UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
JANUARY 26, 2000
--------------------------------------------
(Date of Report)
THE COBALT GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
WASHINGTON 000-26623 91-1674947
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(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
2200 FIRST AVENUE SOUTH, SUITE 400 SEATTLE, WA 98134 (Address of
Principal Executive Offices, including Zip Code)
(206) 269-6363
(Registrant's Telephone Number, including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
On January 26, 2000, The Cobalt Group, Inc. ("Cobalt") sold its YachtWorld
marketing service ("YachtWworld") to Boats.com, Inc., a Delaware corporation
("Boats.com"), pursuant to an Asset Purchase Agreement dated as of January 25,
2000. Boats.com purchased YachtWorld for $14.0 million, of which
$3.5 million was paid in cash at closing and $10.5 million is payable by
December 29, 2000. Cobalt also received a warrant to purchase 473,455 shares of
Boats.com common stock as part of the purchase price. In connection with the
sale, Cobalt agreed to provide Boats.com with Web site hosting and
maintenance services for the YachtWorld Web site for up to twelve months,
subject to annual renewal. Cobalt also granted Boats.com a perpetual,
non-exclusive license to use certain of Cobalt's proprietary software in
connection with the operation of the YachtWorld Web site.
ITEM 7. EXHIBITS
(c) EXHIBITS
2 Asset Purchase Agreement dated January 25, 2000 between The
Cobalt Group, Inc. and Boats.com, Inc. (without exhibits).
99 The Cobalt Group, Inc. Press Release issued January 26, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE COBALT GROUP, INC.
Dated: February 11, 2000
By:/s/ DAVID M. DOUGLASS
------------------------------------
David M. Douglass
Chief Financial Officer
THE COBALT GROUP, INC.,
(SELLER)
AND
BOATS.COM, INC.
(PURCHASER)
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ASSET PURCHASE AGREEMENT
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TABLE OF CONTENTS
1. PURCHASED ASSETS.........................................................1
1.1 Purchased Assets....................................................1
1.2 Excluded Assets.....................................................3
2. LIABILITIES..............................................................3
2.1 Retained Liabilities................................................3
2.2 Assumed Liabilities.................................................3
(a) Liabilities Under Assumed Contracts and Assumed
Equipment Leases...............................................3
(b) Trade Accounts Payable.........................................4
(c) Other Liabilities..............................................4
2.3 Non-Assignable Obligations..........................................4
3. PURCHASE PRICE AND ALLOCATION............................................4
3.1 Purchase Price......................................................4
3.2 Allocation of the Purchase Price....................................5
3.3 Prorations; Adjustments to the Purchase Price.......................5
3.4 Taxes and Assessments...............................................5
3.5 State and Local Transfer Taxes......................................5
3.6 Closing.............................................................5
4. REPRESENTATIONS AND WARRANTIES...........................................6
4.1 Representations and Warranties of the Seller........................6
(a) Corporate Status...............................................6
(b) Purchased Assets...............................................6
(c) No Other Agreements............................................6
(d) Corporate Authorization........................................6
(e) No Breaches of Charter or Other Agreements.....................6
(f) Financial Statements...........................................7
(g) Ordinary Course................................................7
(h) Tax Matters....................................................7
(i) Equipment in Good Repair.......................................8
(j) Intellectual Property..........................................8
(k) Material Contracts.............................................8
(l) Insurance......................................................8
(m) Employees......................................................8
(n) No Unions......................................................9
(o) Compliance with Laws...........................................9
(p) Consents.......................................................9
(q) No Actions....................................................10
(r) Environmental Matters.........................................10
(s) Year 2000 Compliance..........................................10
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(t) Brokerage.....................................................10
4.2 Representations and Warranties of the Purchaser....................10
(a) Corporate Status..............................................10
(b) Corporate Authorization.......................................11
(c) No Breaches of Charter or Other Agreements....................11
(d) Financial Statements..........................................11
(e) Consents......................................................11
(f) No Actions....................................................11
(g) Brokerage.....................................................11
5. COVENANTS...............................................................12
5.1 Covenants of the Seller............................................12
(a) Ordinary Course...............................................12
(b) Access........................................................12
(c) Non-Competition Covenant......................................12
(d) Corporate Structure and Capitalization........................13
5.2 Covenants of the Purchaser.........................................13
(a) Non-Competition Exclusion.....................................13
(b) Access........................................................13
(c) Corporate Structure and Capitalization........................13
6. CLOSING CONDITIONS......................................................13
6.1 Closing Conditions for the Benefit of the Purchaser................13
(a) Representations and Warranties................................13
(b) Covenants.....................................................14
(c) No Action.....................................................14
(d) Consents......................................................14
(e) Operating Agreement...........................................14
(f) McCurdy Employment Agreement..................................14
(g) Certificate of Compliance.....................................14
(h) Opinion of Counsel............................................14
6.2 Conditions for the Benefit of the Seller...........................14
(a) Representations and Warranties................................14
(b) Covenants.....................................................14
(c) No Action.....................................................14
(d) Consents......................................................14
(e) Operating Agreement...........................................14
(f) Promissory Note, Security Agreement and Assignment
and Assumption Agreement......................................14
(g) Certificate of Compliance.....................................14
(h) Opinion of Counsel............................................14
(i) Mutual Waiver of Consents.....................................15
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7. SURVIVAL OF COVENANTS, REPRESENTATIONS
AND WARRANTIES..........................................................15
7.1 Survival...........................................................15
8. INDEMNIFICATION AND DISCLOSURE..........................................15
8.1 Indemnification....................................................15
8.2 Limitation of Recourse.............................................17
8.3 Schedules and Exhibits.............................................17
8.4 Acknowledgment by the Purchaser....................................17
8.5 Further Assurances.................................................18
9. GENERAL MATTERS.........................................................18
9.1 Press Releases and Communications..................................18
9.2 Risk of Loss.......................................................18
9.3 Entire Agreement...................................................18
9.4 Severability.......................................................19
9.5 Assignment.........................................................19
9.6 Expenses...........................................................19
9.7 Notices............................................................19
9.8 Governing Laws.....................................................20
9.9 Counterparts.......................................................20
9.10 Headings...........................................................20
9.11 Construction.......................................................20
9.12 Time of Essence....................................................20
9.13 Currency...........................................................20
9.14 Bulk Transfers.....................................................20
9.15 Knowledge..........................................................20
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EXHIBITS
Exhibit 1.1(j) - Software License
Exhibit 3.1(a) - Warrant
Exhibit 3.1(b) - Bill of Sale
Exhibit 3.1(c) - Assignment and Assumption Agreement
Exhibit 3.1(d) - Promissory Note
Exhibit 3.1(e) - Security Agreement
Exhibit 4.1(f) - Seller's Financial Statements
Exhibit 4.2(d) - Purchaser's Financial Statements
Exhibit 6.1(e) - Operating Agreement
Exhibit 6.1(h) - Seller's Legal Opinion
Exhibit 6.2(h) - Purchaser's Legal Opinion
Exhibit 6.2(i) - Mutual Waiver of Consents
SCHEDULES
Assumed Equipment Leases 1.1(a)
Fixed Assets 1.1(b)
Intellectual Property 1.1(d)
Assumed Contracts 1.1(e)
Employees List 1.1(g)
Transferable Licenses and Permits 1.1(h)
List of Additional Purchased Assets 1.1(k)
Hardware and Software Assets 1.2(c)
Other Liabilities
Allocation of Purchase Price 3.2
Purchased Assets Not Owned, Leased or Licensed
by Seller 4.1(b)(i)
Assets Used in the Business Not Transferred 4.1(b)(ii)
Breach of Seller's Charter or Other Agreements 4.1(e)
Approved Capital Expenditures 4.1(g)(ii)
Infringement of Intellectual Property by Seller 4.1(j)(i)
Infringement of Intellectual Property by Third Parties 4.1(j)(ii)
Material Contracts of the Seller 4.1(k)
Payments to Employees 4.1(m)(ii)
Employment Agreements 4.1(m)(iii)
Employee Benefit Plans 4.1(m)(iv)
Required Consents - Seller 4.1(p)
Required Consents - Purchaser 4.2(e)
Seller's Actions Outside Ordinary Course 5.1(a)
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of the 25th day of
January, 2000.
BY AND AMONG:
THE COBALT GROUP, INC., a company incorporated under
the laws of the State of Washington
hereinafter "Seller"
AND:
BOATS.COM, INC., a company incorporated under the
laws of the State of Delaware
hereinafter "Purchaser"
For and in consideration of the mutual covenants and agreements contained
in this Agreement and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties covenant and agree as
follows:
1. PURCHASED ASSETS
1.1 Purchased Assets. Subject to the terms and conditions of this Agreement,
Seller agrees to sell, assign and transfer to the Purchaser and the
Purchaser agrees to purchase from the Seller all of the property, assets
and rights (other than the Excluded Assets as specified in Section 1.2) of
the Seller's Yacht World Division business (the "Business"). The assets to
be purchased (the "Purchased Assets") include the following:
(a) the equipment leases, conditional sales contracts, title retention
agreements and other agreements between the Seller and third parties
relating to computer hardware and equipment used exclusively by Seller in
connection with the Business described in Schedule 1.1(a) to this Agreement
(the "Assumed Equipment Leases") and the full benefit of all service
contracts relating to any Assumed Equipment Leases or any equipment or
assets covered by the Assumed Equipment Leases and all options, including
options to purchase, under Assumed Equipment Leases;
(b) except for the fixtures, furniture, and furnishings currently used by
personnel of the Business, all fixed assets, machines, machinery,
equipment, fixtures, furniture,
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furnishings, goods, chattels, and other tangible property of all kinds
owned by Seller and used exclusively in the Business (the "Fixed Assets"),
including, without limitation, those items described in Schedule 1.1(b) to
this Agreement, and all inventories and supplies used exclusively in the
Business;
(c) the goodwill of the Business, including, without limitation, the exclusive
right to use the domain name, e-mail addresses, telephone lines and
telephone numbers currently used by the Seller exclusively in connection
with the Business;
(d) all trade marks, trade names and service marks, copyrights, patents or
patent rights (including patents pending), logos and designs, trade
secrets, technical information, know-how (whether confidential or
otherwise), software and other intellectual property (including
applications for any of these) (collectively the "Intellectual Property")
owned by the Seller, used exclusively in the Business, and listed on
Schedule 1.1(d);
(e) Seller' rights under those contracts, agreements, real and personal
property leases, commitments, entitlements and engagements whether written
or oral ("Contracts") of Seller with customers in connection with the
Business to be assumed by Purchaser, whether written or oral (the "Assumed
Contracts"), a list of which is attached as Schedule 1.1(e) to this
Agreement;
(f) copies of all business books and records used exclusively in the conduct of
the Business, including, without limitation, all financial, operating,
supplier, customer and supplier lists and records, employee records for
employees retained by Purchaser, and all sales and promotional literature,
correspondence and files;
(g) a list of the employees of Seller exclusively involved with the Business
(including, without limitation, full-time, permanent part-time and contract
employees) (individually, an "Employee" and collectively, the "Employees"),
a copy of which is attached to this Agreement as Schedule 1.1(g);
(h) all transferable licenses, registrations, qualifications, permits and
approvals issued by any government or governmental unit, agency, board,
body or instrumentality, whether federal, state or municipal, relating
exclusively to the Business, together with all applications for such
licenses or permits as listed in Schedule 1.1(h);
(i) all prepaid expenses paid by Seller, accounts receivable, purchase orders,
maintenance contracts, and development contracts relating exclusively to
the Business, but excluding income and other taxes which are not included
in the Assumed Liabilities;
(j) the software license to be executed at Closing for Seller's software assets
related to but not solely associated with the Business attached as Exhibit
1.1(j) (the "Software License"); and
(k) the items listed on Schedule 1.1(k).
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1.2 Excluded Assets. The following assets of the Seller are excluded from the
Purchased Assets (the "Excluded Assets"):
(a) all cash, bank balances, deposits, term or time deposits and similar cash
items of, owned or held by or for the account of Seller in connection with
the Business as of the Closing Date;
(b) the software assets licensed to Purchaser pursuant to Exhibit 1.1(j);
(c) the hardware and software assets owned or licensed by Seller listed on
Schedule 1.2(c) that are related to or used in the Business but not on an
exclusive basis.
(d) any refunds or credits of taxes for taxable periods prior to and including
the Closing Date;
(e) insurance policies and rights thereunder; and
(f) assets of any kind and nature that are not reflected in the balance sheet
of the Business as of the Closing Date (the "Closing Balance Sheet") and
are (i) used or provided by Seller in connection with general corporate or
administrative services to the Business, or (ii) used or provided by Seller
primarily in connection with businesses other than the Business.
2. LIABILITIES
2.1 Retained Liabilities. Unless specifically assumed by the Purchaser, the
Seller shall be responsible for all liabilities (whether accrued, actual,
contingent or otherwise), claims and demands (including liabilities, claims
and demands for income, sales, excise or other taxes) incurred or arising
out of the operation of the Business prior to the Closing Date. The
Purchaser assumes no liabilities of Seller other than those which it
expressly agrees to assume under this Agreement and those otherwise assumed
in writing.
2.2 Assumed Liabilities. As of the Closing, the Purchaser shall be solely
responsible for all liabilities and obligations incurred, related to, or
arising as a result of operations conducted, actions taken or events
occurring on or subsequent to the Closing Date relating to the Business;
additionally, at the Closing, the Purchaser shall assume and shall
thereafter timely discharge and perform the following liabilities and
obligations of Seller relating to the Business or the Purchased Assets
(collectively, the "Assumed Liabilities"):
(a) Liabilities Under Assumed Contracts and Assumed Equipment Leases. All
obligations arising from operations conducted, actions taken or events
occurring subsequent to the Closing Date under the Assumed Contracts and
Assumed Equipment Leases;
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(b) Trade Accounts Payable. All trade accounts payable of the Business arising
prior to the Closing which (i) are disclosed on Seller's balance sheet
dated as of December 31, 1999 to the extent such payables remain
outstanding on the Closing Date, or (ii) have arisen in the ordinary course
of the Business from December 31, 1999 to the Closing Date and are
reflected on the Closing Balance Sheet; and
(c) Other Liabilities. All accruals and other liabilities in the ordinary
course of the Business that are reflected on the Closing Balance Sheet or
otherwise disclosed in the schedules to this Agreement, including, but not
limited to, the liabilities listed on Schedule 2.2(c).
2.3 Non-Assignable Obligations. This Agreement and any document delivered
under it shall not constitute an assignment or attempted assignment of any
Assumed Equipment Lease or Assumed Contract which is not assignable without the
consent of a third party if such consent has not been obtained and such
assignment or attempted assignment would constitute a breach of such Assumed
Equipment Lease or Assumed Contract.
To the extent that any of the foregoing items are not assignable by their terms
or where consents to their assignment cannot be obtained, then the parties will
cooperate to obtain such assignment, provided that the Seller incurs no
additional cost and the covenants and obligations under such Assumed Equipment
Leases and Assumed Contracts shall be performed by the Purchaser in the name of
the Seller and all benefits and obligations existing under them shall be for the
account of the Purchaser. If any of the items cannot be assigned, the parties
will make such other arrangements between themselves as may be permissible to
implement as far as possible the effective transfer of the benefit and
obligations of such contracts to the Purchaser.
3. PURCHASE PRICE AND ALLOCATION
3.1 Purchase Price. In consideration for the acquisition of the Purchased
Assets, the Purchaser will pay to Seller a purchase price of $14,000,000
(the "Purchase Price"), will assume the Assumed Liabilities and will issue
a warrant in the form attached as Exhibit 3.1(a) to Seller at Closing to
purchase an aggregate of 473,455 shares of common stock in Purchaser. At
Closing, Seller will execute and deliver to Purchaser a Bill of Sale in the
form attached as Exhibit 3.1(b) and the parties will execute an assignment
and assumption agreement in the form attached as Exhibit 3.1(c) (the
"Assignment and Assumption Agreement"). $3,500,000 of the Purchase Price
will be paid at Closing in cash by certified check or wire transfer of
immediately available funds to the account specified by Seller at least two
business days prior to Closing. The $10,500,000 deferred portion of the
Purchase Price will be paid pursuant to the promissory note attached as
Exhibit 3.1(d) (the "Promissory Note") and secured by the Security
Agreement attached as Exhibit 3.1(e) (the "Security Agreement").
3.2 Allocation of the Purchase Price. The parties agree that the Purchase Price
shall be allocated among the Purchased Assets in accordance with the terms
and conditions of this Agreement and that the allocation shall be as set
forth on Schedule 3.2 to this
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Agreement, to be prepared in accordance with Section 1060 of the Internal
Revenue Code of 1986, as amended. Each of the parties agrees to report this
transaction for local, state, federal and foreign tax purposes in a manner
consistent with the allocation set forth in Schedule 3.2, including the
filing of a form 8594 with the Internal Revenue Service reflecting that
allocation. If any taxing authority challenges the allocation, the
Purchaser and the Seller shall cooperate in good faith in responding to the
challenge.
3.3 Prorations; Adjustments to the Purchase Price. All charges and other
matters customarily the subject of adjustment in connection with a purchase
of assets shall be adjusted as at the commencement of business on the
Closing Date and the Purchase Price will be adjusted accordingly. Such
adjustment to the Purchase Price shall be paid in cash (and not by
adjustment to the Promissory Note) by the Purchaser to the Seller, or by
the Seller to the Purchaser, as the case may be, promptly upon
determination of the same (or, if the total amount of such adjustments is
not agreed upon, the undisputed portion of the same). To the extent that
any information necessary for any adjustment is not available to the
parties on the Closing Date, the parties agree to readjust and make payment
to the other party for that item when the necessary information becomes
available.
3.4 Taxes and Assessments. Any taxes on the Purchased Assets, including
personal property taxes, and assessments due and payable on or with respect
to the Purchased Assets, shall be prorated as of the commencement of
business on the Closing Date. If the tax rate for the current year is not
established by the Closing Date, the proration of taxes shall be based upon
the tax rate for the preceding year applied to the latest assessed
evaluation and any adjustments required by reason of a change of the
assessed evaluation or applicable tax rate shall be made in cash between
the Purchaser and the Seller within ten (10) days after the tax rate for
the current year is determined. The obligation to make that adjustment
shall survive the Closing.
3.5 State and Local Transfer Taxes. The Purchaser shall bear all state or local
transfer taxes arising from the transactions contemplated by this Agreement
except for applicable sales tax on the Purchased Assets, which shall be
paid by Seller.
3.6 Closing. The closing of the purchase and sale of the Purchased Assets will
occur on January 25, 2000 (the "Closing Date") at the offices of STOEL
RIVES LLP, or at such other time and place as the parties mutually agree
upon (the "Closing").
4. REPRESENTATIONS AND WARRANTIES.
4.1 Representations and Warranties of Seller. The Seller represents and
warrants as follows to the Purchaser:
As used in this Section 4.1, "Material Adverse Effect" means a material
adverse effect on the Business or the Purchased Assets.
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(a) Corporate Status. The Seller is a corporation duly incorporated and
organized and validly existing under the laws of its state of
incorporation. Seller has the corporate power, authority and capacity to
own its property and to carry on the Business as now being conducted by it.
No bankruptcy, insolvency or receivership proceedings have been instituted
or are pending against Seller and Seller is able to satisfy its liabilities
as they become due.
(b) Purchased Assets. Except as disclosed in Schedule 4.1(b)(i), the Purchased
Assets are owned, licensed or leased by Seller, with good and marketable
title thereto, free and clear of any title defects, mortgages, liens,
charges, pledges, security interests, encumbrances, leases, licenses,
deemed trust or other rights or claims of others, except such as would not
have a Material Adverse Effect. The Seller is entitled to possess and
dispose of the Purchased Assets (subject only to obtaining any necessary
consents to transfer). The Purchased Assets constitute all of the assets
necessary for the conduct of the Business as currently conducted by the
Seller, except for the Excluded Assets and as set forth in Schedule
4.1(b)(ii).
(c) No Other Agreements. No person, firm or corporation has any written or oral
agreement, option, understanding or commitment, for the purchase from
Seller of any of the Purchased Assets outside the ordinary course of
business.
(d) Corporate Authorization. The Seller has all necessary corporate power,
authority and capacity to enter into this Agreement and to perform its
obligations under it. The execution and delivery of this Agreement and the
completion of the transactions contemplated in it have been duly and
validly authorized by all necessary corporate action on the part of Seller
and this Agreement constitutes a legal, valid and binding obligation of
each Seller enforceable against it in accordance with its terms.
(e) No Breaches of Charter or Other Agreements. Except as set forth in Schedule
4.1(e), Seller is not a party to, bound by or subject to any indenture,
mortgage, lease, agreement, instrument, statute, regulation, arbitration
award, charter or by-law provisions, order or judgment which would be
violated, contravened, breached by or under which any default would occur
as a result of the execution and delivery of this Agreement or the
consummation of the transactions contemplated by it, except where such
violation, contravention or breach would not have a Material Adverse
Effect.
(f) Financial Statements. The unaudited Balance Sheets and Statements of
Operations for the Business for the fiscal years ended December 31, 1998
and December 31, 1999 are attached hereto as Exhibit 4.1(f) (collectively,
the "Financial Statements"), and conform in all material respects with
applicable accounting requirements, have been derived from and are
consistent with financial statements prepared in accordance with United
States generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present (subject to normal, recurring year-end
adjustments) the consolidated financial position of the Business as of the
dates thereof and the results of their operations
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and cash flows for the periods then ended. There are no liabilities, debts,
expenses, claims or obligations of any type, whether accrued, absolute,
contingent, matured, unmatured or other which (i) should have been but have
not been reflected in the Financial Statements, or (ii) have not arisen in
the ordinary course of the Seller's business since December 31, 1999.
(g) Ordinary Course. Since December 31, 1999 and except as otherwise disclosed
to Purchaser:
(i) the Business has been carried on in the ordinary and normal course and
will continue to be carried on in the ordinary and normal course after
the date hereof and up to the Closing Date;
(ii) no capital expenditures have been made or authorized in the conduct of
the Business in excess of $10,000 in the aggregate and, except as set
forth in Schedule 4.1(g)(ii), no capital expenditures will be made or
authorized by Seller for the Business in excess of $10,000 in the
aggregate after the date hereof and up to the Closing Date without the
prior written consent of the Purchaser;
(iii)there has been no change in the affairs, business, prospects,
operations or condition of the Business, except changes occurring in
the ordinary course of business or which would not have a Material
Adverse Effect;
(iv) Seller has not transferred, assigned, sold or otherwise disposed of or
agreed to dispose of any of the assets used in the Business, except in
the ordinary and normal course of business;
(v) Seller has not suffered an extraordinary loss, waived any rights of
material value, or entered into any material commitment or transaction
outside the ordinary and normal course of business, except as
otherwise disclosed in this Agreement or in the Financial Statements;
and
(vi) Seller has not entered into any material agreement, contract, lease,
or license outside the ordinary course of business, except as
otherwise disclosed in this Agreement or the Financial Statements.
(h) Tax Matters. The Seller has, or on or before the Closing Date will have,
filed all federal, state and local tax returns required to be filed and
paid and discharged all federal, state and local income taxes related to
the Business (collectively, "Taxes"), including, without limitation, any
interest, penalties or additions to Taxes reflected on the foregoing
returns. Seller is not subject to any dispute, audit or proceeding
regarding Taxes related to the Business that, if determined adversely to
Seller, would likely have a Material Adverse Effect.
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(i) Equipment in Good Repair. To the knowledge of Seller, all facilities and
equipment owned and used by Seller in connection with the Business,
including, without limitation, the Fixed Assets, are in good operating
condition and are in a state of good repair and maintenance consistent with
their age and condition.
(j) Intellectual Property. The Intellectual Property included in the Purchased
Assets is listed on Schedule 1.1(d). To the knowledge of Seller after
reasonable investigation, the intellectual property of Seller does not
infringe the patents, trademarks, trade names, service marks, trade
designs, common law copyrights or other intellectual property rights,
domestic or foreign, of any other person, firm or corporation. Except as
set forth in Schedule 4.1(j)(i), the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
(including the continued conduct by Purchaser after the Closing Date of the
Business as presently conducted by Seller) will not violate or conflict
with any instrument or agreement governing any intellectual property
necessary or required for, or used in, the conduct of the Business as
presently conducted and will not in any material way impair the right of
Purchaser to use, sell, license or dispose of, or to bring any action for
the infringement of, any such intellectual property or portion thereof.
Except as set forth in Schedule 4.1(j)(ii), to the knowledge of Seller,
there is no material unauthorized use, infringement or misappropriation on
the part of any third party of the Intellectual Property.
(k) Material Contracts. Set forth in Schedule 4.1(k) is a complete list of all
material contracts of Seller in addition to the assumed contracts relating
exclusively to the Business ("Material Contracts"). Seller is not in
default or breach of any Material Contract except where such default or
breach would not have a Material Adverse Effect and all such Assumed
Contracts are now in good standing and in full force and effect without
amendment thereto. Seller has furnished Purchaser with true and complete
copies of each such Material Contract.
(l) Insurance. The Seller maintains such policies of insurance, issued by
responsible insurers, as are appropriate to the Business and the Purchased
Assets, in such amounts and against such risks as are customarily carried
and insured against by owners of comparable businesses, properties and
assets. All such policies of insurance are in full force and effect, and
will continue to be so until the Closing Date, and Seller is not in
default, whether as to the payment of premium or otherwise, under the terms
of any policy.
(m) Employees.
(i) Set forth in Schedule 1.1(g) is a list showing the names and titles of
all Employees of the Business. Seller will use its best efforts to
cooperate with Purchaser to ensure that all of the Employees become
the Employees of Purchaser.
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(ii) Except as set forth in Schedule 4.1(m)(ii), no payments have been made
or authorized by Seller to any Employees except in the ordinary course
of business and at the regular rates payable to them as salary or
other remuneration, including Seller's bonus plan, and no increase in
salary or change in bonus formulation payable to any Employee has
become effective or been agreed to or authorized since December 31,
1999.
(iii)To Seller's knowledge, except as set forth in Schedule 4.1(m)(iii),
at Closing, no Employee will have any agreement, whether written or
oral, as to length of employment or as to length of notice required to
terminate the Employee's employment other than such as results by law
and no inducements were offered to any Employee which may have the
effect of increasing the period of notice of termination to which any
Employee is entitled.
(iv) To Seller's knowledge, each "employee benefit plan," as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), whether or not such plan is subject to any of
the provisions of ERISA, and each other employee benefit plan,
arrangement, program or policy, which covers any Employee or
beneficiary of any Employee of the Business, and which is maintained
or administered by Seller or to which Seller makes contributions, is
set forth in Schedule 4.1(m)(iv) hereto (any such plan, arrangement,
program or policy being herein referred to as an "Employee Plan").
Except as set forth in Schedule 4.1(m)(iii) or Schedule 4.1(m)(iv), at
Closing, the Seller will have no severance pay plan, policy, practice
or agreement with any of the Employees. Seller has never contributed
to any Employee Plan with respect to the Business that is a
multi-employer pension plan under ERISA.
(v) To Seller's knowledge, Seller has deducted and remitted to the
relevant governmental authority or entity all payroll taxes and any
other taxes or deductions or other amounts which it is required by
statute or contract to collect from Employees and remit to any
governmental authority.
(vi) To Seller's knowledge, Seller has complied with all material and
applicable federal and state laws relating to the employment of labor,
including, without limitation, the provisions of laws relating to
equal employment opportunity, wages, hours, workers' compensation and
industrial insurance except where the failure to do so would not have
a Material Adverse Effect on the Business.
(vii) All employees and consultants of Seller employed or engaged by
Seller as of the date hereof that have had access to confidential
Intellectual Property relating to the Business are parties to written
agreements ("Confidentiality Agreements") under which each such person
or entity (x) is obligated to disclose and assign to Seller, without
the receipt by such person of any additional value therefor (other
than normal salary or fees for consulting services), all inventions,
developments
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and discoveries relating to the Business which, during the period of
performance of services for Seller, he or she makes or conceives, and
(y) is obligated to maintain the confidentiality of proprietary
information of Seller.
(n) No Unions. In connection with the Business, Seller has not made any
agreements with any labor union or employee association nor made
commitments to or conducted negotiations with any labor union or employee
association with respect to any future agreements and Seller is not aware
of any current attempts to organize or establish any labor union or
employee association in connection with the Business.
(o) Compliance with Laws. To Seller's knowledge, Seller is conducting the
Business in substantial compliance with the applicable laws, rules and
regulations of each jurisdiction in which the Business is carried on and is
duly licensed, registered or qualified in each jurisdiction in which each
Seller owns or leases property related to the Business or carries on the
Business except where the failure to do so would not have a Material
Adverse Effect.
(p) Consents. To Seller's knowledge, except for the consents set forth in
Schedule 4.1(p), there are no consents, authorizations, licenses, franchise
agreements, permits, approvals or orders of any person or government
required to permit Seller to complete the transactions contemplated by this
Agreement.
(q) No Actions. There is no suit, action, litigation, arbitration, proceeding
or governmental proceeding, including appeals and applications for review,
in progress, pending or, to Seller's knowledge, threatened against or
involving the Business. Seller is not aware of any existing ground on which
any such suit, action, litigation, arbitration, proceeding or governmental
proceeding might be commenced with any reasonable likelihood of success.
There is not presently outstanding against Seller any judgment, decree,
injunction or order of any court, governmental department, commission,
agency, instrumentality or arbitrator relating to the Business.
(r) Environmental Matters. To Seller's knowledge, the Business is currently in
substantial compliance with, and at all times has substantially complied
with, all federal, state and local environmental or health or safety laws,
regulations and ordinances. To Seller's knowledge, no Hazardous Substance
(as defined below) has been stored or disposed of in the conduct of the
Business, except for lawful storage or disposal undertaken as part of the
ordinary course of the Business and in substantial compliance with all
pertinent handling, storage, labeling, use, disposal and other applicable
laws, regulations and ordinances. In this paragraph, "Hazardous Substance"
means any hazardous, toxic, radioactive or infectious substance, material
or waste as defined or listed under any federal, state, or local statute,
regulation or ordinance pertaining to the protection of human health or the
environment. The representations and warranties in this subsection do not
include situations in which failure to comply would not have a Material
Adverse Effect.
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(s) Year 2000 Compliance. To Seller's knowledge any computer or computer
related hardware or software that is part of the Purchased Assets (the
"Computer System") is Millennium Compliant, except for such noncompliance
as would not have a Material Adverse Effect. In this paragraph, "Millennium
Compliant" means that the Computer System (i) allows for the input of all
dates in a four digit format; (ii) provides date output in a four digit
format; (iii) accommodates same century and multi-century date related
formulas and calculations; and (iv) responds to two digit date input in a
way that resolves any ambiguity as to century.
(t) Brokerage. No brokerage commissions, finders' fees or similar compensation
in connection with the transactions contemplated by this Agreement based on
any arrangement or agreement made by or on behalf of Seller are due.
(u) No Fraudulent Conveyance. Seller is not entering into this Agreement or any
of the other agreements referenced in this agreement with the intent to
defraud, delay or hinder its creditors and the consummation of the
transactions contemplated by this Agreement, and the other agreements
referenced in this Agreement, will not have any such effect. The
transactions contemplated in this Agreement or any agreements referenced in
this Agreement will not constitute a fraudulent conveyance or, to Seller's
knowledge, otherwise give rise to any right of any creditor of Seller to
any of the Purchased Assets after the Closing.
4.2 Representations and Warranties of the Purchaser. The Purchaser represents
and warrants as follows to the Seller:
(a) Corporate Status. The Purchaser is a corporation duly incorporated and
organized and validly existing under the laws of its state of
incorporation. The Purchaser has the corporate power, authority and
capacity to own its property and to carry its business as now being
conducted by it. No bankruptcy, insolvency or receivership proceedings have
been instituted or are pending against the Purchaser and the Purchaser is
able to satisfy its liabilities as they become due, including, but not
limited to, payment of the Purchase Price when due.
(b) Corporate Authorization. The Purchaser has all necessary corporate power,
authority and capacity to enter into this Agreement and to perform its
obligations under it. The execution and delivery of this Agreement and the
completion of the transactions contemplated in it have been duly and
validly authorized by all necessary corporate action on the part of the
Purchaser and this Agreement constitutes a legal, valid and binding
obligation of the Purchaser enforceable against it in accordance with its
terms.
(c) No Breaches of Charter or Other Agreements. The Purchaser is not a party
to, bound by or subject to any indenture, mortgage, lease, agreement,
instrument, statute, regulation, arbitration award, charter or by-law
provisions, order or judgment which would be violated, contravened,
breached by or under which any default would occur
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as a result of the execution and delivery of this Agreement or the
consummation of the transactions contemplated by it.
(d) Financial Statements. A true and accurate table of the Purchaser's
capitalization as of the Closing Date is attached hereto as Exhibit 4.2(d).
As of the Closing Date, the Company has approximately $7.1 million in cash
and cash equivalents. As of the Closing Date, the company had no material
liabilities or obligations that would be required to be disclosed on a
balance sheet under GAAP, other than promissory notes in the aggregate
principal amount of $2.5 million issued to affiliates of Mayfield Fund and
Trident Capital.
(e) Consents. To Purchaser's knowledge, except as set forth in Schedule 4.2(e),
there are no consents, authorizations, licenses, franchise agreements,
permits, approvals or orders of any person or government required to permit
the Purchaser to complete the transactions contemplated by this Agreement.
(f) No Actions. There is no suit, action, litigation, arbitration, proceeding
or governmental proceeding, including appeals and applications for review,
in progress, pending or, to Purchaser's knowledge, threatened against or
involving the Purchaser. Purchaser is not aware of any existing ground on
which any such suit, action, litigation, arbitration, proceeding or
governmental proceeding might be commenced with any reasonable likelihood
of success. There is not presently outstanding against Purchaser any
judgment, decree, injunction or order of any court, governmental
department, commission, agency, instrumentality or arbitrator relating to
the Purchaser.
(g) Brokerage. No brokerage commissions, finders' fees or similar compensation
in connection with the transactions contemplated by this Agreement based on
any arrangement or agreement made by or on behalf of Purchaser are due.
5. COVENANTS
5.1 Covenants of the Seller. Seller covenants and agrees with the Purchaser as
follows:
(a) Ordinary Course. Until the Closing Date and except as disclosed in Schedule
5.1(a), the Seller shall:
(i) carry on the Business in the ordinary course and shall not, without
the prior written consent of the Purchaser, enter into any transaction
which, to their knowledge, if entered into before the date of this
Agreement would cause any representations or warranties of Seller in
this Agreement to be incorrect or constitute a breach of any covenant
or agreement of Seller contained in this Agreement;
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(ii) use its best efforts to preserve the Purchased Assets intact and to
preserve for the Purchaser its relationships with all suppliers,
customers and others having business relationships with Seller in the
conduct of the Business;
(iii)not make or commit to any wage increase or institute any new bonus
program for Employees, and shall not employ any new Key Employees (as
hereinafter defined) nor terminate the employment of any Key Employees
without the Purchaser's consent; and
(The term "Key Employees" shall include all Employees who have a 1999
annual base salary in excess of $75,000.)
(iv) maintain in full force and effect all policies of insurance in respect
of the Purchased Assets and shall present all claims thereunder in a
due and timely fashion.
(b) Access. Prior to Closing, Seller will permit the Purchaser and its
authorized representatives (who shall, at the sole discretion of Seller, be
accompanied by representatives of the Seller) to have access at reasonable
times and upon reasonable notice to the Business, to all the premises,
properties, personnel, books, records (including tax records), contracts,
and documents of or pertaining to the Business for due diligence review,
and such access shall be conducted in a manner so as not to interfere with
the normal business operations of the Seller.
(c) Non-Competition Covenant. Without the prior written consent of the
Purchaser, and except as provided for in Section 5.2(a), Seller shall not,
within the period commencing on the Closing Date and ending on the third
anniversary of the Closing Date, whether directly or indirectly, as a
partner, stockholder, principal, agent, affiliate or consultant, carry on
any business or activity associated with the marine industry which competes
with the Business as conducted by the Seller or the business conducted by
Purchaser as of the Closing Date; provided, however, that this covenant
shall be effective only so long as Purchaser is not in default in its
payment obligations pursuant to this Agreement and the Promissory Note.
(d) Corporate Structure and Capitalization. Prior to Closing, Seller will not
alter or amend its charter or by-laws, sell or dispose of any of its
capital stock or grant any rights to purchase its capital stock or declare,
set aside or pay any dividend or distribution on its capital stock, in each
case if such action would impair Seller's ability to complete the
transactions contemplated by this Agreement.
5.2 Covenants of the Purchaser. The Purchaser covenants and agrees with the
Seller as follows:
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(a) Non-Competition Exclusion. The Purchaser acknowledges that the
non-competition covenant in Section 5.1(c) shall not include any of the
current business activities of Seller, except for the Business.
(b) Access. Prior to Closing, Purchaser will permit the Seller and its
authorized representatives (who shall, at the sole discretion of Purchaser,
be accompanied by representatives of the Purchaser) to have access at
reasonable times and upon reasonable notice to the Business, to all the
premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to the Business for due diligence
review, and such access shall be conducted in a manner so as not to
interfere with the normal business operations of the Seller.
(c) Corporate Structure and Capitalization. Prior to Closing, Seller will not
alter or amend its charter or by-laws, sell or dispose of any of its
capital stock or grant any rights to purchase its capital stock or declare,
set aside or pay any dividend or distribution on its capital stock, in each
case if such action would impair Seller's ability to complete the
transactions contemplated by this Agreement.
(d) Seller Board Position. Purchaser will cause a representative selected by
Seller to be elected to its Board of Directors ("Board") immediately after
Closing and shall cause such representative or a replacement representative
selected by Seller to remain on the Board until payment in full of the
Promissory Note.
6. CLOSING CONDITIONS
6.1 Closing Conditions for the Benefit of the Purchaser. The obligation of the
Purchaser to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) Representations and Warranties. The representations and warranties set
forth in Section 4.1 above shall be true and correct in all material
respects at and as of the Closing Date;
(b) Covenants. Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c) No Action. There shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement;
(d) Consents. Any applicable consents and approvals required to be obtained
prior to Closing have been obtained;
(e) Operating Agreement. Seller shall have executed the operating agreement
(the "Operating Agreement") attached as Exhibit 6.1(e);
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(f) McCurdy Employment Agreement: Neil McCurdy shall have entered into an
employment agreement with Purchaser providing for Mr. McCurdy's employment
by Purchaser following the Closing;
(g) Certificate of Compliance. The Seller shall have delivered to the Purchaser
a certificate to the effect that each of the conditions specified above in
Section 6.1(a)-(e) is satisfied; and
(h) Opinion of Counsel. Stoel Rives LLP, or other counsel reasonably acceptable
to Purchaser, shall have delivered to Purchaser an opinion of counsel in
the form attached as Exhibit 6.1(h).
6.2 Conditions for the Benefit of the Seller. The obligation of the Seller to
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(a) Representations and Warranties. The representations and warranties set
forth in Section 4.2 above shall be true and correct in all material
respects at and as of the Closing Date;
(b) Covenants. The Purchaser shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c) No Action. There shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement;
(d) Consents. Any applicable consents and approvals required to be obtained
prior to Closing have been obtained;
(e) Operating Agreement. Purchaser shall have executed the Operating Agreement
attached;
(f) Promissory Note, Security Agreement and Assignment and Assumption
Agreement. Purchaser shall have executed and delivered to Seller the
Promissory Note, the Security Agreement and the Assignment and Assumption
Agreement;
(g) Certificate of Compliance. The Purchaser shall have delivered to the Seller
a certificate to the effect that each of the conditions specified above in
Section 6.2(a)-(f) is satisfied in all respects; and
(h) Opinion of Counsel. Venture Law Group, or other counsel reasonably
acceptable to Seller, shall have delivered to Seller an opinion of counsel
in the form attached as Exhibit 6.2(h).
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(i) Mutual Waiver of Consents. The Purchaser shall have executed the Mutual
Waiver of Consents attached as Exhibit 6.2(i).
7. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES
7.1 Survival. The covenants, representations and warranties of the Purchaser and
each Seller contained in this Agreement or in any certificates or documents
delivered pursuant to it or in connection with the transactions contemplated in
it shall continue in full force and effect after the Closing Date for a period
of twelve (12) months (or until the expiration of all applicable statutes of
limitations with respect to any covenant, representation or warranty relating to
taxes) from the Closing Date (the "Survival Period"), notwithstanding any
investigation made by or on behalf of the Purchaser or the Seller, and shall not
merge upon closing of the transactions contemplated under this Agreement.
8. INDEMNIFICATION AND DISCLOSURE
8.1 Indemnification.
(a) From and after Closing and subject to the provisions of Sections 8.1 and
8.2, Seller covenants and agrees to indemnify and hold harmless the
Purchaser against any actual loss, liability, damage or expense (including
reasonable legal fees and expenses, but excluding incidental, consequential
or punitive damages) (collectively, "Losses" and individually, a "Loss")
which the Purchaser suffers, sustains or becomes subject to as a result of
(i) any breach of the representations or warranties of Seller contained in
this Agreement; (ii) breach of any covenant of Seller contained in this
Agreement; or (iii) any liability relating to the Business arising prior to
the Closing Date, unless assumed by the Purchaser, in each case taking into
account any disclosures set forth in this Agreement and the schedules
thereto; provided that (x) Seller shall not be required to pay or be liable
for any Losses that do not equal or exceed $100,000 in the aggregate and
(y) Seller shall not be required to pay or be liable for any Losses if, and
to the extent that, all indemnification payments by Seller exceed
$1,400,000. The Purchaser shall not be entitled to seek indemnification
with respect to any Loss of which the Purchaser or the Purchaser's
representatives or agents had knowledge on or prior to the Closing Date.
(b) From and after the Closing and subject to the provisions of Sections 8.1
and 8.2, the Purchaser shall indemnify and hold harmless Seller against any
Loss which Seller suffers, sustains or becomes subject to as a result of
(i) any breach of the representations or warranties of Purchaser contained
in this Agreement; (ii) breach of any covenant of Purchaser contained in
this Agreement; or (iii) any liability relating to the Business arising on
or subsequent to the Closing Date, except as set forth in Section 8.1(a);
provided that, except with respect to any breach of the Purchaser's payment
covenants contained in this Agreement and the liabilities of the Business
assumed by the Purchaser pursuant to the Assignment and Assumption
Agreement, (x) Purchaser shall
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not be required to pay or be liable for any Losses that do not equal or
exceed $100,000 in the aggregate and (y) Seller shall not be required to
pay or be liable for any Losses if, and to the extent that, all
indemnification payments by Seller exceed $1,400,000. The Seller shall not
be entitled to seek indemnification with respect to any Loss of which the
Seller or the Seller's representatives or agents had knowledge on or prior
to the Closing Date.
(c) The Purchaser and the Seller shall not be liable for any claim for
indemnification under this Section 8.1 unless written notice from the party
seeking indemnification, specifying in reasonable detail the nature of the
claim for indemnification, is received by the party from whom
indemnification is sought within three (3) months after the indemnified
party received notice of the existence of such claim for indemnification,
but in no case later than three (3) months after the expiration of the
Survival Period, in which case the representation, warranty, covenant or
agreement which is the subject of such claim shall survive, to the extent
of such claim, only until such claim is resolved, whether or not the amount
of the Losses resulting from such breach have been finally determined at
the time the notice is given, if, but only if, (i) in the case of a claim
made by reason of a Third Party Claim (as defined in Section 8.1(d) below),
the written notice is accompanied by a copy of the written notice of the
third party claimant and (ii) in the case of any claim made other than by
reason of a Third Party Claim, some Losses shall have been incurred at or
prior to the date of such notice.
(d) Promptly after the assertion by any third party of any claim (a "Third
Party Claim") against any party entitled to indemnification under this
Section 8.1 (the "Indemnitee") that results or may result in the incurrence
by such Indemnitee of any Loss for which such Indemnitee would be entitled
to indemnification pursuant to this Agreement, such Indemnitee shall
promptly notify in writing the party from whom such indemnification could
be sought (the "Indemnitor") of such Third Party Claim. Any Indemnitee
shall have the right to employ separate counsel in any such Third Party
Claim and to participate in the defense thereof, but the fees and expenses
of such counsel shall not be an expense of the Indemnitor unless (i) the
Indemnitor shall have failed, within a reasonable time after having been
notified by the Indemnitee of the existence of such Third Party Claim as
provided in the preceding sentence, to assume the defense of such Third
Party Claim or (ii) the employment of such counsel has been specifically
authorized by the Indemnitor. If an Indemnitee consents to the entry of any
judgment or enters into any settlement with respect to any Third Party
Claim without the prior written consent of the Indemnitor, the Indemnitee
will forfeit any right to indemnification under this Agreement.
(e) The amount of any Loss subject to indemnification hereunder or of any claim
therefor shall be calculated net of (i) any Tax Benefit inuring to the
party suffering the Loss on account of such Loss and (ii) any insurance
proceeds (net of direct collection expenses) received or receivable by the
party suffering the Loss on account of such Loss. If the party suffering
the Loss receives a Tax Benefit after an indemnification payment is made,
that party shall promptly pay to the other party an amount equal to such
Tax
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Benefit at such time or times as and to the extent that such Tax Benefit is
realized. For purposes hereof, "Tax Benefit" shall mean any refund of Taxes
paid or reduction in the amount of Taxes which otherwise would have been
paid. The party suffering the Loss shall seek full recovery under all
insurance policies covering any Loss to the same extent as they would if
such Loss were not subject to indemnification hereunder. In the event that
an insurance recovery is made by a party with respect to any Loss for which
any such party has been indemnified hereunder, then a refund equal to the
aggregate amount of the recovery (net of all direct collection expenses)
shall be made promptly to the indemnifying party.
(f) Each party entitled to indemnification hereunder shall take all reasonable
steps to mitigate all losses, costs, expenses and damages after becoming
aware of any event which could reasonably be expected to give rise to any
Losses that are indemnifiable or recoverable hereunder or in connection
herewith.
8.2 Limitation of Recourse.
(a) Following the Closing, the indemnification provided by Section 8.1 shall be
the sole and exclusive remedy for any Losses of a party with respect to any
breach of any representations or warranties, or any breach or failure in
performance of any covenants or agreements contained in this Agreement or
any certificate delivered hereunder. The indemnification provided by
Section 8.1 shall not be enforceable by set-off or recoupment against the
obligations created by the Promissory Note, Security Agreement, License
Agreement, or Operating Agreement, all of which shall be enforceable
according to their terms and applicable law.
(b) No claim shall be brought or maintained by either party or its successors
or permitted assigns against any officer, director or employee (present or
former) of either party, and no recourse shall be brought or granted
against any of them, by virtue of or based upon any alleged
misrepresentation or inaccuracy in or breach of any of the representations,
warranties or covenants set forth or contained in this Agreement or any
certificate delivered hereunder, except to the extent that the same shall
have been the result of fraud (and in the event of such fraud, such
recourse shall be brought or granted solely against the party or parties
committing such fraud). Without limiting the foregoing, in no event shall
any party, its successors or permitted assigns be entitled to claim or seek
any rescission of the transactions consummated under this Agreement.
8.3 Schedules and Exhibits. Disclosure of any fact or item in any schedule or
exhibit hereto shall be deemed to have been so disclosed in any other
schedule, exhibit or representation or warranty made herein, provided
disclosure of such fact or item on such schedule or exhibit contains fair
disclosure of the facts that would otherwise be required to be disclosed in
such other schedule, exhibit or representation or warranty. Matters
reflected in the schedules and exhibits hereto are not necessarily limited
to matters required by this Agreement to be disclosed herein or therein.
Such additional
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matters are provided for information purposes only and shall not be deemed
to be an admission or acknowledgement in and of itself, that such
information is material.
8.4 Acknowledgment by the Purchaser. The Purchaser acknowledges that it has
conducted to its satisfaction, an independent investigation and
verification of the financial condition, results of operations, assets,
liabilities, properties and projected operations of the Business and, in
making its determination to proceed with the transactions contemplated by
this Agreement, the Purchaser has relied on the results of its own
independent investigation and verification and the representations and
warranties of the Seller expressly and specifically set forth in this
Agreement, including the schedules attached hereto. Such representations
and warranties by the Seller constitute the sole and exclusive
representations and warranties of the Seller to the Purchaser in connection
with the transactions contemplated hereby, and the Purchaser understands,
acknowledges and agrees that all other representations and warranties of
any kind or nature expressed or implied (including, but not limited to, any
relating to the future or historical financial condition, Purchased Assets
or other assets, results of operations, assets or liabilities of the
Business, or the quality, quantity or condition of the Purchased Assets)
are specifically disclaimed by the Seller. The Seller does not make or
provide, and the Purchaser hereby waives, any warranty or representation,
express or implied, as to the quality or use for a particular purpose or
condition of any of the Purchased Assets.
8.5 Further Assurances. From time to time, as and when requested by any party
hereto and at such party's expense, any other party shall execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions as such other party may reasonably deem necessary or desirable to
evidence and effectuate the transactions contemplated by this Agreement.
9. GENERAL MATTERS
9.1 Press Releases and Communications. No press release or public announcement
related to this Agreement or the transactions contemplated herein shall be
issued or made without the joint approval of the Purchaser and the Seller,
unless required by law (in the reasonable opinion of counsel) in which case
the Purchaser and the Seller shall have the right to review such press
release or announcement prior to publication.
9.2 Risk of Loss. Until the Closing Date, the Purchased Assets shall be and
remain at the risk of the Seller. If any of the Purchased Assets shall be
lost, damaged or destroyed prior to the Closing Date, the Seller shall give
written notice to the Purchaser thereof forthwith upon the occurrence of
such loss, damage or destruction, whereupon the Purchaser may elect in
writing to either terminate this Agreement or to complete the purchase to
the extent possible without reduction of the Purchase Price, in which event
all proceeds of any insurance or compensation receivable in respect of such
loss, damage or destruction shall be payable to the Purchaser and all right
and claim of the
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Seller to any such amounts not paid by the Closing Date shall be assigned
to the Purchaser.
9.3 Entire Agreement. This Agreement, including the exhibits and schedules to
it, together with the agreements and other documents to be delivered
pursuant to it and the Confidentiality Agreement dated December 16, 1999,
constitute the entire agreement between the parties pertaining to the
subject matter of this Agreement and supersede all prior agreements,
understandings, negotiations and discussions, whether written or oral, of
the parties, and there are no other warranties, representations or other
agreements between the parties in connection with the subject matter of it.
No amendment, modification, waiver or termination of this Agreement shall
be binding unless executed in writing by the party to be bound thereby. No
waiver of any provision of this Agreement shall be deemed to constitute a
waiver of any other provision (whether or not similar) nor shall such
waiver constitute a continuing waiver unless expressly provided.
9.4 Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision shall be construed as nearly
as possible to give effect to the original intent of the parties.
9.5 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, provided, however, that
neither this Agreement nor any of the rights, interests or obligations
hereunder may be assigned or delegated by the Purchaser without the prior
written consent of the Seller, which consent may not be unreasonably
withheld. Notwithstanding the foregoing, no consent shall be required in
connection with the merger, consolidation or acquisition of Purchaser, or
the sale of all or substantially all of the assets of Purchaser, with, by
or to any person or entity unless such person or entity, directly or
indirectly, as a partner, stockholder, principal, agent, affiliate or
consultant, is engaged in any business that competes with the business then
conducted by Seller. Except as set forth in the License Agreement and the
Operating Agreement, the Seller may assign its rights and interests
hereunder, but not its obligations, without Purchaser's consent.
9.6 Expenses. All costs and expenses (including, without limitation, the fees
and disbursements of legal counsel) incurred in connection with the
negotiation and preparation of this Agreement and the consummation of the
transactions contemplated by it shall be paid solely by the party incurring
such expenses.
9.7 Notices. Any notice or other writing required or permitted to be given
hereunder will be deemed delivered upon actual receipt of the party to be
notified at the address set forth below:
20
<PAGE>
(a) to the Seller at:
The Cobalt Group, Inc.
2200 First Avenue South, Suite 400
Seattle, WA 98134
Attention: Lee Brunz, Esq.
Facsimile Number: (206) 269-6350
With a copy to:
Stoel Rives LLP
600 University Street, Suite 3600
Seattle, Washington 98101
Attention: Ronald Lone, Esq.
Facsimile Number: (206) 386-7500
(b) to the Purchaser at:
Boats.com, Inc.
Pier 38, The Embarcadero
San Francisco, CA 94107
Attention: Rolando Esteverena
Facsimile Number: (415) 356-5417
With a copy to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Attention: Mark A. Medearis, Esq.
Facsimile Number: (650) 233-8386
9.8 Governing Laws. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without reference to
the conflicts of laws provisions thereof.
9.9 Counterparts. This Agreement may be executed in any number of counterparts,
each of which when executed and delivered shall be deemed to be an original
of this Agreement and fully binding upon the signatory to it, but all such
counterparts shall together constitute one and the same instrument.
9.10 Headings. The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
21
<PAGE>
9.11 Construction. The parties to this Agreement have participated jointly in
the negotiation of this Agreement. In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules
and regulations promulgated thereunder, unless the context requires
otherwise
9.12 Time of Essence. Time shall be of the essence of this Agreement.
9.13 Currency. All dollar amounts referred to in this agreement are in lawful
currency of the United States of America.
9.14 Bulk Transfers. Purchaser waives compliance by Seller with the bulk
transfer provisions of the Uniform Commercial Code as in effect in any
state having jurisdiction over the transactions contemplated by this
Agreement. Seller will indemnify and hold Purchaser harmless against any
and all claims arising as a result of Seller's non-compliance with such
provisions.
9.15 Knowledge. Unless expressly stated otherwise, all references in this
Agreement to the "knowledge" of any person mean to the actual (and not the
constructive, imputed or implied) knowledge, without investigation or
review of any public or private files, of (i) the senior management of such
person, in the case of Seller and Purchaser, and (ii) the individual
professionals who personally participated in this transaction, in the case
of representatives and agents of Seller and Purchaser.
IN WITNESS WHEREOF the parties have executed this Agreement as of the day,
month and year first above written.
BOATS.COM, INC.
By: /s/
------------------------------------
Its: CEO
-------------------------------
THE COBALT GROUP, INC.
By: /s/
-------------------------------------
Its: CEO and President
--------------------------------
For more information contact:
Investor Relations Inquiries Media Inquiries
David M. Douglass Amy Anderson
Chief Financial Officer Manager, Marketing
The Cobalt Group, Inc. Communications
206-269-6363 ext. 701 The Cobalt Group, Inc.
[email protected] 206-269-6363 ext. 105
[email protected]
The Cobalt Group Announces Fourth Quarter and
Fiscal Year End 1999 Financial Results
- Sequential Quarterly Revenues Grow 19% to $8.4 million;
Quarter-over-Quarter Revenues Up 270%
- Strategic Initiatives, Key Partnerships and Aggressive
Product Launches Strengthen Business-to-Business Service
Offerings
- Sale of YachtWorld Division Increases Liquidity for
Continued Growth
- John Holt Named President and Chief Executive Officer
SEATTLE (January 26, 2000) - The Cobalt Group, Inc. (NASDAQ: CBLT), a leading
provider of Internet solutions for the automotive industry, today announced
financial results for its fourth quarter and fiscal year ending December 31,
1999.
Revenues for the fourth quarter of 1999 increased 19% to $8.4 million from
revenues of $7.0 million in the third quarter of 1999, and they increased 270%
from revenues of $2.3 million in the fourth quarter of 1998. For the year ending
December 31, 1999, revenues increased 273% to $23.3 million from revenues of
$6.2 million in the year ending December 31, 1998.
During the fourth quarter, $5.7 million in revenues were derived from Internet
marketing services. This compares to $4.2 million for the third quarter of 1999.
The remaining $2.7 million in fourth quarter revenues was attributable to
Cobalt's PartsVoice subsidiary. PartsVoice accounted for $2.8 million in the
third quarter of 1999.
Net loss for the fourth quarter of 1999 was $4.8 million, or $0.29 per
share, compared to a net loss of $5.5 million, or $0.37 per share for the
previous quarter and a net loss of $3.6 million or $1.15 per share in the fourth
quarter of 1998. Net loss for the year ending December 31, 1999 was $16.5
million, or $1.22 per share as compared to $5.1 million, or $1.57 per share for
the year ending December 31, 1998. All per share amounts are computed on a pro
forma diluted basis, which assumes conversion of the convertible preferred stock
from the original date of issuance.
"We are very pleased to report record results for our first full quarter as a
public company," stated John Holt, president and CEO of The Cobalt Group, Inc.
"Since completing our initial public offering in August, we have made major
strides towards becoming a leading provider of Internet-based
business-to-business solutions for the automotive industry."
The Cobalt Group ended the fourth quarter with approximately 5,200 dealer Web
site clients, over 10,000 dealers using its parts locating system and
relationships with 16 automotive manufacturers and more than 50 of the 100
largest dealer groups in the United States.
-- More --
<PAGE>
Cobalt Q4 1999 Financial Results/2
Holt added, "In line with our strategic goals we have established the
largest dealer network in the auto industry, as well as key associations with
the National Automotive Dealers Association, Excite@Home, InfoSpace.com, and
BuySellBid.com. Combined with a number of new product launches, additional
manufacturer partners, the development of MotorPlace.com, and the acquisitions
of PartsVoice and IntegraLink, the Company is positioned to grow and leverage
its dealer network, and provide deep technology solutions for our dealer and
manufacturer clients."
RECENT HIGHLIGHTS
. On In January 20, 2000 The Cobalt Group launched MotorPlace.com, a
business-to-business vertical portal for the automotive industry. The
site aggregates vehicle and parts data from Cobalt's more than 12,000
auto dealer clients to create an e-commerce marketplace for dealers
and other industry participants. Dealers will be able to use
MotorPlace.com to buy, sell and trade new and used vehicles and
original equipment manufacturer (OEM) parts with other dealers. The
site will also allow dealers to combine their purchasing power to make
discounted purchases of goods and supplies.
. The National Automobile Dealers Association (NADA) and The Cobalt
Group announced an unprecedented partnership on January 10, 2000 to
launch an industry-wide e-commerce push aimed at increasing dealer Web
site utilization and create a comprehensive automotive consumer
portal. The partnership was launched at the recently-ended NADA
convention in Orlando, where the Company generated hundreds of leads
and signed up new dealer Web site customers at monthly subscriptions
more than double the current average dealer spend.
. The Cobalt Group announced its intention to expand the Company's data
collection capabilities on January 14, 2000 with the acquisition of
IntegraLink, a provider of advanced data extraction and reporting
services. IntegraLink provides third generation data extraction
capabilities to 2,700 dealers and will add efficiencies to Cobalt's
PartsVoice operation.
. In recent weeks, The Cobalt Group announced partnerships to expand
consumer choice in online car shopping by providing its new and/or
used vehicle listings to Excite@Home, InfoSpace.com and
BuySellBid.com. In turn, Cobalt's dealer clients have gained exposure
to millions of online car buyers nationwide.
. The Cobalt Group announced in December that Kia Motors America had
chosen Cobalt's PartsVoice subsidiary as the exclusive contract vendor
for the Kia National Parts Locator. This service markets Kia dealers'
original equipment inventory to anyone searching for Kia parts,
including Kia dealers, non-Kia dealers, repair/body shops, fleet and
insurance companies and do-it-yourselfers. Kia was the fifth
manufacturer in 1999 to choose Cobalt to provide exclusive Web site
services or parts locator services to its dealer network.
-- More --
<PAGE>
Cobalt Q4 1999 Financial Results/3
. The Cobalt Group has recently launched new Internet-based software
applications to help dealers service their online customers,
including: Lead Manager, which tracks lead response time and sales
closing ratios for Internet leads; AdWizard Plus, an online
advertising application that allows dealers and manufacturers to
create custom advertising campaigns for their Web sites; Service
Solution 2-1-1, a Customer Relationship Management tool that helps
dealers retain owners and increase their service business; and Finance
Solution 2-1-1, an Internet services package that contains loan
calculators and Kelley Blue Book used car pricing.
SALE OF YACHTWORLD.COM DIVISION
The Cobalt Group today announced that it sold its YachtWorld.com division for
$14.0 million in cash and notes as well as warrants to purchase common stock of
Boats.com, Inc. "Though YachtWorld.com has been part of the Company since its
inception, we want to focus all of our energies on strengthening our leadership
position in the automotive industry," said Holt. "The cash proceeds will provide
us with additional liquidity and help fuel our aggressive efforts to grow market
share and develop leading technology solutions for the world's largest consumer
vertical."
HOLT BECOMES PRESIDENT AND CHIEF EXECUTIVE OFFICER
Concurrent with the announcement of the Company's 1999 financial results, John
Holt has been named to the position of president and chief executive officer.
The role of chief executive officer was previously shared between Holt and Geof
Barker. Barker will consult with the Company and remain a member of the Board of
Directors.
"Since co-founding the Company, John has become an industry spokesman for the
new, digital dealer," said Howard Tullman, chairman of The Cobalt Group's Board
of Directors. "We are delighted that he will lead the Company as it continues to
build its growing leadership position as a premier provider of
business-to-business services to auto dealers and manufacturers."
"This change formalizes an evolution that has been underway for some time," said
Barker. "John has always had a more direct involvement in day-to-day operations
as well as in setting the Company's strategic direction, while I've focused
primarily on fundraising and acquisitions and dispositions. Now that the Company
is public, I look forward to helping Cobalt with strategic initiatives at the
Board level."
"Geof has been a close friend and partner throughout Cobalt's evolution,"
commented Holt. "I would like to thank him for his support during this period of
change and I look forward to working together in our respective new roles."
Prior to Cobalt, Holt developed and directed an affiliate label publishing
program for IVI Publishing. He also served as vice president for growth and
development at Oceantrawl Inc., one of the world's largest seafood processing
companies. Holt has a master's degree from The Yale School of Management and a
bachelor's degree from Bowdoin College.
-- More --
<PAGE>
Cobalt Q4 1999 Financial Results/4
ABOUT THE COBALT GROUP
The Cobalt GroupT (NASDAQ: CBLT), based in Seattle, is a leading provider of
Internet-based products and services for the automotive industry. Through
Internet-based application development and hosting, data management, and online
car referral services, Cobalt helps dealers, dealer groups and automobile
manufacturers harness the power of the Internet to realize new efficiencies, win
new prospects and better serve their customers.
With approximately 5,200 dealer Web site clients, over 10,000 dealers using its
parts locating system, and relationships with 16 automotive manufacturers and
more than 50 of the 100 largest dealer groups in the United States, Cobalt is
one of the leading technology companies serving the automotive industry. Cobalt
operates MotorPlace.com (www.motorplace.com), a business-to-business vertical
portal for the automotive industry; DealerNetR (www.dealernet.com), one of the
best-known automotive destination sites on the Web; and PartsVoiceR
www.partsvoice.com), a leading OEM auto parts locating and data management
service.
Cobalt offers Web site services that are endorsed by the National Automobile
Dealers Association.
For more information, please visit The Cobalt Group at
www.cobaltgroup.com
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: This release may contain forward-looking statements relating to the
development of Cobalt's products and services and future operating results,
including statements regarding future market share and new products and
services. The words "believe," "expect," "intend," "anticipate," variations of
such words, and similar expressions identify forward-looking statements, but
their absence does not mean that the statement is not forward-looking. Actual
results may vary significantly from the results expressed or implied in such
statements. For a discussion of the risks that could affect Cobalt's future
performance, please see "Risk Factors" in Cobalt's most recent quarterly report
on Form 10-Q, as filed with the Securities and Exchange Commission. Cobalt
undertakes no obligation to update publicly any forward-looking statements to
reflect new information, events or circumstances after the date of this release
or to reflect the occurrence of unanticipated events. Cobalt, The Cobalt Group,
DealerNet, PartsVoice, IntegraLink, AdWizard, and MotorPlace.com are trademarks
of The Cobalt Group, Inc. All other trademarks are the property of their
respective owners.
(Tables to Follow)
<PAGE>
<TABLE>
<CAPTION>
The Cobalt Group, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
December 31, December 31,
1998 1999
------------ ------------
Assets
<S> <C> <C>
Current assets
Cash and cash equivalents $ 5,756 $14,224
Short-term investments 983 -
Accounts receivable, net of allowance
for doubtful accounts of $85 and
$497, respectively 1,250 4,581
Other current assets 130 2,225
---------- ----------
8,119 21,030
Capital assets, net of accumulated depreciation
of $410 and $1,707, respectively 1,453 4,636
Intangible assets, net of accumulated
amortization of $321 and $4,016,
respectively" 479 27,330
Other assets 11 1,036
---------- ----------
Total assets $10,062 $54,032
========== ==========
Liabilities, Mandatorily Redeemable Convertible Preferred Stock and
Shareholders' (Deficit) Equity
Current liabilities
Accounts payable $ 191 $ 2,020
Accrued liabilities 776 1,520
Deferred revenue 1,290 2,456
Software financing contract, current portion - 362
Capital lease obligations, current portion 328 844
---------- ----------
2,585 7,202
Non-current liabilities
Software financing contract, non-current
portion - 28
Capital lease obligations, non-current
portion 557 1,217
---------- ----------
557 1,245
Mandatorily redeemable convertible preferred stock
Series A; $0.01 par value per share;
2,106,282 and 0 shares issued
and outstanding; redemption and
liquidation value of $1,158 and $0 1,116 -
Series B; $0.01 par value per share;
7,047,620 and 0 shares issued and
outstanding; redemption and liquidation
value of $29,600 plus unpaid dividends
and $0 30,046 -
---------- ----------
31,162 -
Shareholders' (deficit) equity
Preferred stock; $0.01 par value per share;
100,000,000 shares authorized; 9,153,902
and 0 shares issued and outstanding as
mandatorily redeemable convertible
preferred stock - -
Common stock; $0.01 par value per share;
200,000,000 shares authorized; 1,343,898
and 16,855,431 issued and outstanding,
respectively 13 169
Additional paid-in capital 2,435 89,957
Deferred compensation (1,686) (3,036)
Notes receivable from shareholders (144) (144)
Accumulated deficit (24,860) (41,361)
---------- ----------
(24,242) 45,585
---------- ----------
Total liabilities, mandatorily
redeemable convertible preferred
stock and shareholders' (deficit)
equity $10,062 $54,032
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The Cobalt Group, Inc.
Consolidated Statements of Operations
(unaudited)
(in thousands, except share and per share amounts)
Three months ended Twelve months ended
December 31, December 31,
----------------------------- ------------------------------
1998 1999 1998 1999
--------------- ------------- -------------- ----------------
(unaudited)
<S> <C> <C> <C> <C>
Revenues $ 2,261 $ 8,375 $ 6,245 $ 23,286
Cost of revenues 453 1,676 1,199 4,819
--------------- ------------- -------------- ----------------
Gross profit 1,808 6,699 5,046 18,467
Operating expenses
Sales and marketing 1,482 3,815 4,048 11,591
Product development 352 1,333 961 3,168
General and administrative 1,616 4,816 4,328 13,201
Amortization of intangible assets 74 1,330 299 3,694
Stock based compensation 527 424 806 2,806
--------------- ------------- -------------- ----------------
Total operating expenses 4,051 11,718 10,442 34,460
--------------- ------------- -------------- ----------------
Loss from operations (2,243) (5,019) (5,396) (15,993)
Gain on sale of HomeScout - - 1,626 -
Common stock repurchase (1,384) - (1,384) -
Interest expense (35) (67) (93) (993)
Other income, net 94 257 142 485
--------------- ------------- -------------- ----------------
Net loss $ (3,568) $ (4,829) $ (5,105) $ (16,501)
=============== ============= ============== ================
Net loss available to common
shareholders $ (12,385) $ (4,829) $ (13,930) $ (18,042)
=============== ============= ============== ================
Basic and diluted net loss per share $ (8.35) $ (0.29) $ (4.74) $ (2.26)
=============== ============= ============== ================
Weighted-average shares outstanding 1,483,686 16,850,441 2,938,460 7,971,443
=============== ============= ============== ================
Pro forma net loss available to
common shareholders (unaudited) $ (11,830) $ (4,829) $ (13,367) $ (16,501)
=============== ============= ============== ================
Pro forma basic and diluted net
loss per share (unaudited) $ (1.15) $ (0.29) $ (1.57) $ (1.22)
=============== ============= ============== ================
Pro forma weighted-average shares
outstanding (unaudited) 10,261,027 16,850,441 8,530,634 13,519,898
=============== ============= ============== ================
</TABLE>
