unique personal services to be
performed by Employee hereunder, it is acknowledged and agreed
that any purported or attempted assignment or transfer by
Employee of this Agreement or any of Employee's duties,
responsibilities or obligations hereunder shall be void. This
Agreement may be assigned by the Company, but only after the
first anniversary of the date hereof, to any subsidiary or
affiliate of the Company without the prior written consent of
Employee.
11. Notices.
All notices, consents, waivers, and other
communications under this Agreement must be in writing and will
be deemed to have been duly given when (a) delivered by hand
(with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is
mailed by certified mail, return receipt requested, (c) received
by the addressee, if sent by certified mail, return receipt
requested, or (d) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt
requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate by notice to the
other parties):
If to Employee:
10568 E. Laurel Lane
Scottsdale, Arizona 85259
Telecopy: (602) 451-9167
With a copy to:
Fennemore Craig, P.C.
Two North Central Avenue
Suite 2200
Phoenix, Arizona 85004
Attention: Janet W. Lord
Telecopy: (602) 257-8527
If to the Company:
Eagle River Interactive, Inc.
1060 West Beaver Creek Boulevard
Avon, Colorado 81620
Attention: Marc Pinto
Telecopy: (970) 845-3016
with copies to:
Eagle River Interactive, Inc.
1701 N. Market Street
Suite 400
Dallas, Texas 75202
Attention: Fred McCallister
Telecopy: (214) 571-4011
and:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Larry A. Barden
Telecopy: (312) 853-7036
12. General.
(a) Amendments; No Waiver. Neither this Agreement nor
any of the terms or conditions hereof may be waived, amended or
modified except by means of a written instrument duly executed by
the party to be charged therewith. The failure of either party
hereto to enforce any of the provisions of this Agreement, of any
rights with respect thereto, or failure to exercise any election
provided for herein, shall in no way be deemed a waiver of such
provisions, rights or elections, or in any way affect the
validity of this Agreement. The failure of either party hereto
to enforce any of said provisions, rights or elections shall not
prejudice such party from later enforcing or exercising the same
or any other provisions, rights or elections which it may have
under this Agreement.
(b) Captions and Headings. The captions and section
headings used in this Agreement are for convenience of reference
only, and shall not affect the construction or interpretation of
this Agreement or any of the provisions hereof.
(c) Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
(d) Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be
an original hereof, but all of which together shall constitute
one and the same instrument.
(e) Entire Agreement. Except as otherwise set forth
or referred to in this Agreement, and except for the Employee
Proprietary Rights Agreement, this Agreement constitutes the sole
and entire agreement and understanding between the parties hereto
as to the subject matter hereof, and supersedes all prior
discussions, agreements and understandings of every kind and
nature between them as to such subject matter. Any prior
employment agreement or arrangement between the Employee and
Mastering Computers is hereby terminated and of no further force
or effect.
(f) Reliance by Third Parties. This Agreement is
intended for the sole and exclusive benefit of the parties hereto
and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns, and no other
person or entity shall have any right to rely on this Agreement
or to claim or derive any benefit therefrom absent the express
written consent of the party to be charged with such reliance or
benefit.
(g) Governing Law. This Agreement shall be governed
by, and interpreted in accordance with, the laws of the State of
Arizona (without giving effect to the conflicts of laws
provisions thereof).
(h) Release. As a condition of the payment of
severance described in paragraph 3(g) together with any other
amounts that may then be due and payable, Employee on behalf of
himself, his agents, attorneys, heirs, executors, assigns and any
person acting by, through or on behalf of him, agrees that he
will execute a release of the Company, its affiliates, as well as
its and their respective officers, directors, partners,
supervisors, employees, agents, representatives, assigns and any
person acting by, through or on behalf of any of them, of and
from any and all claims, demands, actions, causes of action and
obligations arising out of Employee's employment and/or
termination thereof, whether known or unknown, fixed or
contingent, liquidated or unliquidated, and whether arising from
tort, statute or contract. Employee further agrees to execute
any document and perform all acts which may be required to make
any such release valid.
(i) No Duplicative Compensation for Employment at
Mastering Computers. Employee acknowledges and agrees that (A)
his employment as President of the Mastering Computers subsidiary
of the Company is conditioned upon, and subject to, his
employment with the Company, (B) his employment with Mastering
Computers will cease if and when his employment with the Company
hereunder terminates, (c) that all compensation and benefits
provided herein in respect of Employee's employment with the
Company shall be the sole compensation and benefits required to
be paid or provided by the Company or any affiliate thereof
(including Mastering Computers) in respect of any employment of
Employee with the Company or any such affiliate and (D) in no
event shall Employee be entitled to separate (or duplicate)
compensation or benefits in connection with his service from and
after the date hereof on behalf of both the Company and any
affiliate thereof (including Mastering Computers).
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on and as of the date first set forth above.
EAGLE RIVER INTERACTIVE, INC.
By:/s/ Marc Pinto
EMPLOYEE:
By: /s/ Thomas R. Graunke
Thomas R. Graunke
EAGLE RIVER INTERACTIVE TO ACQUIRE MASTERING COMPUTERS, INC.
For More Information:
Marc Pinto (financial analysts)
Eagle River Interactive
970-845-3002
Elaine Knechtel (press)
Eastwick Communications
415-306-4191
Tom Graunke Mastering Computers, Inc.
602-998-7500
AVON, CO--JULY 31, 1996 --Eagle River Interactive (NASDAQ:ERIV)
today announced that it has entered into a merger agreement to
acquire Mastering Computers, Inc., a privately held provider of
Microsoft WindowsR operating system training solutions for
professional computer support personnel. The agreement provides
for Eagle River Interactive to issue 1,175,000 shares of common
stock in exchange for all the outstanding shares of Mastering
Computers stock. Eagle River Interactive intends to account for
the transaction as a pooling of interests. The merger is
expected to close later this week.
Upon completion of the transaction, Mastering Computers will
become a wholly owned subsidiary of Eagle River Interactive and
will expand the combined company's interactive training offerings
by providing content that is being used to create computer-based
training products. Tom Graunke, currently President and sole
shareholder of Mastering Computers, will serve as President of
Eagle River Interactive's Mastering Computers subsidiary as well
as become an Executive Vice President of Eagle River Interactive.
Graunke is the brother of Terry Graunke, Chairman, President, and
Chief Executive Officer of Eagle River Interactive.
Based in Scottsdale, Arizona, Mastering Computers specializes in
training solutions for the Microsoft WindowsR 95, NT, and 3.1
operating systems. The company, which has a strategic
relationship with Microsoft, provides WindowsR operating system
training solutions through seminars and on-site workshops on a
nationwide basis, augmented by computer-based training (CBT)
media, videos and newsletters. Mastering Computers has trained
over 150,000 MIS professionals, network administrators, and PC
support personnel to effectively support WindowsR and in 1996
expects to train over 50,000 professionals, making them one of
the largest WindowsR operating systems trainers in the world.
For the year ended December 31, 1995, Mastering Computers had
revenue of approximately $10 million. The Company employs 172
full time employees.
Commenting on the acquisition, Eagle River Interactive Executive
Vice President and General Manager Melinda Gladitsch said, "Early
on, as we became strategic partners with our customers, we
recognized that interactive training was a key market.
Dataquest, a leading market research firm, estimates that
computer-based training is the fastest growing piece of the $9
billion worldwide information technology training market, and New
Media magazine estimates the annual sales for corporate CBT alone
to be $3.2 billion by 1998. Eagle River Interactive has been a
player in the area by providing interactive training products to
customers such as Xerox Corporation, Eastman Kodak, and Kaiser
Permanente. We intend to achieve critical mass quickly by
acquiring content providers such as Mastering Computers."
"Mastering Computers, already a well respected and profitable
company, is a leader in corporate training and has been a
customer of ours," said Gladitsch. "We plan to continue to
convert their successful training product portfolio into computer
based training products and have staffed up for that in
anticipation of this acquisition. Joining forces with Mastering
Computers gives us the opportunity to participate more fully in
CBT revenue opportunities."
Tom Graunke, President of Mastering Computers, said, "We are
excited to become a part of Eagle River Interactive. It's an
excellent fit for both companies. Our experience is that the
most effective training is based on an interactive model, which
is why our engaging seminar series is so successful. We have been
moving in the direction of taking that interactive teaching model
to the next level by bringing interactive CBT to our offerings.
We believe the synergies that will result from the joining of our
talents will benefit our customers in terms of enhanced employee
programs, increased flexibility and lower cost of business
training."
The statements in this press release regarding the Company's
plans and intentions are forward looking statements that involve
risks and uncertainties that could cause actual results to differ
materially from those anticipated, including, but not limited to,
quarterly fluctuations in results, the management of growth, the
competitive environment and risks as detailed from time to time
in the Company's Securities and Exchange Commission filings,
including the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996.
Founded in 1994, Eagle River Interactive develops and deploys
interactive solutions that enable companies to communicate more
effectively with their customers and employees. The company
combines strategic business acumen, technological ingenuity, and
creative expertise to deliver interactive solutions using the
Internet and World Wide Web, informational and transactional
kiosks, and CD-ROMs. The company has developed interactive
sales, marketing, training and corporate communications solutions
for many of the world's leading consumer, technology and service
companies including Disney, Hewlett-Packard, Intel, Kaiser
Permanente, McDonalds, Sharp, Sony, Sun Microsystems and Toyota.
Eagle River Interactive has offices in Avon, CO; Mountain View
and Los Angeles, CA; Dallas, TX; Chicago, IL; New York, NY; and
Portland, OR. The Company's Web site is located at
http://www.eriver.com
Founded in 1988, Mastering Computers provides industry leading
technical support training for Information Systems professionals
on Microsoft WindowsR 95, NT, and 3.1 operating systems through
both leader led and computer-based training media. Through a
unique interactive style of training and their strategic
relationship with Microsoft, the company is able to provide
cutting edge content for corporate MIS departments essential to
support these environments. Mastering Computers has provided
training for most of the Fortune 500 companies including Xerox,
Coca Cola, Merck, Lockheed, EDS and General Motors. The Company
is headquartered in Scottsdale, AZ. The Company's Web site is
located at http://www.masteringcomputers.com
Dayna Deaton tel. (415) 5261029
Eagle River Interactive fax (415) 526-1100
V.P., Marketing pager (800)8900328
650 Castro Street Ste 280
http://www.eriver.com
Mountain View, CA 94041
EAGLE RIVER INTERACTlVE COMPLETES MERGER WITH MASTERING
COMPUTERS, INC.
For More Information Contact:
Marc Pinto (financial analysts)
Eagle River Interactive 970-845-3002
Elaine Knechtel (press)
Eastwick Communications
415-306-4191
AVON, CO. AUGUST 1, 1996 Eagle River Interactive (NASDAQ:ERIV)
today announced that it has completed its merger with Mastering
Computers, Inc., a privately held provider of Microsoft Windows
operating system training solutions for professional computer
support personnel. As specified in the merger agreement, which
was announced July 31, 1996, Eagle River Interactive has issued
1,175,000 shares of common stock in exchange for all the
outstanding shares of Mastering Computers stock. As a result of
the transaction, Mastering Computers has become a wholly owned
subsidiary of Eagle River Interactive. Eagle River Interactive
intends to account for the transaction as a pooling of interests.
Founded in 1994, Eagle River Interactive develops and deploys
interactive solutions that enable companies to communicate more
effectively with their customers and employees. The company
combines strategic business acumen, technological ingenuity, and
creative expertise to deliver interactive solutions using the
Internet and World Wide Web, informational and transactional
kiosks, and CD-ROMs. The company has developed interactive sales,
marketing, training and corporate communications solutions for
many of the world's leading consumer, technology and service
companies including Disney, Hewlett-Packard, Intel, Kaiser
Permanente, McDonalds, Sharp, Sony, Sun Microsystems and Toyota.
Eagle River Interactive has offices in Avon, CO; Mountain View
and Los Angeles, CA; Dallas, TX; Chicago, IL; New York, NY;
Portland, OR, and Scottsdale, AZ.
