<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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):
March 1, 1999 (February 2, 1999)
CNET, Inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Delaware 0-20939 13-3696170
- ------------------------------- ---------------- -------------------
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE (IRS EMPLOYER
INCORPORATION) NUMBER) IDENTIFICATION NO.)
150 Chestnut Street
San Francisco, California 94111
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code:
(415) 395-7800
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On February 16, 1999, CNET, Inc. (the "Registrant" or the "Company"),
completed the acquisition of Netventures, Inc., a California corporation
("Netventures"), through a merger of Netventures into the Company (the
"Netventures Acquisition"), in which the Company issued 103,602 shares of its
common stock. The purchase price for the Netventures Acquisition was agreed upon
by negotiation among the parties. The Registrant intends to record this
transaction using the pooling-of-interests accounting method. Netventures owns
and operates ShopBuilder (www.shopbuilder.com), an online store-creation system.
For more information with respect to the terms of the Netventures Acquisition,
reference is made to the Agreement and Plan of Merger attached as Exhibit 2.1 to
this report, which is incorporated herein by reference.
On February 19, 1999, the Company completed the acquisition of
AuctionGate Interactive, Inc., a California corporation ("AuctionGate"), through
a merger of AuctionGate Interactive, Inc. into the Company (the "AuctionGate
Acquisition"), in which the Company issued 53,542 shares of its common stock.
The purchase price for the AuctionGate Acquisition was agreed upon by
negotiation among the parties. The Registrant intends to record this transaction
using the pooling-of-interests accounting method. AuctionGate owns and operates
AuctionGate.com, an auction site specializing in computer products. For more
information with respect to the terms of the AuctionGate Acquisition, reference
is made to the Agreement and Plan of Merger attached as Exhibit 2.2 to this
report, which is incorporated herein by reference.
On February 26, 1999, the Company completed the acquisition (the
"Jenesys Acquisition") of the assets of Winfiles.com, a leading software
downloading service, from Jenesys LLC, a Washington limited liability company
("Jenesys") for a total purchase price of $11.5 million, payable in cash in two
installments of $5.75 million. The purchase price for the Jenesys Acquisition
was agreed upon by negotiation among the parties and was funded through the
Company's working capital. The assets acquired by the Company in the Jenesys
Acquisition, as specified in the Purchase Agreement attached as Exhibit 2.3
hereto, included certain Internet domain names and Jenesys' rights in certain
other Internet domain names, as well as all of Jenesys' rights and obligations
under certain assumed contracts and all of Jenesys' rights in and to certain
intellectual property. For more information with respect to the terms of the
Jenesys Acquisition, reference is made to the Purchase Agreement and Amendment
No. 1 and Amendment No. 2 to the Purchase Agreement attached as Exhibits 2.3,
2.4 and 2.5 to this report, which are incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
2.1 Agreement and Plan of Merger, dated as of February 2, 1999, by
and among CNET, Inc., Netventures, Inc. and the stockholders
of Netventures, Inc.*
2.2 Agreement and Plan of Merger, dated as of February 19, 1999,
by and among CNET, Inc., AuctionGate Interactive, Inc. and the
stockholders of AuctionGate Interactive, Inc.*
2
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2.3 Purchase Agreement, dated as of December 18, 1998, by and
among CNET, Inc., Jenesys LLC and Steve Jenkins.*
2.4 Amendment No. 1 to Purchase Agreement, dated as of January 22,
1999, by and among CNET, Inc., Jenesys LLC and Steve Jenkins.
2.5 Amendment No. 2 to Purchase Agreement, dated as of February
11, 1999, by and among CNET, Inc., Jenesys LLC and Steve
Jenkins.
-----------------
* The schedules to these agreements have been omitted in reliance upon
Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish
supplementally a copy of any omitted schedule to the Commission upon
request.
3
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SIGNATURES
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.
Dated: March 1, 1999 CNET, INC.
By: /s/ SHELBY W. BONNIE
---------------------------------
Shelby W. Bonnie
---------------------------------
Executive Vice President and
Chief Operating Officer
---------------------------------
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of February 2, 1999, by
and among CNET, Inc., Netventures, Inc. and the stockholders of
Netventures, Inc.
2.2 Agreement and Plan of Merger, dated as of February 19, 1999, by
and among CNET, Inc., AuctionGate Interactive, Inc. and the
stockholders of AuctionGate Interactive, Inc.
2.3 Purchase Agreement, dated as of December 18, 1998, by and among
CNET, Inc., Jenesys LLC and Steve Jenkins.
2.4 Amendment No. 1 to Purchase Agreement, dated as of January 22,
1999, by and among CNET, Inc., Jenesys LLC and Steve Jenkins.
2.5 Amendment No. 2 to Purchase Agreement, dated as of February 11,
1999, by and among CNET, Inc., Jenesys LLC and Steve Jenkins.
</TABLE>
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
By and Among
CNET, INC.
NETVENTURES, INC.
and
THE STOCKHOLDERS OF
NETVENTURES, INC.
February 2, 1999
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SCHEDULES
3.03 Capitalization
3.05 No Conflict; Required Filings and Consent
3.06 Permits
3.07(a) Financial Statements
3.08 Absence of Certain Changes or Events
3.11 Tax Matter
3.14 Brokers
3.15 Leased Properties
3.16 Material Contracts
3.17 Principal Customers and Suppliers
3.18 Intellectual Property
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 2, 1999 (this
"Agreement"), is by and among CNET, Inc., a Delaware corporation ("Buyer"),
Netventures, Inc., a California corporation (the "Company"), James Nicholson and
Ilan Reuben (the "Founders"), and the other stockholders of the Company
identified on the signature pages hereto (the "Minority Stockholders" and,
together with the Founders, the "Stockholders").
WHEREAS, Buyer and the Company have determined that the merger of the
Company with and into Buyer ("Merger"), with Buyer surviving, and conversion of
the issued and outstanding shares of common stock, no par value, of the Company
(the "Company Common Stock") into the right to receive shares of common stock,
$0.0001 par value, of Buyer (the "Buyer Common Stock"), on the terms and subject
to the conditions of this Agreement and in accordance with the General
Corporation Law of the State of California ("California Law") and the General
Corporation Law of the State of Delaware ("Delaware Law") would be advantageous
and beneficial to their respective corporations and stockholders;
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a tax-free reorganization under the provisions of section
368(a) of the United States Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, the Merger is intended to be treated as a "pooling of
interests" for financial accounting purposes;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. On the terms and subject to the conditions
set forth in this Agreement, and in accordance with applicable federal and state
law, at the Effective Time (as defined in Section 1.02), the Company shall be
merged with and into Buyer. As a result of the Merger, the separate corporate
existence of the Company shall cease and Buyer shall continue as the surviving
corporation of the Merger (the "Surviving Corporation"). Certain terms used in
this Agreement are defined in Section 10.02.
SECTION 1.02. Closing; Closing Date; Effective Time. Unless this
Agreement is terminated pursuant to Section 8.01, and subject to the
satisfaction or waiver of the conditions set forth in Article VI, the
consummation of the Merger and the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Buyer as soon
as practicable (but in any event within five business days) after the
satisfaction or waiver of the conditions set forth in Article VI, or at such
other date, time and place as Buyer and the Company
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may agree; provided, that the conditions set forth in Article VI shall have been
satisfied or waived at or prior to such time. The date on which the Closing
takes place is referred to herein as the "Closing Date." As promptly as
practicable on the Closing Date, the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger with the Secretary of State of the
State of Delaware, in such form as required by, and executed in accordance with
the relevant provisions of, Delaware Law (the date and time of such filing, or
such later date or time agreed upon by Buyer and the Company and set forth
therein, being the "Effective Time"). As promptly as practicable on the Closing
Date, the parties shall also file a certificate of merger with the Secretary of
State of the State of California, in such form as required by, and executed in
accordance with the relevant provisions of, California Law.
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of California
Law and Delaware Law. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges
and powers of the Company and Buyer will vest in the Surviving Corporation, and
all debts, liabilities and duties of the Company and the Buyer shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 1.04. Articles of Incorporation; Bylaws. At the Effective Time,
the Articles of Incorporation and bylaws of Buyer, as in effect immediately
prior to the Effective Time, shall be the Articles of Incorporation and bylaws
of the Surviving Corporation unless and until amended as provided therein and
pursuant to Delaware Law.
SECTION 1.05. Directors and Officers. The directors and officers of
Buyer immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation at the Effective Time, each to hold office
in accordance with the bylaws of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Consideration; Conversion and Cancellation of Securities.
At the Effective Time, by virtue of the Merger and without any action on the
part of Buyer, the Company or their respective stockholders:
(a) Prior to the Effective Time, all outstanding preferred
stock of the Company will be converted into Company Common Stock and all
outstanding warrants to purchase Company Common Stock will be exercised.
(b) Subject to the other provisions of this Article II, each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into .0096274 shares of Buyer Common Stock,
which equals (i) eight million dollars ($8,000,000), based upon the average last
sales price of the Buyer Common Stock on the Nasdaq National Market System
("Nasdaq") as reported in the West Coast edition of the Wall Street
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Journal for the twenty trading days preceding (but not including) the date of
this Agreement (the "Conversion Price"), divided by (iii) 10,761,143, which is
the total number of outstanding shares of Company Common Stock immediately prior
to the Effective Time.
(c) All shares of Company Common Stock shall cease to be
outstanding and shall automatically be canceled and retired, and each
certificate previously evidencing the Company Common Stock outstanding
immediately prior to the Effective Time (the "Converted Shares") shall
thereafter represent the right to receive Buyer Common Stock in accordance with
this Article II. The Stockholders shall cease to have any rights with respect to
such Converted Shares except as otherwise provided herein or by law.
Certificates previously evidencing Converted Shares shall be exchanged for Buyer
Common Stock upon the surrender of such certificates in accordance with the
provisions of Section 2.02, without interest.
SECTION 2.02. Exchange and Surrender of Certificates.
(a) Each Stockholder shall be entitled to receive, upon
surrender to Buyer or its transfer agent of certificates previously evidencing
Converted Shares, as soon as practicable after the Closing Date, a certificate
representing the Converted Shares so surrendered, registered in the name of such
Stockholder. Until so surrendered and exchanged, each certificate previously
evidencing Converted Shares shall represent solely the right to receive Buyer
Common Stock.
(b) All shares of Buyer Common Stock issued upon the surrender
for exchange of certificates previously representing Converted Shares in
accordance with the terms hereof (including any adjustments pursuant to Section
2.02(c)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Converted Shares. At and after the Effective Time, there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of Company Common Stock that was outstanding immediately
prior to the Effective Time. If, after the Effective Time, certificates which
previously evidenced Converted Shares are presented to the Surviving Corporation
for any reason, they shall be canceled and exchanged as provided in this Article
II.
(c) No certificates or scrip evidencing fractional shares of
Buyer Common Stock shall be issued upon the surrender for exchange of
certificates, and such fractional share interests will not entitle the owner
thereof to any rights as a stockholder of Buyer. In lieu of any such fractional
shares, the number of shares of Buyer Common Stock issuable to any Stockholder
in connection with the Merger shall be rounded up to the nearest whole share.
(d) Buyer shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any former holder
of Converted Shares such amounts as Buyer (or any affiliate thereof) is required
to deduct and withhold with respect to the making of such payment under the
Code, or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by Buyer, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the former holder of the
Converted Shares in respect of which such deduction and withholding was made by
Buyer.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE STOCKHOLDERS
The Company and the Founders and, with respect to Sections 3.05, 3.12
and 3.19 only, the Minority Stockholders hereby represent and warrant to Buyer
that:
SECTION 3.01. Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of California, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted and is
duly qualified and in good standing to do business in each jurisdiction in which
the nature of the business conducted by it or the ownership or leasing of its
properties makes such qualification necessary.
SECTION 3.02. Articles and Bylaws. The Company has furnished to Buyer
complete and correct copies of its Articles of Incorporation and bylaws, in each
case as amended or restated, of the Company. The Company is not in violation of
any of the provisions of its Articles of Incorporation or bylaws.
SECTION 3.03. Capitalization.
(a) The authorized capital stock of the Company consists of
(i) 15,000,000 shares of Company Common Stock, of which 10,761,143 shares are
issued and outstanding; and (ii) 5,000,000 shares of Preferred Stock, no par
value per share, none of which are issued and outstanding. All of the
outstanding capital stock of the Company is held of record and beneficially by
the Stockholders as indicated in Schedule 3.03, and except as set forth in
Schedule 3.03, is free and clear of all security interests, liens, claims,
pledges, agreements, charges or other encumbrances of any nature whatsoever. All
of the outstanding capital stock of the Company is duly authorized, validly
issued, fully paid and nonassessable, and has not been issued in violation of
(nor are any of the authorized shares of capital stock of the Company subject
to) any preemptive or similar rights created by statute, the Articles of
Incorporation or bylaws of the Company or any agreement to which the Company is
a party or bound.
(b) Except as indicated in Schedule 3.03, no shares of capital
stock of the Company are reserved for any purpose or held in treasury by the
Company and there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which the Company is a party
relating to the issued or unissued capital stock of the Company or obligating
the Company to grant, issue or sell any shares of the capital stock of the
Company.
(c) There are no obligations, contingent or otherwise, of the
Company to (i) repurchase, redeem or otherwise acquire any shares of the capital
stock of the Company or (ii) provide material funds to, or make any material
investment in (in the form of a loan, capital contribution or otherwise), or
provide any guarantee with respect to the obligations of, any other person.
There are no agreements, arrangements or commitments of any character
(contingent or otherwise) pursuant to which any person is or may be entitled to
receive any payment based on
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the revenues or earnings, or calculated in accordance therewith, of the Company.
There are no voting trusts, proxies or other agreements or understandings to
which the Company is a party or by which the Company is bound with respect to
the voting of any shares of capital stock of the Company.
(d) The Company (i) does not directly or indirectly own, (ii)
has not agreed to purchase or otherwise acquire and (iii) does not hold any
interest convertible into or exchangeable or exercisable for, any capital stock
(or equivalent equity interest) of any corporation, partnership, joint venture
or other business association or entity.
SECTION 3.04. Authority. The Company has all requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and the Stockholders and constitutes the legal, valid
and binding obligation of the Company and the Stockholders enforceable against
the Company and the Stockholders in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents.
(a) Except as set forth on Schedule 3.05, the execution and
delivery of this Agreement by the Company and the Stockholders does not, and the
consummation of the transactions contemplated hereby will not (i) conflict with
or violate the Articles of Incorporation or bylaws, in each case as amended or
restated, of the Company, (ii) conflict with or violate any federal, state,
foreign or local law, statute, ordinance, rule, regulation, order, judgment or
decree (collectively, "Laws") applicable to the Stockholders or the Company or
by which any of their properties or assets is bound or subject or (iii) result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of any lien or encumbrance on any of the
properties or assets of the Company pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which any Stockholder or the Company is a party or
by or to which any Stockholder or the Company or any of their properties or
assets is bound or subject. The Board of Directors of the Company has taken all
actions necessary under California Law, including approving the transactions
contemplated by this Agreement and taking appropriate actions under California
Law or any other applicable stockholder protection laws, to ensure that any
restrictions on business combinations or the owning or voting of the capital
stock of the Company do not, and will not, apply with respect to or as a result
of the transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by the
Company and the Stockholders does not, and consummation of the transactions
contemplated hereby will not,
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require the Company or any Stockholder to obtain any consent, license, permit,
approval, waiver, authorization or order of, or to make any filing with or
notification to, any governmental or regulatory authority, domestic or foreign
(each individually, a "Governmental Entity," and collectively, "Governmental
Entities"), except for the filing and recordation of appropriate merger
documents as required by California Law and Delaware Law.
SECTION 3.06. Permits; Compliance. Except as set forth in Schedule
3.06, the Company is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "Company
Permits"), and there is no action, proceeding or investigation pending or, to
the Company's knowledge, threatened regarding suspension or cancellation of any
of the Company Permits. The Company and its assets and operations are currently
and have at all times been in compliance with (a) all Laws applicable to the
Company and its operations or by or to which any of its assets is bound or
subject, including without limitation all Laws related to environmental
protection, employee benefits, labor and employment and occupational health and
safety, and (b) all of the Company Permits, if obtained. The Company has not
received from any Governmental Entity any written notification with respect to
possible violations of Laws.
SECTION 3.07. Financial Statements.
(a) Schedule 3.07(a) contains the unaudited balance sheet of
the Company (the "Latest Balance Sheet") as of October 31, 1998 (the "Latest
Balance Sheet Date") and the unaudited statements of operations for the twelve
months ended on such date.
(b) Each of the foregoing financial statements (i) has been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved and (ii) fairly present in
all material respects the financial position of the Company as of the respective
dates thereof and the results of its operations and cash flows for the periods
indicated, except that the interim financial statements are subject to normal
and recurring year-end adjustments, which will not be material individually or
in the aggregate.
(c) All accounts receivable reflected in the Latest Balance
Sheet or generated since the Latest Balance Sheet Date arose in the ordinary
course of business and are fully collectible in the ordinary course of business,
without resort to litigation, at the face amount thereof less any reserve
reflected in the Latest Balance Sheet, and will not be subject to counterclaim,
set-off or other reduction.
SECTION 3.08. Absence of Certain Changes or Events. Except as set forth
in Schedule 3.08 and except for the transactions contemplated by this Agreement,
since the Latest Balance Sheet Date, the Company has conducted its business only
in the ordinary course and in a manner consistent with past practice and there
has not been: (a) any damage, destruction or loss (whether or not covered by
insurance) with respect to any material assets of the Company; (b) any change by
the Company in its accounting methods, principles or practices; (c) any
declaration, setting aside or payment of any dividends or distributions in
respect of shares of the capital stock
<PAGE> 9
of the Company or any redemption, purchase or other acquisition by the Company
of any of its securities; (d) any increase in the benefits under, or the
establishment or amendment of, any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing or other employee benefit
plan, or any increase in the compensation payable or to become payable to
directors, officers or employees of the Company, except for annual bonuses or
merit increases in salaries or wages in the ordinary course of business and
consistent with past practice; (e) any payment or other transfer of assets by
the Company to any Stockholder, other than compensation payments in the ordinary
course of business and consistent with past practice; (f) any revaluation by the
Company of any of its assets, including the writing down or off of notes or
accounts receivable, other than in the ordinary course of business and
consistent with past practices; (g) any entry by the Company into any commitment
or transaction material to the Company including, without limitation, incurring
or agreeing to incur capital expenditures in excess of $50,000; (h) any
incurrence of indebtedness for borrowed money other than trade payables incurred
in the ordinary course of business; (i) a loss, or written notice threatening a
loss, of any customer or supplier set forth on Schedule 3.17; (j) the
termination of employment (whether voluntary or involuntary) of any officer or
key employee of the Company; or (k) any change, occurrence or circumstance
having or reasonably likely to have, individually or in the aggregate, a
material adverse effect on the business, operations, assets, financial
condition, results of operations or prospects of the Company.
SECTION 3.09. No Undisclosed Liabilities. Except as set forth in
Schedule 3.09, the Company does not have any direct or indirect debts,
liabilities or obligations, whether known or unknown, absolute, accrued,
contingent or otherwise ("Liabilities"), except (a) Liabilities fully reflected
in the Latest Balance Sheet and related financial statement notations; (b) trade
payables and accrued expenses incurred in the ordinary course of business and
consistent with past practice since the Latest Balance Sheet Date; (c)
obligations to be performed in the ordinary course of business, consistent with
past practice, under the Material Contracts (as defined in Section 3.16) or
under agreements not required to be disclosed pursuant to Section 3.16; and (d)
any obligation to pay the Company Expenses (as defined in Section 5.11).
SECTION 3.10. Absence of Litigation. Except as set forth in Schedule
3.10, there is no claim, action, suit, litigation, proceeding, arbitration or
investigation of any kind, at law or in equity (including actions or proceedings
seeking injunctive relief), pending or, to the Company's knowledge, threatened
against the Company or any assets or rights of the Company. The Company is not
subject to any continuing order of, consent decree, settlement agreement or
other similar written agreement with, or, continuing investigation by, any
Governmental Entity, or any judgment, order, writ, injunction, decree or award
of any Government Entity or arbitrator, including, without limitation,
cease-and-desist or other orders.
SECTION 3.11. Taxes.
(a) Except as set forth on Schedule 3.11, (i) all returns and
reports ("Tax Returns") of or with respect to any Tax which is required to be
filed on or before the Closing Date by or with respect to the Company have been
or will be duly and timely filed, (ii) all items of income, gain, loss,
deduction and credit or other items required to be included in each such Tax
<PAGE> 10
Return have been or will be so included and all information provided in each
such Tax Return is true, correct and complete, (iii) all Taxes which have become
or will become due with respect to the period covered by each such Tax Return
have been or will be timely paid in full, (iv) all withholding Tax requirements
imposed on or with respect to the Company have been or will be satisfied in full
in all respects, and (v) no penalty, interest or other charge is or will become
due with respect to the late filing of any such Tax Return or late payment of
any such Tax.
(b) There are no Tax Returns of or with respect to the Company
with extended or waived statutes of limitations.
(c) Except as set forth on Schedule 3.11, there is not in
force any extension of time with respect to the due date for the filing of any
Tax Return of or with respect to the Company or any waiver or agreement for any
extension of time for the assessment, collection or payment of any Tax of or
with respect to the Company.
(d) To the Company's knowledge, there are no pending audits,
actions, proceedings, investigations, disputes or claims with respect to or
against the Company for or with respect to any Taxes of the Company; no
assessment, deficiency or adjustment has been assessed or proposed with respect
to any Tax Return of or with respect to the Company; and there is no reasonable
basis on which any claim for material Taxes can be asserted against the Company,
other than those disclosed (and to which are attached true and complete copies
of all audit or similar reports) on Schedule 3.11.
(e) Except for statutory liens for current Taxes not yet due,
no liens for Taxes exist upon the assets of any of the Company.
(f) The Company will not be required to include any amount in
income for any taxable period beginning after the Closing Date as a result of a
change in accounting method for any taxable period ending on or before the
Closing Date or pursuant to any agreement with any Tax authority with respect to
any such taxable period.
(g) To the Company's knowledge, none of the transactions
contemplated by this Agreement will result in any Tax liability or the
recognition of any item of income or gain to the Company.
(h) None of the property of the Company is held in an
arrangement for which partnership Tax Returns are being filed, and the Company
does not own any interest in any controlled foreign corporation (as defined in
section 957 of the Code), passive foreign investment company (as defined in
section 1296 of the Code) or other entity the income of which is required to be
included in the income of the Company.
(i) The Company has never been subject to Taxes in any
jurisdiction outside the United States.
<PAGE> 11
SECTION 3.12. Tax Matters; Pooling. Neither the Company nor any of its
Stockholders or other affiliates has taken or agreed to take any action that
would prevent the Merger from (i) constituting a reorganization qualifying under
the provisions of section 368(a) of the Code or (ii) being treated for financial
accounting purposes as a "pooling of interests" (the "Pooling Transaction") in
accordance with generally accepted accounting principles and the rules,
regulations and interpretations of the Securities and Exchange Commission (the
"SEC").
SECTION 3.13. Certain Business Practices. Neither the Company, the
Founders nor their agents or other representatives has, directly or indirectly,
made or authorized any payment, contribution or gift of money, property or
services, whether or not in contravention of applicable law, (a) to any
political organization, or the holder of or any aspirant to any elective or
appointive public office, except for personal political contributions not
involving the direct or indirect use of funds of the Company, or (b) as a
kickback or bribe to any person.
SECTION 3.14. Brokers. Except as set forth on Schedule 3.14, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
SECTION 3.15. Leased Properties. Schedule 3.15 sets forth a description
(including the street address) of all real property leased by the Company (the
"Leased Properties"). No premises other than the Leased Properties are used in
the business of the Company.
SECTION 3.16. Certain Material Contracts.
(a) Schedule 3.16 lists each agreement and arrangement
(whether written or oral and including all amendments thereto) to which the
Company is a party or a beneficiary or by which the Company is bound that is
material, directly or indirectly, to the business of the Company (collectively,
the "Material Contracts"), including without limitation (i) any licensing,
advertising, promotion, consulting or services agreements pursuant to which the
Company earns revenue; (ii) any licensing, supply, or services agreements
pursuant which the Company is entitled or obligated to acquire any assets or
services from any person; (iii) any insurance policies; (iv) any employment,
consulting, non-competition, separation, collective bargaining, union or labor
agreements or arrangements; (v) any agreement evidencing, securing, guarantying
or otherwise relating to any indebtedness for which the Company has any
Liability, (vi) any agreement with or for the benefit of any Stockholder of the
Company, or any affiliate or family member thereof (which agreements are
specifically identified as such in Schedule 3.16); (vii) any capital or
operating leases or conditional sales agreements relating to vehicles or
equipment; and (viii) any other agreement or arrangement pursuant to which the
Company could be required to make or be entitled to receive aggregate payments
in excess of $50,000.
(b) Except as set forth in Schedule 3.16, the Company has
performed in all material respects all of its obligations under each Material
Contract and there exists no breach or
<PAGE> 12
default (or event that with notice or lapse of time would constitute a breach or
default) under any Material Contract.
(c) Except as set forth on Schedule 3.16 (and, with respect to
the six Software Development, License and Co-Branding Agreements listed on
Schedule 3.16, as related to the notice of assignment requirements of such
agreements), each Material Contract is valid, binding and in full force and
effect and enforceable in accordance with its respective terms. There has been
no termination or, to the Company's knowledge, threatened termination or notice
of default under any Material Contract. Except as set forth on Schedule 3.16,
the Company has delivered to Buyer a copy of each written Material Contract.
SECTION 3.17. Principal Customers and Suppliers; Competing Interests.
Set forth in Schedule 3.17 is a list of the ten largest customers by dollar
volume of the Company and the ten largest suppliers by dollar volume of the
Company (with the amount of revenues or payments, as applicable, attributable to
each such customer and supplier) for 1997 and the first eleven months of 1998.
Except as set forth in Schedule 3.17, since October 30, 1997, no such supplier
or customer of the Company has notified the Company that it has canceled or
otherwise terminated, or, to the Company's knowledge, threatened to cancel or
otherwise terminate, its relationship with the Company, and there has not been
any material dispute with any such customer or supplier. None of the
Stockholders, the Company, nor, to the Company's knowledge, any director or
officer of the Company owns, directly or indirectly, an interest in any entity
that is a competitor, customer or supplier of the Company or that otherwise has
material business dealings with the Company, provided that the foregoing will
not apply to any investment in publicly traded securities constituting less than
1% of the outstanding securities in such class.
SECTION 3.18. Intellectual Property Rights.
(a) For purposes of this Agreement, "Intellectual Property" means all
(i) patents, copyrights and copyrightable works, trademarks, service marks,
trade names, service names, brand names, logos, trade dress, Internet domain
names and all goodwill symbolized thereby and appurtenant thereto; (ii) trade
secrets, inventions, technology, know-how, proprietary information, research
material, specifications, surveys, designs, drawings and processes; (iii)
computer software and related documentation, including without limitation
operating software, network software, firmware, middleware, design software,
design tools, management information systems, systems documentation and
instructions, databases and the tangible objects in which the foregoing rights
are embodied (collectively, "Software"); (iv) artwork, photographs, editorial
copy and materials, formats and designs, including without limitation all
content currently or previously displayed through Internet sites operated by the
Company; (v) customer, partner, prospect and marketing lists, market research
data, sales data and traffic and user data; (vi) registrations, applications,
recordings, common law rights, "moral" rights of authors, licenses (to or from
the Company) and other agreements relating to any of the foregoing; (vii) rights
to obtain renewals, reissues, extensions, continuations, divisions or equivalent
extensions of legal protection pertaining to the foregoing; and (viii) claims,
causes of action or other rights at law or in equity arising out of or relating
to any infringement, misappropriation, distortion, dilution or other
unauthorized use or conduct in derogation of the foregoing occurring prior to
the Closing.
<PAGE> 13
(b) Schedule 3.18 sets forth all registered patents, trademarks, and
copyrights held by the Company. Except as set forth in Schedule 3.18, there are
no registrations or applications for registration of any patents, tradenames or
copyrights in the name of the Company.
(c) The Company owns or has the right to use pursuant to Material
Contracts all Intellectual Property used by the Company in connection with or
necessary to the operation of its business, without infringing on or otherwise
acting adversely to the rights or claimed rights of any person. Except as set
forth on Schedule 3.18, the Company is not obligated to pay any royalty or other
consideration to any person in connection with the use of any such Intellectual
Property.
(d) No claim has been asserted against the Company to the effect that
the use of any Intellectual Property by the Company infringes the rights of any
person. To the Company's knowledge, no other person is currently infringing upon
the rights of the Company with respect to the Company's Intellectual Property.
SECTION 3.19. Investor Representations.
(a) The Company and the Stockholders understand that the Buyer
Common Stock to be issued to them in the Merger will constitute "restricted
securities" under the Securities Act of 1933, as amended (the "Securities Act").
Consequently, each Stockholder must bear the economic risk of ownership of such
Buyer Common Stock indefinitely, and the Stockholders will be able to resell
such Buyer Common Stock only (i) pursuant to an effective registration statement
covering such resale or (ii) pursuant to an exemption from registration, such as
the exemption provided under rule 144 under the Securities Act ("Rule 144").
(b) Each Stockholder (i) has a preexisting personal or
business relationship with the Company or the Founders and (ii) by reason of
such Stockholder's business or financial experience or the business or financial
experience of such Stockholder's professional advisors who are unaffiliated with
and who are not compensated by Buyer or any affiliate or selling agent of Buyer,
directly or indirectly, could be reasonably assumed to have the capacity to
protect such Stockholder's interests in connection with this Agreement.
(c) The Stockholders acknowledge receipt of the SEC Documents
(as defined in Section 4.04) and acknowledge that they have been given the
opportunity to ask questions of representatives of Buyer and to receive
reasonable additional information to the extent requested in connection with
their evaluation of an investment in the Buyer Common Stock.
(d) The Stockholders acknowledge that the Buyer Common Stock
will bear a restrictive legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND THE
HOLDER HEREOF CANNOT MAKE ANY SALE, ASSIGNMENT, OR OTHER TRANSFER OF SUCH
SECURITIES WITHOUT
<PAGE> 14
REGISTRATION UNDER OR EXEMPTION FROM SUCH ACTS AND LAWS. THE ISSUER MAY REQUIRE
EVIDENCE OF SUCH REGISTRATION OR EXEMPTION PRIOR TO ANY SUCH TRANSFER."
SECTION 3.20. Affiliates and Employees. The Founders are the only
persons who may be deemed to be "affiliates" of the Company within the meaning
of Rule 144 under the Securities Act. With the exception of consulting
arrangements, the Founders are the only persons who have ever been employed by
the Company.
SECTION 3.21. Information Supplied. Without limiting any of the
representations and warranties contained herein, no written representation or
written warranty of the Company or the Founders and no statement by the Company
or the Founders contained in the Schedules to this Agreement contains any untrue
statement of material fact, or omits to state a material fact necessary in order
to make the statements contained therein, in light of the circumstances under
which such statements were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company and the
Stockholders that:
SECTION 4.01. Organization and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business conducted by
it or the ownership or leasing of its properties makes such qualification
necessary.
SECTION 4.02. Authority. Buyer has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Buyer and the consummation by Buyer of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action and no other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Buyer and constitutes the legal, valid and binding obligation of Buyer,
enforceable against it in accordance with its terms.
SECTION 4.03. No Conflict; Required Filings and Consent.
(a) The execution and delivery of this Agreement by Buyer does
not, and the consummation of the transactions contemplated hereby will not (i)
conflict with or violate the charter or bylaws, in each case as amended or
restated, of Buyer, (ii) conflict with or violate any Laws applicable to Buyer
or by which any of its properties or assets is bound or subject, or (iii) result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under any note, bond, mortgage,
indenture, contract, agreement, lease,
<PAGE> 15
license, permit, franchise or other instrument or obligation to which Buyer is a
party or by or to which Buyer or any of its properties is bound or subject.
(b) The execution and delivery of this Agreement by Buyer does
not, and the consummation of the transactions contemplated hereby will not,
require Buyer to obtain any consent, license, permit, approval, waiver,
authorization or order of, or to make any filing with or notification to, any
Governmental Entities, except for the filing and recordation of appropriate
merger documents as required by California Law or Delaware Law.
SECTION 4.04. SEC Documents. Buyer has delivered to the Company and the
Founders a true and complete copy of Buyer's Annual Report on Form 10-K for the
year ended December 31, 1997 its quarterly reports on Form 10-Q for the quarter
ended September 30, 1998, and its definitive proxy statement for its annual
meeting of stockholders held in 1998 (together, the "SEC Documents"). As of
their respective dates, the SEC Documents complied in all material respects with
the applicable requirements of the Exchange Act and the rules and regulations of
the SEC thereunder, and none of the Buyer SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 4.05. Financial Statements. The financial statements of Buyer,
including the notes thereto, included in the SEC Documents (the "Buyer Financial
Statements") were complete and correct in all material respects as of their
respective dates, complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, and have been prepared in accordance with United States
generally accepted accounting principles applied on a basis consistent
throughout the periods indicated and consistent with each other (except as may
be indicated in the notes thereto). The Buyer Financial Statements fairly
present the consolidated financial condition and operating results of Buyer and
its subsidiaries at the dates and during the periods indicated therein (subject,
in the case of unaudited statements, to normal, recurring year-end adjustments).
There has been no material change in Buyer accounting policies except as
described in the notes to the Buyer Financial Statements.
SECTION 4.06. Tax Matters; Pooling. Neither Buyer nor, to the knowledge
of Buyer, any of its affiliates has taken or agreed to take any action that
would prevent the Merger from constituting a reorganization qualifying under the
provisions of section 368(a) of the Code.
SECTION 4.07. No Material Adverse Changes. Since the date of the Buyer
Financial Statements included in the SEC Documents, the Buyer has conducted its
business in the ordinary course and there has not occurred: (a) any material
adverse change in the financial condition, liabilities, assets or business of
Buyer; (b) any amendment or change in the Articles of Incorporation or Bylaws of
Buyer; or (c) any damage to, destruction or loss of any assets of Buyer,
(whether or not covered by insurance) that materially and adversely affects the
financial condition of Buyer.
<PAGE> 16
SECTION 4.08. Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Buyer has received written
notice, which seeks to enjoin, alter or materially delay any of the transactions
contemplated by this Agreement.
SECTION 4.09. Capitalization. The authorized and outstanding
capitalization of Buyer consists of (i) a total of 5,000,000 authorized shares
of preferred stock, $.01 par value per share (the "Preferred Stock"), none of
which is issued or outstanding, and (ii) a total of 25,000,000 authorized shares
of Common Stock, of which 17,193,033 shares were issued and outstanding as of
February 2, 1999. All of such outstanding shares are validly issued, fully paid
and nonassessable, and none of such outstanding shares was issued in violation
of any preemptive rights. In addition to the foregoing, as of December 18, 1998,
Buyer had reserved an aggregate of 2,664,247 additional shares for issuance upon
exercise of outstanding warrants and options, consisting of the following: (a)
149,950 shares reserved for issuance upon exercise of outstanding warrants; (b)
1,160,308 shares reserved for issuance upon exercise of outstanding options
granted under Buyer's 1994 Stock Option Plan; and (c) 1,353,989 shares reserved
for issuance upon exercise of outstanding stock options granted under Buyer's
1997 Stock Plan. Except for the foregoing warrants and options and any
additional options that may be granted under the 1994 Stock Option Plan or the
1997 Stock Option Plan after the date hereof, there are not outstanding any
options, warrants or similar agreements for the purchase from Buyer any shares
of its capital stock or any securities convertible into or ultimately
exchangeable or exercisable for any shares of Buyer's capital stock.
ARTICLE V
COVENANTS
SECTION 5.01. Affirmative Covenants of the Company. The Company hereby
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by Buyer,
the Company will:
(a) operate its business only in the usual and ordinary course
consistent with past practices;
(b) use commercially reasonable efforts to preserve
substantially intact its business organization, maintain its Material Contracts,
Company Permits and Intellectual Property and other material rights, retain the
services of its respective officers and key employees and maintain its
relationships with its material customers and suppliers;
(c) maintain and keep its properties and assets in as good
repair and condition as at present, ordinary wear and tear excepted;
(d) maintain and keep in full force and effect insurance
comparable in amount and scope of coverage to that currently in effect; and
(e) from the date of this Agreement and to the Effective Time,
promptly supplement or amend the Schedules to this Agreement with respect to any
matter that arises or
<PAGE> 17
that is required to be set forth or listed in the Schedules or is necessary to
complete or correct any information in the Schedules; provided, that for
purposes of determining the rights and obligations of the parties hereunder
(other than the obligation of the Company under this Section 5.01(e)), any such
supplemental or amended disclosure will not be deemed to have been disclosed to
Buyer unless Buyer otherwise expressly consents in writing.
SECTION 5.02. Negative Covenants of the Company. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by Buyer,
from the date of this Agreement until the Effective Time, the Company will not
do any of the following:
(a) amend or otherwise modify any of the Material Contracts or
Company Permits;
(b) (i) effect any reorganization or recapitalization; (ii)
issue any capital stock or any option, warrant or similar agreement with respect
to its capital stock; (iii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital stock; or
(iv) adopt or propose to adopt any amendments to its Articles of Incorporation
or bylaws;
(c) sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, any of its assets, except for dispositions of
inventories and of assets in the ordinary course of business and consistent with
past practice;
(d) settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy;
(e) take (and will use reasonable best efforts to prevent any
affiliate of the Company from taking) any action that, in the judgment of KPMG
Peat Marwick would cause the Merger not to be treated as a Pooling Transaction
for financial accounting purposes;
(f) take any action that would result in a breach (as of the
Closing) of any of the representations and warranties set forth in Section 3.08;
(g) pay or agree to pay any dividend, distribution, or other
payment to any of its Stockholders;
(h) pay or agree to pay any bonus, incentive compensation, or
similar payment to any of its employees or increase the compensation of any
Stockholder or other employee;
(i) make any material expenditure or commitment except in the
ordinary course of business consistent with past practice; or
(j) agree in writing or otherwise to do any of the foregoing.
<PAGE> 18
SECTION 5.03. Non-Solicitation. Each of the Company and the Founders
hereby covenants and agrees that it will not, and will not permit any of its
affiliates, as applicable, to initiate, solicit or encourage (including by way
of furnishing information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal relating to, or that may
reasonably be expected to lead to, any Competing Transaction (as defined below),
or enter into discussions or negotiate with any person or entity in furtherance
of such inquiries or to obtain a Competing Transaction, or agree to or endorse
any Competing Transaction, or authorize or permit any of the officers, directors
or employees of the Company or any investment banker, financial advisor,
attorney, accountant or other representative retained by the Company, any
Founder or any of their affiliates, as applicable, to take any such action, and
the Company or the Founders, as the case may be, shall promptly notify Buyer of
all relevant terms of any such inquiries and proposals received by the Company,
or any of its affiliates, as applicable, or by any such officer, director,
investment banker, financial advisor, attorney, accountant or other
representative relating to any of such matters and if such inquiry or proposal
is in writing, the Company or the Founders, as the case may be, shall promptly
deliver or cause to be delivered to Buyer a copy of such inquiry or proposal.
For purposes of this Agreement, "Competing Transaction" means any of the
following (other than the transactions contemplated by this Agreement) involving
the Company: (a) any merger, consolidation, share exchange, business combination
or similar transaction; (b) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 5% or more of the assets of the Company, or (c)
any offer for 5% or more of the outstanding shares of capital stock of the
Company.
SECTION 5.04. Confidential Information.
(a) The assets of the Company include certain commercially valuable
technical and non-technical confidential or proprietary information of the
Company (collectively, "Confidential Information"). Confidential Information
means all information used by the Company in connection with operating its
business that is not generally known to others in similar areas of business,
including without limitation (i) trade secrets, software, work product,
processes, analyses and know-how related to the architecture and operation of
the Company's business or the submission, collection or organization of its
contents; (ii) customer and prospect lists and other marketing, advertising,
pricing, strategic and business plans and information related to the Company's
business; and (iii) information concerning traffic at the Company's Internet
sites and financial information concerning the operation of the Company's
business.
(b) Prior to the Closing, the confidentiality and nondisclosure
provisions of the existing Nondisclosure Agreement between Buyer and the
Company, dated as of November 17, 1998 (the "Nondisclosure Agreement"), will
remain in full force and effect and will apply to the Confidential Information,
notwithstanding the execution of this Agreement. Upon termination of this
Agreement for any reason, Buyer shall promptly return to the Company all
Confidential Information, including copies thereof, and destroy any notes,
compilations, analyses or other material that incorporates or otherwise includes
such Confidential Information.
(c) The Founders acknowledge and agree that, following the Closing, the
Confidential Information will be the sole and exclusive property of the
Surviving Corporation. Following the
<PAGE> 19
Closing, neither Founder will, directly or indirectly, use any Confidential
Information for his own benefit or disclose any Confidential Information to any
person (except in the course of performing authorized duties for Buyer or the
Surviving Corporation). At Buyer's request after the Closing, the Founders will
promptly deliver to Buyer or the Surviving Corporation all documents, computer
disks and other computer storage devices, computer printouts, manuals and other
papers and materials (including all copies thereof in whatever form) containing
or incorporating any Confidential Information that are in his possession or
under his control.
SECTION 5.05. Access and Information.
(a) The Company shall (i) afford to Buyer and its officers,
directors, employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, the "Buyer Representatives") reasonable access at
reasonable times, upon reasonable prior notice, to the officers, employees,
agents, properties, offices and other facilities of the Company and to the books
and records thereof, (ii) furnish promptly to Buyer and the Buyer
Representatives such information concerning the business, properties, contracts,
records and personnel of the Company (including, without limitation, financial,
operating and other data and information) as may be reasonably requested, from
time to time, by Buyer, and (iii) authorize Buyer to contact and obtain relevant
information from the Company's accountants, material customers and suppliers and
any governmental agencies having dealings with the Company.
(b) No investigation by the parties hereto made heretofore or
hereafter shall affect the representations and warranties of the parties which
are herein contained and each such representation and warranty shall survive
such investigation.
SECTION 5.06. Appropriate Action; Consents; Filings.
(a) Each of Buyer, the Founders and the Company shall use (and
shall cause each of their respective subsidiaries to use, as applicable) all
reasonable efforts to (i) take, or cause to be taken, all appropriate action,
and do, or cause to be done, all things necessary, proper or advisable under
applicable Law or otherwise to consummate and make effective the transactions
contemplated by this Agreement, and (ii) obtain from any Governmental Entities
or other third parties any consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained or made by Buyer or the Company
or any of their subsidiaries or affiliates, as applicable, in connection with
the authorization, execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, including, without limitation, the
Merger. The Founders, the Company and Buyer shall furnish all information
required for any application or other filing to be made pursuant to the rules
and regulations of any applicable Law in connection with the transactions
contemplated by this Agreement.
(b) Each of Buyer, the Founders and the Company shall give (or
shall cause their respective subsidiaries and affiliates, as applicable, to
give) any notices to third parties, and use (and cause their respective
subsidiaries and affiliates, as applicable, to use) all reasonable efforts to
obtain any third party consents (i) necessary, proper or advisable to consummate
the transactions contemplated by this Agreement, or (ii) otherwise required
under any Material
<PAGE> 20
Contracts, Company Permits or other agreements in connection with, or in order
to allow the Company to continue to be entitled to the benefits thereof
following, the consummation of the transactions contemplated hereby. In the
event that any party shall fail to obtain any third party consent described
above and the parties agree to consummate the Merger without such consent, such
party shall use its best efforts, and shall take any such actions reasonably
requested by the other parties, to limit the adverse effect upon the Company and
Buyer, their respective subsidiaries, and their respective businesses resulting,
or which could reasonably be expected to result after the Effective Time, from
the failure to obtain such consent.
SECTION 5.07. Pooling; Tax Treatment.
(a) The Company and the Founders will use all reasonable
efforts to cause the Merger to be treated for financial accounting purposes as a
Pooling Transaction, and shall not take, and shall use all reasonable efforts to
prevent any of their affiliates from taking, any actions which could prevent the
Merger from being treated for financial accounting purposes as a Pooling
Transaction.
(b) Each party hereto shall use all reasonable efforts to
cause the Merger to qualify, and shall not take, and shall use all reasonable
efforts to prevent any affiliate of such party from taking, any actions which
could prevent the Merger from qualifying as a reorganization under the
provisions of section 368(a) of the Code.
SECTION 5.08. Public Announcements. Buyer may issue a press release
regarding the Merger and shall consult with the Company before issuing any press
release or otherwise making any public statements with respect to the Merger.
The Company shall not issue any press release or make any public statement prior
to such press release by Buyer, except as otherwise required by applicable Law.
SECTION 5.09. Nasdaq Listing. Buyer shall use all reasonable efforts to
cause the shares of Buyer Common Stock to be issued in the Merger to be approved
for listing on Nasdaq as soon as practicable following the Effective Time.
SECTION 5.10. Fees, Expenses and Other Payments. At the Closing, Buyer
will pay all transaction costs and expenses (including, without limitation, all
fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by the Company or the
Stockholders in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby (collectively, "Company Expenses"). Buyer liability
hereunder shall be for up to a maximum amount of $20,000 with any amount in
excess of $20,000 (the "Additional Company Expenses") paid for by the
Stockholders. The Additional Company Expenses shall be paid for by the
Stockholders through a reduction in the number of shares of Buyer Common Stock
to be issued to the Stockholders in the Merger pursuant to Section 2.01(b) equal
to (i) Additional Company Expenses divided by (ii) the Conversion Price. Buyer
shall issue one check at the Closing to each such applicable counsel or
consultant reflecting both the Buyer and Stockholder contribution to payment for
the Company Expenses. Any amounts due that
<PAGE> 21
exceed the estimates agreed upon by the Stockholders and Buyer for the Company
Expenses shall be borne by the Founders.
SECTION 5.11. Employment Agreements. At the Closing, the Surviving
Corporation will enter into an employment agreement with each of the Founders in
substantially in the form of Exhibit A attached hereto.
SECTION 5.12. Stockholder Release. Effective upon the Closing, each
Stockholder, for itself and its heirs, executors, administrators, successors and
assigns, hereby fully and unconditionally releases and forever discharges and
holds harmless the Company and its officers, directors, successors and assigns
from any and all claims, demands, losses, costs, expenses (including reasonable
attorneys' fees and expenses), obligations, liabilities, and damages of every
kind and nature whatsoever, arising or existing (or based on facts occurring)
prior to the Closing and relating in any way, directly or indirectly, to the
Company or the transactions contemplated hereby; provided that the foregoing
release will not affect any obligations of Buyer to any Stockholder under this
Agreement, any other agreements expressly contemplated hereby or any other
agreement executed at or after the Closing. This Agreement constitutes a
unanimous written consent of the Stockholders authorizing and approving the
Merger and the transactions contemplated hereby.
ARTICLE VI
CLOSING CONDITIONS
SECTION 6.01. Conditions to Obligations of Buyer. The obligations of
Buyer to effect the Merger and the other transactions contemplated hereby are
also subject to the satisfaction at or prior to the Closing Date of the
following conditions, any or all of which may be waived in writing by Buyer, in
whole or in part:
(a) Each of the representations and warranties of the Company
and the Stockholders contained in this Agreement shall be true and correct in
all material respects as of the Closing Date as though made on and as of the
Closing Date (except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of such earlier
date).
(b) Each of the Company and the Stockholders shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or prior to
the Closing Date. Buyer shall have received a closing certificate signed by the
President of the Company and by each of the Founders, dated the Closing Date, to
such effect.
(c) Buyer shall have received a closing certificate signed by
the President of the Company and by each of the Founders substantially in the
form of Exhibit B attached hereto.
<PAGE> 22
(d) No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
which has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger (an "Order"); and no such Governmental Entity or
third party shall have initiated or threatened to initiate any proceeding
seeking an Order.
(e) Counsel to the Company shall have delivered to Buyer its
written opinion substantially in the form of Exhibit C attached hereto.
(f) Each of the Company and the Stockholders shall have
obtained each consent and approval necessary in order that the transactions
contemplated hereby do not constitute a material breach or violation of, or
result in a right of termination or acceleration of any encumbrance on any
material portion of the Company's properties or assets, any Material Contract,
material arrangement or understanding or any material license, franchise or
Company Permit.
(g) Buyer shall have received reasonably satisfactory
assurances from KPMG Peat Marwick on the Closing Date that the Merger should be
treated for financial accounting purposes as a Pooling Transaction.
(h) The total Liabilities of the Company of the type that
would be reflected in a balance sheet of the Company prepared as of the Closing
Date in accordance with generally accepted accounting principles shall not
exceed $55,000.
(i) All proceedings taken by the Company and all instruments
executed and delivered by the Company and the Stockholders, as applicable, on or
prior to the Closing Date in connection with the transactions herein
contemplated shall be reasonably satisfactory in form and substance to Buyer.
(j) Buyer has completed its due diligence investigation of the
Company's technology and related Intellectual Property, and Buyer is satisfied
with the results of its investigation, in its sole discretion. Buyer's Board of
Directors has approved the execution and delivery of this Agreement, the Merger
and the transactions contemplated hereby.
(k) Notwithstanding the passing of the date upon which the
Company's repayment obligation ceased with respect to that certain fifty
thousand dollars ($50,000) paid by Buyer to the Company as a deposit pursuant to
that certain letter between Buyer and the Company dated November 30, 1998 and
amended December 21, 1998, the Company hereby agrees to extend such repayment
drop dead date to February 25, 1999 and to repay such deposit amount to Buyer in
cash or by check at the Closing.
SECTION 6.02. Conditions to Obligations of the Company and the
Stockholders. The obligation of the Company to effect the Merger and the other
transactions contemplated
<PAGE> 23
hereby is also subject to the satisfaction at or prior to the Closing Date of
the following conditions, any or all of which may be waived in writing by the
Company, in whole or in part:
(a) Each of the representations and warranties of Buyer
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date as though made on and as of the Closing Date (except to
the extent such representations and warranties specifically relate to an earlier
date, in which case such representations and warranties shall be true and
correct in all material respects as of such earlier date). The Company shall
have received a certificate of an executive officer of the Buyer, dated the
Closing Date, to such effect.
(b) Buyer shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date. The Company
shall have received a certificate of an executive officer of the Buyer, dated
the Closing Date, to such effect.
(c) No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Order which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger; and no such Governmental Entity or third
party shall have initiated or threatened to initiate any proceeding seeking an
Order.
(d) Counsel to Buyer shall have delivered to the Company its
written opinion substantially in the form of Exhibit D attached hereto.
(e) All proceedings taken by Buyer and all instruments
executed and delivered by Buyer on or prior to the Closing Date in connection
with the transactions herein contemplated shall be reasonably satisfactory in
form and substance to the Company.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Indemnification of Buyer. Notwithstanding any
investigation by Buyer or the Buyer Representatives, the Founders, jointly and
severally, will indemnify and hold Buyer, its subsidiaries and their respective
affiliates, directors, officers, employees and agents (collectively, the "Buyer
Indemnified Parties") harmless from any and all Liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all court costs
and reasonable attorneys' fees (collectively, "Losses"), that any Buyer
Indemnified Party may suffer or incur as a result of or relating to:
(a) the breach of any representation or warranty made by the Company or
the Stockholders in this Agreement or pursuant hereto or any allegation by a
third party that, if true, would constitute such a breach; or
<PAGE> 24
(b) the breach of any covenant or agreement of the Company or the
Stockholders under this Agreement or any allegation by a third party that, if
true, would constitute such a breach;
provided that (i) the Buyer Indemnified Parties will not be entitled to
indemnification under paragraph (a) of this Section 7.01 unless the aggregate
amount of all Losses for which indemnification is sought by the Buyer
Indemnified Parties pursuant to such paragraph exceeds $50,000, in which case
the Buyer Indemnified Parties will be entitled to indemnification for the full
amount of all such Losses; and (ii) the Buyer Indemnified Parties will not be
entitled to indemnification under paragraph (a) of this Section 7.01 in an
aggregate amount exceeding $1,000,000. Any claim for indemnification under this
Section 7.01 will be satisfied through the return by the Founders of Buyer
Common Stock having a value (based on the Conversion Price) equal to the amount
of such claim.
SECTION 7.02. Survival. The Buyer Indemnified Parties' rights to
indemnification under paragraph (a) of this Section 7.01 will survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby until the first anniversary of the Closing;
provided that any claim for indemnification will survive until such claim is
finally resolved if a Buyer Indemnified Party notifies the Founders of such
claim in reasonable detail prior to the date on which such claim would otherwise
expire hereunder.
SECTION 7.03. Notice. The Buyer Indemnified Parties entitled to receive
indemnification under this Article VII agree to give prompt written notice to
the Founders upon the occurrence of any indemnifiable Loss or the assertion of
any claim or the commencement of any action or proceeding in respect of which
such a Loss may reasonably be expected to occur (a "Claim"), but the Buyer
Indemnified Parties' failure to give such notice will not affect their rights to
indemnification under this Article VII, except to the extent that the Founders
are materially prejudiced thereby. Such written notice will include a reference
to the event or events forming the basis of such Loss or Claim and the amount
involved, unless such amount is uncertain or contingent, in which event the
Buyer Indemnified Parties will give a later written notice when the amount
becomes fixed.
SECTION 7.04. Defense of Claims. The Founders may elect to assume and
control the defense of any Claim, including the employment of counsel reasonably
satisfactory to the Buyer Indemnified Parties and the payment of expenses
related thereto, if (a) the Founders acknowledge their obligation to indemnify
the Buyer Indemnified Parties for any Losses resulting from such Claim and
provide reasonable evidence to the Buyer Indemnified Parties of its financial
ability to satisfy such obligation; (b) the Claim does not seek to impose any
liability or obligation on the Buyer Indemnified Parties other than for money
damages; and (c) the Claim does not relate to the Buyer Indemnified Parties'
relationship with their customers or employees. If such conditions are satisfied
and the Buyer Indemnifying Parties select to assume and control the defense of a
Claim, then (i) the interests represented by the Founders will not be liable for
any settlement of such Claim effected without the consent of the Buyer
Indemnifying Parties, which consent will not be unreasonably withheld; (ii) the
Founders may settle such Claim without the consent of the Buyer Indemnified
Parties; and (iii) the Buyer Indemnified Parties may employ
<PAGE> 25
separate counsel and participate in the defense thereof, but the Buyer
Indemnified Parties will be responsible for the fees and expenses of such
counsel unless (A) the Founders have failed to adequately assume the defense of
such Claim or to employ counsel with respect thereto or (B) a conflict of
interest exists between the interests of the Buyer Indemnified Parties and the
interests represented by the Founders that requires representation by separate
counsel, in which case the fees and expenses of such separate counsel will be
paid by the Founders. If such conditions are not satisfied, the Buyer
Indemnified Parties may assume and control the defense of the Claim; provided
that the Buyer Indemnified Parties may not settle any such Claim without the
consent of the Founders, which consent will not be unreasonably withheld, and
further provided that the Founders are given a reasonable opportunity to
participate in such defense (at the Founders' expense).
SECTION 7.05. Exclusive Remedy. Buyer Indemnified Parties' right to
indemnification under this Article VII shall be their sole and exclusive remedy
for any breach of the Company's and Stockholders' representations and warranties
contained in this Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, as follows:
(a) by mutual consent of Buyer and the Company;
(b) by Buyer, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Sections 6.01(a) or (b) would
be incapable of being satisfied by February 25, 1999; provided that, in any
case, a willful breach shall be deemed to cause such conditions to be incapable
of being satisfied for purposes of this Section 8.01(b);
(c) by the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of Buyer set forth in this
Agreement, or if any representation or warranty of Buyer shall have become
untrue, in either case such that the conditions set forth in Sections 6.02(a) or
(b) would be incapable of being satisfied by February 25, 1999; provided that,
in any case, a willful material breach shall be deemed to cause such conditions
to be incapable of being satisfied for purposes of this Section 8.01(c);
(d) by either Buyer or the Company, if there shall be any
Order that is final and nonappealable preventing the consummation of the Merger,
except if the party relying on such Order to terminate this Agreement has not
complied with its obligations under Section 5.06 of this Agreement;
(e) by either Buyer or the Company, if the Merger shall not
have been consummated before February 25, 1999.
<PAGE> 26
The right of any party hereto to terminate this Agreement pursuant to this
Section 8.01 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers, directors,
representatives or agents, whether prior to or after the execution of this
Agreement.
SECTION 8.02. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void, there shall be no liability on the part of the parties to the other
parties and all rights and obligations of any party hereto shall cease, except
that nothing herein shall relieve any party of any liability for any breach of
such party's representations, warranties, covenants or agreements contained in
this Agreement. Nothing herein shall be construed to cause the Nondisclosure
Agreement to terminate upon the termination of this Agreement.
SECTION 8.03. Amendment. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time, Buyer,
on the one hand, and the Company, on the other hand, may (a) extend the time for
the performance of any of the obligations or other acts of the other party
hereto, (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered pursuant hereto and
(c) waive compliance by the other party with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party to be bound thereby.
ARTICLE IX
REGISTRATION RIGHTS
SECTION 9.01. Registration Statement. Within ten (10) days of the
Closing Date, Buyer will prepare and file with the SEC, pursuant to the
Securities Act, a registration statement on Form S-3 (the "Registration
Statement") covering the resale of 50% of the Buyer Common Stock issued to the
Stockholders in the Merger (collectively, the "Registered Shares") in a
continuous offering. Buyer will use commercially reasonable efforts to cause the
Registration Statement to become effective as soon as practicable after the
Closing and to remain effective until the earlier of (i) the date that all of
the Registered Shares have been sold by the Stockholders or (ii) the first
anniversary of the Closing. The Stockholders will not sell any Registered Shares
under the Registration Statement unless, at the time of sale, the Registration
Statement (and the most recently filed post-effective amendment thereto, if any)
has been declared effective. The period of time during which the Registration
Statement is effective is referred to as the "Registration Period."
SECTION 9.02. Limitations on Sale.
(a) Each Stockholder will notify Buyer two business days prior
to selling any Registered Shares pursuant to the Registration Statement. If,
upon receipt of such a notice,
<PAGE> 27
Buyer certifies to such Stockholder in writing that (i) due to a change in
circumstances or a pending transaction, the Registration Statement contains an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
and (ii) the public disclosure required to correct such misstatement or omission
would be impracticable or injurious to Buyer, then the Stockholder will refrain
from selling any Registered Shares pursuant to the Registration Statement for
the period of time requested by Buyer (a "Blackout Period"). Buyer may impose no
more than four Blackout Periods, which may not exceed 45 calendar days each and
may not exceed 60 calendar days in the aggregate. Buyer will use reasonable
efforts to minimize the time period during which the Stockholders are required
to refrain from selling under this paragraph.
(b) In addition to the foregoing restrictions, the Founders
will not sell, transfer or otherwise dispose of any shares of Buyer Common Stock
or otherwise reduce their risk of loss with respect to any of the Buyer Common
Stock issued to them in the Merger until Buyer has publicly released earnings
covering at least 30 days of combined operations of the Surviving Corporation.
Buyer will use commercially reasonable efforts to release such earnings as soon
as reasonably practicable after the Closing; provided that Buyer will not be
required to publicly release earnings for a period other than a full calendar
quarter.
SECTION 9.03. Information. Each Stockholder will furnish to Buyer, at
Buyer's reasonable request, such information regarding the ownership of
Registered Shares by such Stockholder and the intended method of disposition
thereof as is required in connection with the preparation of a registration
statement covering the Registered Shares.
SECTION 9.04. Expenses. Buyer will bear all expenses arising or
incurred in connection with any registration of the Registered Shares hereunder,
including without limitation registration fees, printing expenses and Buyer's
accounting and legal fees and expenses; provided that each Stockholder will bear
the expense of any underwriting fees, discounts or commissions applicable to its
sale of the Registered Shares and the fees and expenses of any separate legal
counsel or accounting firm engaged by such Stockholder.
SECTION 9.05. Indemnification.
(a) Buyer agrees to indemnify the Stockholders and each
underwriter and selling broker of the Registered Shares registered hereunder and
their respective officers and directors and each person or entity, if any, who
controls any of the foregoing within the meaning of Section 15 of the Securities
Act and their respective successors against all Losses arising out of or
relating to any untrue statement (or alleged untrue statement) of a material
fact contained in the Registration Statement or any prospectus included therein
or incident thereto or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and agrees to reimburse the Stockholders and such other
persons for any legal and other expenses reasonably incurred by them in
connection with investigating or defending any claim or action related to such a
Loss; provided, however, that Buyer will not be liable in any such case if and
to the extent that (i) such statement or omission was made in reliance upon
information (including, without limitation, written negative responses
<PAGE> 28
to inquiries) furnished to Buyer in writing by a Stockholder expressly for use
in the Registration Statement or such a prospectus or (ii) a Stockholder fails
to deliver or cause to be delivered a copy of the final prospectus relating to
such offering (as then amended or supplemented) to the person asserting such
claim and such final prospectus would have cured the defect giving rise to such
Loss.
(b) Each Stockholder will indemnify Buyer, the other
Stockholders and their respective officers and directors and each person or
entity, if any, who controls any of the foregoing within the meaning of Section
15 of the Securities Act and their respective successors against all Losses
arising out of or relating to any untrue statement (or alleged untrue statement)
of a material fact contained in the Registration Statement or any prospectus
included therein or incident thereto or any omission (or alleged omission) to
state therein a material fact required to be stated or necessary to make the
statements therein not misleading, and will reimburse Buyer, the other
Stockholders and such other persons for any legal and any other expenses
reasonably incurred by them in connection with investigating or defending any
claim or action related to such a Loss; provided, however, that this
subparagraph (b) shall apply only in the case of and to the extent specified in
clauses (i) and (ii) of the preceding paragraph.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to any of the two preceding paragraphs, the
indemnified and indemnifying parties shall comply with the notice and defense of
claims provisions of Sections 7.03 and 7.04 with respect to such proceeding.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given upon receipt, if delivered personally or by overnight delivery service or
if mailed by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like changes of address) or sent by
electronic transmission to the facsimile number specified below:
(a) If to Buyer, to:
CNET, Inc.
150 Chestnut Street
San Francisco, California 94111
Attention: Shelby W. Bonnie
Facsimile: (415) 395-9205
with a copy to:
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attention: R. Clayton Mulford
Facsimile: (214) 939-5849
<PAGE> 29
(b) If to the Company, to:
Netventures, Inc.
1230 Market Street, Suite 503
San Francisco, California 94102
Attention: James Nicholson
Facsimile: (415) 621-4989
with a copy to:
Britton, Silberman, & Cervantez, L.L.P.
461 Second Street, Suite 332
San Francisco, CA 94107
Attention: Tom Cervantez
Facsimile: (415) 538-9001
SECTION 10.02. Certain Definitions. For the purposes of this Agreement,
the term:
(a) "affiliate" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person.
(b) "business day" means any day other than a day on which
banks in the State of California are authorized or obligated to be closed.
(c) "control" (including the terms "controlled," "controlled
by," and "under common control with") means the possession, directly or
indirectly, or as trustee or executor, of the power to direct or cause the
direction of the management or policies of a person, whether through the
ownership of stock or as trustee or executor, by contract or credit arrangement
or otherwise.
(d) "knowledge" of or "known" by a person, with respect to any
matter in question, means (i) in the case of the Company, if any Founder or any
executive officer of the Company has actual knowledge of such matter or would
have knowledge of such matter following due inquiry, and (ii) in the case of
Buyer, if any executive officer of Buyer has actual knowledge of such matter or
would have knowledge of such matter following due inquiry.
(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as used
in Section 13(d) of the Exchange Act).
(f) "Tax" or "Taxes" means any and all taxes, charges, fees,
levies, assessments, duties or other amounts payable to any federal, state,
local or foreign taxing
<PAGE> 30
authority or agency, including, without limitation, (i) income, franchise,
profits, gross receipts, minimum, alternative minimum, estimated, ad valorem,
value added, sales, use, service, real or personal property, capital stock,
license, payroll, withholding, disability, employment, social security, workers
compensation, unemployment compensation, utility, severance, excise, stamp,
windfall profits, transfer and gains taxes, (ii) customs, duties, imposts,
charges, levies or other similar assessments of any kind, and (iii) interest,
penalties and additions to tax imposed with respect thereto.
SECTION 10.03. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement Section references herein are, unless the
context otherwise requires, references to sections of this Agreement.
SECTION 10.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 10.05. Entire Agreement. This Agreement (together with the
Exhibits and the Schedules to this Agreement) and the Nondisclosure Agreement
constitute the entire agreement of the parties, and supersede all prior
agreements and undertakings, both written and oral, among the parties or between
any of them, with respect to the subject matter hereof.
SECTION 10.06. Assignment. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 10.07. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, except as expressly provided with respect to Indemnified
Parties in Article VII.
SECTION 10.08. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder.
<PAGE> 31
SECTION 10.09. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive to, and not exclusive
of, any rights or remedies otherwise available.
SECTION 10.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
SECTION 10.11. Counterparts. This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 32
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
CNET, INC.
/s/ DOUGLAS N. WOODRUM
---------------------------------------
Chief Financial Officer
NETVENTURES, INC.
/s/ JAMES NICHOLSON
---------------------------------------
President and Chief Executive Officer
STOCKHOLDERS:
Founders:
/s/ JAMES NICHOLSON
---------------------------------------
James Nicholson
/s/ ILAN REUBEN
---------------------------------------
Ilan Reuben
Minority Stockholders
/s/ STEVE BOOM
---------------------------------------
Steven Boom
CNA TRUST F/B/O STEVE BOOM
/s/ CNA TRUST CORPORATION
---------------------------------------
Authorized Officer
/s/ THOMAS RANDELL
---------------------------------------
Thomas Randell
/s/ ABE REUBEN
---------------------------------------
Abe Reuben
/s/ ANA MARIA NICHOLSON
---------------------------------------
Ana Maria Nicholson
/s/ DICK SCHWARZ
---------------------------------------
Dick Schwarz
/s/ PETER NICHOLSON
---------------------------------------
Peter Nicholson
<PAGE> 1
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CNET, INC.
AUCTIONGATE INTERACTIVE, INC.
AND
THE STOCKHOLDERS OF
AUCTIONGATE INTERACTIVE, INC.
FEBRUARY 19, 1999
<PAGE> 2
<TABLE>
<CAPTION>
EXHIBITS:
<S> <C>
Exhibit A Form of Employment Agreement
Exhibit B Form of Legal Opinion of Buyer's Counsel
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES:
<S> <C>
3.03 Capitalization
3.07(a) Financial Statements
3.07(c) Operating Statistics
3.09 Liabilities
3.15 Leased Properties
3.16 Material Contracts
3.18 Intellectual Property
</TABLE>
<PAGE> 3
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 19, 1999 (this
"Agreement"), is by and among CNET, Inc., a Delaware corporation ("Buyer"),
AuctionGate Interactive, Inc., a California corporation (the "Company"), and
Nihad Hafiz and Denny Chittick, the sole stockholders of the Company (the
"Stockholders").
WHEREAS, Buyer and the Company have determined that the merger of the
Company with and into Buyer ("Merger"), with Buyer surviving, and conversion of
the issued and outstanding shares of common stock of the Company (the "Company
Common Stock") into the right to receive shares of common stock, $0.0001 par
value, of Buyer (the "Buyer Common Stock"), on the terms and subject to the
conditions of this Agreement and in accordance with the General Corporation Law
of the State of California ("California Law") and the Section 252 of the
General Corporation Law of the State of Delaware ("Delaware Law") would be
advantageous and beneficial to their respective corporations and stockholders;
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization under the provisions of section 368(a) of
the United States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Merger is intended to be treated as a "pooling of
interests" for financial accounting purposes;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. On the terms and subject to the conditions
set forth in this Agreement, and in accordance with applicable federal and
state law, at the Effective Time (as defined in Section 1.02), the Company
shall be merged with and into Buyer. As a result of the Merger, the separate
corporate existence of the Company shall cease and Buyer shall continue as the
surviving corporation of the Merger (the "Surviving Corporation"). Certain
terms used in this Agreement are defined in Section 10.02.
SECTION 1.02. Closing; Closing Date; Effective Time. Unless this
Agreement is terminated pursuant to Section 8.01, and subject to the
satisfaction or waiver of the conditions set forth in Article VI, the
consummation of the Merger and the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Buyer as soon
as practicable (but in any event within five business days) after the
satisfaction or waiver of the conditions set forth in Article VI, or at such
other date, time and place as Buyer and the Company may agree; provided, that
the conditions set forth in Article VI shall have been satisfied or waived at
or prior to such time. The date on which the Closing takes place is referred to
herein as
<PAGE> 4
the "Closing Date." As promptly as practicable on or within five (5) days after
the Closing Date, the parties hereto shall cause the Merger to be consummated
by filing a certificate of merger with the Secretary of State of the State of
Delaware, in such form as required by, and executed in accordance with the
relevant provisions of, Delaware Law (the date and time of such filing, or such
later date or time agreed upon by Buyer and the Company and set forth therein,
being the "Effective Time"). As promptly as practicable on or within five (5)
days after the Closing Date, the parties shall also file a certificate of
merger with the Secretary of State of the State of California, in such form as
required by, and executed in accordance with the relevant provisions of,
California Law.
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of California
Law and Delaware Law. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges
and powers of the Company and Buyer will vest in the Surviving Corporation, and
all debts, liabilities and duties of the Company and the Buyer shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 1.04. Articles of Incorporation; Bylaws. At the Effective
Time, the Articles of Incorporation and bylaws of Buyer, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
and bylaws of the Surviving Corporation unless and until amended as provided
therein and pursuant to Delaware Law.
SECTION 1.05. Directors and Officers. The directors and officers of
Buyer immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation at the Effective Time, each to hold
office in accordance with the bylaws of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Consideration; Conversion and Cancellation of
Securities. At the Effective Time, by virtue of the Merger and without any
action on the part of Buyer, the Company or their respective stockholders:
(a) Prior to the Effective Time, all outstanding preferred stock
of the Company will be converted into Company Common Stock and all outstanding
options or warrants to purchase Company Common Stock will be exercised.
(b) Subject to the other provisions of this Article II, each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into 5.3542 shares of pre-split Buyer Common
Stock, which equals (i) six and a half million dollars ($6,500,000), divided by
$121.40 (the average last sales price of the Buyer Common Stock on the Nasdaq
National Market System ("Nasdaq") as reported in the West Coast edition of the
Wall Street Journal for the five trading days preceding (but not including) the
date of this
<PAGE> 5
Agreement) (the "Conversion Price"), divided by (ii) 10,000, which is the total
number of outstanding shares of Company Common Stock immediately prior to the
Effective Time.
(c) All shares of Company Common Stock shall cease to be
outstanding and shall automatically be canceled and retired, and each
certificate previously evidencing the Company Common Stock outstanding
immediately prior to the Effective Time (the "Converted Shares") shall
thereafter represent the right to receive Buyer Common Stock in accordance with
this Article II. The Stockholders shall cease to have any rights with respect
to such Converted Shares except as otherwise provided herein or by law.
Certificates previously evidencing Converted Shares shall be exchanged for
Buyer Common Stock upon the surrender of such certificates in accordance with
the provisions of Section 2.02, without interest.
SECTION 2.02. Exchange and Surrender of Certificates.
(a) Each Stockholder shall be entitled to receive, upon surrender
to Buyer or its transfer agent of certificates previously evidencing Converted
Shares, as soon as practicable after the Closing Date, a certificate
representing the Converted Shares so surrendered, registered in the name of
such Stockholder. Until so surrendered and exchanged, each certificate
previously evidencing Converted Shares shall represent solely the right to
receive Buyer Common Stock.
(b) All shares of Buyer Common Stock issued upon the surrender
for exchange of certificates previously representing Converted Shares in
accordance with the terms hereof (including any adjustments pursuant to Section
2.02(c)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Converted Shares. At and after the Effective Time, there
shall be no further registration of transfers on the stock transfer books of
the Surviving Corporation of Company Common Stock that was outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates which previously evidenced Converted Shares are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.
(c) No certificates or scrip evidencing fractional shares of
Buyer Common Stock shall be issued upon the surrender for exchange of
certificates, and such fractional share interests will not entitle the owner
thereof to any rights as a stockholder of Buyer. In lieu of any such fractional
shares, the number of shares of Buyer Common Stock issuable to any Stockholder
in connection with the Merger shall be rounded up to the nearest whole share.
(d) Buyer shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any former holder
of Converted Shares such amounts as Buyer (or any affiliate thereof) is
required to deduct and withhold with respect to the making of such payment
under the Code, or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by Buyer, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the former
holder of the Converted Shares in respect of which such deduction and
withholding was made by Buyer.
<PAGE> 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders hereby represent and warrant
(provided that, with respect to each of the Stockholders, any representation or
warranty that relates solely to matters involving the Company shall be limited
to such Stockholder's knowledge) to Buyer that:
SECTION 3.01. Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of California, has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as it is now
being conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary.
SECTION 3.02. Articles and Bylaws. The Company has furnished to Buyer
complete and correct copies of its Articles of Incorporation and bylaws, in
each case as amended or restated, of the Company. The Company is not in
violation of any of the provisions of its Articles of Incorporation or bylaws.
SECTION 3.03. Capitalization.
(a) The authorized capital stock of the Company consists of (i)
100,000 shares of Company Common Stock, of which 10,000 shares are issued and
outstanding. All of the outstanding capital stock of the Company is held of
record and beneficially by the Stockholders as indicated in Schedule 3.03, free
and clear of all security interests, liens, claims, pledges, agreements,
charges or other encumbrances of any nature whatsoever. All of the outstanding
capital stock of the Company is duly authorized, validly issued, fully paid and
nonassessable, and has not been issued in violation of (nor are any of the
authorized shares of capital stock of the Company subject to) any preemptive or
similar rights created by statute, the Articles of Incorporation or bylaws of
the Company or any agreement to which the Company is a party or bound.
(b) Except as indicated in Schedule 3.03, no shares of capital
stock of the Company are reserved for any purpose or held in treasury by the
Company and there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which the Company is a party
relating to the issued or unissued capital stock of the Company or obligating
the Company to grant, issue or sell any shares of the capital stock of the
Company.
(c) There are no obligations, contingent or otherwise, of the
Company to (i) repurchase, redeem or otherwise acquire any shares of the
capital stock of the Company or (ii) provide material funds to, or make any
material investment in (in the form of a loan, capital contribution or
otherwise), or provide any guarantee with respect to the obligations of, any
other person. There are no agreements, arrangements or commitments of any
character (contingent or otherwise) pursuant to which any person is or may be
entitled to receive any payment based on the revenues or earnings, or
calculated in accordance therewith, of the Company. There are no
<PAGE> 7
voting trusts, proxies or other agreements or understandings to which the
Company is a party or by which the Company is bound with respect to the voting
of any shares of capital stock of the Company.
(d) The Company (i) does not directly or indirectly own, (ii) has
not agreed to purchase or otherwise acquire and (iii) does not hold any
interest convertible into or exchangeable or exercisable for, any capital stock
(or equivalent equity interest) of any corporation, partnership, joint venture
or other business association or entity.
SECTION 3.04. Authority. The Company has all requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by
all necessary corporate action and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and the Stockholders and constitutes the legal, valid
and binding obligation of the Company and the Stockholders enforceable against
the Company and the Stockholders in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company
and the Stockholders does not, and the consummation of the transactions
contemplated hereby will not (i) conflict with or violate the Articles of
Incorporation or bylaws, in each case as amended or restated, of the Company,
(ii) conflict with or violate any federal, state, foreign or local law,
statute, ordinance, rule, regulation, order, judgment or decree (collectively,
"Laws") applicable to the Stockholders or the Company or by which any of their
properties or assets is bound or subject or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or require payment under, or result
in the creation of any lien or encumbrance on any of the properties or assets
of the Company pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which any Stockholder or the Company is a party or by or to which any
Stockholder or the Company or any of their properties or assets is bound or
subject. The Board of Directors of the Company has taken all actions necessary
under California Law, including approving the transactions contemplated by this
Agreement and taking appropriate actions under California Law or any other
applicable stockholder protection laws, to ensure that any restrictions on
business combinations or the owning or voting of the capital stock of the
Company do not, and will not, apply with respect to or as a result of the
transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by the Company
and the Stockholders does not, and consummation of the transactions
contemplated hereby will not, require the Company or any Stockholder to obtain
any consent, license, permit, approval, waiver, authorization or order of, or
to make any filing with or notification to, any governmental or
<PAGE> 8
regulatory authority, domestic or foreign (each individually, a "Governmental
Entity," and collectively, "Governmental Entities"), except for the filing and
recordation of appropriate merger documents as required by California Law and
Delaware Law.
SECTION 3.06. Permits; Compliance. Except as set forth in Schedule
3.06, the Company is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "Company
Permits"), and there is no action, proceeding or investigation pending or, to
the Company's knowledge, threatened regarding suspension or cancellation of any
of the Company Permits. The Company and its assets and operations are currently
and have at all times been in compliance in all material respects with (a) all
Laws applicable to the Company and its operations or by or to which any of its
assets is bound or subject, including without limitation all Laws related to
environmental protection, employee benefits, labor and employment and
occupational health and safety, and (b) all of the Company Permits, if
obtained. The Company has not received from any Governmental Entity any written
notification with respect to possible violations of Laws.
SECTION 3.07. Financial Statements.
(a) Schedule 3.07(a) includes (i) the unaudited balance sheet
data of the Company as of January 31, 1999 and the unaudited statements of
operations, retained earnings and cash flows of the Company for the year ended
on such date and (ii) contains the unaudited balance sheet of the Company (the
"Latest Balance Sheet") as of January 31, 1999 (the "Latest Balance Sheet
Date") and the unaudited statements of operations, retained earnings and cash
flows for the twelve months ended on such date.
(b) Each of the foregoing financial statements (i) has been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved except as may be indicated
on notes thereto and (ii) fairly present in all material respects the financial
position of the Company as of the respective dates thereof and the results of
its operations and cash flows for the periods indicated, except that the
interim financial statements are subject to normal and recurring year-end
adjustments, which will not be material individually or in the aggregate.
(c) Schedule 3.07(c) sets forth certain statistics concerning the
operations of the Company, which are accurate (subject to the margins of error
indicated on such schedule for certain of such statistics).
(d) All accounts receivable reflected in the Latest Balance Sheet
or generated since the Latest Balance Sheet Date arose in the ordinary course
of business and are fully collectible in the ordinary course of business,
without resort to litigation, at the face amount thereof less any reserve
reflected in the Latest Balance Sheet, and will not be subject to counterclaim,
set-off or other reduction.
<PAGE> 9
SECTION 3.08. Absence of Certain Changes or Events. Since the Latest
Balance Sheet Date, the Company has conducted its business only in the ordinary
course and in a manner consistent with past practice and there has not been:
(a) any damage, destruction or loss (whether or not covered by insurance) with
respect to any material assets of the Company; (b) any change by the Company in
its accounting methods, principles or practices; (c) any declaration, setting
aside or payment of any dividends or distributions in respect of shares of the
capital stock of the Company or any redemption, purchase or other acquisition
by the Company of any of its securities; (d) any increase in the benefits
under, or the establishment or amendment of, any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing or other employee
benefit plan, or any increase in the compensation payable or to become payable
to directors, officers or employees of the Company, except for annual bonuses
or merit increases in salaries or wages in the ordinary course of business and
consistent with past practice; (e) any payment or other transfer of assets by
the Company to any Stockholder, other than compensation payments in the
ordinary course of business and consistent with past practice; (f) any
revaluation by the Company of any of its assets, including the writing down or
off of notes or accounts receivable, other than in the ordinary course of
business and consistent with past practices; (g) any entry by the Company into
any commitment or transaction material to the Company including, without
limitation, incurring or agreeing to incur capital expenditures in excess of
$50,000; (h) any incurrence of indebtedness for borrowed money other than trade
payables incurred in the ordinary course of business; (i) a loss, or written
notice threatening a loss, of any customer or supplier set forth on Schedule
3.17(a); (j) the termination of employment (whether voluntary or involuntary)
of any officer or key employee of the Company; or (k) any change, occurrence or
circumstance having or reasonably likely to have, individually or in the
aggregate, a material adverse effect on the business, operations, assets,
financial condition, results of operations or prospects of the Company.
SECTION 3.09. No Undisclosed Liabilities. The Company does not have
any direct or indirect debts, liabilities or obligations, whether known or
unknown, absolute, accrued, contingent or otherwise ("Liabilities"), except (a)
Liabilities fully reflected in the Latest Balance Sheet and related financial
statement notations; (b) trade payables and accrued expenses incurred in the
ordinary course of business and consistent with past practice since the Latest
Balance Sheet Date; (c) obligations to be performed in the ordinary course of
business, consistent with past practice, under the Material Contracts (as
defined in Section 3.16) or under agreements not required to be disclosed
pursuant to Section 3.16; and (d) Liabilities described in Schedule 3.09. In
addition, the Company did not assume any liabilities of RacingData, Inc., a
California corporation, upon the spin-off of the Company from RacingData, Inc.
on January 28, 1999, other than the Liabilities described in Schedule 3.09 and
certain other ordinary course of business Liabilities that have been previously
disclosed to Buyer by the Company.
SECTION 3.10. Absence of Litigation. There is no claim, action, suit,
litigation, proceeding, arbitration or investigation of any kind, at law or in
equity (including actions or proceedings seeking injunctive relief), pending
or, to the Company's knowledge, threatened against the Company or any assets or
rights of the Company. The Company is not subject to any continuing order of,
consent decree, settlement agreement or other similar written agreement with,
or, continuing investigation by, any Governmental Entity, or any judgment,
order, writ,
<PAGE> 10
injunction, decree or award of any Government Entity or arbitrator, including,
without limitation, cease-and-desist or other orders.
SECTION 3.11. Taxes.
(a) (i) all returns and reports ("Tax Returns") of or with
respect to any Tax which is required to be filed on or before the Closing Date
by or with respect to the Company have been or will be duly and timely filed,
(ii) all items of income, gain, loss, deduction and credit or other items
required to be included in each such Tax Return have been or will be so
included and all information provided in each such Tax Return is true, correct
and complete, (iii) all Taxes which have become or will become due with respect
to the period covered by each such Tax Return have been or will be timely paid
in full, (iv) all withholding Tax requirements imposed on or with respect to
the Company have been or will be satisfied in full in all respects, and (v) no
penalty, interest or other charge is or will become due with respect to the
late filing of any such Tax Return or late payment of any such Tax.
(b) There are no Tax Returns of or with respect to the Company
with extended or waived statutes of limitations that have not been audited by
the applicable governmental authority.
(c) There is not in force any extension of time with respect to
the due date for the filing of any Tax Return of or with respect to the Company
or any waiver or agreement for any extension of time for the assessment,
collection or payment of any Tax of or with respect to the Company.
(d) The Company has previously delivered to Buyer true and
complete copies of each written Tax allocation or sharing agreement and a true
and complete description of each unwritten Tax allocation or sharing
arrangement affecting the Company, if any.
(e) There are no pending audits, actions, proceedings,
investigations, disputes or claims with respect to or against the Company for
or with respect to any Taxes of the Company; no assessment, deficiency or
adjustment has been assessed or proposed with respect to any Tax Return of or
with respect to the Company; and there is no reasonable basis on which any
claim for material Taxes can be asserted against the Company.
(f) Except for statutory liens for current Taxes not yet due, no
liens for Taxes exist upon the assets of any of the Company.
(g) The Company will not be required to include any amount in
income for any taxable period beginning after the Closing Date as a result of a
change in accounting method for any taxable period ending on or before the
Closing Date or pursuant to any agreement with any Tax authority with respect
to any such taxable period.
<PAGE> 11
(h) To the Company's and the Stockholders' knowledge based on the
advice of their professional tax advisors, none of the transactions
contemplated by this Agreement will result in any Tax liability or the
recognition of any item of income or gain to the Company.
(i) None of the property of the Company is held in an arrangement
for which partnership Tax Returns are being filed, and the Company does not own
any interest in any controlled foreign corporation (as defined in section 957
of the Code), passive foreign investment company (as defined in section 1296 of
the Code) or other entity the income of which is required to be included in the
income of the Company.
(j) The Company has never been subject to Taxes in any
jurisdiction outside the United States.
(k) The Company has had in effect since its corporate inception a
valid, binding, timely filed election to be taxed pursuant to Subchapter S of
the Code, is not liable for any federal income taxes as a "C corporation" and
has no net unrealized built in gain potentially subject to tax under Section
1374 of the Code.
SECTION 3.12. Tax Matters; Pooling. Neither the Company nor any of its
Stockholders or other affiliates has taken or agreed to take any action that
would prevent the Merger from (i) constituting a reorganization qualifying
under the provisions of section 368(a) of the Code or (ii) being treated for
financial accounting purposes as a "pooling of interests" (the "Pooling
Transaction") in accordance with generally accepted accounting principles and
the rules, regulations and interpretations of the Securities and Exchange
Commission (the "SEC").
SECTION 3.13. Certain Business Practices. Neither the Company, the
Stockholders nor their agents or other representatives has, directly or
indirectly, made or authorized any payment, contribution or gift of money,
property or services in contravention of applicable law.
SECTION 3.14. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
SECTION 3.15. Leased Properties. Schedule 3.15 sets forth a
description (including the street address) of all real property leased by the
Company (the "Leased Properties"). No premises other than the Leased Properties
are used in the business of the Company.
SECTION 3.16. Certain Material Contracts.
(a) Schedule 3.16 lists each agreement and arrangement (whether
written or oral and including all amendments thereto) to which the Company is a
party or a beneficiary or by which the Company is bound that is material,
directly or indirectly, to the business of the Company (collectively, the
"Material Contracts"), including without limitation (i) any licensing,
advertising, promotion, consulting or services agreements pursuant to which the
Company earns
<PAGE> 12
revenue; (ii) any licensing, supply, or services agreements pursuant which the
Company is entitled or obligated to acquire any assets or services from any
person; (iii) any insurance policies; (iv) any employment, consulting,
non-competition, separation, collective bargaining, union or labor agreements
or arrangements; (v) any agreement evidencing, securing, guarantying or
otherwise relating to any indebtedness for which the Company has any Liability,
(vi) any agreement with or for the benefit of any Stockholder of the Company,
or any affiliate or family member thereof (which agreements are specifically
identified as such in Schedule 3.16); (vii) any capital or operating leases or
conditional sales agreements relating to vehicles or equipment; and (viii) any
other agreement or arrangement pursuant to which the Company could be required
to make or be entitled to receive aggregate payments in excess of $50,000.
(b) The Company has performed in all material respects all of its
obligations under each Material Contract and there exists no breach or default
(or event that with notice or lapse of time would constitute a breach or
default) under any Material Contract.
(c) Each Material Contract is valid, binding and in full force
and effect and enforceable in accordance with its respective terms. There has
been no termination or, to the Company's knowledge, threatened termination or
notice of default under any Material Contract. The Company has delivered to
Buyer a copy of each written Material Contract and a written summary of the
material terms of each oral Material Contract.
SECTION 3.17. Principal Customers and Suppliers; Competing Interests.
Since January 1, 1998, no such supplier or customer of the Company has notified
the Company that it has canceled or otherwise terminated, or, to the Company's
knowledge, threatened to cancel or otherwise terminate, its relationship with
the Company, and there has not been any material dispute with any such customer
or supplier. None of the Stockholders, the Company, nor, to the Company's
knowledge, any director or officer of the Company owns, directly or indirectly,
an interest in any entity that is a competitor, customer or supplier of the
Company or that otherwise has material business dealings with the Company,
provided that the foregoing will not apply to any investment in publicly traded
securities constituting less than 1% of the outstanding securities in such
class.
SECTION 3.18. Intellectual Property Rights.
(a) For purposes of this Agreement, "Intellectual Property" means
all (i) patents, copyrights and copyrightable works, trademarks, service marks,
trade names, service names, brand names, logos, trade dress, Internet domain
names and all goodwill symbolized thereby and appurtenant thereto; (ii) trade
secrets, inventions, technology, know-how, proprietary information, research
material, specifications, surveys, designs, drawings and processes; (iii)
computer software and related documentation, including without limitation
operating software, network software, firmware, middleware, design software,
design tools, management information systems, systems documentation and
instructions, databases and the tangible objects in which the foregoing rights
are embodied (collectively, "Software"); (iv) artwork, photographs, editorial
copy and materials, formats and designs, including without limitation all
content currently or previously displayed through Internet sites operated by
the Company; (v) customer, partner,
<PAGE> 13
prospect and marketing lists, market research data, sales data and traffic and
user data; (vi) registrations, applications, recordings, common law rights,
"moral" rights of authors, licenses (to or from the Company) and other
agreements relating to any of the foregoing; (vii) rights to obtain renewals,
reissues, extensions, continuations, divisions or equivalent extensions of
legal protection pertaining to the foregoing; and (viii) claims, causes of
action or other rights at law or in equity arising out of or relating to any
infringement, misappropriation, distortion, dilution or other unauthorized use
or conduct in derogation of the foregoing occurring prior to the Closing.
(b) There are no registrations or applications for registration
of any Intellectual Property or any licenses (to or from the Company) with
respect to any registered Intellectual Property.
(c) The Company owns or has the right to use pursuant to Material
Contracts all Intellectual Property used by the Company in connection with or
necessary to the operation of its business, without infringing on or otherwise
acting adversely to the rights or claimed rights of any person. The Company is
not obligated to pay any royalty or other consideration to any person in
connection with the use of any such Intellectual Property.
(d) No claim has been asserted against the Company to the effect
that the use of any Intellectual Property by the Company infringes the rights
of any person. To the Company's knowledge, no other person is currently
infringing upon the rights of the Company with respect to the Company's
Intellectual Property.
SECTION 3.19. Investor Representations.
(a) The Company and the Stockholders understand that the Buyer
Common Stock to be issued to them in the Merger will constitute "restricted
securities" under the Securities Act of 1933, as amended (the "Securities
Act"). Consequently, the Stockholders will be able to resell such Buyer Common
Stock only (i) pursuant to an effective registration statement covering such
resale or (ii) pursuant to an exemption from registration, such as the
exemption provided under rule 144 under the Securities Act ("Rule 144").
(b) Each Stockholder (i) has a preexisting personal or business
relationship with the Company and (ii) by reason of such Stockholder's business
or financial experience or the business or financial experience of such
Stockholder's professional advisors who are unaffiliated with and who are not
compensated by Buyer or any affiliate or selling agent of Buyer, directly or
indirectly, could be reasonably assumed to have the capacity to protect such
Stockholder's interests in connection with this Agreement.
(c) The Stockholders acknowledge receipt of the SEC Documents (as
defined in Section 4.04) and acknowledge that they have been given the
opportunity to ask questions of representatives of Buyer and to receive
reasonable additional information to the extent requested in connection with
their evaluation of an investment in the Buyer Common Stock.
<PAGE> 14
(d) The Stockholders acknowledge that the Buyer Common Stock will
bear a restrictive legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND THE
HOLDER HEREOF CANNOT MAKE ANY SALE, ASSIGNMENT, OR OTHER TRANSFER OF SUCH
SECURITIES WITHOUT REGISTRATION UNDER OR EXEMPTION FROM SUCH ACTS AND LAWS. THE
ISSUER MAY REQUIRE EVIDENCE OF SUCH REGISTRATION OR EXEMPTION PRIOR TO ANY SUCH
TRANSFER."
SECTION 3.20. Affiliates and Employees. The Stockholders are the only
persons who may be deemed to be "affiliates" of the Company within the meaning
of Rule 144 under the Securities Act
SECTION 3.21. Information Supplied. Without limiting any of the
representations and warranties contained herein, no written representation or
written warranty of the Company or the Stockholders and no statement by the
Company or the Stockholders contained in the Schedules to this Agreement
contains any untrue statement of material fact, or omits to state a material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which such statements were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company and the
Stockholders that:
SECTION 4.01. Organization and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under Delaware Law and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and is
duly qualified and in good standing to do business in each jurisdiction in
which the nature of the business conducted by it or the ownership or leasing of
its properties makes such qualification necessary.
SECTION 4.02. Authority. Buyer has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Buyer and the consummation by Buyer of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action and no other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Buyer and constitutes the legal, valid and binding obligation of Buyer,
enforceable against it in accordance with its terms.
SECTION 4.03. No Conflict; Required Filings and Consent.
<PAGE> 15
(a) The execution and delivery of this Agreement by Buyer does
not, and the consummation of the transactions contemplated hereby will not (i)
conflict with or violate the charter or bylaws, in each case as amended or
restated, of Buyer, (ii) conflict with or violate any Laws applicable to Buyer
or by which any of its properties or assets is bound or subject, or (iii)
result in any breach of or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, or give others any
rights of termination, amendment, acceleration or cancellations of, or require
payment under, or result in the creation of any lien or encumbrance on any of
the properties or assets of Buyer pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Buyer is a party or by or to which Buyer or
any of its properties is bound or subject. The Board of Directors of Buyer has
taken all actions necessary under Delaware Law, including approving the
transactions contemplated by this Agreement and taking appropriate actions
under Delaware Law or any other applicable stockholder protection Laws, to
ensure that any restrictions on business combinations or the owning or voting
of the Buyer Common Stock do not, and will not, apply with respect to or as a
result of the transactions contemplate by this Agreement.
(b) The execution and delivery of this Agreement by Buyer does
not, and the consummation of the transactions contemplated hereby will not,
require Buyer to obtain any consent, license, permit, approval, waiver,
authorization or order of, or to make any filing with or notification to, any
Governmental Entities, except for the filing and recordation of appropriate
merger documents as required by California Law or Delaware Law.
SECTION 4.04. Compliance. Buyer and its assets and operations are
currently and have at all times been in compliance in all material respects
with (a) all Laws applicable to Buyer and its operations or by or to which any
of its assets is bound or subject, including without limitation all Laws
related to environmental protection, employee benefits, labor and employment
and occupational health and safety, and (b) all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and order necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted, if
obtained. Buyer has not received from any Governmental Entity any written
notification with respect to possible violations of Laws.
SECTION 4.05. SEC Documents. Buyer has delivered to the Company and
the Stockholders a true and complete copy of Buyer's Annual Report on Form 10-K
for the year ended December 31, 1997 its quarterly reports on Form 10-Q for the
quarter ended September 30, 1998, and its definitive proxy statement for its
annual meeting of stockholders held in 1998 (together, the "SEC Documents"). As
of their respective dates, the SEC Documents complied in all material respects
with the applicable requirements of the Exchange Act and the rules and
regulations of the SEC thereunder, and none of the Buyer SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
SECTION 4.06. Financial Statements. The financial statements of Buyer,
including the notes thereto, included in the SEC Documents (the "Buyer
Financial Statements") were
<PAGE> 16
complete and correct in all material respects as of their respective dates,
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, and have been prepared in accordance with United States
generally accepted accounting principles applied on a basis consistent
throughout the periods indicated and consistent with each other (except as may
be indicated in the notes thereto). The Buyer Financial Statements fairly
present the consolidated financial condition and operating results of Buyer and
its subsidiaries at the dates and during the periods indicated therein
(subject, in the case of unaudited statements, to normal, recurring year-end
adjustments). There has been no material change in Buyer accounting policies
except as described in the notes to the Buyer Financial Statements.
SECTION 4.07. No Material Adverse Changes. Since the date of Buyer
Financial Statements included in the SEC Documents, there has not been any
change, occurrence or circumstance having or reasonably likely to have,
individually or in the aggregate, a material and adverse effect on the
financial condition of Buyer that has not been disclosed to the Company and the
Stockholders.
SECTION 4.08. Absence of Litigation. There is no action, suit,
proceeding, claim, arbitration or investigation pending, or as to which Buyer
has received written notice, which seeks to enjoin, alter or materially delay
any of the transactions contemplated by this Agreement.
SECTION 4.09. Tax Matters; Pooling. Neither Buyer nor, to the
knowledge of Buyer, any of its affiliates, has taken or agreed to take any
action that would prevent the Merger from (i) constituting a reorganization
qualifying under the provisions of section 368(a) of the Code or (ii) being
treated for financial purposes as a Pooling Transaction in accordance with
generally accepted accounting principles and the rules, regulations and
interpretations of the SEC.
SECTION 4.10. Certain Business Practices. Neither the Buyer nor its
agents or other representatives has, directly or indirectly, made or authorized
any payment, contribution or gift of money, property or services in
contravention of applicable law.
SECTION 4.11. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Buyer.
SECTION 4.12. Employees of the Company. Buyer shall continue to
employ, for a reasonable period of time, on a full-time basis the current
employees of the Company (the "Company Employees") with salaries equal to or
greater than their current salaries with the Company, as well as standard
employee benefits, except as otherwise mutually agreed upon by Nihad Hafiz and
Buyer. Buyer will provide prior written notice to Mr. Hafiz if Buyer desires to
terminate any of the Company Employees within one month after the Closing.
<PAGE> 17
ARTICLE V
COVENANTS
SECTION 5.01. Affirmative Covenants of the Company. The Company hereby
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by Buyer,
the Company will:
(a) operate its business only in the usual and ordinary course
consistent with past practices;
(b) use commercially reasonable efforts to preserve substantially
intact its business organization, maintain its Material Contracts, Company
Permits and Intellectual Property and other material rights, retain the
services of its respective officers and key employees and maintain its
relationships with its material customers and suppliers;
(c) maintain and keep its properties and assets in as good repair
and condition as at present, ordinary wear and tear excepted;
(d) maintain and keep in full force and effect insurance
comparable in amount and scope of coverage to that currently in effect; and
(e) from the date of this Agreement and to the Effective Time,
promptly supplement or amend the Schedules to this Agreement with respect to
any matter that arises or that is required to be set forth or listed in the
Schedules or is necessary to complete or correct any information in the
Schedules; provided, that for purposes of determining the rights and
obligations of the parties hereunder (other than the obligation of the Company
under this Section 5.01(e)), any such supplemental or amended disclosure will
not be deemed to have been disclosed to Buyer unless Buyer otherwise expressly
consents in writing.
SECTION 5.02. Negative Covenants of the Company. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by Buyer,
from the date of this Agreement until the Effective Time, the Company will not
do any of the following:
(a) amend or otherwise modify any of the Material Contracts or
Company Permits;
(b) (i) effect any reorganization or recapitalization; (ii) issue
any capital stock or any option, warrant or similar agreement with respect to
its capital stock; (iii) split, combine or reclassify any of its capital stock
or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital stock; or
(iv) adopt or propose to adopt any amendments to its Articles of Incorporation
or bylaws;
(c) sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, any of its assets, except for dispositions of
inventories and of assets in the ordinary course of business and consistent
with past practice;
<PAGE> 18
(d) settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy;
(e) take (and will use reasonable best efforts to prevent any
affiliate of the Company from taking) any action that, in the judgment of KPMG
Peat Marwick would cause the Merger not to be treated as a Pooling Transaction
for financial accounting purposes;
(f) take any action that would result in a breach (as of the
Closing) of any of the representations and warranties set forth in Section
3.08;
(g) pay or agree to pay any dividend, distribution, or other
payment to any of its Stockholders;
(h) pay or agree to pay any bonus, incentive compensation, or
similar payment to any of its employees or increase the compensation of any
Stockholder or other employee;
(i) make any material expenditure or commitment except in the
ordinary course of business consistent with past practice; or
(j) agree in writing or otherwise to do any of the foregoing.
SECTION 5.03. Non-Solicitation. Each of the Company and the
Stockholders hereby covenants and agrees that it will not, and will not permit
any of its affiliates, as applicable, to initiate, solicit or encourage
(including by way of furnishing information or assistance), or take any other
action to facilitate, any inquiries or the making of any proposal relating to,
or that may reasonably be expected to lead to, any Competing Transaction (as
defined below), or enter into discussions or negotiate with any person or
entity in furtherance of such inquiries or to obtain a Competing Transaction,
or agree to or endorse any Competing Transaction, or authorize or permit any of
the officers, directors or employees of the Company or any investment banker,
financial advisor, attorney, accountant or other representative retained by the
Company, any Stockholder or any of their affiliates, as applicable, to take any
such action, and the Company or the Stockholders, as the case may be, shall
promptly notify Buyer of all relevant terms of any such inquiries and proposals
received by the Company, or any of its affiliates, as applicable, or by any
such officer, director, investment banker, financial advisor, attorney,
accountant or other representative relating to any of such matters and if such
inquiry or proposal is in writing, the Company or the Stockholders, as the case
may be, shall promptly deliver or cause to be delivered to Buyer a copy of such
inquiry or proposal. For purposes of this Agreement, "Competing Transaction"
means any of the following (other than the transactions contemplated by this
Agreement) involving the Company: (a) any merger, consolidation, share
exchange, business combination or similar transaction; (b) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 5% or more of the
assets of the Company, or (c) any offer for 5% or more of the outstanding
shares of capital stock of the Company.
SECTION 5.04. Confidential Information.
<PAGE> 19
(a) The assets of the Company include certain commercially
valuable technical and non-technical confidential or proprietary information of
the Company (collectively, "Confidential Information"). Confidential
Information means all information used by the Company in connection with
operating its business that is not generally known to others in similar areas
of business, including without limitation (i) trade secrets, software, work
product, processes, analyses and know-how related to the architecture and
operation of the Company's business or the submission, collection or
organization of its contents; (ii) customer and prospect lists and other
marketing, advertising, pricing, strategic and business plans and information
related to the Company's business; and (iii) information concerning traffic at
the Company's Internet sites and financial information concerning the operation
of the Company's business.
(b) Prior to the Closing, the confidentiality and nondisclosure
provisions of the existing Letter of Intent among Buyer, the Stockholders and
the Company, dated as of January 25, 1999 (the "Nondisclosure Agreement"), will
remain in full force and effect and will apply to the Confidential Information,
notwithstanding the execution of this Agreement. Upon termination of this
Agreement for any reason, Buyer shall promptly return to the Company all
Confidential Information, including copies thereof, and destroy any notes,
compilations, analyses or other material that incorporates or otherwise
includes such Confidential Information.
(c) The Stockholders acknowledge and agree that, following the
Closing, the Confidential Information will be the sole and exclusive property
of the Surviving Corporation. Following the Closing, neither Stockholder will,
directly or indirectly, use any Confidential Information for his own benefit or
disclose any Confidential Information to any person (except in the course of
performing authorized duties for Buyer or the Surviving Corporation). At
Buyer's request after the Closing, the Stockholders will promptly deliver to
Buyer or the Surviving Corporation all documents, computer disks and other
computer storage devices, computer printouts, manuals and other papers and
materials (including all copies thereof in whatever form) containing or
incorporating any Confidential Information that are in his possession or under
his control.
SECTION 5.05. Access and Information.
(a) The Company shall (i) afford to Buyer and its officers,
directors, employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, the "Buyer Representatives") reasonable access
at reasonable times, upon reasonable prior notice, to the officers, employees,
agents, properties, offices and other facilities of the Company and to the
books and records thereof, (ii) furnish promptly to Buyer and the Buyer
Representatives such information concerning the business, properties,
contracts, records and personnel of the Company (including, without limitation,
financial, operating and other data and information) as may be reasonably
requested, from time to time, by Buyer, and (iii) authorize Buyer to contact
and obtain relevant information from the Company's accountants, material
customers and suppliers and any governmental agencies having dealings with the
Company.
<PAGE> 20
(b) No investigation by the parties hereto made heretofore or
hereafter shall affect the representations and warranties of the parties which
are herein contained and each such representation and warranty shall survive
such investigation.
SECTION 5.06. Appropriate Action; Consents.
(a) Each of Buyer, the Stockholders and the Company shall use
(and shall cause each of their respective subsidiaries to use, as applicable)
all reasonable efforts to (i) take, or cause to be taken, all appropriate
action, and do, or cause to be done, all things necessary, proper or advisable
under applicable Law or otherwise to consummate and make effective the
transactions contemplated by this Agreement, and (ii) obtain from any
Governmental Entities or other third parties any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or made by
Buyer or the Company or any of their subsidiaries or affiliates, as applicable,
in connection with the authorization, execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, including,
without limitation, the Merger. The Stockholders, the Company and Buyer shall
furnish all information required for any application or other filing to be made
pursuant to the rules and regulations of any applicable Law in connection with
the transactions contemplated by this Agreement.
(b) Each of Buyer, the Stockholders and the Company shall give
(or shall cause their respective subsidiaries and affiliates, as applicable, to
give) any notices to third parties, and use (and cause their respective
subsidiaries and affiliates, as applicable, to use) all reasonable efforts to
obtain any third party consents (i) necessary, proper or advisable to
consummate the transactions contemplated by this Agreement, or (ii) otherwise
required under any Material Contracts, Company Permits or other agreements in
connection with, or in order to allow the Company to continue to be entitled to
the benefits thereof following, the consummation of the transactions
contemplated hereby. In the event that any party shall fail to obtain any third
party consent described above and the parties agree to consummate the Merger
without such consent, such party shall use its best efforts, and shall take any
such actions reasonably requested by the other parties, to limit the adverse
effect upon the Company and Buyer, their respective subsidiaries, and their
respective businesses resulting, or which could reasonably be expected to
result after the Effective Time, from the failure to obtain such consent.
SECTION 5.07. Pooling; Tax Treatment.
(a) The parties will use all reasonable efforts to cause the
Merger to be treated for financial accounting purposes as a Pooling
Transaction, and shall not take, and shall use all reasonable efforts to
prevent any of their affiliates from taking, any actions which could prevent
the Merger from being treated for financial accounting purposes as a Pooling
Transaction.
(b) Each party hereto shall use all reasonable efforts to cause
the Merger to qualify, and shall not take, and shall use all reasonable efforts
to prevent any affiliate of such party from taking, any actions which could
prevent the Merger from qualifying as a reorganization under the provisions of
section 368(a) of the Code.
<PAGE> 21
SECTION 5.08. Public Announcements. Buyer may issue a press release
regarding the Merger and shall consult with the Company before issuing any
press release or otherwise making any public statements with respect to the
Merger. The Company shall not issue any press release or make any public
statement prior to such press release by Buyer, except as otherwise required by
applicable Law.
SECTION 5.9. Nasdaq Listing. Buyer shall use all reasonable efforts to
cause the shares of Buyer Common Stock to be issued in the Merger to be
approved for listing on Nasdaq as soon as practicable following the Effective
Time.
SECTION 5.10. Fees, Expenses and Other Payments. At the Closing, Buyer
will pay all transaction costs and expenses (including, without limitation, all
fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by the Company or
the Stockholders in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement and the
transactions contemplated hereby (collectively, "Company Expenses"), up to a
maximum amount of $20,000. Any Company Expenses in excess of such amount will
be paid by the Stockholders.
SECTION 5.11. Employment Agreements. At the Closing, the Surviving
Corporation will enter into an employment agreement with Nihad Hafiz in
substantially in the form of Exhibit A attached hereto.
ARTICLE VI
CLOSING CONDITIONS
SECTION 6.01. Conditions to Obligations of Buyer. The obligations of
Buyer to effect the Merger and the other transactions contemplated hereby are
also subject to the satisfaction at or prior to the Closing Date of the
following conditions, any or all of which may be waived in writing by Buyer, in
whole or in part:
(a) Each of the representations and warranties of the Company and
the Stockholders contained in this Agreement shall be true and correct in all
material respects as of the Closing Date as though made on and as of the
Closing Date (except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of such
earlier date).
(b) Each of the Company and the Stockholders shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date.
(c) No Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and which has
the effect of making the Merger illegal or otherwise prohibiting
<PAGE> 22
consummation of the Merger (an "Order"); and no such Governmental Entity or
third party shall have initiated or threatened to initiate any proceeding
seeking an Order.
(d) Each of the Company and the Stockholders shall have obtained
each consent and approval necessary in order that the transactions contemplated
hereby do not constitute a material breach or violation of, or result in a
right of termination or acceleration of any encumbrance on any material portion
of the Company's properties or assets, any Material Contract, material
arrangement or understanding or any material license, franchise or Company
Permit.
(e) Buyer shall have received reasonably satisfactory assurances
from KPMG Peat Marwick on the Closing Date that the Merger should be treated
for financial accounting purposes as a Pooling Transaction.
(f) The total Liabilities of the Company of the type that would
be reflected in a balance sheet of the Company prepared as of the Closing Date
in accordance with generally accepted accounting principles shall not exceed
$45,000.
(g) All proceedings taken by the Company and all instruments
executed and delivered by the Company and the Stockholders, as applicable, on
or prior to the Closing Date in connection with the transactions herein
contemplated shall be reasonably satisfactory in form and substance to Buyer.
(h) Buyer has completed its due diligence investigation of the
Company's technology and related Intellectual Property, and Buyer is satisfied
with the results of its investigation in its sole discretion.
(i) Buyer's Board of Directors has approved the execution and
delivery of this Agreement, the Merger and the transactions contemplated
hereby.
SECTION 6.02. Conditions to Obligations of the Company and the
Stockholders. The obligation of the Company to effect the Merger and the other
transactions contemplated hereby is also subject to the satisfaction at or
prior to the Closing Date of the following conditions, any or all of which may
be waived in writing by the Company, in whole or in part:
(a) Each of the representations and warranties of Buyer contained
in this Agreement shall be true and correct in all material respects as of the
Closing Date as though made on and as of the Closing Date (except to the extent
such representations and warranties specifically relate to an earlier date, in
which case such representations and warranties shall be true and correct in all
material respects as of such earlier date).
(b) Buyer shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date.
<PAGE> 23
(c) No Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Order which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger; and no such Governmental Entity or
third party shall have initiated or threatened to initiate any proceeding
seeking an Order.
(d) Counsel to Buyer shall have delivered to the Company its
written opinion substantially in the form of Exhibit B attached hereto.
(e) All proceedings taken by Buyer and all instruments executed
and delivered by Buyer on or prior to the Closing Date in connection with the
transactions herein contemplated shall be reasonably satisfactory in form and
substance to the Company.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Indemnification of Buyer. Notwithstanding any
investigation by Buyer or the Buyer Representatives, the Stockholders, jointly
and severally, will indemnify and hold Buyer, its subsidiaries and their
respective affiliates, directors, officers, employees and agents (collectively,
the "Buyer Indemnified Parties") harmless from any and all Liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
court costs and reasonable attorneys' fees (collectively, "Losses"), that any
Buyer Indemnified Party may suffer or incur as a result of or relating to:
(a) the breach of any representation or warranty made by the
Company or the Stockholders in this Agreement or pursuant hereto or any
allegation by a third party that, if true, would constitute such a breach; or
(b) the breach of any covenant or agreement of the Company or the
Stockholders under this Agreement or any allegation by a third party that, if
true, would constitute such a breach;
provided that (i) the Buyer Indemnified Parties will not be entitled to
indemnification under paragraph (a) of this Section 7.01 unless the aggregate
amount of all Losses for which indemnification is sought by the Buyer
Indemnified Parties pursuant to such paragraph exceeds $50,000, in which case
the Buyer Indemnified Parties will be entitled to indemnification for the full
amount of all such Losses; and (ii) the Buyer Indemnified Parties will not be
entitled to indemnification under paragraph (a) of this Section 7.01 in an
aggregate amount exceeding $1,000,000. Any claim for indemnification under this
Section 7.01 will be satisfied through the return by the Stockholders of Buyer
Common Stock having a value (based on the Conversion Price) equal to the amount
of such claim.
SECTION 7.02. Survival. The Buyer Indemnified Parties' rights to
indemnification under paragraph (a) of this Section 7.01 will survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby until the first anniversary of the
<PAGE> 24
Closing; provided that any claim for indemnification will survive until such
claim is finally resolved if a Buyer Indemnified Party notifies the
Stockholders of such claim in reasonable detail prior to the date on which such
claim would otherwise expire hereunder.
SECTION 7.03. Notice. The Buyer Indemnified Parties entitled to
receive indemnification under this Article VII agree to give prompt written
notice to the Stockholders upon the occurrence of any indemnifiable Loss or the
assertion of any claim or the commencement of any action or proceeding in
respect of which such a Loss may reasonably be expected to occur (a "Claim"),
but the Buyer Indemnified Parties' failure to give such notice will not affect
their rights to indemnification under this Article VII, except to the extent
that the Stockholders are materially prejudiced thereby. Such written notice
will include a reference to the event or events forming the basis of such Loss
or Claim and the amount involved, unless such amount is uncertain or
contingent, in which event the Buyer Indemnified Parties will give a later
written notice when the amount becomes fixed.
SECTION 7.04. Defense of Claims. The Stockholders may elect to assume
and control the defense of any Claim, including the employment of counsel
reasonably satisfactory to the Buyer Indemnified Parties and the payment of
expenses related thereto, if (a) the Stockholders acknowledge their obligation
to indemnify the Buyer Indemnified Parties for any Losses resulting from such
Claim and provide reasonable evidence to the Buyer Indemnified Parties of its
financial ability to satisfy such obligation; (b) the Claim does not seek to
impose any liability or obligation on the Buyer Indemnified Parties other than
for money damages; and (c) the Claim does not relate to the Buyer Indemnified
Parties' relationship with their customers or employees. If such conditions are
satisfied and the Buyer Indemnifying Parties select to assume and control the
defense of a Claim, then (i) the interests represented by the Stockholders will
not be liable for any settlement of such Claim effected without the consent of
the Buyer Indemnifying Parties, which consent will not be unreasonably
withheld; (ii) the Stockholders may settle such Claim without the consent of
the Buyer Indemnified Parties; and (iii) the Buyer Indemnified Parties may
employ separate counsel and participate in the defense thereof, but the Buyer
Indemnified Parties will be responsible for the fees and expenses of such
counsel unless (A) the Stockholders have failed to adequately assume the
defense of such Claim or to employ counsel with respect thereto or (B) a
conflict of interest exists between the interests of the Buyer Indemnified
Parties and the interests represented by the Stockholders that requires
representation by separate counsel, in which case the fees and expenses of such
separate counsel will be paid by the Stockholders. If such conditions are not
satisfied, the Buyer Indemnified Parties may assume and control the defense of
the Claim; provided that the Buyer Indemnified Parties may not settle any such
Claim without the consent of the Stockholders, which consent will not be
unreasonably withheld, and further provided that the Stockholders are given a
reasonable opportunity to participate in such defense (at the Stockholders'
expense).
SECTION 7.05. Exclusive Remedy. Buyer Indemnified Parties' right to
indemnification under this Article VII shall be their sole and exclusive remedy
for any breach of the Company's and Stockholders' representations and
warranties contained in this Agreement.
<PAGE> 25
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any
time prior to the Effective Time, as follows:
(a) by mutual consent of Buyer and the Company;
(b) by Buyer, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement,
or if any representation or warranty of the Company shall have become untrue,
in either case such that the conditions set forth in Sections 6.02(a) or (b)
would be incapable of being satisfied by February 28, 1999; provided that, in
any case, a willful breach shall be deemed to cause such conditions to be
incapable of being satisfied for purposes of this Section 8.01(b);
(c) by the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of Buyer set forth in this
Agreement, or if any representation or warranty of Buyer shall have become
untrue, in either case such that the conditions set forth in Sections 6.03(a)
or (b) would be incapable of being satisfied by February 28, 1999; provided
that, in any case, a willful material breach shall be deemed to cause such
conditions to be incapable of being satisfied for purposes of this Section
8.01(c);
(d) by either Buyer or the Company, if there shall be any Order
that is final and nonappealable preventing the consummation of the Merger,
except if the party relying on such Order to terminate this Agreement has not
complied with its obligations under Section 5.06 of this Agreement;
(e) by either Buyer or the Company, if the Merger shall not have
been consummated before February 28, 1999.
The right of any party hereto to terminate this Agreement pursuant to this
Section 8.01 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers, directors,
representatives or agents, whether prior to or after the execution of this
Agreement.
SECTION 8.02. Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 8.01, this Agreement shall forthwith
become void, there shall be no liability on the part of the parties to the
other parties and all rights and obligations of any party hereto shall cease,
except that nothing herein shall relieve any party of any liability for any
breach of such party's representations, warranties, covenants or agreements
contained in this Agreement. Nothing herein shall be construed to cause the
Nondisclosure Agreement to terminate upon the termination of this Agreement.
SECTION 8.03. Amendment. This Agreement may not be amended except by
an instrument in writing signed by each of the parties hereto.
<PAGE> 26
SECTION 8.04. Waiver. At any time prior to the Effective Time, Buyer,
on the one hand, and the Company, on the other hand, may (a) extend the time
for the performance of any of the obligations or other acts of the other party
hereto, (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered pursuant hereto and
(c) waive compliance by the other party with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be bound
thereby.
ARTICLE IX
REGISTRATION RIGHTS
SECTION 9.01. Registration Statement. Within ten (10) days of the
Closing Date, Buyer will prepare and file with the SEC, pursuant to the
Securities Act, a registration statement on Form S-3 (the "Registration
Statement") covering the resale of 50% of the Buyer Common Stock issued to the
Stockholders in the Merger (collectively, the "Registered Shares") in a
continuous offering. Buyer will use commercially reasonable efforts to cause
the Registration Statement to become effective as soon as practicable after the
Closing and to remain effective until the earlier of (i) the date that all of
the Registered Shares have been sold by the Stockholders or (ii) the first
anniversary of the Closing. The Stockholders will not sell any Registered
Shares under the Registration Statement unless, at the time of sale, the
Registration Statement (and the most recently filed post-effective amendment
thereto, if any) has been declared effective. The period of time during which
the Registration Statement is effective is referred to as the "Registration
Period."
SECTION 9.02. Limitations on Sale.
(a) Each Stockholder will notify Buyer two business days prior to
selling any Registered Shares pursuant to the Registration Statement. If, upon
receipt of such a notice, Buyer certifies to such Stockholder in writing that
(i) due to a change in circumstances or a pending transaction, the Registration
Statement contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (ii) the public disclosure required to correct such
misstatement or omission would be impracticable or injurious to Buyer, then the
Stockholder will refrain from selling any Registered Shares pursuant to the
Registration Statement for the period of time requested by Buyer (a "Blackout
Period"). Buyer may impose no more than four Blackout Periods, which may not
exceed 45 calendar days each and may not exceed 60 calendar days in the
aggregate. Buyer will use reasonable efforts to minimize the time period during
which the Stockholders are required to refrain from selling under this
paragraph.
(b) In addition to the foregoing restrictions, the Stockholders
will not sell, transfer or otherwise dispose of any shares of Buyer Common
Stock or otherwise reduce their risk of loss with respect to any of the Buyer
Common Stock issued to them in the Merger until Buyer has publicly released
earnings covering at least 30 days of combined operations of the Surviving
Corporation (the "Earnings Statement"). Buyer will use commercially reasonable
efforts to release such earnings as soon as reasonably practicable after the
Closing; provided that
<PAGE> 27
Buyer will not be required to publicly release earnings for a period other
than a full calendar quarter.
(c) To the extent Blackout Period(s) occurs or the Earnings
Statement is delayed more than 30 days from the end of the period covered by
such statement (an "Earnings Statement Delay"), Buyer will use commercially
reasonable efforts to cause the Registration Statement to remain effective for
an additional period of time beyond the first anniversary of the Closing equal
to the aggregate number of days of such Blackout Period(s) and Earnings
Statement Delay, unless all of the Registered Shares have been sold by the
Stockholders prior to the first anniversary of the Closing.
SECTION 9.03. Information. Each Stockholder will furnish to Buyer, at
Buyer's reasonable request, such information regarding the ownership of
Registered Shares by such Stockholder and the intended method of disposition
thereof as is required in connection with the preparation of a registration
statement covering the Registered Shares.
SECTION 9.04. Expenses. Buyer will bear all expenses arising or
incurred in connection with any registration of the Registered Shares
hereunder, including without limitation registration fees, printing expenses
and Buyer's accounting and legal fees and expenses; provided that each
Stockholder will bear the expense of any underwriting fees, discounts or
commissions applicable to its sale of the Registered Shares and the fees and
expenses of any separate legal counsel or accounting firm engaged by such
Stockholder.
SECTION 9.05. Indemnification.
(a) Buyer agrees to indemnify the Stockholders and each
underwriter and selling broker of the Registered Shares registered hereunder
and their respective officers and directors and each person or entity, if any,
who controls any of the foregoing within the meaning of Section 15 of the
Securities Act and their respective successors against all Losses arising out
of or relating to any untrue statement (or alleged untrue statement) of a
material fact contained in the Registration Statement or any prospectus
included therein or incident thereto or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and agrees to reimburse the
Stockholders and such other persons for any legal and other expenses reasonably
incurred by them in connection with investigating or defending any claim or
action related to such a Loss; provided, however, that Buyer will not be liable
in any such case if and to the extent that (i) such statement or omission was
made in reliance upon information (including, without limitation, written
negative responses to inquiries) furnished to Buyer in writing by a Stockholder
expressly for use in the Registration Statement or such a prospectus or (ii) a
Stockholder fails to deliver or cause to be delivered a copy of the final
prospectus relating to such offering (as then amended or supplemented) to the
person asserting such claim and such final prospectus would have cured the
defect giving rise to such Loss.
(b) Each Stockholder will indemnify Buyer, the other Stockholders
and their respective officers and directors and each person or entity, if any,
who controls any of the
<PAGE> 28
foregoing within the meaning of Section 15 of the Securities Act and their
respective successors against all Losses arising out of or relating to any
untrue statement (or alleged untrue statement) of a material fact contained in
the Registration Statement or any prospectus included therein or incident
thereto or any omission (or alleged omission) to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, and will reimburse Buyer, the other Stockholders and such other
persons for any legal and any other expenses reasonably incurred by them in
connection with investigating or defending any claim or action related to such
a Loss; provided, however, that this subparagraph (b) shall apply only in the
case of and to the extent specified in clauses (i) and (ii) of the preceding
paragraph.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to any of the two preceding paragraphs, the
indemnified and indemnifying parties shall comply with the notice and defense
of claims provisions of Sections 7.03 and 7.04 with respect to such proceeding.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given upon receipt, if delivered personally or by overnight delivery service or
if mailed by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like changes of address) or sent by
electronic transmission to the facsimile number specified below:
(a) If to Buyer, to:
CNET, Inc.
150 Chestnut Street
San Francisco, California 94111
Attention: Shelby W. Bonnie
Facsimile: (415) 395-9205
with a copy to:
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attention: R. Clayton Mulford
Facsimile: (214) 939-5849
(b) If to the Company, to:
AuctionGate Interactive, Inc.
21072 Bake Parkway, Suite 1000
Lake Forest, California 92630
<PAGE> 29
Attention: Nihad Hafiz
Facsimile: (949) 460-7802
If to the Stockholders, to:
Nihad Hafiz
21072 Bake Parkway, Suite 1000
Lake Forest, California 92630
Facsimile: (949) 460-7802
Denny Chittick
8665-1 South 51st Street
Phoenix, AZ 85044
Facsimile: (602) 431-0272
with a copy to:
Johnson & Associates
1641 W. Glendale Ave., Suite A
Phoenix, AZ 85021
Attention: Kurt A. Johnson
Facsimile: (602) 841-5545
SECTION 10.02. Certain Definitions. For the purposes of this
Agreement, the term:
(a) "affiliate" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person.
(b) "business day" means any day other than a day on which banks
in the State of California are authorized or obligated to be closed.
(c) "control" (including the terms "controlled," "controlled by,"
and "under common control with") means the possession, directly or indirectly,
or as trustee or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock or
as trustee or executor, by contract or credit arrangement or otherwise.
(d) "knowledge" of or "known" by a person, with respect to any
matter in question, means (i) in the case of the Company, if any executive
officer of the Company has actual knowledge of such matter or would have
knowledge of such matter following due inquiry, (ii) in the case of each of the
Stockholders, if such Stockholder had actual knowledge of such matter and (iii)
in the case of Buyer, if any executive officer of Buyer has actual knowledge of
such matter or would have knowledge of such matter following due inquiry.
<PAGE> 30
(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as used
in Section 13(d) of the Exchange Act).
(f) "Tax" or "Taxes" means any and all taxes, charges, fees,
levies, assessments, duties or other amounts payable to any federal, state,
local or foreign taxing authority or agency, including, without limitation, (i)
income, franchise, profits, gross receipts, minimum, alternative minimum,
estimated, ad valorem, value added, sales, use, service, real or personal
property, capital stock, license, payroll, withholding, disability, employment,
social security, workers compensation, unemployment compensation, utility,
severance, excise, stamp, windfall profits, transfer and gains taxes, (ii)
customs, duties, imposts, charges, levies or other similar assessments of any
kind, and (iii) interest, penalties and additions to tax imposed with respect
thereto.
SECTION 10.03. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement Section references herein are, unless the
context otherwise requires, references to sections of this Agreement.
SECTION 10.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
SECTION 10.05. Entire Agreement. This Agreement (together with the
Exhibits and the Schedules to this Agreement) and the Nondisclosure Agreement
constitute the entire agreement of the parties, and supersede all prior
agreements and undertakings, both written and oral, among the parties or
between any of them, with respect to the subject matter hereof.
SECTION 10.06. Assignment. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 10.07. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, except as expressly provided with respect to Indemnified
Parties in Article VII.
SECTION 10.08. Specific Performance. The parties hereby acknowledge
and agree that the failure of any party to perform its agreements and covenants
hereunder, including its
<PAGE> 31
failure to take all actions as are necessary on its part to the consummation of
the Merger, will cause irreparable injury to the other parties for which
damages, even if available, will not be an adequate remedy. Accordingly, each
party hereby consents to the issuance of injunctive relief by any court of
competent jurisdiction to compel performance of such party's obligations and to
the granting by any court of the remedy of specific performance of its
obligations hereunder.
SECTION 10.09. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of any party hereto in the exercise of any
right hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive to,
and not exclusive of, any rights or remedies otherwise available.
SECTION 10.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, regardless
of the laws that might otherwise govern under applicable principles of
conflicts of law.
SECTION 10.11. Counterparts. This Agreement may be executed in
multiple counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 32
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
CNET, INC.
/s/ HALSEY MINOR
------------------------
Chief Executive Officer
AUCTIONGATE INTERACTIVE, INC.
/s/ NIHAD HAFIZ
------------------------
Chief Executive Officer
STOCKHOLDERS:
/s/ NIHAD HAFIZ
------------------------
Nihad Hafiz
/s/ DENNY CHITTICK
------------------------
Denny Chittick
I, David Overmyer, Assistant Secretary of CNET, Inc., hereby certify that this
agreement has been adopted by CNET, Inc. pursuant to Section 251(f) of the
Delaware General Corporate Law and that all of the conditions specified in the
first sentence of such subsection have been satisfied by CNET, Inc.
/s/ DAVID OVERMYER
------------------------
David Overmyer
Assistant Secretary
<PAGE> 1
EXHIBIT 2.3
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is entered into as of
December 18, 1998, by and among CNET, Inc., a Delaware corporation ("Buyer"),
Jenesys LLC, a Washington limited liability company ("Seller"), and, for the
limited purposes specified on the signature page hereto, Steve Jenkins
("Jenkins").
WHEREAS, Seller operates the WinFiles.com Internet site, which is
accessible from http://www.winfiles.com (the "Site"), as well as the related
email newsletter (collectively with the Site, the "Business");
WHEREAS, Seller's assets used in the operation of the Business include
both the assets described on attached Schedule A (the "Included Assets") and the
assets described on attached Schedule B (the "Excluded Assets"); and
WHEREAS, Buyer desires to acquire, and Seller desires to sell, the
Included Assets on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, Buyer and Seller hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale. At the Closing (as defined in Section 1.4),
Seller agrees to sell, assign and transfer the Included Assets to Buyer, and
Buyer agrees to purchase the Included Assets from Seller, on the terms and
subject to the conditions set forth in this Agreement. The Excluded Assets are
not being sold to Buyer.
1.2 Assumed Liabilities. It is understood and agreed that Buyer will
not assume, and Seller will retain following the Closing, any direct or indirect
debts, obligations or liabilities of Seller or the Business or binding upon the
Assets of any nature, whether absolute, accrued, contingent, liquidated or
otherwise, and whether due or to become due, asserted or unasserted, known or
unknown (collectively, "Liabilities"), except for the following specific
liabilities (the "Assumed Liabilities"):
(a) obligations to be performed after the Closing under the
Assumed Contracts identified in Schedule 2.9, but excluding any Liabilities
under an Assumed Contract that result from any breach or default (or event that
with notice or lapse of time would constitute a breach or default) by Seller
under an Assumed Contract.
1.3 Purchase Price. As consideration in full for the purchase of the
Included Assets, Buyer will assume the Assumed Liabilities and make cash
payments to Seller in the aggregate amount of $11,500,000 (collectively, the
"Purchase Price"). The Purchase Price will be payable as follows:
1
<PAGE> 2
(a) Buyer will pay $5,750,000 of the Purchase Price at the Closing
(the "Closing Cash Payment") by wire transfer of immediately available funds to
accounts specified in writing by Seller to Buyer at least two business days
prior to the Closing); and
(b) Buyer will pay $5,750,000 of the Purchase Price (the "Deferred
Payment") 18 months after the Closing (or, if such day is not a business day, on
the next succeeding business day) by wire transfer of immediately available
funds (to an account specified in writing by Seller to Buyer at least two
business days prior to the payment date).
1.4 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will occur on the fifth business day after all of the
conditions set forth in Article V have been satisfied or waived or on such
earlier date as Buyer and Seller may mutually agree (the "Closing Date").
1.5 Closing Deliveries. At the Closing:
(a) Buyer will pay the Closing Cash Payment to Seller by wire
transfer, in accordance with Section 1.3(a);
(b) Seller will execute and deliver to Buyer a Bill of Sale
conveying the Included Assets to Buyer, substantially in the form attached as
Exhibit A (the "Bill of Sale");
(c) Seller will complete and deliver to Buyer all forms and other
documents required by Network Solutions, Inc. ("InterNIC") or otherwise
necessary to transfer to Buyer (or Buyer's designee) registered ownership of the
Internet domain names included within the Included Assets (the "Names"); and
(d) To the extent not previously delivered, Seller will deliver to
Buyer (or otherwise make available) the originals or copies of all of the disks,
files, proprietary information and other data relating to the Included Assets,
together with an accounts receivable history report for current customers of the
Business.
1.6 Pre-Closing Deliveries. At Buyer's request following the date
hereof, Seller will transmit or deliver to Buyer an electronic copy of all files
and other information necessary or advisable to allow Buyer to prepare to host
the Site on Buyer's own servers, with the same functionality and features
currently offered through the Site, immediately upon the Closing, including
without limitation all original graphics, file record data, layout templates and
other Intellectual Property included within the Included Assets. Seller will
also forward all file submission email received after the date hereof and prior
to the Closing to an email address designated by Buyer. Buyer will not begin
hosting the Site at a publicly accessible address until after the Closing. If
this Agreement is terminated prior to the Closing, Buyer will destroy all of its
copies of such information, or return such information to Seller.
1.7 Further Assurances. After the Closing, Seller will execute and
deliver to Buyer, without further consideration, but at Buyer's sole expense,
such additional instruments of conveyance and transfer as Buyer may reasonably
request in order more effectively to convey and transfer the operation of the
Business and the Included Assets to Buyer or to assist Buyer in reducing to
possession any of the Included Assets or exercising rights with respect thereto.
2
<PAGE> 3
1.8 Allocation of Purchase Price. Buyer and Seller agree that, for all
purposes relevant to the calculation of federal or state income taxes, the
Purchase Price will be allocated among the Included Assets in the manner
described in Schedule 1.8. Buyer and Seller each agree to file Internal Revenue
Service Form 8594, Asset Allocation Statement, consistent with the allocation
described in Schedule 1.8.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer (which representations
and warranties will survive the transactions contemplated hereby) as follows:
2.1 Organization. Seller is a limited liability company duly organized,
validly existing and in good standing under the laws of Washington, and has full
limited liability company power to own its properties and to operate the
Business as presently operated.
2.2 Authority. Seller has all necessary right, power and authority to
execute, deliver and perform under this Agreement, the Bill of Sale and the
other documents required to be executed and delivered by Seller hereunder (the
"Seller Documents"). This Agreement has been duly executed and delivered by
Seller and constitutes the legal, valid and binding agreement of Seller,
enforceable against Seller in accordance with its terms. Upon execution and
delivery at the Closing, the other Seller Documents will have been duly executed
and delivered by Seller and will constitute the legal, valid and binding
agreement of Seller, enforceable against Seller in accordance with their terms.
2.3 Included Assets. Except for the specific items enumerated on
Schedule B, the Included Assets include all tangible and intangible assets used
by Seller or Jenkins in the conduct of the Business. Either Seller or Jenkins is
registered with InterNIC as the administrative contact for each of the Names,
and the Included Assets include all rights granted by InterNIC to Seller or
Jenkins with respect to the use of the Names. Seller has good and marketable
title to all of the Included Assets and owns all of the Included Assets free and
clear of any Liabilities, liens, claims, security interests, encumbrances or
contingencies of any nature (collectively, "Liens"), other than statutory Liens
securing current taxes and other obligations that are not yet delinquent, to the
extent such Liens could arise after the Closing. The execution and delivery of
the Bill of Sale by Seller at the Closing will convey to and vest in Buyer good
and marketable title to the Included Assets, free and clear of any Liens except
those described in clause (i) of the preceding sentence. With respect to any
Included Assets held by Seller under leases included within the Assumed
Contracts, the foregoing representations concerning title are limited to
Seller's leasehold interest in such Assets.
2.4 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
governmental or quasi-governmental agency, authority, commission, board or other
body (collectively, a "Governmental Body") is required on the part of Seller or
any of its owners in connection with the transfer of any of the Included Assets
to Buyer or any of the other transactions contemplated by this Agreement.
3
<PAGE> 4
2.5 No Violation. Except as disclosed in Schedule 2.5, neither the
execution and delivery of this Agreement, nor the consummation of the
transaction contemplated hereby, will require consent under, conflict with or
result in the breach of any term or provision of, or violate or constitute a
default under, or result in the creation of any lien on the pursuant to, or
relieve any Person of any obligation under, or give any Person the right to
terminate or accelerate any obligation under, any agreement, instrument, permit,
license, law or regulation to which Seller is a party or by which Seller or any
of the Included Assets is in any way bound or obligated. For purposes of this
Agreement, "Person" means any individual, corporation, partnership, limited
liability company, Governmental Body or other entity.
2.6 Financial and Operational Data.
(a) Attached as Schedule 2.6(a) is certain unaudited financial
information concerning the Business, including a list of advertising revenues
received by the Business for the six months ending October 31, 1998, and an
agreed upon procedures report prepared by Arthur Andersen LLP with respect to
such advertising revenues (the "Schedule of Advertising Revenues"). The Schedule
of Advertising Revenues is accurate and presents fairly the information set
forth therein and does not contain any items of a special or nonrecurring
nature, except as expressly stated therein. The Schedule of Advertising Revenues
has been prepared from the books and records of Seller.
(b) Since June 1, 1998, except as specifically contemplated by this
Agreement and except for cash distributions to Seller's equity owners, there has
not been: (i) any material adverse change in the condition (financial or
otherwise), results of operations, business, Site traffic, prospects, assets or
Liabilities of the Business; (ii) any change by Seller in its accounting
methods, principles or practices; (iii) any sale, assignment or transfer of any
assets of the Business, except in the ordinary course of business and consistent
with past practice; (iv) any waiver by Seller of any material rights related to
the Business or the Included Assets; (v) any other transaction, agreement or
commitment affecting the Business or the Included Assets, except in the ordinary
course of business and consistent with past practice; or (vi) any agreement or
understanding to do or resulting in any of the foregoing.
(c) Schedule 2.6(c) sets forth certain statistics concerning the
operations of the Business, which are accurate (subject to the margins of error
indicated in such schedule for certain of such statistics). The summary of
traffic for the Site included in Schedule 2.6(c) accurately and fairly reflects
traffic for the Site during the periods indicated, and, to Seller's knowledge,
there is no reason why traffic for the Site during such periods would be
unrepresentative or atypical in any material respect. Seller has delivered to
Buyer accurate and complete copies of the computer log files that correspond to
the summary of traffic set forth in Schedule 2.6(c).
(d) To Seller's knowledge, Seller has no Liabilities related to or
arising out of the Business or the Included Assets except for (i) the Assumed
Liabilities; and (ii) performance obligations under the Excluded Contracts.
2.7 Actions. There are currently no pending or, to Seller's knowledge,
threatened lawsuits or proceedings against or relating to Seller or the Business
or to which any of the Included Assets is subject. None of Seller, the Business
nor any of the Included Assets is subject to or bound by any judgment, order,
writ, injunction or decree.
4
<PAGE> 5
2.8 Compliance with Law. In connection with the Business, and to
Seller's knowledge, Seller is currently complying with and has at all times
complied with, and the Site and the use, operation and maintenance of the
Included Assets comply with and have at all times complied with, all applicable
statutes, laws, ordinances, decrees, orders, rules and regulations, including
without limitation all laws and regulations relating to taxes, required licenses
and permits, communications decency, obscenity, occupational health and safety,
employment and labor matters and environmental protection.
2.9 Material Agreements. There are no agreements binding upon Seller,
the Business or the Included Assets that are related to the Business other than
the Assumed Contracts and the Excluded Contracts described on Schedule 2.9
(collectively, the "Material Agreements"). Seller has delivered to Buyer a copy
of each written Material Agreement and a written summary of each oral Material
Agreement. Seller has performed in all material respects all of its respective
obligations under each Material Agreement, and there exists no material breach
or default (or event that with notice or lapse of time would constitute a
material breach or default) under any Material Agreement. To Seller's knowledge,
each Assumed Contract is valid, binding and in full force and effect and
enforceable in accordance with its terms. There has been no termination or
threatened termination or notice of default under any Assumed Contract. To the
extent indicated in Schedule 2.9, the Excluded Contracts will be terminated at
or prior to the Closing at Seller's sole cost and expense.
2.10 Intellectual Property Rights.
(a) For purposes of this Agreement, "Intellectual Property" means
all (i) patents, copyrights and copyrightable works, trademarks, service marks,
trade names, service names, brand names, logos, trade dress, Internet domain
names and all goodwill symbolized thereby and appurtenant thereto; (ii) trade
secrets, inventions, technology, know-how, proprietary information, research
material, specifications, surveys, designs, drawings and processes; (iii)
computer software and related documentation, including without limitation
operating software, network software, firmware, middleware, design software,
design tools, management information systems, systems documentation and
instructions, databases and the tangible objects in which the foregoing rights
are embodied (collectively, "Software"); (iv) content of the Site, artwork,
photographs, editorial copy and materials, formats and designs, including
without limitation all content currently or previously displayed or offered for
downloading through the Site; (v) email addresses of newsletter subscribers,
customer, partner, prospect and marketing lists, market research data, sales
data and traffic and user data; (vi) registrations, applications, recordings,
common law rights, "moral" rights of authors, licenses (to or from Seller) and
other agreements relating to any of the foregoing; (vii) rights to obtain
renewals, reissues, extensions, continuations, divisions or equivalent
extensions of legal protection pertaining to the foregoing; and (viii) claims,
causes of action or other rights at law or in equity arising out of or relating
to any infringement, misappropriation, distortion, dilution or other
unauthorized use or conduct in derogation of the foregoing occurring prior to
the Closing.
(b) The Included Assets do not include any registrations or
applications for registration of any Intellectual Property or any licenses (to
or from Seller) with respect to any registered Intellectual Property.
5
<PAGE> 6
(c) Except as otherwise provided in Section 2.12 below, Seller owns
or has the right to use pursuant to Assumed Contracts all Intellectual Property
used by Seller in connection with or necessary to the operation of the Business,
without infringing on or otherwise acting adversely to the rights or claimed
rights of any Person, and all of Seller's rights in such Intellectual Property
are included in the Included Assets. Seller is not obligated to pay any royalty
or other consideration to any Person in connection with the use of any such
Intellectual Property.
(d) No claim has been asserted against Seller to the effect that
the use of any Intellectual Property by Seller infringes the rights of any
Person. To Seller's knowledge, no other Person is infringing the rights of
Seller with respect to the Intellectual Property used in the Business.
2.11 Affiliate Transactions and Competing Interests.
(a) Set forth in Schedule 2.11(a) is a complete list of all
equipment, services and other items of value provided to the Business by other
divisions of Seller or by any "affiliate" of Seller within the meaning of Rule
144 under the Securities Act of 1933, as amended (an "Affiliate").
(b) Except as described in Schedule 2.11(b), neither Seller nor any
of its Affiliates (i) owns, directly or indirectly, an interest in any Person
that is a competitor, customer or supplier of the Business or that otherwise has
material business dealings with the Business or (ii) is a party to, or otherwise
has any direct or indirect interest opposed to Seller under, any Material
Agreement or other business relationship or arrangement material to the
Business.
2.12 Microsoft. Attached as Schedule 2.12 is an accurate summary of all
written, verbal or electronic communications between Microsoft Corporation or
any of its affiliates or agents ("Microsoft"), on the one hand, and Seller or
Jenkins, on the other hand, related to (a) the use by Seller of any of the
Names, (b) any assertion by Microsoft of rights in or to any of the Names, as
well as copies of any such written or electronic communications, or (c)
discussions regarding Microsoft's grant of a license to Seller to use certain of
the Names. The only Names as to which Microsoft has asserted any potential
claims or rights in such communications are "windows95.com", "windows96.com",
"windows97.com", "windows98.com" and "windows99.com" (the "Disputed Names").
Notwithstanding Section 2.7, Section 2.10 or any other provision of this
Agreement to the contrary, except for the two preceding sentences and Section
2.13 below, Seller and Jenkins make no representation or warranty hereunder, and
have no indemnification obligations hereunder, with respect to any rights that
Microsoft may have in or to the Disputed Names or with respect to any Liens that
Microsoft may have asserted in the past or may assert in the future regarding
the Disputed Names.
2.13 No Misrepresentations. Seller has disclosed to Buyer all facts and
information known to it that a reasonable person would believe to be material to
a purchase of the Included Assets. The representations and warranties made by
Seller in this Agreement are true, complete and correct in all material respects
and, to Seller's knowledge, do not contain any untrue statement of a material
fact or omit to state any material fact necessary to make any such
representation or warranty, under the circumstances in which it is made, not
misleading.
6
<PAGE> 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller (which representations and
warranties will survive the transactions contemplated hereby) as follows:
3.1 Good Standing. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
3.2 Authority. The execution, delivery and performance of this
Agreement have been authorized by all necessary action on the part of Buyer.
This Agreement has been duly executed and delivered by Buyer and constitutes the
legal, valid and binding agreement of Buyer, enforceable against Buyer in
accordance with its terms.
3.3 No Violation. Neither the execution or delivery of this Agreement
by Buyer nor the consummation by Buyer of the transactions contemplated hereby
will require any consent under, or conflict with result in the breach of any
terms or provisions of, or violate or constitute a default under any agreement,
instrument, permit, license, law or regulation to which Buyer is a party or by
which Buyer is a party or by which Buyer is in any way bound or obligated.
ARTICLE IV
COVENANTS AND AGREEMENTS
4.1 Conduct of Business. Prior to the Closing, unless Buyer otherwise
consents in writing, Seller will: (a) operate the Business in the ordinary
course of business and consistent with past practices, and use commercially
reasonable efforts to preserve the goodwill associated with the Business and the
Included Assets; (b) except as specifically contemplated by this Agreement, not
engage in any transaction related to the Business or the Included Assets that is
outside the ordinary course of business, including without limitation by making
any material expenditure, investment or commitment, entering into or modifying
the terms of any material agreement or arrangement or transferring any interest
in the Included Assets; and (c) maintain books of account, computer log files
and other records in the usual, regular and ordinary manner and consistent with
past practices.
4.2 Access and Information. Prior to the Closing, Seller will permit
Buyer and its representatives to have reasonable access, during normal business
hours, to all assets, properties, books, records and documents relating to the
Business and the Included Assets and will furnish to Buyer such information,
financial records, computer files and other documents relating to the Business
and the Included Assets as Buyer may reasonably request, provided that Buyer
will exercise its right of access in a manner that does not materially interfere
with or interrupt the operation of the Business. Seller will permit Buyer and
its representatives reasonable access to Seller's officers, employees,
accountants, customers and suppliers for consultation or verification of any
information obtained by Buyer and will instruct such persons to cooperate with
Buyer and its representatives in such consultations and in verifying such
information.
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4.3 No Shop. Each of Seller and Jenkins hereby covenants and agrees
that (a) it will not, and will not permit any of its Affiliates to, initiate,
solicit or encourage (including by way of furnishing information or assistance),
or take any other action to facilitate, any inquiries or the making of any
proposal relating to, or that may reasonably be expected to lead to, any sale of
the Included Assets or the Business or any portion thereof, whether by merger,
stock sale, asset sale or otherwise (a "Competing Transaction"), or enter into
discussions or negotiate with any Person in furtherance of such inquiries or to
obtain a Competing Transaction, or endorse or agree to endorse any Competing
Transaction, or authorize or permit any of the officers, directors or employees
of Seller or any investment banker, financial advisor, attorney, accountant or
other representative retained by Seller, Jenkins or any of their Affiliates to
take any such action, and (b) Seller and Jenkins shall promptly notify Buyer of
all relevant terms of any such inquiries and proposals received by it or any of
its Affiliates or by any such officer, director, investment banker, financial
advisor, attorney, accountant or other representative relating to any of such
matters, and if such inquiry or proposal is in writing, Seller or Jenkins shall
promptly deliver or cause to be delivered to Buyer a copy of such inquiry or
proposal.
4.4 Publicity. Prior to the Closing, except as otherwise required by
law, neither Seller, Jenkins nor Buyer (directly or through agents) will
disclose the existence or terms of this Agreement or the transactions
contemplated hereby to, or otherwise engage in any written, verbal or electronic
communications concerning the transactions contemplated hereby with, any Person
(including without limitation any communication with Microsoft concerning the
use of the Disputed Names or any communication with advertising customers of the
Site concerning the proposed transactions), unless the other party consents in
advance to the text of any written or electronic communication or the nature,
content and purpose of any verbal communication, which consent will not be
unreasonably withheld. Following the Closing, neither Seller, Jenkins nor Buyer
will publicize derogatory comments concerning the operation of the Site by the
other party or parties.
4.5 Employees. Prior to the Closing, Buyer will notify Seller in
writing of those employees of the Business to whom Buyer will offer employment
following the Closing. Any such employees who accept employment with Buyer on
the terms offered are referred to as the "Transferred Employees." Seller (and
not Buyer) will be solely responsible for and will discharge in full in a due
and timely manner any Liabilities related to or resulting from (a) the
employment of the Transferred Employees prior to the Closing, and (b) the
employment, termination of employment or reassignment of any employees of the
Business other than the Transferred Employees.
4.6 Discharge of Retained Liabilities. Following the Closing, Seller
will fully pay or otherwise discharge in full, prior to the due date therefor
and otherwise in accordance with the terms thereof, all Liabilities of Seller
related to the Business other than the Assumed Liabilities.
4.7 Fulfillment of Conditions by Seller. Seller will not intentionally
take any action that is reasonably likely to cause the conditions on the
obligations of the parties to effect the transactions contemplated hereby not to
be fulfilled, including without limitation by taking any action that would cause
the representations and warranties of Seller herein not to be true and correct
as of the Closing. Seller will take all commercially reasonable actions within
its power to
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cause to be fulfilled the conditions precedent to Buyer's obligations to
consummate the transactions contemplated hereby.
4.8 Fulfillment of Conditions by Buyer. Buyer will not intentionally
take any action that is reasonably likely to cause the conditions on the
obligations of the parties to effect the transactions contemplated hereby not to
be fulfilled, including without limitation by taking any action that would cause
the representations and warranties of Buyer herein not to be true and correct as
of the Closing. Buyer will take all commercially reasonable actions within its
power to cause to be fulfilled the conditions precedent to the obligations of
Seller to consummate the transactions contemplated hereby.
4.9 Closing Costs. Buyer will pay all transaction costs and expenses
(including legal and accounting fees) that it incurs in connection with the
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby. Seller will pay all transaction costs and expenses
(including legal and accounting fees) that Seller incurs in connection with the
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby, and Seller will pay all transfer taxes associated with the
sale of the Included Assets to Buyer.
4.10 Post-Closing Email. Following the Closing, Buyer will forward, at
its expense, email received by the Site at the email addresses listed on
Schedule 4.10 (the "Specified Addresses") to the corresponding forwarding
addresses specified in Schedule 4.10 (the "Forwarding Addresses") in accordance
with this paragraph. For the first week following the Closing, Buyer will
forward email from the Specified Addresses to the corresponding Forwarding
Addresses without any autoreply prompt or notification to the sender of the
recipient's new email address. From the second week after the Closing until
three months after the Closing, Buyer will forward email from the Specified
Addresses to the corresponding Forwarding Addresses and provide an autoreply
message notifying the sender of the recipient's new address. During the fourth
month following the Closing, Buyer will not be obligated to forward email from
the Specified Addresses but will provide an autoreply message notifying the
sender that the intended recipient no longer maintains a mailbox at such
address. After the fourth month following the Closing, Buyer will have no
obligation to forward email from the Specified Addresses or to notify the sender
that the intended recipient no longer maintains a mailbox at such address.
Notwithstanding the foregoing, (a) with respect to persons providing transition
services after the Closing pursuant to Section 6.4, Buyer agrees to implement
the foregoing procedures commencing on the date that such persons are no longer
providing such transition services, rather than from the date of the Closing,
(b) Buyer will be entitled to inspect any email addressed to the Specified
Addresses and will have no obligation to forward email messages that reasonably
appear to relate to solely to the Business, and (c) at Buyer's request, Seller
will obtain an agreement from each individual who receives email at the
Forwarding Addresses to return to Buyer any email that relates to the Business.
4.11 Collection of Accounts Receivable.
(a) All accounts receivable arising (before or after the Closing)
out of the operation of the Business by Seller prior to the Closing Date are
referred to as the "Seller's
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Receivables." All accounts receivable arising out of the operation of the
Business by Buyer on or after the Closing Date are referred to as "Buyer's
Receivables." Unless the parties agree on another allocation method with respect
to a particular account receivable, accounts that cover a time period both
before and after the Closing Date will be allocated between Seller's Receivables
and Buyer's Receivables based on the number of days before and after the Closing
Date.
(b) For a period of 120 days following the Closing (the "Collection
Period"), Buyer (and not Seller) will attempt to collect Seller's Receivables,
on behalf of Seller, in good faith in a manner consistent with that used in
attempting to collect Buyer's other accounts receivable and in compliance with
applicable law. Payments from each account debtor in respect of Seller's
Receivables and in respect of Buyer's Receivables will be applied as instructed
by the account debtor or, if no such instructions are provided, in the order in
which the accounts were created. Neither party will, nor will it permit any of
its employees or agents to, request that any account debtor issue any
instruction with respect to the application of its payments. At least once each
month during the Collection Period, Buyer will pay to Seller any amounts
collected by Buyer in respect of Seller's Receivables. If Seller receives any
payment in respect of Seller's Receivables, Seller will promptly notify Buyer
thereof, and if Seller receives any payment in respect of Buyer's Receivables,
Seller will promptly (and in any event within 15 days) pay over the amount
collected to Buyer. Following the Collection Period, Seller shall have the right
to collect any previously uncollected Seller's Receivables using any
commercially reasonable and lawful means.
4.12 CD-ROM Business. Immediately following the Closing, Seller will
discontinue the CD-ROM distribution business currently described on the Site
(the "CD-ROM Business") and discharge any Liabilities related to or arising out
of the operation of the CD-ROM Business; provided that, during the 30 days after
the Closing, Seller may liquidate the inventory of CD-ROMs held by Seller at the
Closing.
ARTICLE V
CLOSING CONDITIONS
5.1 Conditions to Obligations of Buyer. The obligations of Buyer under
this Agreement are subject to the satisfaction at or prior to the Closing of the
following conditions, but compliance with any such conditions may be waived by
Buyer:
(a) All representations and warranties of Seller contained in this
Agreement are true and correct in all material respects at and as of the Closing
with the same effect as though such representations and warranties were made at
and as of the Closing.
(b) Seller has performed and complied in all material respects with
all the covenants and agreements required by this Agreement to be performed or
complied with by them at or prior to the Closing.
(c) Between the date of this Agreement and the Closing, there has
not occurred any material adverse change in the condition (financial or
otherwise), results of operations, business, Site traffic, prospects, assets or
Liabilities of the Business.
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(d) Seller has delivered to Buyer a closing certificate,
substantially in the form of Exhibit B hereto.
(e) Seller has entered into an agreement with Microsoft, on terms
satisfactory to Buyer and assignable to Buyer hereunder, pursuant to which (i)
Microsoft will acquire ownership of the Disputed Names in return for an
agreement to promote the Site on certain of Microsoft's Internet sites, and (ii)
Buyer will be entitled to use the Names "windows95.com" and "windows98.com" in
connection with the Business for a specified period of time.
(f) Buyer has received all contractual and governmental consents
and approvals necessary in connection with the consummation of the transactions
described herein.
(g) Seller has delivered to Buyer executed UCC-3 termination
statements or other releases satisfactory to Buyer to evidence the release of
any Liens on the Included Assets other than statutory Liens securing current
taxes and other obligations that are not yet delinquent, to the extent such
Liens could arise after the Closing.
(h) Seller has delivered to Buyer a legal opinion of Seller's
counsel, substantially in the form of Exhibit C hereto.
5.2 Conditions to Obligations of Seller. The obligations of Seller
under this Agreement are subject to the satisfaction at or prior to the Closing
of the following conditions, but compliance with any such conditions may be
waived by Seller:
(a) All representations and warranties of Buyer contained in this
Agreement are true and correct in all material respects at and as of the Closing
with the same effect as though such representations and warranties were made at
and as of the Closing.
(b) Buyer has performed and complied in all material respects with
the covenants and agreements required by this Agreement to be performed or
complied with by it at or prior to the Closing.
(c) Microsoft has not taken or threatened to take legal action
against or sought or threatened to seek to enforce legal or equitable remedies
against Seller or Jenkins, and Seller and Jenkins have received all contractual
and governmental consents and approvals necessary in connection with the
consummation of the transactions described herein; provided that Seller will not
be relieved of its obligations hereunder pursuant to this paragraph unless it
reasonably believes that such legal action or enforcement (giving effect to any
agreement, arrangement or understanding between Seller or Jenkins and Microsoft)
or the failure to obtain such consent or approval could result in material
losses or damage to Seller or to Jenkins.
(d) Buyer has delivered to Seller a legal opinion of Buyer's
counsel, substantially in the form of Exhibit D hereto.
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ARTICLE VI
CONFIDENTIALITY AND NONCOMPETITION
6.1 Confidential Information.
(a) The Included Assets include certain commercially valuable
technical and non-technical confidential or proprietary information of Seller
(collectively, "Confidential Information"). Confidential Information means all
information used by Seller in connection with operating the Business that is not
generally known to others in similar areas of business, including without
limitation (i) trade secrets, software, work product, processes, analyses and
know-how related to the architecture and operation of the Business or the
submission, collection or organization of its contents; (ii) customer and
prospect lists and other marketing, advertising, pricing, strategic and business
plans and information related to the Business; and (iii) information concerning
Site traffic and financial information concerning the operation of the Business.
(b) Prior to the Closing, the confidentiality and nondisclosure
provisions of the existing Nondisclosure Agreement between Buyer and Seller,
dated as of October 16, 1998, will remain in full force and effect and will
apply to the Confidential Information, notwithstanding the execution of this
Agreement. Upon termination of this Agreement for any reason, Buyer shall
promptly return to Seller all Confidential Information, including copies
thereof, and destroy any notes, compilations, analyses or other material that
incorporates or otherwise includes such Confidential Information. Buyer further
agrees that for a period of one year following any termination of this Agreement
(if the contemplated acquisition is not consummated), Buyer will not, directly
or indirectly, without the prior written consent of Seller in each instance,
knowingly recruit, interview or solicit for employment any person who is an
employee of Seller at such time.
(c) Seller and Jenkins acknowledge and agree that, following the
Closing, the Confidential Information will be the sole and exclusive property of
Buyer. Following the Closing, neither Seller nor Jenkins will, directly or
indirectly, use any Confidential Information for its own benefit or disclose any
Confidential Information to any third party (except in the course of performing
authorized duties for Buyer). At Buyer's request after the Closing, Seller and
Jenkins will promptly deliver to Buyer all documents, computer disks and other
computer storage devices, computer printouts, manuals and other papers and
materials (including all copies thereof in whatever form) containing or
incorporating any Confidential Information that are in his or her possession or
under his or her control.
6.2 Non-Competition. For a period of two years following the Closing,
neither Seller nor Jenkins will, directly or indirectly, (a) engage in any
business involved in offering files for downloading from the Internet, as an
owner, employee, director, officer, consultant or in any other capacity except
by or through Buyer or its successors or assigns or (b) knowingly recruit,
interview or solicit for employment any person who is an employee of Buyer at
such time. Notwithstanding the foregoing, (i) Seller or Jenkins may own less
than 5% of the equity interests in any entity, even if such entity is engaged in
a competing business, so long as Jenkins has no personal involvement in the
management or operations of such entity; and (ii) this Section 6.2 specifically
excludes, and does not prohibit Seller's or Jenkins' participation in the
specific businesses described in Schedule 6.2.
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6.3 Enforcement.
(a) Seller and Jenkins represent to Buyer that they are willing and
able to engage in businesses that do not involve any Competitive Business and
that enforcement of the restrictions set forth in Section 6.2 would not be
unduly burdensome to them. Seller and Jenkins acknowledge and agree that the
restrictions set forth in Section 6.2 are reasonable as to time, geographic area
and scope of activity and do not impose a greater restraint than is necessary to
protect Buyer's legitimate business interests.
(b) If the provisions of Section 6.2 are found by a court of
competent jurisdiction to contain limitations as to time, geographical area or
scope of activity that are not reasonable or not necessary to protect the
legitimate business interests of Buyer, then such court is hereby directed to
reform such provisions to the minimum extent necessary to cause the limitations
contained therein as to time, geographical area and scope of activity to be
reasonable and to impose a restraint that is not greater than necessary to
protect Buyer's legitimate business interests.
(c) Seller and Buyer acknowledge and agree that each would be
irreparably harmed by any violation by the other of Section 6.1 or Section 6.2
and that, in addition to all other rights or remedies available at law or in
equity, Seller or Buyer will be entitled to injunctive and other equitable
relief to prevent or enjoin any such violation.
6.4 Transition Services.
(a) Seller and Jenkins will provide to Buyer the services described
in Schedule 6.4 (the "Services"). The parties intend the Services to be
sufficient for Buyer to continue operating the Business in a manner consistent
with Seller's past practice and to be substantially equivalent in terms of
quality, depth and scope to the corresponding services previously provided by
Seller and Jenkins to the Business during the twelve months preceding the date
hereof. To the extent that Seller currently uses Excluded Assets and employees
other than the Transferred Employees to provide such Services, Seller will
continue to make such Excluded Assets and employees (or suitable replacement
employees) available in connection with providing the Services hereunder. Seller
and Jenkins will perform the Services exercising the same degree of care as they
exercise in performing the same or similar services for their own account, with
priority equal to that provided to their own businesses and those of their
affiliates and other divisions. Seller will also provide Buyer with access to
records of the Business and reasonable consultation and assistance as necessary
to coordinate the physical transfer of the records of the Business to Buyer and
to facilitate the transition of the Services to Buyer's own systems or to third
parties designated by Buyer.
(b) Each of the Services will be provided for the term specified
for such Service in Schedule 6.4; provided that Buyer may terminate any of the
Services at any time by giving five days written notice of termination to
Seller.
(c) In exchange for the Services, Buyer will pay Seller at the
rates indicated for each Service in Schedule 6.4. Unless otherwise indicated in
Schedule 6.4 with respect to a
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particular type of Service or otherwise agreed by Buyer in advance with respect
to a particular expense, Seller will be responsible for all out of pocket costs
and expenses incurred in connection with performing the Services.
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated and abandoned (a) at any time prior to the Closing by
mutual written consent of Buyer and Seller; or (b) by either Buyer or Seller if
the Closing has not occurred by the close of business on January 22, 1999. Any
termination pursuant to (b) above will be without prejudice to any right that
any party may have hereunder against the other party for any misrepresentation
or breach of warranty or covenant under this Agreement.
7.2 Indemnification.
(a) Seller agrees to indemnify, defend and hold Buyer and its
directors, officers, employees and agents harmless from any and all liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
court costs and reasonable attorneys' fees (collectively, "Losses"), that any
such person may suffer or incur as a result of or relating to (i) the breach or
inaccuracy, or any allegation by a third party of facts that would constitute a
breach or inaccuracy, of any of the representations, warranties or agreements
made by Seller in this Agreement or any attachment hereto, or (ii) any Liability
of Seller, other than the Assumed Liabilities, that exists at or prior to the
Closing or that arises out of facts existing at or prior to the Closing or
content displayed on the Site prior to the Closing, including without limitation
any Liabilities related to outstanding litigation involving Seller or the
Business. Buyer's sole recourse in connection with any claim under this Section
7.2(a) shall be to offset such claim against the Deferred Payment; provided that
such limitation will not apply to any claim with respect to Losses arising out
of a Known Liability. For such purposes, "Known Liability" means any Liability
(other than an Assumed Liability) that is (A) liquidated and known by Seller or
Jenkins to exist at the Closing or (B) not liquidated but known by Seller or
Jenkins to exist at the Closing and as to which Seller has not fully informed
Buyer prior to the Closing of all known material facts related to such
Liability.
(b) Buyer will have the burden of proof in establishing any claim
for indemnification under Section 7.2(a) and any right to offset such claim
against the Deferred Payment. The amount that Buyer is entitled to offset with
respect to a particular indemnification claim (an "Offset Amount") will be
limited to the maximum Loss that could reasonably be expected to result from
such claim. If Buyer and Seller cannot agree on the Offset Amount for a
particular indemnification claim within 30 days after Buyer asserts such
indemnification claim against Seller, the Offset Amount will be determined
through binding arbitration as provided in Section 7.2(e) below. If it is
ultimately determined that the Offset Amount exceeds the actual Loss resulting
from such claim, then Buyer will promptly pay the amount of such excess to
Seller, together with interest on such excess from the 18-month anniversary of
Closing to the date of payment, at an interest rate equal to the average prime
rate over such period, as determined by the prime rate quoted in the Wall Street
Journal Money Rates column.
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(c) Buyer agrees to indemnify, defend and hold Seller harmless from
any and all Losses that Seller may suffer or incur as a result of or relating to
(a) the breach or inaccuracy, or any allegation by a third party of facts that
would constitute a breach or inaccuracy, of any of the representations,
warranties or agreements made by Buyer in this Agreement or pursuant hereto, (b)
any Liability incurred by Buyer or arising out of the operation of the Business
after the Closing, (c) any Liability described in Schedule 7.2(c), or (d) the
Assumed Liabilities.
(d) Each party's rights to indemnification pursuant to this Section
7.2 and any other rights to recover for a breach of representation or warranty
hereunder, will survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby only for 18 months
following the Closing; provided that (i) any claim with respect to such rights
will survive until such claim is finally resolved if the party asserting such
claim notifies the other party of such claim in reasonable detail prior to the
end of such 18 month period; and (ii) the limitation set forth in this paragraph
will not apply to any claim under Section 7.2(a) with respect to Losses arising
out of a Known Liability.
(e) If arbitration is required to determine the Offset Amount as
described in Section 7.2(a) above, the Offset Amount shall be determined by
binding arbitration as described in this Section 7.2(e). The 30th day after
Buyer asserts an indemnification claim is referred to as the "Arbitration
Commencement Date".
(i) Within 15 days after the Arbitration Commencement Date,
each party shall provide the other party with written notice (a
"Notice") of its determination of the Offset Amount. The matter
shall then be submitted for decision to an arbitrator. The
arbitrator shall be an independent third party knowledgeable in
the Business, who is acceptable to both Buyer and Seller. If the
parties cannot agree on an arbitrator, then an arbitrator shall be
appointed by the director (or the equivalent) of the San Francisco
office of the American Arbitration Association upon the
application of either party.
(ii) Within 30 days after the selection of the arbitrator
pursuant to the preceding paragraph, the arbitrator shall
determine the Offset Amount by selecting either the figure stated
in Seller's Notice or the figure stated in Buyer's Notice. The
arbitrator shall have no power to average such amounts or to
designate an Offset Amount other than that specified in either
Seller's Notice or Buyer's Notice.
(iii) Both parties may submit any information to the
arbitrator for his or her consideration, with copies to the other
party. The arbitrator shall have the right to consult experts and
competent authorities for factual information or evidence
pertaining to the determination. The arbitrator shall render his
or her decision by written notice to each party. The determination
of the arbitrator will be final and binding upon Seller and Buyer.
The cost of the arbitration will be paid by Buyer if the Offset
Amount determined by arbitration is that specified in Seller's
Notice, and by Seller if the Offset Amount determined by
arbitration is that specified in Buyer's Notice.
7.3 Assignment. The rights and obligations of the parties under this
Agreement may not be assigned by any party, except that Buyer may assign its
rights and obligations hereunder to
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any wholly-owned subsidiary of Buyer, provided that such assignment will not
relieve Buyer of any liabilities hereunder or under any documents to be executed
pursuant to this Agreement.
7.4 Notices. All notices that are required or may be given pursuant to
this Agreement must be in writing and delivered personally, by a recognized
courier service, by a recognized overnight delivery service, by telecopy or by
United States mail, postage prepaid, to the parties at the following addresses
(or to such other address as any party may specify in a notice delivered in
accordance with this Section):
If to Buyer, with copies to:
CNET, Inc. Hughes & Luce, L.L.P.
150 Chestnut 1717 Main Street, Suite 2800
San Francisco, CA 94111 Dallas, Texas 75201
Attention: Nish Bhutani Attention: Jon L. Mosle
Telecopy: (415) 395-9330 Telecopy: (214) 939-6100
If to Seller with copies to:
Steve Jenkins Alston, Courtnage, Proctor
22785 S.E. 27th Street & Bassetti LLP
Issaquah, WA 92029 1000 Second Avenue, Suite 3900
Telecopy: (425) 313-0545 Seattle, WA 98104-1045
Attention: Thomas W. Read
Telecopy: (206) 623-1752
Any such notice or other communication will be deemed to have been
given and received (whether actually received or not) on the day it is
personally delivered or delivered by courier or overnight delivery service or
sent by telecopy or, if mailed, when actually received.
7.5 Attorneys' Fees and Costs. If attorneys' fees or other costs are
incurred to secure performance of any obligations hereunder, or to establish
damages for the breach thereof or to obtain any other appropriate relief,
whether by way of prosecution or defense, the prevailing party will be entitled
to recover reasonable attorneys' fees and costs incurred in connection therewith
7.6 Counterparts. This Agreement may be executed in one or more
counterparts for the convenience of the parties hereto, all of which together
will constitute one and the same instrument.
7.7 Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) contains the entire understanding of the parties relating to
the subject matter hereof and supersedes all prior written or oral and all
contemporaneous oral agreements and understandings relating to the subject
matter hereof. This Agreement cannot be modified or amended except in writing
signed by the party against whom enforcement is sought.
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7.8 Governing Law/Venue. This Agreement will be governed by and
construed and interpreted in accordance with the substantive laws of the State
of Washington, without giving effect to any conflicts of law rule or principle
that might require the application of the laws of another jurisdiction. Venue
for any dispute hereunder shall be in King County, Washington; provided that any
arbitration pursuant to Section 7.2(e) shall be conducted in the location of the
arbitrator.
7.9 Knowledge. As used in this Agreement, a matter is "known" to a
party or within such party's "knowledge" if any executive officer of such party
has actual knowledge of such matter or would reasonably be expected to have
actual knowledge of such matter following reasonable inquiry of the appropriate
employees and agents of such party.
IN WITNESS OF, the parties hereto have executed this Agreement as of
the date first above written.
CNET, INC.
/s/ DOUGLAS N. WOODRUM
-----------------------------------------
Chief Financial Officer
Date: 12-18-98
JENESYS LLC
/s/ STEVE JENKINS
-----------------------------------------
Steve Jenkins, Member
Date: 12-18-98
This Agreement has been executed by Steve Jenkins, in his individual
capacity, solely for the purpose of evidencing his agreement to the terms of
Sections 2.12, 4.3, 4.4, 6.1, 6.2, 6.3, 6.4 and (to the extent applicable to the
enforcement and interpretation of the foregoing sections) Sections 7.3 through
7.8.
/s/ STEVE JENKINS
- --------------------------
Steve Jenkins
Date: 12-18-98
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SCHEDULE A
INCLUDED ASSETS
The "Included Assets" mean all of the following properties and assets
of Seller:
(a) the following Internet domain names: winfiles.com and winfile.com;
(b) all of Seller's rights in the following Internet domain names:
windows95.com, windows96.com, windows97.com, windows98.com, and windows99.com;
(c) all of Seller's rights and obligations under the Assumed Contracts
identified in Schedule 2.9; and
(d) all of Seller's rights in and to any Intellectual Property used in
connection with or arising out of the Business.
18
<PAGE> 19
SCHEDULE B
EXCLUDED ASSETS
The following items are specifically excluded from the Included Assets:
1. Cash on hand of Seller at the Closing and all bank accounts of
Seller.
2. All office supplies, computer equipment and other equipment and
furnishings used in connection with the Site, which has an aggregate fair market
value of less than $10,000 (the "Excluded Equipment"):
3. Rights in third party software generally available to the public,
such as word-processing and spreadsheet software, to the extent loaded on the
Excluded Equipment identified above.
4. The personal online home page and online resume of Steve Jenkins.
5. Seller's rights and obligations under the Excluded Contracts
identified in Schedule 2.9.
6. Seller's rights in the name "Jenesys."
7. The Seller's Receivables (as defined in Section 4.11).
In addition to the specifically enumerated items above, all assets other than
the Included Assets used in connection with or arising out of the Business are
excluded from the Included Assets.
19
<PAGE> 20
SCHEDULES
1.8 Allocation of Purchase Price
2.5 Consents
2.6(a) Schedule of Advertising Revenues
2.6(c) Operating Statistics
2.9 Material Agreements
2.11(a) Equipment and Services Provided by Affiliates
2.11(b) Affiliate Relationships
2.12 Microsoft Communications
4.10 Post-Closing Email
6.2 Permitted Businesses
6.4 Transition Services
7.2(c) Indemnified Liabilities
<PAGE> 1
EXHIBIT 2.4
AMENDMENT NO. 1 TO PURCHASE AGREEMENT
This AMENDMENT NO. 1 (this "Amendment") to the Purchase Agreement (the
"Purchase Agreement"), dated December 18, 1998, by and among CNET, Inc., a
Delaware Corporation ("Buyer"), Jenesys LLC, a Washington limited liability
company ("Seller"), and, for the limited purposes specified on the signature
page thereto, Steve Jenkins ("Jenkins"), is entered into as of January 22, 1999,
by and among Buyer, Seller and Jenkins.
WHEREAS, the parties hereto wish to amend certain provisions of the
Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements set forth in this Amendment and the
Purchase Agreement, the parties hereto agree as follows:
1. Closing. Section 7.1 of the Purchase Agreement is hereby deleted in
its entirety and replaced with the following:
"7.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated and abandoned (a) at any time prior to the
Closing by mutual written consent of Buyer and Seller; or (b) by either
Buyer or Seller if the Closing has not occurred by the close of
business on February 12, 1999. Any termination pursuant to clause (b)
above will be without prejudice to any right that any party may have
hereunder against the other party for any misrepresentation or breach
of warranty or covenant under this Agreement."
2. Authority Relative to the Amendment. The execution, delivery and
performance of the Purchase Agreement and this Amendment and the consummation of
the transactions contemplated thereby and hereby have been duly and effectively
authorized by all necessary action of the parties, and the Purchase Agreement,
as amended by this Amendment, constitutes the valid and binding obligations of
the parties, enforceable against each of them in accordance with its terms.
3. Reference to and Effect on the Purchase Agreement.
(a) Upon execution of this Amendment, each reference in the
Purchase Agreement to "this Agreement," "hereunder," "hereof," "herein" or words
of like import, and each reference in any document related thereto, or executed
in connection herewith, shall mean and be a reference to the Purchase Agreement
as amended hereby, and the Purchase Agreement and this Amendment shall be read
together and construed as one single instrument.
<PAGE> 2
(b) Except as specifically amended above, the Purchase
Agreement shall remain in full force and effect and is hereby ratified and
confirmed by the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
CNET, INC.
/s/ DOUGLAS N. WOODRUM
----------------------------------
Chief Financial Officer
Date: January 22, 1999
JENESYS LLC
/s/ STEVE JENKINS
----------------------------------
Steve Jenkins, Member
Date: January 22, 1999
<PAGE> 1
Exhibit 2.5
AMENDMENT NO. 2 TO PURCHASE AGREEMENT
This AMENDMENT NO. 2 to Purchase Agreement (the "Amendment") is dated
as of February 11, 1999, and it serves as an amendment to the Purchase Agreement
dated December 18, 1998, by and among CNET, Inc., a Delaware Corporation
("Buyer"), Jenesys LLC, a Washington limited liability company ("Seller"), and
for the limited purposes specified under the signature page thereto, Steve
Jenkins ("Jenkins"), as amended by Amendment No. 1 to Purchase Agreement dated
as of January 22, 1999. The Purchase Agreement and Amendment No.1 are
hereinafter collectively referred to as the "Purchase Agreement." Capitalized
terms not defined herein shall have the meaning give to them in the Purchase
Agreement.
WHEREAS, the parties hereto wish to amend certain provisions of the
Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements set forth in this Amendment and the
Purchase Agreement, the parties hereto agree as follows:
1. Closing. Section 7.1 of the Purchase Agreement is hereby deleted in
its entirety and replaced with the following:
7.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated and abandoned (a) at any time prior to Closing
by mutual written consent of Buyer and Seller; or (b) by either Buyer
or Seller if the Closing has not occurred by the close of business on
March 12, 1999. Any termination pursuant to clause (b) above will be
without prejudice to any right that any party may have hereunder
against the other party for any misrepresentation or breach of warranty
or covenant under this Agreement.
Section 1.4 of the Purchase Agreement is hereby deleted in its entirety and
replaced with the following:
1.4 Closing. The closing of the transaction contemplated by this
Agreement (the "Closing") will occur on the 10th business day after all
the conditions set forth in Article V have been satisfied or waived, or
on such earlier date as Buyer and Seller may mutually agree (the
"Closing Date"); subject, however, to the right of termination
contained in Section 7.1 below.
2. Summary of Site Traffic. Schedule 2.6(c) of the Agreement is
replaced with Schedule 2.6(c) attached hereto.
<PAGE> 2
3. Microsoft Representation and Warranty. Since the date of the
Agreement, Seller has had continued discussions with Microsoft regarding use of
the Disputed Names. Seller has kept Buyer generally apprised of the contents and
progress of those discussions. Provided that Seller has, prior to closing,
entered into an agreement with Microsoft on terms satisfactory to Buyer and that
is assignable to Buyer, which will permit (a) Microsoft to acquire ownership of
the Disputed Names in return for an agreement to promote the Site on certain of
Microsoft's Internet sites, and (b) Buyer to use the names "windows95.com" and
"windows98.com" in connection with the Business for a specific period of time,
Seller shall not be obligated to update in writing Schedule 2.12 attached to the
Agreement. An agreement between Seller and/or Jenkins and Microsoft providing
for these terms and otherwise acceptable to Seller shall be referred to herein
as the "License."
4. Closing Obligations. Upon Seller receiving the License from
Microsoft which Seller is prepared to sign, Seller shall provide a copy of the
License to Buyer. Buyer shall have one (1) business day following receipt of the
License from Seller in which to approve or disapprove of the License. If Buyer
approves of the License, then upon Seller providing Buyer with a fully executed
copy of such License, all Buyer's closing conditions under the Purchase
Agreement and under this Amendment shall be deemed satisfied, and, provided that
Seller makes its required closing deliveries under Section 1.5 of the Agreement,
Buyer shall be irrevocably and unconditionally obligated to close its purchase
under the Agreement. As used in this paragraph, Seller's closing deliveries
shall include the closing certificate described in Section 5.1(d) of the
Agreement, and any UCC-3 Termination Statements or other releases required under
Section 5.1(g) of the Agreement, and the legal opinion described under Section
5.1(h) of the Agreement. Buyer's failure to close as required under this
paragraph shall constitute a material default to this Amendment and this
Agreement, and allow Seller, without further notice or demand, to immediately
exercise all rights and remedies available to it at law or in equity.
5. Authority Relative to the Amendment. The execution, delivery and
performance of the Purchase Agreement and this Amendment, and the consummation
of the transactions contemplated hereby, have been duly and effectively
authorized by all necessary action of the parties, and the Purchase Agreement,
as amended by this Amendment, constitutes the valid and binding obligations of
the parties, enforceable against each of them in accordance with its terms.
6. Reference to and Effect on the Purchase Agreement.
(a) Upon execution of this Amendment, each reference in the
Purchase Agreement to "this Agreement," "hereunder," "hereof," "herein" or words
of like import, and each reference in any document related thereto, or executed
in connection herewith, shall mean and be a reference to the Purchase Agreement
as amended hereby, and the Purchase Agreement and this Amendment shall be read
together and construed as one single instrument.
(b) Except as specifically amended above, the Purchase
Agreement shall remain in full force and effect and is hereby ratified and
confirmed by the parties.
<PAGE> 3
(c) In case of a conflict between the terms of this Amendment
and the terms of the Purchase Agreement, the terms of this Amendment shall
control.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
CNET, INC.
/s/ DOUGLAS N. WOODRUM
------------------------------------
Chief Financial Officer
Date: February 12, 1999
JENESYS LLC
/s/ STEVE JENKINS
------------------------------------
Steve Jenkins, Member
Date: February 12, 1999
/s/ STEVE JENKINS
------------------------------------
Steve Jenkins, Individually
Date: February 12, 1999
