<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 22, 1999
REGISTRATION NO. 333-79709
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TICKETS.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7999 06-1424841
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF CLASSIFICATION NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
</TABLE>
------------------------
4675 MACARTHUR COURT, SUITE 1400
NEWPORT BEACH, CALIFORNIA 92660
(949) 862-5400
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
W. THOMAS GIMPLE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
4675 MACARTHUR COURT, SUITE 1400
NEWPORT BEACH, CALIFORNIA 92660
(949) 862-5400
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
BRUCE R. HALLETT, ESQ. JULIA L. DAVIDSON, ESQ.
BROBECK, PHLEGER & HARRISON LLP COOLEY GODWARD LLP
38 TECHNOLOGY DRIVE 5 PALO ALTO SQUARE
IRVINE, CALIFORNIA 92618 3000 EL CAMINO REAL
(949) 790-6300 PALO ALTO, CALIFORNIA 94306
(650) 843-5000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale and
distribution of the securities being registered. All amounts are estimated
except the Securities and Exchange Commission, NASD and Nasdaq National Market
fees. All of the expenses below will be paid by Tickets.com.
<TABLE>
<CAPTION>
ITEM
- ----
<S> <C>
Registration fee............................................ $20,850
NASD filing fee............................................. 10,500
Nasdaq National Market listing fee.......................... *
Blue sky fees and expenses.................................. *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Transfer Agent and Registrar fees........................... *
Miscellaneous............................................... *
-------
Total............................................. *
=======
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law permits indemnification
of officers and directors of Tickets.com under certain conditions and subject to
certain limitations. Section 145 of the Delaware General Corporation Law also
provides that a corporation has the power to purchase and maintain insurance on
behalf of its officers and directors against any liability asserted against such
person and incurred by him or her in such capacity, or arising out of his or her
status as such, whether or not the corporation would have the power to indemnify
him or her against such liability under the provisions of Section 145 of the
Delaware General Corporation Law.
Article VII, Section I of the Restated Bylaws of Tickets.com provides that
Tickets.com shall indemnify its directors and executive officers to the fullest
extent not prohibited by the Delaware General Corporation Law. The rights to
indemnity thereunder continue as to a person who has ceased to be a director,
officer, employee or agent and inure to the benefit of the heirs, executors and
administrators of the person. In addition, expenses incurred by a director or
executive officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding by reason of the fact that he or she is
or was a director or officer of Tickets.com (or was serving at Tickets.com's
request as a director or officer of another corporation) shall be paid by
Tickets.com in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by Tickets.com as authorized by the relevant
section of the Delaware General Corporation Law.
As permitted by Section 102(b)(7) of the Delaware General. Corporation Law,
Article V, Section (A) of Tickets.com's Restated Certificate of Incorporation
provides that a director of Tickets.com shall not be personally liable for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to Tickets.com or
its stockholders, (ii) for acts or omissions not in good faith or acts or
omissions that involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived any improper personal benefit.
Tickets.com has entered into indemnification agreements with each of its
directors and executive officers. Generally, the indemnification agreements
attempt to provide the maximum protection permitted by
II-1
<PAGE> 3
Delaware law as it may be amended from time to time. Moreover, the
indemnification agreements provide for certain additional indemnification. Under
such additional indemnification provisions, however, an individual will not
receive indemnification for judgments, settlements or expenses if he or she is
found liable to Tickets.com (except to the extent the court determines he or she
is fairly and reasonably entitled to indemnity for expenses), for settlements
not approved by Tickets.com or for settlements and expenses if the settlement is
not approved by the court. The indemnification agreements provide for
Tickets.com to advance to the individual any and all reasonable expenses
(including legal fees and expenses) incurred in investigating or defending any
such action, suit or proceeding. In order to receive an advance of expenses, the
individual must submit to Tickets.com copies of invoices presented to him or her
for such expenses. Also, the individual must repay such advances upon a final
judicial decision that he or she is not entitled to indemnification.
Tickets.com has purchased directors' and officers' liability insurance.
Tickets.com intends to enter into additional indemnification agreements with
each of its directors and executive officers to effectuate these indemnity
provisions.
The underwriting agreement (Exhibit 1.1 hereto) contains provisions by
which the Underwriters have agreed to indemnify Tickets.com, each person, if
any, who controls Tickets.com within the meaning of Section 15 of the Securities
Act, each director of Tickets.com, and each officer of Tickets.com. who signs
this Registration Statement, with respect to information furnished in writing by
or on behalf of the Underwriters for use in the Registration Statement.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following securities of the Registrant have been sold by the Registrant
during the past three years without registration under the Securities Act of
1933, as amended (the "Act"). Securities issued prior to May 25, 1999 were
issued under the Registrant's former name "Advantix, Inc." or "Entertainment
Express, Inc."
(a) In May 1996, the Registrant repurchased 4,500,000, 1,000,000 and
1,000,000 shares of common stock sold in May 1995 to Irvin E. Richter, James S.
Cassano and Laurence F. Schwartz, respectively, at a purchase price per share of
$0.001. The shares were repurchased at their original issue price. The
Registrant then issued and sold 8,000,000, 1,000,000 and 1,000,000 shares of
common stock at $0.0001 per share to R4 Holdings, LLC, James S. Cassano and
Laurence F. Schwartz, respectively, for an aggregate consideration of $1,000.
(b) In May 1996, the Registrant issued a $3,000,000 Convertible Promissory
Note ("Hill Note") to Hill Arts & Entertainment Systems, Inc. ("Hill A&E") in
connection with the acquisition of certain assets and liabilities of Hill A&E.
(c) In May 1996, the Registrant issued and sold 1,250,000 shares of common
stock at $0.01 per share, warrants to purchase 1,900,000 shares of common stock
at $0.01 per share and 408,163 shares of Series A Preferred Stock at $0.49 per
share to Ventana Express, LLC, for an aggregate cash consideration of $212,500.
(d) In September and October of 1996 and January of 1997, the Registrant
issued and sold 8,440,002 shares of Series A Preferred Stock at $0.49 per share
to 25 investors in a private offering, for a net aggregate cash consideration of
$4,090,993. In connection with the Series A Private Placement, 50,510, 19,684
and 44,948 shares of the Registrant's common stock were issued to All Asia
Company, Ltd., PS Holdings, Ltd. and IPPC Investments, Inc., respectively, as
finder's fees. These parties also purchased shares of Series A Preferred Stock
in the offering.
(e) In December 1996, the Registrant issued 1,082,404 shares of common
stock to Playhouse Square Foundation ("PSF"), an Ohio not-for-profit
corporation, in connection with the acquisition of certain assets and
liabilities of the Advantix ticketing division of PSF.
(f) In March and May of 1997, the Registrant issued and sold 2,094,174
shares of Series B Preferred Stock at $1.25 per share to 16 investors in a
private offering, for an aggregate cash consideration of $2,617,718.
II-2
<PAGE> 4
(g) In March 1997, a terminated employee of the Registrant exercised a
stock option to acquire 375 shares of the Registrant's common stock at $0.40 per
share, for an aggregate cash consideration of $150.
(h) In April 1997, terminated employees of the Registrant exercised stock
options to acquire 20,844 shares of the Registrant's common stock at $0.40 per
share, for an aggregate cash consideration of $8,337.
(i) In May 1997, the Registrant issued 489,796 shares of common stock at
$0.49 per share in lieu of interest in the amount of $240,000 due on the Hill
Note.
(j) In July 1997, a terminated employee of the Registrant exercised an
outstanding stock option to acquire 891 shares of the Registrant's common stock
at $0.40 per share, for an aggregate cash consideration of $356.
(k) In August 1997, the Registrant issued 1,136,000 shares of common stock
to Fantastix Ticket Company, LLC ("Fantastix") in connection with the
acquisition of substantially all of the assets and liabilities of Fantastix.
(l) In September and October of 1997, the Registrant issued and sold
7,505,700 shares of Series B Preferred Stock at $1.25 per share to 34 investors
in a private offering (the "Second Series B Private Placement"), for an
aggregate cash consideration of $9,382,125. In connection with the issuance of
such Series B Preferred Stock, International Capital Partners, Inc. received as
a finder's fee a warrant to purchase up to 400,000 shares of the Registrant's
common stock at $0.01 per share.
(m) In November 1997, the Registrant issued and sold 400,000 shares of
common stock in connection with the exercise of the warrant described in
paragraph (1) above, for an aggregate cash consideration of $4,000.
(n) In September 1997, the Registrant issued warrants to purchase 2,998,003
shares of common stock at $2.00 per share to the shareholders of Bay Area
Seating Service ("BASS") in connection with the acquisition of the outstanding
securities of BASS.
(o) In September 1997, the Registrant issued Provident Bank a warrant to
purchase up to 400,000 shares of the Registrant's common stock at $0.01 per
share, in connection with a loan from Provident Bank.
(p) In October 1997, a terminated employee of the Registrant exercised a
stock option to acquire 10,000 shares of the Registrant's common stock at $0.40
per share, for an aggregate cash consideration of $4,000.
(q) In October 1997, the Registrant issued an additional 18,364 shares of
common stock representing underpaid interest on the Hill Note.
(r) In December 1997, the Registrant, pursuant to its 1997 Nonemployee
Directors' Stock Option Plan, issued options to purchase 225,000 shares of
common stock to its nonemployee directors, with an exercise price of $1.00 per
share.
(s) In May 1998, the Registrant issued and sold 11,597,114 shares of Series
C Preferred Stock at $1.75 per share to three investors in a private offering,
for an aggregate cash consideration of $20,294,949.
(t) In October 1998, the Registrant issued 714,979 shares of common stock,
warrants to purchase 1,435,419 shares of common stock at $0.01 per share and
promissory notes in the aggregate principal amount of $1,297,000 to the
stockholders of ProTix, Inc., in exchange for all of the issued and outstanding
capital stock of ProTix, Inc.
(u) In April 1999, the Registrant issued 11,690,504 shares of common stock
to the shareholders of TicketsLive Corporation, a New York corporation
("TicketsLive") in connection with the acquisition of TicketsLive, in exchange
for all of the issued and outstanding capital stock of TicketsLive. [discuss
additional shares to be issued]
(v) In May 1999, the Registrant issued 8,838,869 shares of common stock,
2,678,577 shares of Series Al Preferred Stock, and 5,782,241 shares of Series C
Preferred Stock to the stockholders of California Tickets.com in exchange for
9,899,510 shares of California Tickets.com common stock, 3,000,000 shares of
II-3
<PAGE> 5
California Tickets.com Series A Preferred Stock, and 6,400,438 shares of
California Tickets.com Series C Preferred Stock, respectively, in connection
with the acquisition of California Tickets.com., Inc.
(w) In March and May 1999, the Registrant issued and sold 13,333,335 shares
of Series D Preferred Stock at $2.25 per share to 14 investors for an aggregate
cash consideration of $30,000,003.
(x) Since May 31, 1996, the Registrant has issued options to purchase an
aggregate of 14,750,742 shares of common stock to certain of its employees under
its 1996 and 1997 1998 Stock Option Plans, with exercise prices ranging from
$0.05 to $3.25 per share. In addition, the Registrant assumed options to
purchase an aggregate of 1,075,240 shares of common stock in connection with its
acquisition of TicketsLive and options to purchase 3,366,407 shares of common
stock in connection with its acquisition of California Tickets.com.
None of the optionees paid any cash consideration for such options. Such
options did not involve a "sale" of securities, and, accordingly, registration
was not required. The following table sets forth the grant date, number of
options, current exercise price and class of optionees for all of such options:
<TABLE>
<CAPTION>
GRANT DATE NO. OF OPTIONS EXERCISE PRICE CLASS OF OPTIONEES
---------- -------------- -------------- ------------------
<S> <C> <C> <C>
10/01/96 to 08/04/97 1,270,500 $0.40 Employee
10/01/96 to 08/04/97 1,060,000 $0.40 Officer
08/05/97 to 03/01/98 571,981 $0.06 Employee
09/26/97 to 02/09/98 1,819,730 $1.00 Employee
10/15/97 to 02/09/98 1,690,000 $1.00 Officer
12/01/97 1,428,575 $0.06 Officer
12/22/97 225,000 $1.00 Director
02/02/98 22,321 $0.05 Employee
03/17/98 to 04/16/99 436,000 $2.00 Employee
05/04/98 to 04/20/99 1,361,583 $0.20 Employee
06/23/98 to 12/17/98 2,457,000 $1.50 Employee
09/14/98 2,062,500 $1.50 Officer
11/09/98 to 02/01/99 85,713 $0.84 Employee
12/01/98 22,321 $1.12
04/20/99 951,943 $0.62 Employee
04/29/99 to 05/17/99 2,457,000 $2.00 Officer
05/14/99 to 05/17/99 684,900 $3.25 Employee
</TABLE>
The sale and issuance of securities in the above transactions were deemed to be
exempt from registration under the Securities Act by virtue of Section 4(2) or
Rule 701 thereof, or Regulation D, as transactions by an issuer not involving a
public offering. Appropriate legends are affixed to the stock certificates
issued in such transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. All recipients either received adequate
information about the Company or had access, through employment or other
relationships, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1 * Form of Underwriting Agreement
3.1 * Amended and Restated Certificate of Incorporation of the
Company as filed with the Delaware Secretary of State on May
14, 1999, as amended
3.2 * Amended and Restated Certificate of Incorporation of the
Company, as amended and filed with the Delaware Secretary of
State in June 1999
</TABLE>
II-4
<PAGE> 6
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
3.3 * Restated Certificate of Incorporation of the Company, to be
filed with the Delaware Secretary of State upon consummation
of this offering
3.4 * Bylaws of the Company
4.1 * Specimen certificate representing shares of common stock of
the Company
5.1 * Form of Opinion of Brobeck, Phleger & Harrison LLP
10.1 * Form of Indemnification Agreement
10.2 * 1999 Stock Incentive Plan, together with form of Stock
Option Agreement (and related Notice of Grant of Option),
Stock Purchase Agreement and Stock Issuance Agreement
10.3 * 1999 Employee Stock Purchase Plan
10.4 * 1998 Stock Incentive Plan, together with form of
Nonstatutory Stock Option Agreement (and related Notice of
Exercise of Nonstatutory Stock Option), Incentive Stock
Option Agreement (and related Notice of Exercise of
Incentive Stock Option), Stock Purchase Agreement and Stock
Issuance Agreement
10.5 ** 1997 Stock Option Plan (California and Other Employees),
together with form of Nonstatutory Stock Option Agreement
(and related Notice of Exercise of Nonstatutory Stock
Option), Incentive Stock Option Agreement (and related
Notice of Exercise of Incentive Stock Option), Stock
Purchase Agreement and Stock Issuance Agreement
10.6 * 1997 Non-Employee Director's Option Plan, together with form
of Stock Option Agreement (and related Notice of Grant of
Option), Stock Purchase Agreement and Stock Issuance
Agreement
10.7 ** 1996 Stock Option Plan, together with form of Nonstatutory
Stock Option Agreement (and related Notice of Exercise of
Nonstatutory Stock Option), Incentive Stock Option Agreement
(and related Notice of Exercise of Incentive Stock Option),
Stock Purchase Agreement and Stock Issuance Agreement
10.8 ** Fourth Amended and Restated Investor Rights Agreement among
the Company and the stockholders named therein, dated May
17, 1999
10.9 ** Agreement dated as of May 21, 1999 between the Company and
Karen S. Goetz
10.10 ** Agreement and Plan of Merger and Reorganization by and among
the Company, Advantix Acquisition Corp., Tickets.com, Inc.
(n/k/a California Tickets.com, Inc.) and certain of its
stockholders dated as of January 26, 1999
10.11 Agreement and Plan of Merger and Reorganization by and among
the Company, Advantix Acquisition II Corp., TicketsLive
Corporation, and certain of its stockholders dated as of
March 18, 1999
10.12 Stock Purchase Agreement by and among the Company, ProTix,
Inc. and certain of its shareholders effective as of October
16, 1998
10.13 + Stock Purchase Agreement by and among the Company, Bay Area
Seating Service, Inc. and certain of its shareholders
effective as of September 18, 1997
10.14 ** Agreement by and between the Company and RBB Bank AG dated
as of January 24, 1999, as amended
10.15 ** Employment Agreement between W. Thomas Gimple and the
Company effective as of April 29, 1999
10.16 ** Employment Agreement between John M. Markovich and the
Company effective as of April 29, 1999
10.17 ** Employment Agreement between Thomas R. Pascoe and the
Company effective as of April 29, 1999
10.18 ** Employment Agreement between James A. Caccavo and the
Company effective as of May 17, 1999
10.19 * Employment Agreement between Karen S. Goetz and the Company
dated as of April 21, 1999
10.20 + Commercial Application Partner Agreement by and between the
Company, Advantix (Ohio), Inc., Bay Area Seating Service,
Inc. and Sybase, Inc. dated as of April 6, 1998
</TABLE>
II-5
<PAGE> 7
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.21 + Merchant Agreement dated as of March 1, 1999 by and between
GeoCities and the Company
10.22 + Sponsorship Agreement by and between the Company and
MP3.com., Inc. dated February 17, 1999
10.23 + Agreement dated as of November 1, 1998, by and between
International Merchandising Corporation and the Company, as
amended
10.24 * Lease Agreement by and between the Company and The Irvine
Company dated February 3, 1999, as amended
10.25 ** Lease Agreement between Sierra Pacific Properties, Inc. and
Bay Area Seating Service, Inc. dated December 29, 1989, and
amendments thereto
10.26 * Lease Agreement by and between ProTix, Inc. and Guinea Road
Associates dated January 30, 1995
10.27 ** Lease Agreement by and between Advantix (Ohio), Inc. and
Playhouse Square Foundation dated October 1, 1997
10.28 + Channel Partner Agreement dated as of April 20, 1999 between
Sitematic Corporation and the Company
21.1 ** List of Subsidiaries
23.1 ** Consent of Arthur Andersen LLP
23.2 ** Consent of KPMG LLP
23.3 ** Consent of Burr, Pilger & Mayer
23.4 * Consent of Brobeck, Phleger & Harrison LLP (contained in
Exhibit 5.1)
24.1 ** Power of Attorney (contained on signature page on page II-5)
27.1 ** Financial Data Schedule year end
27.2 ** Financial Data Schedule 3 months
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
+ Confidential treatment is being sought with respect to certain portions of
this agreement. Such portions have been omitted from this filing and have
been filed separately with the Securities and Exchange Commission.
II-6
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Newport Beach, State of
California, on the 22nd day of June, 1999.
TICKETS.COM, INC.
By: /s/ W. THOMAS GIMPLE
------------------------------------
W. Thomas Gimple
President, Chief Executive
Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, the undersigned hereby constitute and
appoint W. Thomas Gimple and John M. Markovich, and each of them, his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, or any related registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents, or
his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board June 22, 1999
- -----------------------------------------------------
C. Ian Sym-Smith
/s/ W. THOMAS GIMPLE President, Chief Executive June 22, 1999
- ----------------------------------------------------- Officer (principal executive
W. Thomas Gimple officer) and Director
* Chief Financial Officer June 22, 1999
- ----------------------------------------------------- (principal financial officer)
John M. Markovich
* Vice President, Corporate June 22, 1999
- ----------------------------------------------------- Controller (principal
Michael R. Rodriguez accounting officer)
* Director June 22, 1999
- -----------------------------------------------------
James A. Caccavo
* Director June 22, 1999
- -----------------------------------------------------
Christos M. Cotsakos
</TABLE>
II-7
<PAGE> 9
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director June 22, 1999
- -----------------------------------------------------
William E. Ford
* Director June 22, 1999
- -----------------------------------------------------
Howard L. Morgan
* Director June 22, 1999
- -----------------------------------------------------
Irvin E. Richter
* Director June 22, 1999
- -----------------------------------------------------
Nicholas E. Sinacori
</TABLE>
*By: /s/ W. THOMAS GIMPLE
---------------------------------------------------
W. Thomas Gimple
(Attorney-in-fact)
II-8
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1 * Form of Underwriting Agreement
3.1 * Amended and Restated Certificate of Incorporation of the
Company as filed with the Delaware Secretary of State on May
14, 1999, as amended
3.2 * Amended and Restated Certificate of Incorporation of the
Company, as amended and filed with the Delaware Secretary of
State in June 1999
3.3 * Restated Certificate of Incorporation of the Company, to be
filed with the Delaware Secretary of State upon consummation
of this offering
3.4 * Bylaws of the Company
4.1 * Specimen certificate representing shares of common stock of
the Company
5.1 * Form of Opinion of Brobeck, Phleger & Harrison LLP
10.1 * Form of Indemnification Agreement
10.2 * 1999 Stock Incentive Plan, together with form of Stock
Option Agreement (and related Notice of Grant of Option),
Stock Purchase Agreement and Stock Issuance Agreement
10.3 * 1999 Employee Stock Purchase Plan
10.4 * 1998 Stock Incentive Plan, together with form of
Nonstatutory Stock Option Agreement (and related Notice of
Exercise of Nonstatutory Stock Option), Incentive Stock
Option Agreement (and related Notice of Exercise of
Incentive Stock Option), Stock Purchase Agreement and Stock
Issuance Agreement
10.5 ** 1997 Stock Option Plan (California and Other Employees),
together with form of Nonstatutory Stock Option Agreement
(and related Notice of Exercise of Nonstatutory Stock
Option), Incentive Stock Option Agreement (and related
Notice of Exercise of Incentive Stock Option), Stock
Purchase Agreement and Stock Issuance Agreement
10.6 * 1997 Non-Employee Director's Option Plan, together with form
of Stock Option Agreement (and related Notice of Grant of
Option), Stock Purchase Agreement and Stock Issuance
Agreement
10.7 ** 1996 Stock Option Plan, together with form of Nonstatutory
Stock Option Agreement (and related Notice of Exercise of
Nonstatutory Stock Option), Incentive Stock Option Agreement
(and related Notice of Exercise of Incentive Stock Option),
Stock Purchase Agreement and Stock Issuance Agreement
10.8 ** Fourth Amended and Restated Investor Rights Agreement among
the Company and the stockholders named therein, dated May
17, 1999
10.9 ** Agreement dated as of May 21, 1999 between the Company and
Karen S. Goetz
10.10 ** Agreement and Plan of Merger and Reorganization by and among
the Company, Advantix Acquisition Corp., Tickets.com, Inc.
(n/k/a California Tickets.com, Inc.) and certain of its
stockholders dated as of January 26, 1999
10.11 Agreement and Plan of Merger and Reorganization by and among
the Company, Advantix Acquisition II Corp., TicketsLive
Corporation, and certain of its stockholders dated as of
March 18, 1999
10.12 Stock Purchase Agreement by and among the Company, ProTix,
Inc. and certain of its shareholders effective as of October
16, 1998
10.13 + Stock Purchase Agreement by and among the Company, Bay Area
Seating Service, Inc. and certain of its shareholders
effective as of September 18, 1997
10.14 ** Agreement by and between the Company and RBB Bank AG dated
as of January 24, 1999, as amended
10.15 ** Employment Agreement between W. Thomas Gimple and the
Company effective as of April 29, 1999
10.16 ** Employment Agreement between John M. Markovich and the
Company effective as of April 29, 1999
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.17 ** Employment Agreement between Thomas R. Pascoe and the
Company effective as of April 29, 1999
10.18 ** Employment Agreement between James A. Caccavo and the
Company effective as of May 17, 1999
10.19 * Employment Agreement between Karen S. Goetz and the Company
dated as of April 21, 1999
10.20 + Commercial Application Partner Agreement by and between the
Company, Advantix (Ohio), Inc., Bay Area Seating Service,
Inc. and Sybase, Inc. dated as of April 6, 1998
10.21 + Merchant Agreement dated as of March 1, 1999 by and between
GeoCities and the Company
10.22 + Sponsorship Agreement by and between the Company and
MP3.com., Inc. dated February 17, 1999
10.23 + Agreement dated as of November 1, 1998, by and between
International Merchandising Corporation and the Company, as
amended
10.24 * Lease Agreement by and between the Company and The Irvine
Company dated February 3, 1999, as amended
10.25 ** Lease Agreement between Sierra Pacific Properties, Inc. and
Bay Area Seating Service, Inc. dated December 29, 1989, and
amendments thereto
10.26* Lease Agreement by and between ProTix, Inc. and Guinea Road
Associates dated January 30, 1995
10.27 ** Lease Agreement by and between Advantix (Ohio), Inc. and
Playhouse Square Foundation dated October 1, 1997
10.28 + Channel Partner Agreement dated as of April 20, 1999 by and
between Sitematic Corporation and the Company
21.1 ** List of Subsidiaries
23.1 ** Consent of Arthur Andersen LLP
23.2 ** Consent of KPMG LLP
23.3 ** Consent of Burr, Pilger & Mayer
23.4 * Consent of Brobeck, Phleger & Harrison LLP (contained in
Exhibit 5.1)
24.1 ** Power of Attorney (contained on signature page on page II-5)
27.1 ** Financial Data Schedule year end
27.2 ** Financial Data Schedule 3 months
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
+ Confidential treatment is being sought with respect to certain portions of
this agreement. Such portions have been omitted from this filing and have
been filed separately with the Securities and Exchange Commission.
<PAGE> 1
EXHIBIT 10.11
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
By and Among
ADVANTIX, INC.
ADVANTIX ACQUISITION II CORP.,
TICKETSLIVE CORPORATION
and
CERTAIN OF ITS SHAREHOLDERS
Dated as of March 18, 1999
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I THE MERGER.........................................................................2
1.1 The Merger....................................................................2
1.2 Closing.......................................................................2
1.3 Effective Time................................................................2
1.4 Effects of the Merger.........................................................2
1.5 Certificate of Incorporation; Bylaws..........................................2
1.6 Directors and Officers........................................................2
1.7 Merger Consideration; Conversion and Cancellation of Company Capital Stock....3
1.8 Dissenters' Rights............................................................4
1.9 Options and Warrants to Purchase Company Common Stock.........................5
1.10 Tax Consequences..............................................................5
1.11 Exemption from Registration...................................................5
ARTICLE II EXCHANGE OF SHARES................................................................6
2.1 Exchange Agent................................................................6
2.2 Exchange Fund.................................................................6
2.3 Escrow Fund...................................................................8
2.4 Exchange of Shares............................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY SHAREHOLDERS......11
3.1 Corporate Organization.......................................................12
3.2 Capitalization...............................................................12
3.3 Authority; No Violation......................................................13
3.4 Consents and Approvals.......................................................14
3.5 Financial Statements.........................................................15
3.6 Absence of Undisclosed Liabilities...........................................15
3.7 Absence of Certain Changes or Events.........................................15
3.8 Legal Proceedings............................................................16
3.9 Restrictions on Business Activities..........................................17
3.10 Governmental Authorization...................................................17
3.11 Title and Condition of Personal Property.....................................17
3.12 Real and Leased Property.....................................................17
3.13 Intellectual Property........................................................19
3.14 Taxes........................................................................21
3.15 Environmental Matters........................................................22
3.16 Major Customers and Suppliers; Supplies......................................22
3.17 List of Accounts.............................................................23
3.18 Employment Agreements........................................................23
3.19 Employee Benefit Plans.......................................................23
3.20 Labor Matters................................................................26
3.21 Contracts and Commitments....................................................27
3.22 Absence of Breaches or Defaults..............................................29
</TABLE>
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<TABLE>
<S> <C> <C>
3.23 Interested Party Transactions................................................29
3.24 Compliance with Applicable Law...............................................29
3.25 Insurance....................................................................30
3.26 Reorganization...............................................................30
3.27 Section 912 of the NYBCL Not Applicable......................................30
3.28 Brokers......................................................................30
3.29 Minute Books.................................................................30
3.30 Accounts and Notes Receivable................................................30
3.31 Vote Required................................................................31
3.32 Board Approval...............................................................31
3.33 Employee Nondisclosure and Assignment of Inventions Agreements...............31
3.34 Year 2000 Compliance.........................................................31
3.35 Certain Payments.............................................................31
3.36 Representations Complete.....................................................32
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..........................32
4.1 Corporate Organization.......................................................32
4.2 Authority; No Violation......................................................32
4.3 Capitalization of Parent and Merger Sub......................................33
4.4 Subsidiaries.................................................................34
4.5 Consents and Approvals.......................................................34
4.6 Parent Financial Statements..................................................34
4.7 Absence of Undisclosed Liabilities...........................................35
4.8 Absence of Certain Changes...................................................35
4.9 Brokers......................................................................35
4.10 Vote Required................................................................35
4.11 Additional Representations and Warranties....................................35
4.12 ProTix Confidential Private Offering Memorandum..............................36
4.13 Representations Complete.....................................................36
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS.........................................36
5.1 Covenants of the Company.....................................................36
5.2 Covenants of Parent..........................................................37
ARTICLE VI ADDITIONAL AGREEMENTS............................................................38
6.1 Intentionally Deleted........................................................38
6.2 Shareholders' Meetings.......................................................38
6.3 Access to Information........................................................38
6.4 Public Disclosure............................................................39
6.5 Consents; Cooperation........................................................40
6.6 Legal Requirements...........................................................40
6.7 Blue Sky Laws................................................................40
6.8 Employee Benefit Plans.......................................................40
6.9 Loan to the Company..........................................................41
6.10 Reorganization...............................................................41
6.11 Control of Operations........................................................41
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
6.12 Best Efforts and Further Assurances..........................................41
6.13 Amendment to Certificate of Incorporation....................................42
6.14 Shareholder Voting Agreements; Irrevocable Proxies...........................42
6.15 Stockholders Agreement.......................................................42
6.16 Indemnification for Personal Guarantees......................................42
6.17 Filing of Form S-8...........................................................42
6.18 Board Representation.........................................................43
6.19 No Impairment of Obligations.................................................43
6.20 Guarantee of Company Promissory Notes........................................43
ARTICLE VII CONDITIONS PRECEDENT............................................................43
7.1 Conditions to Each Party's Obligation to Effect the Merger...................43
7.2 Conditions to Obligations of Parent and Merger Sub...........................44
7.3 Conditions to the Obligations of Company and Company Shareholders............45
ARTICLE VIII TERMINATION AND AMENDMENT......................................................47
8.1 Termination..................................................................47
8.2 Effect of Termination........................................................48
8.3 Amendment....................................................................48
8.4 Extension; Waiver............................................................48
ARTICLE IX INDEMNIFICATION AND ESCROW FUND..................................................48
9.1 Indemnity; Escrow Fund.......................................................48
9.2 Claims.......................................................................49
9.3 Objections to Claims.........................................................50
9.4 Attempt to Resolve Conflicts; Arbitration....................................50
9.5 Actions of the Shareholders' Agent...........................................53
9.6 Third-Party Claims...........................................................53
9.7 Limitations..................................................................53
ARTICLE X GENERAL PROVISIONS................................................................54
10.1 Survival of Representations, Warranties and Agreements.......................54
10.2 Expenses.....................................................................55
10.3 Notices......................................................................55
10.4 Governing Law................................................................58
10.5 Severability.................................................................58
10.6 Assignment; Binding Effect; Benefit..........................................58
10.7 Headings.....................................................................58
10.8 Entire Agreement.............................................................59
10.9 Counterparts.................................................................59
</TABLE>
iii
<PAGE> 5
EXHIBITS AND SCHEDULES
Exhibit A Form of Escrow Agreement
Exhibit B Form of Secured Promissory Note
Exhibit C Form of Shareholder Voting Agreement
Exhibit D Form of Irrevocable Proxy
Exhibit E Form of Second Amended and Restated Stockholders Agreement
Exhibit F Form of Series A Note
Exhibit G Form of Opinion of Company's counsel
Exhibit H Form of Shareholder Representation Agreement
Exhibit I Form of Optionee Market Stand-Off Agreement
Exhibit J Opinion of Parent's counsel
Exhibit K Form of Third Amended and Restated Investor Rights Agreement
Exhibit L Form of Employment Agreement with Karen Goetz
Exhibit M Form of Employment Agreement with Robert Long
Exhibit N Form of Agreement with Ms Goetz
Exhibit O Arbitration Procedures
Schedule I Company Shareholders
Schedule II Shareholders Executing Shareholders Representation Agreement
Schedule III Shareholders Executing Shareholders Voting Agreement
Schedule IV Preferred Stock Conversion Shares
Schedule V Persons Who Constitute Knowledge of the Company
Schedule VI Persons Who Constitute Knowledge of Parent and Merger Sub
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "Agreement"),
is made and entered into as of March 18, 1999, by and among ADVANTIX, INC., a
Delaware corporation ("Parent"), ADVANTIX ACQUISITION II CORP., a Delaware
corporation and wholly-owned subsidiary of Parent ("Merger Sub"), TICKETSLIVE
CORPORATION, a New York corporation (the "Company"), and the individual
shareholders of the Company listed on Schedule I hereto (individually, a
"Company Shareholder" and collectively, the "Company Shareholders"). Merger Sub
and the Company are sometimes collectively referred to herein as the
"Constituent Corporations."
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company
have each determined that it is in the best interest of their respective
companies and in the best interest of their respective stockholders to
consummate the business combination transaction provided for herein in which
Merger Sub will, subject to the terms and conditions set forth herein, merge
with and into the Company (the "Merger"); and
WHEREAS, pursuant to the Merger, among other things, (i) all of the
outstanding shares of Common Stock, par value $.01 per share, of the Company
("Company Common Stock") and all of the outstanding shares of the Company's
Series A Convertible Participating Preferred Stock, par value $1.00 per share,
of the Company ("Company Series A Preferred") shall be converted into shares of
Common Stock, par value $.0001 per share, of Parent ("Parent Common Stock") at
the rate set forth herein. As used herein, the Company Common Stock and Company
Series A Preferred are sometimes collectively referred to as the "Company
Capital Stock".
WHEREAS, for federal income tax purposes, it is intended that the Merger
will 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 parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
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<PAGE> 7
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this
Agreement, in accordance with the applicable provisions of the General
Corporation Law of the State of Delaware (the "DGCL") and the New York Business
Corporation Law ("NYBCL"), at the Effective Time (as defined in Section 1.3
hereof), Merger Sub shall merge with and into the Company. The Company shall be
the surviving company (hereinafter sometimes called the "Surviving Corporation")
in the Merger, and shall continue its corporate existence under the laws of the
State of New York. Upon consummation of the Merger, the separate corporate
existence of Merger Sub shall terminate, and the Company shall be a wholly-owned
subsidiary of Parent.
1.2 Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place as soon as practicable after the satisfaction
or waiver of each of the conditions set forth in Article VII hereof or at such
other time as the parties hereto agree (the "Closing Date"), provided, however,
that the parties shall use reasonable commercial efforts to effect the Closing
on or prior to March 31, 1999. The Closing shall take place at the offices of
Brobeck, Phleger & Harrison LLP, 38 Technology Drive, Irvine, California or at
such other location as the parties hereto agree.
1.3 Effective Time. The Merger shall become effective upon the
filing of a Certificate of Merger with the Secretary of State of the State of
Delaware and the New York Department of State in such form as is required by,
and executed in accordance with the relevant provisions of, the DGCL and the
NYBCL on the Closing Date (the "Certificate of Merger"). The term "Effective
Time" shall be the date and time of the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware and the New York Department of
State, or such later time as is specified in the Certificate of Merger.
1.4 Effects of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in this Agreement, the Certificate of
Merger and the applicable provisions of the DGCL and the NYBCL. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
the property, rights, privileges, powers and franchises of the Company and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
1.5 Certificate of Incorporation; Bylaws. At the Effective Time, the
Certificate of Incorporation of the Company as in effect at the Effective Time,
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with applicable law.
At the Effective Time, the Bylaws of the Company, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.6 Directors and Officers. The persons set forth on Section 1.6 of
the Parent Disclosure Schedule shall be the directors and officers of the
Surviving Corporation, each to hold
2
<PAGE> 8
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation until their respective successors are duly elected or
appointed and qualified.
1.7 Merger Consideration; Conversion and Cancellation of Company
Capital Stock. By virtue of the Merger without any action on the part of Parent,
Merger Sub, the Company or the holders of any Company Capital Stock (the holders
of Company Capital Stock immediately prior to the Effective Time are sometimes
hereinafter referred to individually as a "Holder" and collectively as the
"Holders") or capital stock of Merger Sub:
(a) Conversion of Company Capital Stock. Subject to the
terms and conditions of this Agreement, at the Effective Time, each share of
Company Capital Stock issued and outstanding immediately prior to the Effective
Time (other than Dissenting Shares (as hereinafter defined)) and all rights in
respect thereof shall be converted and exchanged for that number of shares of
Parent Common Stock equal to the quotient of (A) 13,000,000 divided by (B) the
sum of (1) the number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time, (2) the number of shares of Company
Common Stock into which the Company Series A Preferred issued and outstanding
immediately prior to the Effective Time are convertible (or have been converted,
as the case may be), and (3) the number of shares of Company Common Stock
issuable upon conversion or exercise of all other securities convertible into
Company Common Stock and all stock options, warrants and other rights (if any)
to purchase Company Common Stock issued and outstanding immediately prior to the
Effective Time (the "Exchange Ratio").
(ii) At the Effective Time, all shares of Company
Capital Stock converted into the right to receive shares of Parent Common Stock
at the Exchange Ratio (the "Merger Consideration") pursuant to this Article I
shall no longer be outstanding and shall automatically be canceled and shall
cease to exist, and each certificate (each a "Certificate") previously
representing any such shares of Company Capital Stock shall thereafter only
represent the right to receive the shares of Parent Common Stock into which the
shares represented by such Certificate have been converted pursuant to this
Section 1.7(a). Certificates previously representing shares of Company Capital
Stock shall be exchanged for shares of Parent Common Stock upon surrender of
such Certificates in accordance with Section 2.4 hereof, without any interest.
The allocation of the Merger Consideration among the Holders and the holders of
options ("Company Optionees") issued under the Company Stock Option Plan (as
defined in paragraph (c) of this Section 1.7) shall be subject to adjustment
pursuant to Section 2.2(b) hereof.
(b) Cancellation of Company Capital Stock Owned by Parent or
Company. At the Effective Time, all shares of Company Capital Stock that are
owned by the Company as treasury stock, each share of Company Capital Stock
owned by Parent or any direct or indirect wholly owned subsidiary of Parent or
of the Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Company Stock Option Plan. At the Effective Time, the
Company's Amended and Restated Stock Award and Incentive Plan (the "Company
Stock Option Plan") and all options to purchase Company Common Stock then
outstanding under the Company Stock Option Plan shall be assumed by Parent in
accordance with Sections 1.9 and 6.8 of this Agreement.
3
<PAGE> 9
(d) Certain Adjustments to Exchange Ratio. The Exchange
Ratio shall be adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of securities
convertible into the applicable class or series of Company Capital Stock or
Parent Common Stock), reorganization, recapitalization or other like change with
respect to the applicable class or series of Company Capital Stock, any
termination or cancellation of any previously granted stock options or any
issuances of stock options permitted by the terms hereof, occurring after the
date hereof and prior to the Effective Time.
(e) Conversion of Merger Sub Capital Stock. Each share of
Common Stock of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one newly and validly
issued, fully paid and nonassessable share of Common Stock of the Surviving
Corporation.
(f) Fractional Shares. No fraction of a share of Parent
Common Stock will be issued, but in lieu thereof each holder of shares of
Company Capital Stock who would otherwise be entitled to a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of the
applicable class or series of Parent Common Stock to be received by such holder)
shall receive from Parent an amount of cash (rounded to the nearest whole cent)
equal to the product of (i) such fraction, multiplied by (ii) $2.15.
1.8 Dissenters' Rights.
(a) Notwithstanding any provision of the Agreement to the
contrary, each share of Company Capital Stock that is issued and outstanding
immediately prior to the Effective Time and is held by shareholders who have not
voted such shares in favor of the approval and adoption of this Agreement and
who shall have properly demanded appraisal of such shares in accordance with
Section 9.10 of the NYBCL ("Dissenting Shares") shall not be converted into the
right to receive the relevant Merger Consideration at the Effective Time, unless
and until the holder of such Dissenting Shares shall have failed to perfect or
shall have effectively withdrawn or lost such right to appraisal and payment
under the NYBCL. If a holder of Dissenting Shares (a "Dissenting Shareholder")
shall have so failed to perfect or shall have effectively withdrawn or lost such
right to appraisal and payment, then, as of the Effective Time or the occurrence
of such event, whichever last occurs, such Dissenting Shares shall be converted
into and represent solely the right to receive the relevant Merger
Consideration, without any interest thereon, as provided in Section 1.7.
(b) The Company shall give Parent (i) prompt notice of any
written demands for payment, withdrawal of demands for payment and any other
instruments served pursuant to Section 623 of the NYBCL and (ii) the opportunity
to direct all proceedings with respect to demands for appraisal under Section
623 of the NYBCL. The Company agrees that prior to the Effective Time, it will
not, without the prior written consent of Parent, voluntarily make or agree to
make any payment with respect to, or settle or offer to settle, any such
demands.
(c) Each holder of Dissenting Shares who becomes entitled,
pursuant to the provisions of Section 910 of the NYBCL, to payment of his or her
Dissenting Shares shall receive payment therefor after the Effective Time from
the Surviving Corporation (but only after
4
<PAGE> 10
the amount thereof shall have been agreed upon or finally determined pursuant to
such provisions) and such shares shall be canceled.
(d) Parent hereby assumes responsibility for the preparation
and delivery of any and all notices, documents, information or instruments
required by law to be delivered to shareholders of the Company in connection
with the provisions of Section 623 of the NYBCL and for compliance of such
materials with any disclosure obligations imposed by applicable law.
1.9 Options and Warrants to Purchase Company Common Stock. At the
Effective Time, each option or warrant granted by the Company to purchase shares
of Company Common Stock (each, a "Company Stock Option") which is outstanding
and unexercised immediately prior to the Effective Time shall be assumed by
Parent and converted into an option or warrant to purchase shares of Parent
Common Stock in such number and at such exercise price as provided below and
otherwise having the same terms and conditions as in effect immediately prior to
the Effective Time (except to the extent that such terms, conditions and
restrictions may be altered in accordance with their terms as a result of the
Merger):
(a) the number of shares of Parent Common Stock to be
subject to the new option or warrant shall be equal to the product of (i) the
number of shares of Company Common Stock subject to the original option (subject
to adjustment pursuant to Section 2.2(b)) or warrant and (ii) the Exchange
Ratio;
(b) the exercise price per share of Parent Common Stock
under the new option (including options issued pursuant to Section 2.2(b)
hereof) or warrant shall be equal to the quotient of (i) the exercise price per
share of Company Common Stock under the original option or warrant divided by
(ii) the Exchange Ratio; and
(c) upon each exercise of options or warrants by a holder
thereof, the aggregate number of shares of Parent Common Stock deliverable upon
such exercise shall be rounded down, if necessary, to the nearest whole share
and the aggregate exercise price shall be rounded up, if necessary, to the
nearest cent.
The adjustments provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with the requirements of Section 424(a) of the Code; provided,
however, that any options which are the subject of any modifications to the
exercise period or other conditions of exercise for employees of the Company
whose employment is terminated after the Effective Time shall not be required to
maintain their status as "incentive stock options."
1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Code.
1.11 Exemption from Registration. Assuming the accuracy of the
representations contained in the Shareholder Representation Agreements delivered
to Parent by those holders of Company Capital Stock set forth on Schedule II
hereto pursuant to Section 7.2 hereof and the Shareholder Voting Agreements
delivered to Parent by holders of Company Capital Stock set forth on Schedule
III hereto, the shares of Parent Common Stock to be issued in
5
<PAGE> 11
connection with the Merger will be issued in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act").
ARTICLE II
EXCHANGE OF SHARES
2.1 Exchange Agent. The Company and Parent shall mutually select an
agent to serve as exchange agent (the "Exchange Agent") in the Merger.
2.2 Exchange Fund. (a) At or prior to the Effective Time, Parent
shall deposit, or shall cause to be deposited, with the Exchange Agent for the
benefit of the holders of Certificates, for exchange in accordance with this
Article II (i) certificates evidencing a number of shares of Parent Common Stock
for the conversion of Company Capital Stock in accordance with the provisions of
Section 1.7(a), less such numbers of shares of Parent Common Stock (A) as shall
be deposited into the Escrow Fund (as defined in Section 2.3 below) and (B) as
shall be held by Parent and delivered pursuant to paragraph (b) of this Section
2.2, and (ii) cash in an amount sufficient to provide for the payments to be
made in lieu of issuing any fractional shares of Parent Common Stock as provided
in Section 1.7(f) of this Agreement (such certificates and cash being
hereinafter referred to as the "Exchange Fund").
(b) Parent shall reserve for issuance 2,325,582 shares of
Parent Common Stock (the "Preferred Stock Conversion Shares") which shall be
delivered within five (5) days following the Determination Date (as defined
below) in accordance with the provisions of this Section 2.2(b) (except that
certain of such shares may be delivered to the Company's optionees in the form
of options to purchase Parent Common Stock and except as set forth in Section
2.2(d)). Parent shall also reserve for issuance 234,257 options (the "Additional
Options") to purchase shares of Parent Common Stock, which may become payable to
certain of the Company's optionees pursuant to the terms of this Section 2.2(b).
In the event that on the Determination Date the Determination Date Valuation Per
Share is equal to or greater than the Target Valuation Per Share, then, except
as set forth in Section 2.2(d), 2,091,325 of the Preferred Stock Conversion
Shares shall be distributed to the Holders and the Additional Options shall be
distributed to the optionees, in each case in accordance with Schedule IV
hereto. In all other cases, the Preferred Stock Conversion Shares shall be
valued at the Determination Date Valuation Per Share and, subject to Section
2.3(c), shall be distributed as follows: (i) the first $5 Million in value shall
be distributed 40% to Intel Corporation, 40% to CMG@Ventures II, LLC, and 20% to
Liberty Ventures I, L.P. (in each case taking into account Preferred Stock
Conversion Shares distributed pursuant to Section 2.2(d) and valued at the
Determination Date Valuation per Share), and (ii) the balance, if any, shall be
distributed among the Holders and optionees, in shares of Parent Common Stock or
options to purchase Parent Common Stock, as the case may be, according to such
persons' proportionate interests in the Company, as determined according to the
interests set forth on Schedule IV. In no event shall Parent be required to make
any distribution pursuant to this Section 2.2(b) for an aggregate number of
shares of Parent Common Stock and options to purchase Parent Common Stock in
excess of 2,325,582. The obligations of Parent with regard to the issuance of
the Preferred Stock Conversion Shares pursuant to the terms hereof are
unconditional; provided, however, that Parent shall have no obligation to make
any distribution pursuant to this Section 2.2(b) until it shall have received
written instructions executed by each member of the committee which
6
<PAGE> 12
constitutes the Shareholders' Agent (as defined in Section 9.4(f)) specifying
the number of shares and/or options to be distributed to each Holder and/or
optionee under this Section 2.2(b). Parent shall have no right to setoff its
obligations under this Section 2.2(b) against any amounts owing by the Company
or any Holder or optionee to Parent, its affiliates (including the Company) or
any third party, including without limitation in the event of breach of this
Agreement or the transactions contemplated hereby by the Company or any Holder
or optionee; provided, however, that immediately following the Determination
Date, up to an additional 152,364 Preferred Stock Conversion Shares may be
placed into the Escrow Fund in accordance with Section 2.3 hereof (as a result
of the Reallocation pursuant to paragraph (c) thereof) and shall be subject to
the provisions of Article IX hereof. In the event that for any reason Parent is
uncertain as to the appropriate allocation of Preferred Stock Conversion Shares
or uncertain as to any of its other obligations under this Section 2.2(b), it
shall request instruction from the Shareholders' Agent. Instruction from the
Shareholders' Agent on matters relating to this Section 2.2(b) shall require
unanimous consent of the members of the committee comprising the Shareholders'
Agent.
(c) For purposes of this Section 2.2(b) and Section 2.3, the
following terms shall have the following meanings:
"Determination Date" shall mean the earlier of (i) the closing
date of a Liquidation Event, or (ii) October 29, 1999.
"Determination Date Valuation Per Share" shall mean (i) in the
event of an initial public offering, the per share offering price in such IPO,
(ii) in the event of any other Liquidation Event, the sum of (x) the cash
received per share, if any, and (y) the average of the closing bid and asked
price for any shares of stock received, if any, multiplied by the number of
shares received and divided by the number of shares surrendered, and (iii) if no
Liquidation Event shall have occurred on or before October 29, 1999, the per
share price of the most recently closed private placement financing of Parent's
common or preferred stock.]
"Liquidation Event" shall mean either (i) an initial public
offering of Parent Common Stock, or (ii) a sale of all or substantially all of
the outstanding shares of Parent capital stock or a merger of Parent with or
into a third party in which the sole consideration received by the holders of
Parent Common Stock (who were formerly holders of Company preferred stock) is
cash and/or freely tradeable shares of a publicly listed entity.
"Reallocation" shall mean a distribution of Preferred Stock
Conversion Shares other than according to Schedule IV (i.e., additional shares
are allocated to Intel, CMGI and Liberty Ventures).
"Target Valuation Per Share" shall mean the dollar amounts
indicated on the following chart for a given Determination Date.
<TABLE>
<CAPTION>
==========================================================================
DETERMINATION DATE TARGET VALUATION PER SHARE
- --------------------------------------------------------------------------
<S> <C>
on or before 4/29/99 $3.69
==========================================================================
</TABLE>
7
<PAGE> 13
<TABLE>
<CAPTION>
==========================================================================
DETERMINATION DATE TARGET VALUATION PER SHARE
- --------------------------------------------------------------------------
<S> <C>
after 4/29/99 and on or before 5/27/99 $3.81
after 5/27/99 and on or before 6/29/99 $3.92
after 6/29/99 and on or before 7/29/99 $4.04
after 7/29/99 and on or before 8/30/99 $4.15
after 8/30/99 and on or before 9/29/99 $4.27
after 9/29/99 and on or before 10/28/99 $4.39
on 10/29/99 $4.50
==========================================================================
</TABLE>
(d) At the Effective Time, in addition to any other Parent
Common Stock issued pursuant to the terms hereof (and except as provided in
paragraph (e) of this Section 2.2), Parent shall make the following issuances of
the Preferred Stock Conversion Shares:
<TABLE>
<CAPTION>
========================================================================================
NUMBER OF PREFERRED STOCK CONVERSION
HOLDER SHARES TO BE ISSUED AT THE EFFECTIVE TIME
- ----------------------------------------------------------------------------------------
<S> <C>
Intel Corporation 320,779
CMGI @ Ventures II, LLC 320,779
Liberty Ventures I, L.P. 160,389
========================================================================================
</TABLE>
(e) The number of Preferred Stock Conversion Shares that the
foregoing Holders would otherwise be entitled to receive pursuant to the terms
of Section 2.2(b) shall be reduced by the number of Preferred Stock Conversion
Shares issued pursuant to the terms of this Section 2.2(d).
2.3 Escrow Fund.
(a) Deposit of Shares.
At or prior to the Effective Time, Parent shall cause to be issued in
the name of each holder of a Certificate, a certificate representing ten percent
(10%) of the number of shares of Parent Common Stock to be received by such
holder in the Merger (to be calculated assuming that 100% of the Preferred Stock
Conversion Shares is distributed according to Schedule IV) (the "Escrow Shares")
and shall deposit the Escrow Shares on behalf of such holders with the Escrow
Agent to be held (together with any monies exchanged for Escrowed Shares
pursuant to paragraph (b) of this Section 2.3 and any shares of Parent Common
Stock distributed with respect to the Escrowed Shares in a stock split or
reverse stock split) in a fund (the "Escrow
8
<PAGE> 14
Fund"), pursuant to the Escrow Agreement attached hereto as Exhibit A (the
"Escrow Agreement"), to be held in escrow in accordance with the terms and
conditions of such Escrow Agreement.
(b) Withdrawal of Shares During Escrow Period.
At any time during the twelve (12) month period following the Closing
Date (the "Escrow Period") each Holder may withdraw such Holder's shares of
Parent Common Stock from the Escrow Fund by (i) delivering to each of the Escrow
Agent and Parent a notice (a "Withdrawal Notice") setting forth the number and
class or series of shares of Parent Common Stock to be withdrawn, and (ii) by
delivering to the Escrow Agent a certified or bank cashier's check in an amount
equal to the product of (a) $2.15 and (b) the number of shares of Parent Common
Stock set forth in the Withdrawal Notice. Promptly following receipt of such
certified or bank cashier's check, the Escrow Agent shall deliver to the Holder
a certificate or certificates representing the number of shares of Parent Common
Stock withdrawn pursuant to the Withdrawal Notice. In the event that claims have
been made against the Escrow Fund pursuant to Article IX hereof and such claims
have not been resolved by the end of the Escrow Period, each Holder shall have
an additional thirty (30) days following the end of the Escrow Period to
complete the procedures set forth in (i) and (ii) above with respect to shares
of such Holder held in the Escrow Fund in contemplation of such claims.
(c) Adjustment for Distribution of Preferred Stock
Conversion Shares.
In the event of a Reallocation, then the number of shares of each Holder
held as Escrow Shares shall be appropriately adjusted. If additional shares of
Parent Common Stock received and to be received by a Holder are required to be
deposited as Escrow Shares as a result of the distribution of Preferred Stock
Conversion Shares in order for such Holders' shares in the Escrow Fund to equal
10% of the number of shares of Parent Common Stock to be received by such Holder
in the Merger, Parent shall cause to be issued in the name of such Holder a
certificate representing the number of such additional shares and such
certificate shall be placed and held in the Escrow Fund according to the terms
of the Escrow Agreement. If fewer shares of Parent Common Stock received and to
be received by a Holder are required to be held as Escrow Shares as a result of
the distribution of Preferred Stock Conversion Shares in order for such Holders'
shares in the Escrow Fund to equal 10% of the number of shares of Parent Common
Stock to be received by such Holder in the Merger, Parent shall cause to be
released from the Escrow Fund and delivered to such Holder the number of shares
of Parent Common Stock equal to the number of shares of such Holder originally
placed in the Escrow Fund minus the number of shares equal to 10% of the number
of shares of Parent Common Stock to be received by such Holder in the Merger.
2.4 Exchange of Shares.
(a) Exchange Procedures. As soon as practicable after the
Effective Time, and in no event more than three (3) business days thereafter,
the Exchange Agent shall mail to each holder of record of a Certificate or
Certificates a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent) and instructions
for use in effecting the
9
<PAGE> 15
surrender of the Certificates in exchange for shares of Parent Common Stock and
cash in lieu of any fractional shares, into which the shares of Company Capital
Stock shall have been converted pursuant to this Agreement. The Company shall
have the right to approve both the letter of transmittal and the instructions
prior to the Effective Time, which approval shall not be unreasonably withheld.
Upon surrender of a Certificate for exchange and cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, the holder of
such Certificate shall be entitled to receive in exchange therefor a certificate
representing ninety percent (90%) of that number of whole shares of Parent
Common Stock which such holder has the right to receive pursuant to the
provisions of Section 1.7(a) and cash in the amount such holder has the right to
receive pursuant to the provisions of Section 1.7(f), and the Certificates so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the cash payable to holders of Certificates.
(b) Transfers of Ownership. If any payment for shares of
Company Capital Stock is to be made in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such payment that the Certificate so surrendered shall be properly
endorsed (or accompanied by an appropriate instrument of transfer) and otherwise
in proper form for transfer, and that the person requesting such exchange shall
pay to the Exchange Agent in advance any transfer or other taxes required by
reason of the payment of the relevant Merger Consideration to a person other
than the registered holder of the Certificate surrendered, or required for any
other reason, or shall establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable.
(c) Distribution With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the Certificates representing whole shares of
Parent Common Stock issued in exchange thereof, without interest, at the time of
such surrender, the amount of dividends or other distributions with a record
date after the Effective Time payable with respect to such whole shares of
Parent Common Stock.
(d) No Liability. Notwithstanding anything to the contrary
in this Section 2.4, none of the Parent, Company, Exchange Agent, the Escrow
Agent, the Surviving Corporation or any other party hereto shall be liable to a
holder of shares of Parent Common Stock or Company Capital Stock for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(e) No Further Ownership Rights in Company Capital Stock.
The Merger Consideration paid upon the surrender for exchange of shares of
Company Capital Stock in accordance with the terms hereof (including any cash
paid in lieu of fractional shares), shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Capital Stock
and there shall be no further registration of transfers on the records of
Company of shares of Company Capital Stock which were outstanding immediately
prior to the Effective
10
<PAGE> 16
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
Section 2.4.
(f) Lost, Stolen or Destroyed Certificates. In the event any
Certificate evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Parent Common Stock and cash for
fractional shares, if any, as may be required pursuant to Section 2.4(a);
provided, that Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificates to indemnify Parent against any loss or cost incurred by or claim
that may be made against Parent, the Surviving Corporation, or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
(g) Transfer Restrictions; Legends. The shares of Parent
Common Stock issued in the Merger shall not be transferable in the absence of an
effective registration statement under the Securities Act or an exemption
therefrom. In the absence of an effective registration statement under the
Securities Act, neither such shares of Parent Common Stock nor any interest
therein shall be sold, transferred, assigned or otherwise disposed of, unless
Parent shall have previously received an opinion of counsel knowledgeable in
Federal securities law, in form and substance reasonably satisfactory to Parent,
to the effect that registration under the Securities Act is not required in
connection with such disposition. At any time after shares of Parent Common
Stock have been registered under the Securities Act, Parent shall make available
its regular outside counsel (at Parent's expense) for purposes of delivering
such opinion. Parent shall be entitled to give stop transfer instructions to its
transfer agent with respect to such shares of Parent Common Stock in order to
enforce the foregoing restrictions.
The certificate or certificates representing the shares of Parent Common
Stock issued in the Merger shall bear the following legend restricting the
transfer thereof, in addition to any other legend required by applicable law:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS (1) A REGISTRATION STATEMENT
WITH RESPECT THERETO IS IN EFFECT UNDER SUCH ACT, (2) SUCH TRANSFER IS
PURSUANT TO RULE 144 UNDER SUCH ACT OR (3) THE HOLDER HEREOF FURNISHES
TO ADVANTIX, INC. AN OPINION OF COUNSEL, WHICH COUNSEL AND WHICH OPINION
SHALL BE REASONABLY SATISFACTORY TO ADVANTIX, INC. THAT REGISTRATION
UNDER SUCH ACT IS NOT REQUIRED.."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE COMPANY SHAREHOLDERS
For purposes of this Agreement, the phrases "knowledge of the Company,"
or "to the Company's knowledge", or references to the absence of "notice to the
Company" or the like
11
<PAGE> 17
shall refer to the actual knowledge of those persons set forth on Schedule V
attached hereto after due inquiry by one or more of such persons. The Company,
Karen S. Goetz ("Ms. Goetz"), individually, and each of the other Company
Stockholders (with respect to any matters regarding such Company Stockholder but
not with respect to matters regarding the Company or any other Company
Stockholder), represent and warrant to Parent and Merger Sub that, except as
disclosed in the disclosure schedule attached hereto (the "Company Disclosure
Schedule"):
3.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. The Company has the corporate power and authority to own or lease its
properties and assets and to carry on its business as it is now being conducted,
and is qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such qualification necessary. The copies of
the Certificate of Incorporation and Bylaws of the Company which have previously
been delivered to Parent are true and correct copies of such documents as in
effect as of the date of this Agreement. For purposes of this Agreement, an
action, event or occurrence has a "Material Adverse Effect" if it has a material
adverse effect on the assets, liabilities, business, financial condition or
results of operations of the Company or Parent, as the case may be.
(b) Set forth in Section 3.1(b) of the Company Disclosure
Schedule is a complete list of all subsidiaries of the Company ("Company
Subsidiaries"), setting forth for each (i) the date of incorporation or other
organization, (ii) the number of shares of each class of capital stock or other
ownership interests in each Company Security which are issued and outstanding,
(iii) the jurisdiction under which such Company Subsidiary was incorporated or
organized, and (iv) the address of such Company Subsidiary's principal executive
offices. Except as Set forth in Section 3.1(b) of the Company Disclosure
Schedule, the Company owns 100% of the outstanding shares of capital stock (or
other ownership interests) in each Company Subsidiary. Each Company Subsidiary
is duly organized, validly existing and in good standing under the laws of the
jurisdiction set forth in Section 3.1(b) of the Company Disclosure Schedule with
respect to such Company Subsidiary. Each Company Subsidiary has full lawful
power and authority to own or lease its properties and assets and to carry on
its business as it is now being conducted, and is qualified to do business in
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such qualification necessary. The copies of the constituent documents of each
Company Subsidiary which have previously been made available to Parent are true
and correct copies of such documents as in effect as of the date of this
Agreement.
3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
25,000,000 shares of Company Common Stock, par value $0.01 per share, and
5,000,000 shares of Company Series A Preferred. As of the date hereof, there are
(i) 8,894,694 shares of Company Common Stock outstanding and no shares of
Company Common Stock held by the Company as treasury stock, (ii) 5,000,000
shares of Company Series A Preferred, (iii) a sufficient number of shares of
Company Common Stock have at all times been reserved for issuance upon exercise
of outstanding stock options, and (iv) a sufficient number of shares of Company
Common Stock have at all times been reserved for issuance upon conversion of the
Company Series A Preferred.
12
<PAGE> 18
Except as set forth in Section 3.2(a) of the Company Disclosure Schedule, all of
the issued and outstanding shares of Company Capital Stock were duly authorized
and validly issued and are fully paid and nonassessable and are free of any
liens or encumbrances created by or resulting from the actions of the Company,
and are not subject to preemptive rights or rights of first refusal created by
statute, the Certificate of Incorporation or Bylaws of the Company or any
agreement to which the Company or any Company Shareholder is a party or by which
it is bound. All outstanding shares of Company Capital Stock were issued in
compliance with all applicable federal and state securities laws. Except as
described in this Section 3.2 or reflected in Section 3.2(a) of the Company
Disclosure Schedule, the Company does not have and is not bound by any
outstanding subscriptions, options, warrants, convertible securities, calls,
commitments, agreements or obligations of any character calling for the
purchase, redemption or issuance of any shares of Company Capital Stock or any
other equity security of the Company or any securities representing the right to
purchase or otherwise receive any shares of Company Capital Stock or any other
equity security of the Company. The terms of the Company Stock Option Plan
permit the assumption or substitution of options to purchase Parent Common Stock
as provided in this Agreement, without the consent or approval of the holders of
such securities or the Company Shareholders. True and complete copies of all
forms of agreements and instruments relating to or issued under the Company
Stock Option Plan have been made available to Parent and such agreements and
instruments have not been amended, modified or supplemented, and there are no
agreements to amend, modify or supplement such agreements or instruments in any
case from the form made available to Parent.
(b) Except as set forth in Section 3.2(b) of the Company
Disclosure Schedule, the Company owns directly or indirectly each of the
outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of directors or others
performing similar functions) of each of the entities set forth in Section
3.2(b) to the Company Disclosure Schedule ("Company Subsidiaries"). All of the
issued and outstanding shares of capital stock of the Company Subsidiaries
("Subsidiary Capital Stock") were duly authorized and validly issued and are
fully paid and nonassessable and are free of any liens or encumbrances created
by or resulting from the actions of the Company or any Company Subsidiary, and
are not subject to preemptive rights or rights of first refusal created by
statute, the Certificate of Incorporation or Bylaws of the Company or any
Company Subsidiary or any agreement to which the Company or any Company
Subsidiary is a party or by which any of them may be bound.
3.3 Authority; No Violation.
(a) The Company has full 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 and the consummation of the transactions contemplated hereby have
been duly and validly approved by the Board of Directors of the Company. The
Board of Directors of the Company has directed that this Agreement and the
transactions contemplated hereby be submitted to the Company's shareholders for
approval at a meeting of such shareholders and, except for the adoption of this
Agreement by the requisite vote of the Company's shareholders, no other
corporate proceedings on the part of the Company are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This Agreement
and all other agreements and documents to
13
<PAGE> 19
be entered into in connection herewith have been duly and validly executed and
delivered by the Company and each of the Company Shareholders and (assuming due
authorization, execution and delivery by Parent and Merger Sub) constitute valid
and binding obligations of the Company and each of the Company Shareholders,
enforceable against the Company and each of the Company Shareholders, in
accordance with their respective terms, except as enforcement may be limited by
general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally.
(b) Except as set forth in Section 3.3(b) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement by the
Company and each of the Company Shareholders, nor the consummation by the
Company and each of the Company Shareholders of the transactions contemplated
hereby, nor compliance by the Company and each of the Company Shareholders with
any of the terms or provisions hereof, will (i) violate any provision of the
Certificate of Incorporation or Bylaws of the Company or the constituent
documents of any Company Subsidiary, or (ii) assuming that the consents and
approvals referred to in Section 3.4 hereof are duly obtained, (x) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to the Company, any Company Subsidiary or any of the
Company Shareholders or any of their respective properties or assets, or (y)
violate, materially conflict with, result in a material breach of any provision
of or the loss of any material benefit under, constitute a material default (or
an event which, with notice or lapse of time, or both, would constitute a
material default) under, result in the termination of or a right of termination
or cancellation under, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other encumbrance
upon any of the properties or assets of the Company, any Company Subsidiary or
any of the Company Shareholders under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
sublicense, lease, agreement or other instrument or obligation to which the
Company, any Company Subsidiary or any of the Company Shareholders is a party,
or by which the Company, any Company Subsidiary or any of the Company
Shareholders or any of their respective properties or assets may be bound or
affected.
3.4 Consents and Approvals. Except for (a) the approval of this
Agreement by the requisite vote of the Company Shareholders, (b) the filing of
Certificate of Merger with the Secretary of State of the State of Delaware
pursuant to Section 259 of the DGCL and Section 9.04 of the NYBCL, and (c) such
filings, authorizations or approvals as may be set forth in Section 3.4 of the
Company Disclosure Schedule, no consents or approvals orders or authorizations
of or filings or registrations with any court, administrative agency or
commission or other governmental or quasi-governmental authority or
instrumentality, whether in the United States of America or otherwise (each a
"Governmental Entity") or with any third party are necessary with respect to the
Company or any of the Company Shareholders in connection with (1) the execution
and delivery of this Agreement and (2) the consummation of the Merger and the
other transactions contemplated hereby. At or before the Effective Time, each
holder of the Company Series A Preferred shall have waived any and all rights to
receive any distribution under Article FIFTH of the Certificate of Amendment of
the Certificate of Incorporation (the "Amended Certificate of Incorporation") of
the Company as a result of the consummation of the transactions contemplated in
this Agreement.
14
<PAGE> 20
3.5 Financial Statements. Set forth in Section 3.5 of the Company
Disclosure Schedule are true and correct copies of (a) audited consolidated
balance sheets of the Company at April 30, 1996, 1997 and 1998, together with
related audited consolidated statements of operations, shareholders' equity and
cash flows for the fiscal years then ended, and (b) the Company's unaudited
consolidated balance sheet (the "Reference Balance Sheet") together with related
unaudited consolidated statements of operations, shareholders' equity and cash
flows as of and for the nine (9) month period ended January 31, 1999 (the
"Reference Balance Sheet Date") (collectively, the "Financial Statements"). Such
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") (except that the unaudited Financial Statements
do not contain all footnotes required by GAAP and are subject to normal year-end
audit adjustments that in the aggregate will not be material) applied on a
consistent basis throughout the periods indicated and with each other. The
Financial Statements fairly present the financial condition and operating
results of the Company in all material respects in accordance with GAAP as of
the dates, and for the periods indicated therein, subject to normal year-end
audit adjustments. The books and records of the Company have been, and are
being, maintained in all material respects in accordance with GAAP and any other
applicable legal and accounting requirements.
3.6 Absence of Undisclosed Liabilities. Neither the Company nor any
Company Subsidiary has any material obligations or liabilities of any nature
(matured or unmatured, fixed or contingent, including without limitation any
obligations or liabilities as guarantor or indemnitor of any other person, firm,
partnership or corporation ("Person")) other than (i) those set forth or
adequately provided for in the Reference Balance Sheet, (ii) those incurred in
the ordinary course of business and not required to be set forth in the
Reference Balance Sheet under GAAP, (iii) those incurred in the ordinary course
of business since the Reference Balance Sheet Date and consistent with past
practice, (iv) those set forth in Section 3.6 of the Company Disclosure
Schedule, and (v) those incurred in connection with the execution of this
Agreement.
3.7 Absence of Certain Changes or Events. Except as disclosed in
Section 3.7 of the Company Disclosure Schedule, since the Reference Balance
Sheet Date, the Company and each Company Subsidiary has conducted its business
in the ordinary course consistent with past practice, and except as contemplated
by this Agreement, there has not occurred (i) any purchase or other acquisition
of, sale, lease, disposition, or other transfer of, or mortgage, pledge or
subjection to any material encumbrance or lien on, any material asset, tangible
or intangible, of the Company or any Company Subsidiary, other than in the
ordinary course of business; (ii) any change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by the
Company or any Company Subsidiary or any revaluation by the Company or any
Company Subsidiary of any of its assets; (iii) any declaration, setting aside,
or payment of a dividend or other distribution with respect to the shares of the
Company Capital Stock, or any split-up or other recapitalization in respect of
the Company Capital Stock, or any direct or indirect redemption, purchase or
other acquisition by the Company of any shares of Company Capital Stock; (iv)
any material contract entered into by the Company or any Company Subsidiary,
other than in the ordinary course of business and as provided to Parent, or any
amendment or termination of, or default under, any material contract to which
the Company or any Company Subsidiary is a party or by which it is bound; (v)
any amendment or change to the Certificate of Incorporation or Bylaws of the
Company or the constituent documents of any Company Subsidiary; (vi) any
material increase in or modification of the compensation or
15
<PAGE> 21
benefits payable or to become payable by the Company or any Company Subsidiary
to any of their respective officers, directors or employees; (vii) any issuance,
transfer, sale or pledge by the Company, any Company Subsidiary or any Company
Shareholder of any shares of Company Capital Stock or Subsidiary Capital Stock
or other securities or of any commitment, option, right or privilege under which
the Company or any Company Subsidiary is or may become obligated to issue any
shares of Company Capital Stock or Subsidiary Capital Stock or other securities;
(viii) any indebtedness for borrowed money incurred by the Company or any
Company Subsidiary, except such as may have been incurred or entered into in the
ordinary course of business not exceeding $50,000; (ix) any loan made or agreed
to be made by the Company or any Company Subsidiary, nor has the Company or any
Company Subsidiary become liable or agreed to become liable as a guarantor with
respect to any loan (other than loans between the Company and any Company
Subsidiary or between Company Subsidiaries); (x) any waiver or compromise by the
Company or any Company Subsidiary of any right or rights or any payment, direct
or indirect, of any material debt, liability or other obligation, other than in
the ordinary course of business; (xi) any sale, assignment, or transfer of any
patents, trademarks, copyrights, trade secrets or other intangible assets,
including, without limitation, any Intellectual Property (as defined below)
associated with the Company's event ticketing software products, other than in
the ordinary course of business; (xii) any actual or, to the knowledge of the
Company, threatened termination or loss of (a) any material contract, lease,
license or other agreement to which the Company or any Company Subsidiary was or
is a party; (b) any certificate, license or other authorization required for the
continued operation by the Company or any Company Subsidiary of any portion of
any of its business; or (c) any customer or other revenue source, which
termination or loss could reasonably be expected to result in loss of revenues
to the Company or any Company Subsidiary in excess of $75,000 per year, and the
Company has no knowledge of any event (other than the transactions contemplated
hereby, with respect to which the Company has not received any written notice
from any customer or other revenue source of an intention to terminate any
arrangement as a result of the transactions contemplated hereby) which could
reasonably be expected to result in any such termination or loss; (xiii) any
resignation of employment of any key officer or employee of the Company or any
Company Subsidiary, or to the knowledge of the Company, any impending
resignation of employment of any such officer or employee; (xiv) any negotiation
by any executive officer of the Company or any agreement by the Company or any
Company Subsidiary to do any of the things described in the preceding clauses
(i) through (xiii) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement); or (xv) any other
event or circumstance that will have or, to the knowledge of the Company could
reasonably be expected to have a Material Adverse Effect on the Company or any
Company Subsidiary.
3.8 Legal Proceedings. Except as set forth in Section 3.8 of the
Company Disclosure Schedule, there are no legal actions, suits, arbitrations or
other legal, administrative or governmental proceedings or investigations
pending or, to the knowledge of the Company, threatened against the Company or
any Company Subsidiary or any of their respective properties, assets or business
in which an unfavorable outcome, ruling or finding would have a Material Adverse
Effect and to the knowledge of the Company and the Company Shareholders there
exist no facts which could reasonably be expected to result in any such action,
suit or other proceeding or which would challenge the validity or propriety of
the transactions contemplated by this Agreement. Neither the Company nor any
Company Subsidiary is in default with respect to any judgment, order or decree
of any court or any governmental agency or instrumentality
16
<PAGE> 22
which would have a Material Adverse Effect on the Company or any Company
Subsidiary. The foregoing includes, without limiting the generality thereof,
pending or threatened actions involving the Company's or any Company
Subsidiary's use in connection with the Company's or any Company Subsidiary's
business of any information or techniques allegedly proprietary to a former
employee.
3.9 Restrictions on Business Activities. Except as set forth in
Section 3.9 of the Company Disclosure Schedule, there is no agreement, judgment,
injunction, order or decree binding upon the Company or any Company Subsidiary
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any current business practice of the Company or any Company
Subsidiary, any acquisition of property by the Company or any Company
Subsidiary, the ability of the Company or any Company Subsidiary to compete with
any other person or the conduct of business by the Company or any Company
Subsidiary as currently conducted by the Company or any Company Subsidiary.
3.10 Governmental Authorization. The Company and each Company
Subsidiary has obtained each federal, state, county, local or foreign
governmental consent, license, permit, grant, or other authorization of a
Governmental Entity (i) pursuant to which the Company or any Company Subsidiary
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of the Company's or any Company Subsidiary's
business or the holding of any such interest ((i) and (ii) herein collectively
called the "Company Authorizations"), and all of such Company Authorizations are
in full force and effect, except where the failure to obtain or have any such
Company Authorizations could not reasonably be expected to have a Material
Adverse Effect on the Company.
3.11 Title and Condition of Personal Property. The Company and each
Company Subsidiary has good and marketable title to all personal property owned
by it and reflected in the Reference Balance Sheet or acquired after the
Reference Balance Sheet Date (other than property sold or otherwise disposed of
since the Balance Sheet Date in the ordinary course of business), free and clear
of all mortgages, liens, pledges, charges or encumbrances of any kind or
character or claims thereto, except (i) the lien of current taxes not yet due
and payable, (ii) such imperfections of title, liens and easements as do not and
will not materially detract from or interfere with the use of the properties
subject thereto or affected thereby, or otherwise materially impair business
operations involving such properties, (iii) liens securing debt which is
reflected on the Reference Balance Sheet, and (iv) as set forth in Section 3.11
of the Company Disclosure Schedule. The plants, property and equipment of the
Company or any Company Subsidiary that is used in the operations of its business
are in all material respects in good operating condition and repair. All
properties used in the operations of the Company and each Company Subsidiary are
reflected in the Reference Balance Sheet to the extent GAAP require the same to
be reflected.
3.12 Real and Leased Property.
(a) Neither the Company nor any Company Subsidiary owns any
fee simple interest in real property. Neither the Company nor any Company
Subsidiary leases or subleases any real property other than as set forth on
Section 3.12 of the Company Disclosure Schedule. Section 3.12 of the Company
Disclosure Schedule sets forth the street address of each
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parcel of real property leased or subleased by the Company or any Company
Subsidiary (the "Leased Property"). The Company has previously delivered to
Parent a true and complete copy of all of the lease and sublease agreements, as
amended to date (the "Leases") relating to the Leased Property. The Company and
each Company Subsidiary enjoys a peaceful and undisturbed possession of the
Leased Property held by it. All improvements located on the Leased Property are
in a state of good maintenance and repair and in a condition adequate and
suitable for the effective conduct therein of the business conducted and
proposed to be conducted by the Company or any Company Subsidiary. To the
Company's knowledge, no person other than the Company or any Company Subsidiary
has any right to use or occupy any part of the Leased Property, whether pursuant
to sublease, license or otherwise. The Leases are valid, binding and in full
force and effect, all rent and other sums and charges payable thereunder are
current, no notice of default or termination under any of the Leases is
outstanding, no termination event or condition or uncured default on the part of
the Company or any Company Subsidiary or, to the Company's knowledge, on the
part of the landlord or sublandlord, as the case may be, thereunder, exists
under the Leases, and to the Company's knowledge no event has occurred and no
condition exists which, with the giving of notice or the lapse of time or both,
would constitute such a default or termination event or condition. In the event
that any of the Leases is a sublease, the Company or a Company Subsidiary, as
the case may be, as sublessee or sublessor, as the case may be, has obtained the
required consent of the prime landlord to such sublease, and such prime lease is
in full force and effect, there are no outstanding uncured notices of default or
termination, and no right of the Company or any Company Subsidiary in any such
sublease conflicts with such prime lease. All of the Leased Property is used in
the conduct of the Company's or a Company Subsidiary's business.
(b) The heating, ventilation, air conditioning, plumbing,
electrical systems and telephone systems at the Leased Property are in a
condition adequate and suitable for the effective conduct therein of the
business conducted and proposed to be conducted by the Company or any Company
Subsidiary and will be so adequate and suitable on the Closing Date. Neither the
Company nor any Company Subsidiary has experienced any material interruption in
the services provided to any of the Leased Property within the last six (6)
months. To the Company's knowledge, no landlord under the Leases has any plans
to make any material alterations to any of the Leased Property, the construction
of which would interfere with the use of any portion of the Leased Property. To
the Company's knowledge, no landlord under the Leases has any plans to make any
material alterations to any of the buildings in which Leased Property is
located, the costs of which alterations would be borne in any part by a tenant
under the applicable Lease.
(c) Section 3.12 of the Company Disclosure Schedule sets
forth all material permits, licenses, franchises, approvals and authorizations
(collectively, the "Real Property Permits") of all Governmental Entities having
jurisdiction over each Leased Property and from all insurance companies and fire
rating and other similar boards and organizations (collectively, the "Insurance
Organizations"). All such Real Property Permits required or appropriate have
been lawfully issued to the Company or a Company Subsidiary to enable each
Leased Property to be lawfully occupied and used for all of the purposes for
which they are currently occupied and useful and are, as of the date hereof, in
full force and effect. Neither the Company nor any Company Subsidiary has
received or been informed by a third party of the receipt by it of any notice
from any Governmental Entity having jurisdiction over any Leased
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Property or from any Insurance Organization threatening a suspension,
revocation, modification or cancellation of any Real Property Permit or of any
insurance policies and, to the Company's knowledge, there is no basis for the
issuance of any such notice or the taking of any such action. No action is
required in order for all Real Property Permits and liability and casualty
insurance policies required under any of the Leases to remain Real Property
Permits and insurance policies of the Surviving Corporation.
(d) Neither the Company nor any Company Subsidiary has
received any notice nor has any knowledge of any pending, threatened or
contemplated condemnation proceeding affecting any Leased Property or any part
thereof.
(e) To the Company's knowledge, there are no liabilities
(other than rent and other sums and charges regularly payable) associated with
any of the Leases including, without limitation, any liability under any
Environmental Law or regulation, which is or which may become payable by the
Surviving Corporation.
3.13 Intellectual Property.
(a) Section 3.13(a) of the Company Disclosure Schedule sets
forth an accurate and complete description of (i) all foreign and domestic
patents, patent applications, patent rights, trademarks, service marks, trade
names, brands and copyrights of the Company and each Company Subsidiary which
are registered or issued or for which registration or issuance is pending with
any Governmental Entity specifying as to each such item, as applicable, the
jurisdiction(s) by or in which such patent, trademark or copyright has been
issued or registered or in which an application for such issuance or
registration has been filed or proposed, including the registration or
application number; (ii) substantially all foreign and domestic franchises,
licenses, sublicenses, contracts, options and agreements pursuant to which any
person other than the Company or a Company Subsidiary is authorized to use any
foreign and domestic patents, patent rights, trademarks, trade names, service
marks, brands, copyrights, and any applications therefor, maskworks, net lists,
URLs, domain names, schematics, technology, know-how, trade secrets, inventory,
ideas, algorithms, processes, computer software programs or applications (in
both source code and object code form), and tangible or intangible proprietary
information or material ("Intellectual Property") owned by the Company and each
Company Subsidiary; and (iii) substantially all foreign and domestic franchises,
licenses, sublicenses, contracts, options and agreements, other than shrink-wrap
software licenses, pursuant to which the Company or any Company Subsidiary is
authorized to use any such Intellectual Property not owned by the Company or any
Company Subsidiary ("Third Party Intellectual Property Rights") including, with
respect to (ii) or (iii), the identity and location (city, state and country) of
all parties thereto and, for each party, a description of the nature and subject
matter thereof, account type, date of installation, and the current version of
Company software being utilized and a description of any contracts the terms of
which could adversely impact the ownership, use or distribution of any
Intellectual Property (including, without limitation, any contract terms which
under any circumstances could make any source code available to a third party).
(b) Except as set forth in Section 3.13(b) of the Company
Disclosure Schedule, the Company and each Company Subsidiary owns or has the
right to use, pursuant to franchise, license, sublicense, contract, agreement,
or permission, all of the Intellectual Property
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necessary for the conduct of its business as currently conducted by it,
including, without limitation, all network operating system and database
softwares or other Intellectual Property used by the Company or any Company
Subsidiary and developed or owned by Megasoft, Inc. ("Megasoft"). Except as set
forth in Section 3.13(b) of the Company Disclosure Schedule, all applicable
fees, royalties and other amounts due and payable by the Company or any Company
Subsidiary to any person or to the Company or any Company Subsidiary by any
person in respect of such Intellectual Property have been paid. The Company and
each Company Subsidiary has taken all commercially reasonable measures to
maintain and protect the Intellectual Property that it owns or has the right to
use. At the Effective Time, the Company will have good and marketable title,
free and clear of all liens, encumbrances and claims of third parties of any
kind, to 100% of the assets of Megasoft, including, without limitation, the
assets listed on Section 7.2(j) of the Company Disclosure Schedule.
(c) Except for third party licenses listed in Section
3.13(c) of the Company Disclosure Schedule, the Company and each Company
Subsidiary is the sole and exclusive owner of its Intellectual Property
including, but not limited to, those listed or described on the Company
Disclosure Schedule, or has the right to the use thereof for the material
covered thereby in connection with the services or products in respect to which
they have been or are now being used.
(d) Except as set forth in Section 3.13(d) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary (i) is the
subject of any pending litigation or, to the Company's knowledge, any claim
regarding infringement of or misappropriation or misuse of any Intellectual
Property of the Company or other tangible right of any other person, (ii) has
knowledge of any such infringement, whether or not claimed by any other person,
(iii) has knowledge of any infringement by any other person of the Intellectual
Property of the Company or any Company Subsidiary, and (iv) has knowledge of any
facts or circumstances which would reasonably lead the Company to conclude that
the continued operation and conduct of any aspect of its or any Company
Subsidiary's business would result in any such litigation or claim. To the
knowledge of the Company, except as set forth in Section 3.13(d) of the Company
Disclosure Schedule, there is no other person that is operating under or
otherwise using any name confusingly similar with any trade names, trademarks,
service names, service marks, URLs, domain names or logos included in the
Intellectual Property owned by the Company or any Company Subsidiary. To the
Company's knowledge, no Intellectual Property licensed by the Company or any
Company Subsidiary from a third party is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting the use thereof by the
Company or any Company Subsidiary. Except as set forth in Section 3.13(d) of the
Company Disclosure Schedule, no Intellectual Property of the Company or any
Company Subsidiary is subject to any outstanding order, judgment, decree,
stipulation or agreement restricting the use thereof by the Company or any
Company Subsidiary. Except as set forth in Section 3.13(d) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary has entered
into any agreement to indemnify any other person against any charge of
infringement of any Third Party Intellectual Property.
(e) To the Company's knowledge, except as set forth in
Section 3.13(e) of the Company Disclosure Schedule, there has been no
unauthorized use, disclosure, infringement
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or misappropriation of any Intellectual Property rights of the Company or any
Company Subsidiary, any trade secret material to the Company or any Company
Subsidiary, or any Intellectual Property right of any third party to the extent
licensed by or through the Company or any Company Subsidiary, by any third
party, including any employee or former employee of the Company or any Company
Subsidiary.
(f) Except as set forth in Section 3.13(g) of the Company
Disclosure Schedule, to the Company's knowledge, no material trade secrets
included in the Intellectual Property of the Company have been disclosed by the
Company to any person other than employees, agents and representatives of the
Company or Parent. The Company has taken such reasonable measures as is
appropriate to protect all of its trade secrets, including securing valid
written assignments from all consultants and employees who contributed to the
creation or development of Intellectual Property of the rights to such
contributions that the Company or a Company Subsidiary does not already own by
operation of law.
(g) Except for obligations that arise under the common law
of the appropriate jurisdiction, to the Company's knowledge, neither the
Company, any Company Subsidiary nor any of their respective employees has, other
than confidentiality and other agreements assigning inventions made prior to
their employment with the Company or such Company Subsidiary, any written
agreements or arrangements with former employers of such employees relating to
trade secrets of such employers, the assignment of inventions of such employers,
or such employee's engagement in activities competitive with such employers.
Except for obligations that arise under the common law of the appropriate
jurisdiction, to the Company's knowledge, the activities of such employees on
behalf of the Company or such Company Subsidiary do not violate any agreements
or arrangements known to the Company which any such employees have with former
employers.
3.14 Taxes.
(a) Except as set forth in Section 3.14(a) of the Company
Disclosure Schedule, the Company and each Company Subsidiary has duly and timely
filed (including applicable extensions granted without penalty) all material Tax
Returns (as hereinafter defined) required to be filed at or prior to the
Effective Time, and such Tax Returns are true and correct in all material
respects, except where failure to do so would not have a Material Adverse Effect
and the Company or such Company Subsidiary paid in full or made adequate
provision in the financial statements of the Company (in accordance with GAAP)
for all material Taxes (as hereinafter defined) shown to be due on such Tax
Returns except where failure to do so would not have a Material Adverse Effect.
Except as set forth in Section 3.14(a) of the Company Disclosure Schedule, as of
the date hereof (i) neither the Company nor any Company Subsidiary has requested
any extension of time within which to file any Tax Returns in respect of any
fiscal year which have not since been filed and no request for waivers of the
time to assess any Taxes are pending or outstanding, (ii) no claim for Taxes has
become a lien against the property of the Company or any Company Subsidiary or
is being asserted against the Company or any Company Subsidiary other than liens
for Taxes not yet due and payable, (iii) no audit of any Tax Return of the
Company or any Company Subsidiary is being conducted by a Tax authority, (iv) no
extension of the statute of limitations on the assessment of any Taxes has been
granted to the Company or any Company Subsidiary and is currently in effect, and
(v) there is no agreement,
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contract or arrangement to which the Company or any Company Subsidiary is a
party that may result in the payment of any amount that would not be deductible
by reason of Sections 280G, 162 or 404 of the Code. Neither the Company nor any
Company Subsidiary has been or will be required to include any adjustment in
taxable income for any Tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or foreign Tax laws
as a result of transactions, events or accounting methods employed prior to the
Merger.
(b) For the purposes of this Agreement, "Taxes" shall mean
all taxes, charges, fees, levies, penalties or other assessments imposed by any
United States federal, state, local or foreign taxing authority, including, but
not limited to income, excise, property, sales, transfer, franchise, payroll,
withholding, social security or other taxes, including any interest, penalties
or additions attributable thereto. For purposes of this Agreement, "Tax Return"
shall mean any return, report, information return or other document (including
any related or supporting information) filed or required to be filed with a
Governmental Entity with respect to Taxes.
3.15 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any
federal, state, local or foreign laws, ordinances, codes, regulations, rules,
policies and orders that are intended to assure the protection of the
environment, or that classify, regulate, call for the remediation of, require
reporting with respect to, or list or define air, water, groundwater, solid
waste, hazardous or toxic substances, materials, wastes, pollutants or
contaminants, or which are intended to assure the safety of employees, workers
or other persons, including the public.
(ii) "Property" shall mean all real property leased
or owned by the Company or any Company Subsidiary either currently or in the
past.
(iii) "Facilities" shall mean all buildings and
improvements on the Property of the Company or any Company Subsidiary.
(b) The Company represents and warrants as follows: (i)
neither the Company nor any Company Subsidiary has received notice (oral or
written) of any noncompliance of the Facilities or its past or present
operations with Environmental and Safety Laws; (ii) no notices, administrative
actions or suits are pending or, to the Company's knowledge, threatened relating
to a violation of any Environmental and Safety Laws; (iii) the Company's or any
Company Subsidiary's uses of and activities within the Facilities have at all
times complied with all Environmental and Safety Laws; and (iv) the Company and
each Company Subsidiary has all the permits and licenses required to be issued
and are in full compliance with the terms and conditions of those permits.
3.16 Major Customers and Suppliers; Supplies. Parent has been
provided with a list of customers of the Company and the Company Subsidiaries
and all suppliers of significant goods or services to the Company and the
Company Subsidiaries for the year ended April 30, 1998 and the eight (8) months
ended December 31, 1998. Section 3.16 of the Company Disclosure Schedule
identifies those suppliers of significant goods or services with respect to
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which alternative sources of supply are not readily available on reasonably
comparable terms and conditions. Except as indicated in Section 3.16 of the
Company Disclosure Schedule, all supplies and services necessary for the conduct
of the business of the Company and each Company Subsidiary as presently
conducted, may be obtained from alternate sources on terms and conditions
comparable to those presently available to the Company or such Company
Subsidiary, and no facts, circumstances or conditions exist which create a
reasonable basis for believing that the Company or any Company Subsidiary will
be unable to continue to procure the supplies and services necessary to conduct
its business on substantially the same terms and conditions as such supplies and
services are currently procured. To the Company's knowledge, there has not been,
and there will not be, any material adverse change in the relations of the
Company or any Company Subsidiary with its suppliers, contractors, creditors, or
and lessors, as a result of the announcement or consummation of the transactions
contemplated by this Agreement.]
3.17 List of Accounts. Set forth in Section 3.17 of the Company
Disclosure Schedule is: (a) the name and address of each bank or other
institution in which the Company or any Company Subsidiary maintains an account
(cash, securities or other) or safe deposit box; (b) the name, phone number and
telefax number of the contact person at such bank or institution and (c) the
account number of the relevant account, a description of the type of account and
a list of the authorized signatories on such account.
3.18 Employment Agreements. Section 3.18 of the Company Disclosure
Schedule contains the names, start dates, contracts dates, job descriptions,
annual salary rates and other compensation (including, without limitation
bonuses, stock options and stock purchase rights) of all officers, directors and
employees of the Company or any Company Subsidiary or consultants being paid
more than $75,000 a year by the Company or any Company Subsidiary (including
compensation paid or payable by the Company or any Company Subsidiary under the
Company Employee Plans). Section 3.18 of the Company Disclosure Schedule
contains a list of all employee policies, employee manuals or other written
statements of rules or policies as to hiring practices and procedures, working
conditions, vacation and sick leave, a complete copy of each of which has been
made available to Parent. Except as set forth in Section 3.18 of the Company
Disclosure Schedule, there are no employment, consulting, severance or
indemnification arrangements, agreements or understandings between the Company
or any Company Subsidiary and any officer, director, consultant or employee
including, without limitation, any contracts to employ executive officers, any
severance, change in control or similar arrangements with any officers,
employees or agents of the Company or any Company Subsidiary that will result in
any obligation (absolute or contingent) of the Company or any Company Subsidiary
to make any payment to any officer, employee or agent of the Company or any
Company Subsidiary following either the consummation of the transactions
contemplated hereby, termination of employment, or both ("Company Employment
Agreements").
3.19 Employee Benefit Plans.
(a) Section 3.19(a) of the Company Disclosure Schedule
lists, with respect to the Company and any trade or business (whether or not
incorporated) which is treated as a single employer with the Company (an "ERISA
Affiliate") within the meaning of Section 414(b), (c), (m) or (o) of the Code,
(i) all material employee benefit plans (as defined in Section
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3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) maintained, sponsored or contributed to or required to be contributed
to by the Company or an ERISA Affiliate, (ii) each loan to a non-officer
employee in excess of $10,000, loans to officers and directors and any stock
option, stock purchase, phantom stock, stock appreciation right, supplemental
retirement, severance, sabbatical, medical, dental, vision care, disability,
employee relocation, cafeteria benefit (Code section 125) or dependent care
(Code Section 129), life insurance or accident insurance plans, programs or
arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (iv) other fringe or
employee benefit plans, programs or arrangements that apply to senior management
of the Company and that do not generally apply to all employees, and (v) any
current or former employment or executive compensation or severance agreements,
written or otherwise, as to which unsatisfied obligations of the Company of
greater than $10,000 remain for the benefit of, or relating to, any present or
former employee, consultant or director of the Company (together, the "Company
Employee Plans").
(b) The Company has furnished to Parent a copy of the
Company Employee Plans and related plan documents, to the extent reduced to
writing (including trust documents, insurance policies or contracts, employee
booklets, summary plan descriptions and other authorizing documents, and, to the
extent still in its possession, any material employee communications relating
thereto) and has, with respect to each Company Employee Plan which is subject to
ERISA reporting requirements, provided copies of the Form 5500 reports filed for
the last three plan years. The Company has, with respect to any Company Employee
Plan intended to be qualified under Section 401(a) of the Code, either obtained
from the Internal Revenue Service a favorable determination letter as to its
qualified status under the Code, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent legislation, or applied to the
Internal Revenue Service for such a determination letter prior to the expiration
of the requisite period under applicable Treasury Regulations or Internal
Revenue Service pronouncements in which to apply for such determination letter
and to make any amendments necessary to obtain a favorable determination. The
Company has also furnished Parent with the most recent Internal Revenue Service
determination letter issued with respect to each such Company Employee Plan, and
nothing has occurred since the issuance of each such letter which could
reasonably be expected to cause the loss of the tax-qualified status of any
Company Employee Plan subject to Code Section 401(a).
(c) Except as disclosed in Section 3.19(c) of the Company
Disclosure Schedule, (i) none of the Company Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person; (ii) there has
been no "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Code, with respect to any Company Employee Plan,
for which no exemption exists; (iii) each Company Employee Plan has been
administered substantially in accordance with its terms and in substantial
compliance with the requirements prescribed by any applicable statutes, rules
and regulations (including applicable provisions of ERISA and the Code), and the
Company and each ERISA Affiliate have performed substantially all obligations
required to be performed by them under, are not in any material respect in
default under or violation of, and have no knowledge of any material default or
violation by any other party to, any of the Company Employee Plans; (iv) to the
Company's knowledge neither the Company nor any ERISA Affiliate is subject to
any liability or penalty under Sections 4976 through 4980 of the Code or Title I
of ERISA with respect to any of the
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Company Employee Plans, other than obligations for the payment of benefits in
the normal operation of the Plan; (v) all material contributions required to be
made by the Company and ERISA Affiliate to any Company Employee Plan have been
made on a timely basis and any accruals required by GAAP for contributions to
each Company Employee Plan for the current plan years are reflected on the
financial statements of the Company; (vi) with respect to each Company Employee
Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the thirty (30) day notice requirement has
been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 of ERISA has occurred with respect to
any Company Employee Plan subject to Title IV of ERISA; (vii) none of the
Company nor any ERISA Affiliate has incurred any liability under Title IV of
ERISA or Section 412 of the Code and (viii) no Company Employee Plan which is
subject to Title IV or ERISA has an "unfunded benefit liability" within the
meaning of Section 4001(a)(18) of ERISA. With respect to each Company Employee
Plan subject to ERISA as either an employee pension plan within the meaning of
Section 3(2) of ERISA or an employee welfare benefit plan within the meaning of
Section 3(1) of ERISA, the Company has prepared in good faith and timely filed
all requisite governmental reports (which were true and correct as of the date
filed) and has properly and timely filed and distributed or posted all notices
and reports to employees required to be filed, distributed or posted with
respect to each such Company Employee Plan. No suit, administrative proceeding,
action or other litigation has been brought, or to the best knowledge of the
Company is threatened, against or with respect to any such Company Employee
Plan, including any audit or inquiry by the IRS or United States Department of
Labor. Neither the Company nor any ERISA Affiliate has any liability (including
current or potential withdrawal liability) with respect to any "multiemployer
plan" as such term is defined in Section 3(37) of ERISA. Each Company Employee
Plan can be amended, terminated or otherwise discontinued after Closing in
accordance with its terms without material liability (other than expenses
typically incurred in a termination event). The consummation of the transactions
contemplated by this Agreement will not entitle any current or former employee
or other service provider of the Company or any ERISA Affiliate to severance
benefits or any other payment, except as provided by this Agreement or the
schedules attached hereto.
(d) With respect to each Company Employee Plan, the Company
has complied with (i) the applicable health care continuation and notice
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and the proposed regulations thereunder, (ii) the applicable
requirements of the Family Leave Act of 1993 and the regulations thereunder and
(iii) the applicable requirements of the Health Insurance Portability and
Accountability Act of 1996.
(e) Except as set forth in Section 3.19(e) of the Company
Disclosure Schedule, consummation of the transactions contemplated by this
Agreement will not entitle any current or former employee or other service
provider of the Company or any other ERISA Affiliate to severance benefits or
any other payment, except as vesting, or increase the amount of compensation due
any such employee or service provider.
(f) Except as disclosed in Section 3.19(f) of the Company
Disclosure Schedule, there has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or other ERISA Affiliate
relating to, or change in participation or coverage under, any Company Employee
Plan which would increase the expense of maintaining
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such Plan above the level of expense incurred with respect to that Plan for the
most recent fiscal year included in the Company's financial statements, other
than increases resulting from premium increases or the employment of additional
employees, in each case in the ordinary course of business.
3.20 Labor Matters. Except as set forth in Section 3.20 of the
Company Disclosure Schedule, (a) neither the Company nor any Company Subsidiary
is a party to or otherwise bound by or threatened by with any collective
bargaining agreement or other labor union contract and to the Company's
knowledge currently there are no organizational campaigns, petitions or other
unionization activities seeking recognition of a collective bargaining unit
which could affect the Company or such Company Subsidiary; (b) there are no
controversies, strikes, slowdowns, work stoppages or labor disturbances pending
or to the Company's knowledge threatened between the Company, any Company
Subsidiary and any of their respective employees, and neither the Company nor
any Company Subsidiary has experienced any such controversy, strike, slowdown,
work stoppage or labor disturbances within the past three years; (c) neither the
Company nor any Company Subsidiary has breached or otherwise failed to comply
with the provisions of any collective bargaining or union contract and there are
no grievances outstanding against the Company or any Company Subsidiary under
any such agreement or contract; (d) there are no unfair labor practice
complaints pending against the Company or any Company Subsidiary before the
National Labor Relations Board or any other Governmental Entity or any current
union representation questions involving employees of the Company or any Company
Subsidiary; (e) there are no pending claims against the Company or any Company
Subsidiary under any workers' compensation plan or policy or for long-term
disability; (f) to the Company's knowledge, neither the Company nor any Company
Subsidiary has any obligations under COBRA with respect to any former employees
or qualifying beneficiaries thereunder; (g) the Company and each Company
Subsidiary is currently in compliance with all applicable Laws relating to the
employment of labor, including those related to wages, hours, collective
bargaining and the payment and withholding of taxes and other sums as required
by the appropriate Governmental Entity and has withheld and paid to the
appropriate Governmental Entity or is holding for payment not yet due to such
Governmental Entity all amounts required to be withheld from employees of the
Company or any Company Subsidiary and is not liable for any arrears of wages,
taxes, penalties or other sums for failure to comply with any of the foregoing;
(h) the Company and each Company Subsidiary has paid in full to all their
respective employees or adequately accrued for in accordance with GAAP all
wages, salaries, commissions, bonuses, benefits and other compensation due to or
on behalf of such employees, including all compensation owing and due for
over-time work; (i) the Company and each Company Subsidiary has provided its
employees with all relocation benefits, stock options, bonuses and incentives,
and all other compensation that such employee has earned up through the date of
this Agreement or that such employee was otherwise promised in their employment
agreements with the Company or such Company Subsidiary; (j) there is no claim
with respect to payment of wages, salary or overtime pay that has been asserted
or is now pending or to the Company's knowledge threatened before any
Governmental Entity with respect to any Persons currently or formerly employed
by the Company or any Company Subsidiary; (k) neither the Company nor any
Company Subsidiary is a party to, or otherwise bound by, any consent decree
with, or citation by, any Governmental Entity relating to employees or
employment practices; (l) there is no charge or proceeding with respect to a
violation of any occupational safety or health standards that has been asserted
or is now pending or to the Company's knowledge threatened
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with respect to the Company or any Company Subsidiary; (m) there is no charge of
discrimination in employment or employment practices, for any reason, including,
without limitation, age, gender, race, religion or other legally protected
category, which has been asserted or is now pending or threatened before the
United States Equal Employment Opportunity Commission, or any other Governmental
Entity in any jurisdiction in which the Company or any Company Subsidiary has
employed or currently employs any Person; (n) the Company and each Company
Subsidiary is in compliance in all material respects with the requirements of
the Americans With Disabilities Act and any similar law of any Government
Entity; and (o) the Company and each Company Subsidiary to which it is
applicable is in compliance with the requirements of the Workers Adjustment and
Retraining Notification Act ("WARN") and each has no liabilities pursuant to
WARN.
Except as set forth in Section 3.20 of the Company Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any severance benefits or
any other payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any current
or former director, employee or other service provider of the Company or any
Company Subsidiary or any other ERISA Affiliate, (ii) increase any benefits
otherwise payable by the Company or any Company Subsidiary or (iii) result in
the acceleration of the time of payment or vesting of any such benefits, or any
options or warrants to purchase Company Capital Stock, or any increase in the
amount of compensation of benefits due any such person.
3.21 Contracts and Commitments. Section 3.21 of the Company
Disclosure Schedule contains a complete and accurate list of all contracts and
agreements (including, without limitation, oral and informal arrangements, but
excluding agreements between the Company and any Company Subsidiary or among
Company Subsidiaries) of the following categories to which the Company or any
Company Subsidiary is a party or by which it is bound as of the date of this
Agreement.
(a) labor contracts or collective bargaining agreements;
(b) material manufacturing, distribution, franchise,
license, sales, agency or advertising contracts;
(c) contracts which require the payment in excess of $50,000
per year for (i) the purchase of inventory, materials, supplies or equipment
which are not cancelable (without material penalty, cost or other liability)
within one (1) year, (ii) management, consulting, service or other similar
contracts, (iii) advertising or marketing agreements or arrangements, and (iv)
other contracts made in the ordinary course of business involving annual
expenditures or liabilities in excess of $50,000 which are not cancelable
(without material penalty, cost or other liability) within ninety (90) days,
other than purchase orders made in the ordinary course of business consistent
with past practice;
(d) promissory notes, loans, agreements, indentures,
evidences of indebtedness or other instruments proving for the lending of money,
whether as borrower, lender or guarantor;
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(e) contracts (other than Leases) containing covenants
limiting the freedom of the Company or any Company Subsidiary to engage in any
line of business or compete with any Person or operate at any location;
(f) joint venture or partnership agreements or joint
development or similar agreements;
(g) agreement, contract or other arrangement with (i) the
Company or any affiliate of the Company (other than any Company Subsidiary) or
(ii) any current or former officer, director or employee of the Company or any
Company Subsidiary or any affiliate of the Company or of any Company Subsidiary
(other than non-compete or intellectual property agreements);
(h) material lease or similar agreement with any person
under which (i) the Company or any Company Subsidiary is lessee of, or holds or
uses, any machinery, equipment, vehicle or other tangible property owned by any
person or (ii) the Company or any Company Subsidiary is a lessor or sublessor
of, or makes available for use by any person, any tangible personal property
owned or leased by the Company or any Company Subsidiary, in any such case which
has an aggregate future liability or receivable, as the case may be, and is not
terminable by the Company or such Company Subsidiary by notice of not more than
sixty (60) days;
(i) contracts or other instruments (including so-called
take-or-pay or keepwell agreements) under which (i) any person has directly or
indirectly guaranteed indebtedness, liabilities or obligations of the Company or
any Company Subsidiary or (ii) the Company or any Company Subsidiary has
directly or indirectly guaranteed indebtedness, liabilities or obligations of
any person (in each case other than endorsements for the purpose of collection
in the ordinary course of business);
(j) contracts or other instruments under which the Company
or any Company Subsidiary has, directly or indirectly, made any advance, loan,
extension of credit or capital contribution to, or other investment in, any
person involving aggregate payments in excess of $50,000, excluding agreements
between the Company and a Company Subsidiary or between Company Subsidiaries;
(k) mortgage, pledge, security agreement, deed of trust or
other instrument granting a lien or other encumbrance upon any property of the
Company or any Company Subsidiary;
(l) agreement or instrument involving aggregate payments in
excess of $50,000 providing for indemnification of any person with respect to
liabilities relating to any current or former business of the Company or any
Company Subsidiary, or any predecessor person;
(m) contract for the acquisition, sale or lease of any
assets or capital stock or other ownership interests outside the ordinary course
of the business or involving aggregate payments in excess of $50,000 or to
effect any merger of the Company or any Company Subsidiary; and
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(n) any exclusive retainer agreement or arrangement with
attorneys, accountants, actuaries, appraisers, investment bankers or other
professional advisors.
(o) any agreements or arrangements with respect to
telecommunications, web hosting or similar or related matters involving payments
in excess of $50,000.
True copies of the written contracts identified in Section 3.21 of the
Company Disclosure Schedule have been made available to Parent.
3.22 Absence of Breaches or Defaults. Neither the Company nor any
Company Subsidiary is, and, to the knowledge of the Company, no other party is,
in default under, or in breach or violation of, any contract to which the
Company or any Company Subsidiary is a party, including, without limitation,
those identified on Section 3.21 of the Company Disclosure Schedule and, to the
knowledge of the Company, no event has occurred which, with the giving of notice
or passage of time or both would constitute a default under any contract
identified on Section 3.21 of the Company Disclosure Schedule, except in each
case set forth above for defaults, breaches, violations or events which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company or any Company Subsidiary. Other than contracts which have
terminated or expired in accordance with their terms, each of the contracts
identified on Section 3.21 of the Company Disclosure Schedule is valid, binding
and enforceable in accordance with its terms (subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered on a proceeding in equity or at law))
and is in full force and effect, and assuming all consents required by the terms
thereof or applicable law have been obtained, such contracts will continue to be
valid, binding and enforceable in accordance with their respective terms and in
full force and effect immediately following the consummation of the transactions
contemplated hereby, in each case except where the failure to be valid, binding,
enforceable and in full force and effort would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. No event has occurred
which either entitles, or would, on notice or lapse of time or both, entitle the
holder of any indebtedness for borrowed money affecting the Company or any
Company Subsidiary (except for the execution or consummation of this Agreement)
to accelerate, or which does accelerate, the maturity of any indebtedness
affecting the Company or any Company Subsidiary, except as set forth in Section
3.22 of the Company Disclosure Schedule.
3.23 Interested Party Transactions. Except as set forth in Section
3.23 of the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary is indebted to any director, officer, employee or agent of the
Company or any Company Subsidiary (except for amounts due as normal salaries and
bonuses and in reimbursement of ordinary expenses), and no such person is
indebted to the Company or any Company Subsidiary. Except as set forth in
Section 3.23 of the Company Disclosure Schedule, no affiliate of the Company,
any Company Subsidiary or any Company Shareholder has, or has had, any interest
in any material property (whether real, personal, or mixed and whether tangible
or intangible), used in or pertaining to the Company or any Company Subsidiary.
3.24 Compliance with Applicable Law. The Company and each Company
Subsidiary holds, and has at all times held, all licenses, franchises, permits
and authorizations
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which (a) are necessary for it to engage in the business currently conducted by
it and (b) if not possessed by the Company or such Company Subsidiary would have
a Material Adverse Effect. The Company and each Company Subsidiary has complied
with and is not in default in any respect under any, applicable law, statute,
order, rule, regulation, policy and/or guideline of any Governmental Entity
relating to the Company or such Company Subsidiary except where the failure to
do so would not have a Material Adverse Effect and the Company has not received
notice of any violations of any of the above.
3.25 Insurance. Section 3.25 of the Company Disclosure Schedule sets
forth a true and complete list of all insurance policies providing insurance
coverage of any nature to the Company and each Company Subsidiary. Such policies
are sufficient for compliance by the Company and each Company Subsidiary with
all requirements of law and all material agreements to which the Company or such
Company Subsidiary is a party or by which any of their assets are bound. All of
such policies are in full force and effect and are valid and enforceable, and
the Company and each Company Subsidiary has complied with all material terms and
conditions of such policies, including premium payments. None of the insurance
carriers has indicated to the Company or any Company Subsidiary an intention to
cancel any such policy. Except as set forth in Section 3.25 of the Company
Disclosure, neither the Company nor any Company Subsidiary has any claim pending
against any of the insurance carriers under any of such policies and the Company
has no knowledge of any actual or alleged occurrence of any kind which may give
rise to any such claim.
3.26 Reorganization. Neither the Company nor, to the knowledge of the
Company, any of its directors, officers or shareholders has taken any action
which would prevent the Merger from constituting a reorganization qualifying
under the provisions of Section 368(a)(2)(E) of the Code.
3.27 Section 912 of the NYBCL Not Applicable. The Board of Directors
of the Company has taken all actions so that the restrictions contained in
Section 912 of the NYBCL applicable to a "business combination" (as defined in
Section 912(a)(5) of the NYBCL) will not apply to the execution, delivery or
performance of this Agreement or to the consummation of the Merger or the other
transactions contemplated by this Agreement.
3.28 Brokers. Neither the Company nor any of its officers or
directors has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with any of the
transactions contemplated by this Agreement.
3.29 Minute Books. The minute books of the Company and each Company
Subsidiary made available to Parent contain a complete and accurate summary of
all meetings of directors and shareholders or actions by written consent since
the time of incorporation of the Company and each Company Subsidiary through the
date of this Agreement, and reflect all transactions referred to in such minutes
accurately.
3.30 Accounts and Notes Receivable. Subject to any reserves set forth
on the Reference Balance Sheet, the accounts receivable and the notes receivable
shown on the Reference Balance Sheet represent and will represent bona fide
claims arising in the ordinary course of business against debtors for sales and
other charges, and are not subject to discount
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except for normal cash and immaterial trade discounts. To the Company's
knowledge, and subject to any reserves set forth on the Reference Balance Sheet,
such accounts receivable and notes receivable are collectible by the Company or
the appropriate Company Subsidiary in the ordinary course of business. The
amount carried for doubtful accounts and allowances disclosed in the Reference
Balance Sheet is sufficient to provide for any losses which may be sustained on
realization of the accounts receivable and notes receivable.
3.31 Vote Required. The affirmative vote of the holders of a majority
of the shares of Company Common Stock and the consent of the holders of 60% of
the shares of Company Series A Preferred, voting separately as a class, in each
case outstanding on the record date set for the Company Shareholders Meeting (as
defined below) are the only votes of the holders of any of Company Capital Stock
necessary to approve this Agreement and the transactions contemplated hereby.
3.32 Board Approval. The Board of Directors of the Company has (i)
approved this Agreement and the Merger and all transactions contemplated hereby,
(ii) determined that the Merger is in the best interests of the shareholders of
the Company and is on terms that are fair to such shareholders and (iii)
recommended that the shareholders of the Company approve this Agreement and
consummation of the Merger.
3.33 Employee Nondisclosure and Assignment of Inventions Agreements.
Except as set forth in Section 3.33 of the Company Disclosure Schedule, each
employee of the Company and each Company Subsidiary who has access to
confidential information has executed and delivered to the Company the standard
employee confidentiality and assignment of inventions agreement in the form
previously delivered to Parent.
3.34 Year 2000 Compliance. Except as set forth in Section 3.34 of the
Company Disclosure Schedule, the Company and each Company Subsidiary has
performed all acts necessary to ensure it is Year 2000 Compliant. As used
herein, "Year 2000 Compliant" shall mean, in regard to any entity, that all
software (except for software licensed from third parties other than Megasoft),
hardware, firmware equipment, goods or systems utilized by or material to the
business, operation or financial condition of such entity, including, without
limitation, all telephone or other communications systems and all software
licensed to clients, will properly perform date sensitive functions before,
during and after the year 2000; provided, however, that the term "Year 2000
Compliant" does not relate to the impact on the Company or any Company
Subsidiary of the failure of any third party (other than Megasoft) to be Year
2000 Compliant. The Company shall, and shall cause each Company Subsidiary
promptly upon request, provide to Parent such certifications or other evidence
of its compliance with the terms hereof as Parent may from time to time require.
3.35 Certain Payments. Since January 1, 1995, to the Company's
knowledge, none of the Company, any Company Subsidiary, nor any officer, agent
or employee of the Company or any Company Subsidiary or, to the Company's
knowledge, any other person affiliated with or acting on behalf of the Company
or any Company Subsidiary has directly or indirectly (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or other payment in
violation of any applicable law, rule or regulation to any person, private or
public, regardless of form, whether in money, property, or services (i) to
obtain favorable
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treatment in securing business, (ii) to pay for favorable treatment for business
secured, or (iii) to obtain special concessions or for special concessions
already obtained, for or in respect of the Company or any Company Subsidiary, or
(b) established or maintained any fund or material asset that has not been
recorded in the books and records of the Company.
3.36 Representations Complete. None of the representations or
warranties made by the Company or Company Shareholders herein or in any Schedule
hereto, including the Company Disclosure Schedule, or certificate furnished by
the Company pursuant to this Agreement, contains any untrue statement of a
material fact, or omits to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
For purposes of this Agreement, the phrases "knowledge of Parent and
Merger Sub," or "to Parent's and Merger Sub's knowledge" or references to the
absence of "notice to Parent and Merger Sub" and the like shall mean the actual
knowledge of those persons set forth on Schedule VI hereto after due inquiry by
one or more of such persons. Parent and Merger Sub hereby jointly and severally
represent and warrant to the Company that, except as set forth in the disclosure
schedule attached hereto (the "Parent Disclosure Schedule"):
4.1 Corporate Organization. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Parent and Merger Sub have the corporate power and
authority to own or lease their respective properties and assets and to carry on
their respective businesses as they are now being conducted, and are duly
qualified to do business in each jurisdiction in which the nature of the
business conducted by them or the character or location of the properties and
assets owned or leased by them makes such qualification necessary, except where
the failure to be so qualified (i) would not individually or in the aggregate
have a Material Adverse Effect or (ii) would not adversely affect the ability of
Parent or Merger Sub to consummate the transactions contemplated hereby. The
copies of the Certificate of Incorporation and Bylaws of Parent and Merger Sub
which have previously been made available to the Company are true and correct
copies of such documents as in effect as of the date of this Agreement.
4.2 Authority; No Violation.
(a) Each of Parent and Merger Sub has the requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The Board of Directors of Parent has (i) unanimously approved this
Agreement and the Merger and all transactions contemplated hereby, (ii)
determined that the Merger is in the best interests of the stockholders of
Parent and is on terms that are fair to such stockholders and (iii) determined
that this Agreement is advisable and recommended that the stockholders of Parent
approve this Agreement and consummation of the Merger. The Board of Directors
and the stockholder of Merger Sub have approved this Agreement and the Merger
and all transactions contemplated hereby. No other corporate
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proceedings on the part of Parent or Merger Sub are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This Agreement
and all other agreements and documents to be entered into in connection herewith
have been duly and validly executed and delivered by Parent and Merger Sub and
(assuming due authorization, execution and delivery by the Company and Company
Shareholders) constitute valid and binding obligations of Parent and Merger Sub,
enforceable against each of them, in accordance with their terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(b) Except as set forth in Section 4.2(b) of the Parent
Disclosure Schedule, neither the execution and delivery of this Agreement by
Parent and Merger Sub, nor the consummation by Parent and Merger Sub of the
transactions contemplated hereby, nor compliance by Parent and Merger Sub with
any of the terms or provisions hereof, will (i) violate any provision of the
Certificate of Incorporation or Bylaws of Parent or Merger Sub, or (ii) assuming
that the consents and approvals referred to in Section 4.5 hereof are duly
obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Parent or Merger Sub or any of
their respective properties or assets, or (y) violate, conflict with, result in
a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the properties or assets of Parent or Merger Sub under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Parent or Merger Sub is a party, or by which either of them
or any of their respective properties or assets may be bound or affected.
4.3 Capitalization of Parent and Merger Sub.
(a) Parent's authorized capital stock consists solely of (i)
100,000,000 shares of Parent Common Stock, of which (A) 16,171,091 shares were
issued and outstanding, (B) no shares were issued and held in treasury (which
does not include the shares reserved for issuance set forth in clause (C) below)
and no shares were held by Subsidiaries of Parent, and (C) 12,225,000 shares
were reserved for issuance upon the exercise of outstanding options and
37,554,287 shares were reserved for issuance upon the conversion or exchange of
convertible or exchangeable securities granted or issued by Parent; and (ii)
35,000,000 shares of Parent Preferred Stock of which 8,440,002 shares were
designated as Series A Preferred of which 8,440,002 shares were issued and
outstanding, 9,500,000 shares were designated as Series B Preferred, of which
9,499,874 shares were issued and outstanding, and 11,597,112 shares were
designated Series C Preferred, of which 11,547,112 shares were issued and
outstanding. Each outstanding share of Parent Common Stock is, and all shares of
Parent Common Stock to be issued in connection with the Merger will be, duly
authorized and validly issued, fully paid and nonassessable, and each
outstanding share of Parent Common Stock has not been, and all shares of Parent
Common Stock to be issued in connection with the Merger will not be, issued in
violation of any preemptive or similar rights. As of the date hereof, other than
as set forth herein or in Section 4.3 of the Parent Disclosure Schedule, and
except for shares to be issued in connection with the Merger (including shares
of Parent Common Stock to be issued upon the
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exercise of Company Stock Options), there are no outstanding subscriptions,
options, warrants, calls, commitments, agreements, or obligations of any
character calling for the purchase, redemption or issuance by Parent of any
equity securities of Parent, nor are there outstanding any securities which are
convertible into or exchangeable for any shares of Parent Common Stock and
neither Parent nor any Subsidiary has any obligation of any kind to issue any
additional securities or to pay for or repurchase any securities of Parent, its
Subsidiaries or its or their predecessors. Except as set forth in Section 4.3 of
the Parent Disclosure Schedule, Parent has no agreement, arrangement or
understanding to register any securities of Parent or any of its Subsidiaries
under the Securities Act or under any state securities law and has not granted
registration rights to any person or entity; copies of all such agreements have
previously been provided to the Company.
(b) Merger Sub's authorized capital stock consists solely of
10,000 shares of Common Stock, par value $.0001 per share ("Merger Sub Common
Stock"), of which, as of the date hereof, 1,000 shares are issued and
outstanding and none are reserved for issuance. As of the date hereof, all of
the outstanding shares of Merger Sub Common Stock are owned free and clear of
any liens, claims or encumbrances by Parent.
4.4 Subsidiaries. Section 4.4 of the Parent Disclosure Schedule sets
forth a list of all entities in which Parent has an equity interest
("Subsidiaries"). Except as set forth in Section 4.4 of the Parent Disclosure
Schedule, Parent owns directly or indirectly all of the outstanding shares of
capital stock (or other ownership interests having by their terms ordinary
voting power to elect a majority of directors or others performing similar
functions) of each of such Subsidiaries.
4.5 Consents and Approvals. Neither the execution and delivery of
this Agreement by Parent or Merger Sub nor the consummation of the transactions
contemplated hereby will require any action or consent or approval of, or review
by, or registration or filing by Parent or any of its affiliates with, any third
party or any Governmental Entity, other than (i) registrations or other actions
required under federal and state securities laws as are contemplated by this
Agreement or (ii) consents or approvals of any Governmental Entity set forth in
Section 4.5 to the Parent Disclosure Schedule, except for those which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent and its Subsidiaries taken as a whole or a Material
Adverse Effect on the ability of the parties to consummate the transactions
contemplated hereby.
4.6 Parent Financial Statements. Set forth in Section 4.6 of Parent
Disclosure Schedule are true and correct copies of (a) an audited consolidated
balance sheet of Parent at December 31, 1997, together with related audited
statements of operations, stockholders' equity and cash flows for the fiscal
year then ended, and (b) Parent's unaudited consolidated balance sheet (the
"Parent Balance Sheet") and income statement as of and for the year ended
December 31, 1998 (collectively, the "Parent Financial Statements"). Such Parent
Financial Statements have been prepared in accordance with GAAP (except that the
unaudited Parent Financial Statements do not contain all footnotes required by
GAAP and are subject to normal year-end audit adjustments that in the aggregate
will not be material) applied on a basis consistent throughout the periods
indicated and with each other. The Parent Financial Statements fairly present
the consolidated financial condition and operating results of Parent as of the
dates, and
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for the periods indicated therein, subject to normal year-end audit adjustments.
The books and records of Parent have been, and are being, maintained in
accordance with GAAP and any other applicable legal and accounting requirements.
4.7 Absence of Undisclosed Liabilities. Except (i) as and to the
extent disclosed or reserved against in the Parent Balance Sheet, (ii) as
incurred in the ordinary course of business and consistent with past practice
and not prohibited by this Agreement, (iii) as incurred in connection with the
execution of this Agreement and (iv) as disclosed in Section 4.7 of the Parent
Disclosure Schedule, Parent, together with its Subsidiaries, does not have any
liabilities or obligations of any nature, whether known or unknown, absolute,
accrued, contingent or otherwise and whether due or to become due, that,
individually or in the aggregate, have or would have a Material Adverse Effect
on Parent and its Subsidiaries, taken as a whole.
4.8 Absence of Certain Changes. Since December 31, 1998, (a) except
as disclosed in Section 4.8 of Parent Disclosure Schedule, there has not been
any change that would have a Material Adverse Effect on the assets, business,
properties, operations or financial condition of Parent and its Subsidiaries,
taken as a whole, or any condition, event or occurrence that, individually or in
the aggregate, could reasonably be expected to result in a Material Adverse
Effect on Parent, (b) neither Parent nor any of its Subsidiaries has
participated in any transaction, or otherwise acted outside the ordinary course
of business, including, without limitation, declaring or paying any dividend or
declaring or making any distribution to its stockholders except out of the
earnings of Parent, issuing Parent Common Stock or any securities convertible
into Parent Common Stock, or acquiring any other business, whether by merger,
acquisition of stock or assets, or otherwise, and (c) neither Parent nor any of
its Subsidiaries has increased the compensation of any of its officers or the
rate of pay of any of its employees, except as part of regular compensation
increases in the ordinary course of business.
4.9 Brokers. Except as set forth in Section 4.9 of the Parent
Disclosure Schedule, neither Parent, Merger Sub, nor any of their respective
officers or directors has employed any broker or finder or incurred any
liability for any broker's fees, commissions or finder's fees in connection with
any of the transactions contemplated by this Agreement.
4.10 Vote Required. No approval of the stockholders of Parent is
necessary to approve this Agreement and the transactions contemplated hereby.
4.11 Additional Representations and Warranties. Except as disclosed
in Section 4.11 of the Parent Disclosure Schedule, the representations and
warranties of Parent set forth in Sections 3.5, 3.6, 3.8, 3.9, 3.12, 3.14, 3.16
through 3.18 and 3.20 through 3.27 (the "Series C Representations") of that
certain Stock Purchase Agreement, dated as of May 26, 1998, by and among Parent,
General Atlantic Partners 46, L.P., GAP Coinvestment Partners, L.P. and Bayview
Investors, Ltd. (the "Series C Purchase Agreement") are true and correct in all
material respects as of the date hereof. For the purposes of this Section 4.11,
all capitalized terms used in the Series C Representations and not otherwise
defined herein shall have the meanings given to them in Section 1.1 of the
Series C Purchase Agreement. All schedules referred to in the Series C
Representations shall refer to the applicable schedules set forth in Section
4.11 of the Parent Disclosure Schedule.
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4.12 ProTix Confidential Private Offering Memorandum. The information
regarding Parent and its subsidiaries set forth in the Confidential Private
Offering Memorandum dated September 30, 1998 delivered by Parent to the
shareholders of ProTix, Inc. (the "ProTix Memorandum") was true and correct in
all material respects as of the date thereof; provided, however, that neither
Parent nor Merger Sub makes any representation or warranty with respect to the
truth and accuracy of information contained in the ProTix Memorandum at any date
other than September 30, 1998.
4.13 Representations Complete. None of the representations or
warranties made by Parent or Merger Sub herein or in any Schedule hereto,
including the Parent Disclosure Schedule, or certificate furnished by the Parent
pursuant to this Agreement, contains any untrue statement of a material fact, or
omits to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which made,
not misleading.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of the Company. During the period from the date of
this Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior written consent of
Parent, the Company and each Company Subsidiary shall carry on its business in
the ordinary course consistent with past practice. Without limiting the
generality of the foregoing, and except as set forth in Section 5.1 of the
Company Disclosure Schedule or as otherwise contemplated by this Agreement or
consented to in writing by Parent, neither the Company nor any Company
Subsidiary shall:
(a) declare or pay any dividends on, or make other
distributions in respect of, any of the Company Capital Stock;
(b) (i) repurchase, redeem or otherwise acquire any shares
of its capital stock, or any securities convertible into or exercisable for any
shares of such capital stock, (ii) split, combine or reclassify any shares 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 (iii) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with respect to any of the
foregoing;
(c) amend its Certificate of Incorporation, Bylaws or other
similar governing documents, except as contemplated by Section 6.13 of this
Agreement;
(d) make any capital expenditures other than those which are
made in the ordinary course of business or are necessary to maintain existing
assets in good repair;
(e) enter into any new line of business;
(f) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other
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manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire any assets, which
would be material, individually or in the aggregate, to the Company;
(g) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue, or in any of the conditions to the
Merger set forth in Article I not being satisfied;
(h) change its methods of accounting in effect at April 30,
1998, except as required by changes in GAAP or as concurred with by the
Company's independent auditors;
(i) (i) except as required by applicable law or as required
to maintain qualification pursuant to the Code, adopt, amend, or terminate any
employee benefit plan (including, without limitation, any Company Employee Plan)
or any agreement, arrangement, plan or policy between the Company or any Company
Subsidiary and one or more of its current or former directors, officers or
employees, (ii) except for normal increases in the ordinary course of business
consistent with past practice or except as required by applicable law, increase
in any manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any Company Employee Plan or
agreement as in effect as of the date hereof (including, without limitation, the
granting of stock options, stock appreciation rights, restricted stock,
restricted stock units or performance units or shares); provided, however, that
nothing contained herein shall prohibit the Company or any Company Subsidiary
from paying any bonuses listed in Section 5.1(i) of the Company Disclosure
Schedule;
(j) other than activities in the ordinary course of business
consistent with past practice, sell, lease, encumber, assign or otherwise
dispose of, or agree to sell, lease, encumber, assign or otherwise dispose of,
any of its material assets, properties or other rights or agreements;
(k) other than in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money or assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity;
(l) create, renew, amend or terminate or give notice of a
proposed renewal, amendment or termination of, any material contract, agreement
or lease for goods, services or office space to which the Company or any Company
Subsidiary is a party or by which the Company, any Company Subsidiary or any of
their respective properties are bound, other than the renewal in the ordinary
course of business of any lease the term of which expires prior to the Closing
Date; or
(m) agree to do any of the foregoing
5.2 Covenants of Parent. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior written consent of
the Company, and except as set forth in Section 5.2 of the Parent Disclosure
Schedule, Parent and its Subsidiaries shall carry on their respective businesses
in the ordinary course consistent with past practice. Without limiting the
generality
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of the foregoing, and except as set forth in Section 5.2 of the Parent
Disclosure Schedule or as otherwise contemplated by this Agreement or consented
to in writing by the Company, Parent shall not, and shall not permit any of its
Subsidiaries to:
(a) declare or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, in respect of any of its capital
stock, except that any Parent Subsidiary may pay dividends or make other
distributions to Parent or any other Parent Subsidiary;
(b) purchase or otherwise acquire, directly or indirectly,
any of its capital stock;
(c) split, combine or reclassify any shares of its capital
stock, unless appropriate adjustment to the Exchange Ratio is made pursuant to
Section 1.7(d) hereof;
(d) sell, transfer, license, sublicense or otherwise dispose
of any material assets;
(e) acquire any other business whether by merger, purchase
of stock or assets, or otherwise;
(f) except upon the exercise of outstanding options or
warrants, issue any shares of Parent Common Stock or any security convertible
into Parent Common Stock;
(g) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue, or in any of the conditions to the
Merger set forth in Article I not being satisfied; or
(h) agree to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS.
6.1 Intentionally Deleted.
6.2 Shareholders' Meetings. Company shall call and hold the Company
Shareholders' Meeting, or solicit written stockholder consent, as the case may
be, as promptly as practicable after the date hereof for the purpose of voting
upon the approval of this Agreement, the Merger and the transactions
contemplated hereby pursuant to the Information Statement. Company shall use all
reasonable efforts to solicit from its shareholders proxies in favor of the
approval of this Agreement, the Merger and the transactions contemplated hereby
pursuant to the Information Statement and shall take all other action necessary
or advisable to secure the vote or consent of shareholders required by the NYBCL
to obtain such approval. Each of the parties hereto shall take all other action
necessary or, in the opinion of the other parties hereto, advisable to promptly
and expeditiously secure any vote or consent of stockholders required by
applicable law and such party's Certificate of Incorporation and Bylaws to
effect the Merger.
6.3 Access to Information.
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(a) Upon reasonable notice and subject to applicable laws
relating to the exchange of information, the Company shall afford to the
officers, employees, accountants, counsel and other representatives of Parent,
access, during normal business hours during the period prior to the Effective
Time, to all its properties, books, contracts, commitments, records, officers,
employees, accountants, counsel and other representatives and, during such
period, the Company shall make available to Parent all information concerning
its business, properties and personnel as Parent may reasonably request. The
Company shall not be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of its
customers, jeopardize any attorney-client privilege or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply. All information furnished to
Parent pursuant to this Section 6.3(a) shall be subject to, and Parent shall
hold all such information in confidence in accordance with, the provisions of
the confidentiality agreement, dated December 10, 1998 (the "Confidentiality
Agreement"), between Parent and the Company.
(b) Upon reasonable notice and subject to applicable laws
relating to the exchange of information, Parent shall, and shall cause its
Subsidiaries to, afford to the officers, employees, accountants, counsel and
other representatives of the Company, access, during normal business hours
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments, records, officers, employees, accountants, counsel and
other representatives and, during such period, the Parent shall make available
to the Company all information concerning its business, properties and personnel
as the Company may reasonably request. Neither Parent nor any of its
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of
Parent's customers, jeopardize any attorney-client privilege or contravene any
law, rule, regulation, order, judgment, decree, fiduciary duty or binding
agreement entered into prior to the date of this Agreement. The parties hereto
will make appropriate substitute disclosure arrangements under circumstances in
which the restrictions of the preceding sentence apply. All information
furnished to the Company pursuant to this Section 6.3(b) shall be subject to,
and the Company shall hold all such information in confidence in accordance
with, the provisions of the confidentiality agreement, dated December 10, 1998
(the "Confidentiality Agreement"), between Parent and the Company.
(c) No investigation by Parent or the Company or their
respective representatives shall affect the representations, warranties,
covenants or agreements of the other set forth herein; provided, however, that
neither Parent nor the Company is aware as of the date hereof of any breach of
representations or warranties of the other party with respect to which breach it
has failed to notify such other party.
6.4 Public Disclosure. Unless otherwise permitted by this Agreement,
Parent and the Company shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement
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or disclosure without the prior approval of the other (which approval shall not
be unreasonably withheld), except as may be required by law.
6.5 Consents; Cooperation.
(a) Each of Parent, Merger Sub and the Company shall
promptly apply for or otherwise seek, and use its best efforts to obtain, all
consents and approvals required to be obtained by it for the consummation of the
Merger, and shall use commercially reasonable efforts to obtain all necessary
consents, waivers and approvals under any of its material contracts in
connection with the Merger for the assignment thereof or otherwise. The parties
hereto will consult and cooperate with one another, and consider in good faith
the views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to any other federal or state antitrust or fair trade law.
(b) Notwithstanding anything to the contrary in Section
6.6(a) neither Parent nor any of it Subsidiaries nor the Company shall be
required to divest any of their respective businesses, product lines or assets,
or to take or agree to take any other action or agree to any limitation.
6.6 Legal Requirements. Each of Parent, Merger Sub and the Company
will, and will cause their respective subsidiaries to, take all reasonable
actions necessary to comply promptly with all legal requirements which have been
or which may be imposed on them with respect to the consummation of the
transactions contemplated by this Agreement and will promptly cooperate with and
furnish information to any party hereto necessary in connection with any such
requirements imposed upon such other party in connection with the consummation
of the transactions contemplated by this Agreement and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
person, required to be obtained or made in connection with the taking of any
action contemplated by this Agreement.
6.7 Blue Sky Laws. Parent shall take such steps as may be necessary
to comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common Stock in connection with the
Merger. The Company shall use its best efforts to assist Parent as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable in connection with the issuance of Parent Common Stock in
connection with the Merger.
6.8 Employee Benefit Plans. At the Effective Time, the Company Stock
Option Plan and each outstanding option to purchase shares of Company Common
Stock under the Company Stock Option Plan shall vest and shall be assumed by
Parent and any outstanding repurchase rights shall be assigned to Parent.
Section 6.8 of the Company Disclosure Schedule sets forth a true and complete
list as of the date hereof of all holders of outstanding options under the
Company Stock Option Plan including the number of shares of Company Common Stock
subject to each such option, the date of grant of each such option, the exercise
or vesting schedule, the exercise price per share and the term of each such
option. On the Closing Date, the
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Company shall deliver to Parent an updated Section 6.8 of the Company Disclosure
Schedule current as of such date. Each such option so assumed by Parent under
this Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Company Stock Option Plan immediately prior to the
Effective Time, except that (i) such option will be exercisable for that number
of whole shares of Parent Common Stock equal to the product of the number of
shares of Company Common Stock that were issuable upon exercise of such option
immediately prior to the Effective Time multiplied by the Exchange Ratio and
rounded down to the nearest whole number of shares of Parent Common Stock, and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed option will be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
option was exercisable immediately prior to the Effective Time by the Exchange
Ratio, rounded up to the nearest whole cent. It is the intention of the parties
that the options so assumed by Parent qualify following the Effective Time as
incentive stock options as defined in Section 422 of the Code to the extent such
options qualified as incentive stock options prior to the Effective Time. Within
ten (10) business days after the Effective Time, Parent will issue to each
person who, immediately prior to the Effective Time was a holder of an
outstanding option under the Company Stock Option Plan a document in form and
substance satisfactory to the Company evidencing the foregoing assumption of
such option by Parent.
6.9 Loan to the Company. Parent agrees that, on the earlier of (i)
ten (10) days following the execution of this Agreement or (ii) one (1) business
day following the closing of the offering of Series D Preferred Stock of Parent
(the "Parent Series D Preferred"), in the event the Company shall have exhausted
its ability to borrow under any credit facility (the "Marine Midland Facility")
with Marine Midland Bank ("Marine Midland") and upon the execution and delivery
by the Company of a Senior Subordinated Promissory Note and Security Agreement
in the form attached hereto as Exhibit B (the "Promissory Note"), Parent shall
lend funds to the Company for working capital in an amount up to $1,000,000 in
accordance with the terms of such Promissory Note.
6.10 Reorganization. Parent and the Company shall each use its best
efforts to cause the business combination to be effected by the Merger to be
qualified as a "reorganization" described in Section 368(a) of the Code.
6.11 Control of Operations. Nothing contained in this Agreement shall
give Parent, directly or indirectly, the right to control or direct the
operations of the Company prior to the Effective Time. Prior to the Effective
Time, each of Parent and the Company shall exercise, consistent with the terms
and conditions of this Agreement, complete control and supervision over its
respective operations.
6.12 Best Efforts and Further Assurances. Each of the parties to this
Agreement shall use its best efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to Closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby.
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6.13 Amendment to Certificate of Incorporation.
By executing this Agreement, each of the Company Shareholders holding
Company Series A Preferred hereby waives any and all rights to receive any
distribution under Section 3(a) of Article FIFTH of the Amended Certificate of
Incorporation as a result of the consummation of the transactions contemplated
in this Agreement and agrees to vote all shares of Company Series A Preferred
held by it in favor of the amendment of the Amended Certificate of Incorporation
to eliminate all rights to receive any distribution under Section 3(a) of
Article FIFTH of the Amended Certificate of Incorporation which might otherwise
be receivable as a result of the transactions contemplated by this Agreement.
6.14 Shareholder Voting Agreements; Irrevocable Proxies.
Each of the Company Shareholders agrees, concurrently with the execution
of this Agreement, to execute a Shareholder Voting Agreement in the form
attached hereto as Exhibit C (each a "Shareholder Voting Agreement"). In
addition, each Company Shareholder hereby agrees to vote for approval of this
Agreement and the Merger pursuant to the Shareholder Voting Agreement or
pursuant to an irrevocable proxy in the form attached hereto as Exhibit D (each
an "Irrevocable Proxy"). Ms. Goetz, in her capacity as Proxy Agent under each
Irrevocable Proxy, agrees to vote all shares of Company Capital Stock with
respect to which she has or will be granted a proxy, (i) in favor of approval
and adoption of the Merger Agreement and the Merger and any matter that could
reasonably be expected to facilitate the Merger, including, without limitation,
in favor of the amendment to the Company's Amended Certificate of Incorporation
contemplated by Section 6.13 of the Merger Agreement, and (ii) against approval
of any corporate action that, in the reasonable judgment of Advantix's Board of
Directors, would violate, frustrate the purpose of, prevent or delay
consummation of such Merger.
6.15 Stockholders Agreement. Parent shall execute, and use its best
efforts to cause the necessary parties to that certain Amended and Restated
Stockholders Agreement to be dated on or about March 16, 1999 among Parent, and
the several stockholders of Parent named therein to execute a Second Amended and
Restated Stockholders Agreement (the "Second Amended Stockholders Agreement") in
the form of Exhibit E hereto, to add the holders of Company Series A Preferred
(the "Company Series A Holders") as parties thereto for the purpose of granting
certain rights to the Company Series A Holders.
6.16 Indemnification for Personal Guarantees. Parent shall indemnify,
defend and hold harmless Ms. Goetz and Mr. Long from and against any obligations
or liabilities incurred under their guarantee of the Marine Midland Facility as
a result of any claim under the Marine Midland Facility occurring from and after
the Effective Time.
6.17 Filing of Form S-8. Parent shall use commercially reasonable
efforts (which shall not be less than the efforts used with respect to the
options granted to its employees under Parent's stock option plans) to file, not
later than 90 days following the effective date of a Parent IPO, a registration
statement on Form S-8 covering the shares of Parent Common Stock issuable upon
exercise of options granted under the Company Stock Option Plan, and to keep
such registration statement (or a successor registration statement) effective
for so long as there are options outstanding and exercisable under such plan.
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6.18 Board Representation. In the event that a Parent IPO does not
close on or before August 31, 1999, consistent with applicable law and its
Bylaws, the Board of Directors of Parent shall increase the number of members of
its Board of Directors by one and shall elect a nominee designated by notice
signed by all members of the committee which constitutes the Shareholders' Agent
(the "Committee Nominee") to fill such vacancy, to serve as such until the next
annual meeting of Parent stockholders or such time as her successor shall have
been duly elected or appointed and qualified; provided, however, that in the
event that a Parent IPO does not close on or before the date required for
director nominations for such next annual meeting of Parent stockholders, the
Board of Directors of Parent shall nominate the Committee Nominee (or such other
nominee as the committee which constitutes the Shareholders' Agent shall
unanimously nominate in writing to the Board of Directors of Parent) for
election as a director at such annual meeting; provided, further, that term of
office of any Committee Nominee as a director of Parent shall terminate and such
Committee Nominee shall resign as a director effective at the effective time of
a Parent IPO.
6.19 No Impairment of Obligations. Parent agrees that, for a period
of twelve (12) months following the Effective Time, it will not, and will not
permit the Company to, by amendment of its Certificate of Incorporation or
through reorganization, consolidation, merger, dissolution, issuance of
securities, sale of assets or other voluntary action, avoid or seek to avoid the
observance or performance of any of the Company's contracts or obligations.
6.20 Guarantee of Company Promissory Notes. Parent hereby guarantees
the obligation, if any, of the Company, to pay the principal and interest on the
promissory notes in the form of Exhibit F (the "Series A Notes") payable to the
holders of the Company Series A Preferred pursuant to the terms thereof, if and
to the extent the Company fails to pay such principal and interest as provided
therein; provided, however, that Parent shall have no obligation under this
Section 6.20 if the Merger does not close.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Shareholder Approval. This Agreement shall have been
approved and adopted by the requisite vote or written consent of (i) the holders
of the outstanding shares of Company Capital Stock as of the record date set for
the Company Shareholders' Meeting, and (ii) Parent, as the sole stockholder of
Merger Sub.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the
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consummation of the Merger illegal. In the event an injunction or other order
shall have been issued, each party agrees to use its reasonable diligent efforts
to have such injunction or other order lifted.
(c) Governmental Approval. The Company, each Company
Subsidiary, Parent and its Subsidiaries shall have timely obtained from each
Governmental Entity all approvals, waivers and consents, if any, necessary for
consummation of or in connection with the Merger and the several transactions
contemplated hereby (each a "Requisite Regulatory Approval"), including such
approvals, waivers and consents as may be required under the Securities Act and
under state blue sky laws (other than those filings, approvals, waivers and
consents relating to the Merger or affecting Parent's ownership of Company or
any of its properties that, if not obtained would not have a Material Adverse
Effect to either party).
(d) Tax-Free Reorganization. The Company shall have received
an opinion from its tax advisors to the effect that the Merger should constitute
a reorganization within the meaning of Section 368(a) of the Code, and such
opinion shall have been reviewed and approved by Arthur Andersen LLP on behalf
of Parent. In rendering such opinion, the Company's tax advisors shall be
entitled to rely upon representations of Parent and Company and certain
shareholders of the Company.
7.2 Conditions to Obligations of Parent and Merger Sub. The
obligation of Parent and Merger Sub to effect the Merger is also subject to the
satisfaction or waiver by Parent and Merger Sub at or prior to the Effective
Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date. Parent shall have received a certificate signed on behalf of
the Company by the Chief Executive Officer and the Chief Financial Officer of
the Company to the foregoing effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company to such effect.
(c) Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Parent's conduct or operation of the
business of the Company or any Company Subsidiary following the Merger shall be
in effect, nor shall any proceeding brought by an administrative agency or
commission or other Governmental Entity, domestic or foreign, seeking the
foregoing be pending.
(d) No Material Adverse Changes. There shall not have
occurred any material adverse change in the condition (financial or otherwise),
properties, assets (including
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intangible assets), liabilities, business, operations or results of operations
of the Company or any Company Subsidiary.
(e) Third Party Consents. Parent shall have been furnished
with evidence satisfactory to it of the consent or approval of those persons
whose consent or approval shall be required in connection with the Merger under
the contracts of the Company and each Company Subsidiary set forth on Section
3.4 of the Company Disclosure Schedule.
(f) Legal Opinion. Parent shall have received a legal
opinion from Roberts, Sheridan & Kotel in substantially the form attached hereto
as Exhibit G.
(g) Shareholder Representation Agreements. Parent shall have
received from each holder of Company Capital Stock listed on Schedule II
attached hereto an executed Shareholder Representation Agreement in
substantially the form attached hereto as Exhibit H.
(h) Approval of Company Shareholders. Shareholders of the
Company holding 100% of the outstanding Company Capital Stock shall have voted
their shares of Company Capital Stock in favor of, or executed a written consent
approving, the Merger.
(i) Assets of Megasoft. The Company shall have acquired good
and marketable title, free and clear of all liens, encumbrances and claims of
third parties of any kind, to 100% of the assets of Megasoft, Inc., including,
without limitation, the assets listed on Section 7.2(j) of the Company
Disclosure Schedule.
(j) Waiver and Consent of Marine Midland Bank. Marine
Midland shall have (a) executed a written waiver of any and all defaults of the
Company under any of the Company's credit facilities with Marine Midland up to
and including the Closing Date and (b) executed a written consent to the
transactions contemplated by this Agreement, each in form and substance
satisfactory to Parent.
(k) Market Stand-Off. The holders of not less than 95% of
the outstanding Company Stock Options shall have executed an agreement
containing market stand-off provisions in the form attached hereto as Exhibit I.
7.3 Conditions to the Obligations of Company and Company
Shareholders. The obligation of the Company to effect the Merger is also subject
to the satisfaction or waiver by the Company at or prior to the Effective Time
of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date. The Company shall have received a certificate
signed (i) on behalf of Parent by the Chief Executive Officer and the Chief
Financial Officer of Parent and (ii) on behalf of Merger Sub by the President of
Merger Sub, in each case to the foregoing effect.
(b) Performance of Obligations of Parent and Merger Sub.
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed
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by them under this Agreement at or prior to the Closing Date, and the Company
shall have received a certificate signed (i) on behalf of Parent by the Chief
Executive Officer and the Chief Financial Officer of Parent and (ii) on behalf
of Merger Sub by the President of Merger Sub, in each case to such effect.
(c) Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Parent's business following the
Merger shall be in effect, nor shall any proceeding brought by an administrative
agency or commission or other Governmental Entity, domestic or foreign, seeking
the foregoing be pending.
(d) No Material Adverse Changes. There shall not have
occurred any material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of Parent and its Subsidiaries, taken as a
whole.
(e) Legal Opinion. Company shall have received a legal
opinion from Brobeck Phleger & Harrison LLP in substantially the form attached
hereto as Exhibit J.
(f) Investor Rights Agreement.
Parent shall execute, and use its best efforts to cause the necessary
parties to that certain Amended and Restated Investor Rights Agreement to be
dated on or about March 16, 1999 among Parent and the several stockholders of
Parent named therein to execute a Third Amended and Restated Investor Rights
Agreement (the "Third Amended Investor Rights Agreement") in the form of Exhibit
K hereto, to (i) grant certain registration rights to Karen S. Goetz, and (ii)
to add each of the Holders as a "Designated Holder" for purposes of Section 4
thereof.
(g) Employment Agreements.
Parent shall have entered into employment agreements with Karen S. Goetz
and Robert E. Long in substantially the form of Exhibit L and Exhibit M,
respectively, hereto.
(h) Equity Financing. Parent shall have closed the offering
of Parent Series D Preferred in an aggregate amount not less than $20 million at
a combined pre-money valuation of Parent and Company of no less than $190
million (assuming consummation of the Merger).
(i) Agreement with Ms. Goetz.
Parent shall have executed the Agreement with Karen S. Goetz in the form
of Exhibit N hereto.
(j) Release from Stockholder's Agreement.
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The Company shall executed a written release of Karen S. Goetz,
Christopher G. Smith, Lee H. Goetz, Donald M. Hellstedt and Roy Pinsky from each
such stockholder's obligations under their respective Stockholder's Agreements
with the Company, as each may have been amended, and Parent hereby consents to
the grant of such release.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the matters presented
in connection with the Merger by the shareholders of the Company:
(a) by mutual consent of the Company, Parent and Merger Sub
in a written instrument, if the Board of Directors of each so determines by a
vote of a majority of the members of its entire Board;
(b) by either Parent or the Company upon written notice to
the other party if any Governmental Entity of competent jurisdiction shall have
issued a final nonappealable order enjoining or otherwise prohibiting the
Merger.
(c) by either Parent or the Company if the Merger shall not
have been consummated on or before April 15, 1999 unless the failure of the
Closing to occur by such date shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein;
(d) by either Parent or the Company if any approval of the
shareholders of the Company required for the consummation of the Merger shall
not have been obtained by reason of the failure to obtain the required vote at a
duly held meeting of such stockholders or at any adjournment or postponement
thereof;
(e) by either Parent or the Company if there shall have been
a material breach of any of the representations or warranties set forth in this
Agreement on the part of the other party, which breach is not cured within
thirty (30) days following written notice to the party committing such breach,
or which breach, by its nature, cannot be cured prior to the Closing; provided,
however, that neither party shall have the right to terminate this Agreement
pursuant to this Section 8.1(e) unless the breach of representation or warranty,
together with all other such breaches, would entitle the party receiving such
representation not to consummate the transactions contemplated hereby under
Section 7.2(d) (in the case of a breach of representation or warranty by the
Company) or Section 7.3(d) (in the case of a breach of representation or
warranty by Parent);
(f) by either Parent or the Company if there shall have been
a material breach of any of the covenants or agreements set forth in this
Agreement on the part of the other party, which breach shall not have been cured
within thirty (30) days following receipt by the breaching party of written
notice of such breach from the other party hereto, or which breach, by its
nature, cannot be cured prior to the Closing.
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8.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect except that (i) the
last sentence of Section 6.3(a), the last sentence of Section 6.3(b), and each
of Sections 6.4, 6.11, 8.2, 10.2, 10.3, 10.4, 10.5 and 10.8 shall survive any
termination of this Agreement and (ii) notwithstanding anything to the contrary
contained in this Agreement, no party shall be relieved or released from any
liabilities or damages arising out of its willful breach of any provision of
this Agreement.
8.3 Amendment. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized by
their respective Boards of Directors, at any time before or after approval of
the matters presented in connection with the Merger by the shareholders of the
Company; provided, however, that after any approval of the transactions
contemplated by this Agreement by the Company's shareholders, there may not be,
without further approval of such shareholders, any amendment of this Agreement
which reduces the amount or changes the form of the consideration to be
delivered to the Company shareholders hereunder or which otherwise changes any
of the principal terms of this Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, each
of the parties hereto, by action taken or authorized by its Board of Directors,
may, to the extent legally allowed, (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
with any of the agreements or conditions of the other party contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf of
such party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE IX
INDEMNIFICATION AND ESCROW FUND
9.1 Indemnity; Escrow Fund.
(a) The Holders (pro rata in accordance with each such
Holder's percentage interest in Company Capital Stock immediately prior to the
Effective Time; except that each holder shall be solely responsible for all
Damages (as defined below) arising from any breach of the representations,
warranties or covenants set forth in each such Holder's Shareholder Voting
Agreement or Shareholder Representation Agreement, as the case may be) shall
indemnify and hold harmless Parent and the Surviving Corporation (as used in
this Article IX, the "Holder Indemnified Parties" and/or "Parent Indemnifying
Parties") in respect of any and all loss, expense, liability or other damage,
including, without limitation, reasonable attorneys' fees, accountants' fees,
and all other reasonable costs and expenses of litigation, investigation,
defense or settlement of claims (including costs of all appeals related thereto)
or threats thereof and amounts paid in settlement to the extent of the amount of
such loss, expense, liability or other damage (collectively, "Damages") that
Parent or the Surviving Corporation incur by reason
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of any breach by the Company or any Company Shareholder of any representation,
warranty, covenant or agreement of the Company or any Company Shareholder
contained herein or in the Shareholders Voting Agreement or Shareholders
Representation Agreement, as the case may be (subject to the foregoing
limitation regarding warranties given on a several rather than a joint basis)
("Company Indemnifiable Items").
(b) Parent and Merger Sub shall indemnify and hold harmless
the Holders (as used in this Article IX, the "Parent Indemnified Parties" and/or
"Holder Indemnifying Parties") in respect of any and all Damages that the
Holders incur by reason of the breach by Parent or Merger Sub of any
representation, warranty, covenant or agreement of the Parent or Merger Sub
contained herein ("Parent Indemnifiable Items").
(c) To secure performance of the Holders' indemnification
obligations hereunder, the Escrow Shares shall be deposited with the Escrow
Agent in accordance with Section 2.3 hereof. The Escrow Fund shall be available
to compensate Parent and the Surviving Corporation for any Damages that Parent
and the Surviving Corporation incur by reason of any Company Indemnifiable Item.
Subject to Section 2.3(b) and Article IX hereof, the Escrow Shares shall be held
in the Escrow Fund for the Escrow Period. Any Escrow Shares or funds remaining
in the Escrow Fund upon expiration of the Escrow Period shall be distributed to
the Holders pro rata in accordance with their percentage interests in Company
Capital Stock immediately prior to the Effective Time, provided that to the
extent any Holder has made a withdrawal in accordance with Section 2.3(b) hereof
shall receive such Holder's interest in cash, pro rata in accordance with such
Holder's percentage interests in Company Capital Stock immediately prior to the
Effective Time.
9.2 Claims.
(a) Claims by Parent. Upon receipt by the Escrow Agent on or
before the last day of the Escrow Period of a certificate of Parent (an
"Officer's Certificate") setting forth a claim under this Article IX and
specifying in reasonable detail (i) the individual items of such Damages
included in the amount so stated, (ii) the date each such item was paid or
properly accrued or arose, and (iii) the nature of the Company Indemnifiable
Item to which such item is related, the Escrow Agent shall, subject to the
provisions of Sections 9.3(a) and 9.7 hereof, deliver to Parent out of the
Escrow Fund, as promptly as practicable, Parent Capital Stock, cash (or a
certified or bank cashier's check or wire transfer) or other assets held in the
Escrow Fund having a fair market value (determined in accordance with Section
2.4 of the Escrow Agreement) equal to such Damages, in the same proportion of
Parent Capital Stock, cash and such other assets as constitutes the Escrow Fund
at the time of such delivery, whereupon the Holders shall have no further
liability to Parent with respect to the claim set forth in such Officer's
Certificate.
(b) Claims by Holders. Upon receipt by Parent on or before
the last day of the Escrow Period of a certificate of the Shareholders' Agent
(as defined below) (the "Agent's Certificate") setting forth a claim under this
Article IX and specifying in reasonable detail (i) the individual items of such
Damages included in the amount so stated, (ii) the date each such item was paid
or properly accrued or arose, and (iii) the nature of the Parent Indemnifiable
Item to which such item is related, Parent shall, subject to the provisions of
Sections 9.3(b) and 9.7 hereof, deliver to Shareholders' Agent a certified check
or wire transfer payable to the
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Shareholders' Agent, as agent for the Holders,
in the amount of such Damages, whereupon Parent shall have no further liability
to the Holders with respect to the claim set forth in such Agent's Certificate.
9.3 Objections to Claims.
(a) Objections to Claims by Parent. At the time of delivery
of any Officer's Certificate to the Escrow Agent, a duplicate copy of such
Officer's Certificate shall be delivered to the Shareholders' Agent (defined in
Section 9.4 below), and for a period of thirty (30) days after such delivery,
the Escrow Agent shall make no delivery of Parent Capital Stock or other
property pursuant to Section 9.2 hereof unless the Escrow Agent shall have
received written authorization from the Shareholders' Agent to make such
delivery. After the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery of the Parent Capital Stock or other property in the Escrow
Fund in accordance with Section 9.2(a) hereof; provided, that no such payment or
delivery may be made if the Shareholders' Agent shall object in a written
statement specifying in reasonable detail the basis for such objection to the
claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent and to Parent prior to the expiration of such
thirty (30) day period.
(b) Objections to Claims by Holders. Parent shall have a
period of thirty (30) days after the time of delivery of any Agent's Certificate
to Parent to object to any claim made by Holders pursuant to Section 9.2(b)
above, by delivery to the Shareholders' Agent of an objection in a written
statement specifying in reasonable detail the basis for such objection, to the
claim made in the Agent's Certificate.
9.4 Attempt to Resolve Conflicts; Arbitration.
(a) In case (i) the Shareholders' Agent shall object in
writing to any claim or claims by Parent made in any Officer's Certificate or
otherwise in accordance with Section 9.3(a) above, or (ii) Parent shall object
in writing to the Shareholders' Agent within twenty (20) days of receipt of any
claim for indemnification hereunder in accordance with Section 9.3(b) above, the
party receiving such objection shall have twenty (20) days to respond in a
written statement to the objection. If after such twenty (20) day period there
remains a dispute as to any claims, the Shareholders' Agent and Parent shall
attempt in good faith for twenty (20) days to agree upon the rights of the
respective parties with respect to each of such claims. If the Shareholders'
Agent and Parent should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties. If a claim is being made against
the Escrow Fund, such memorandum shall be furnished to the Escrow Agent and the
Escrow Agent shall be entitled to rely on such memorandum and shall distribute
the Parent Capital Stock or other property from the Escrow Fund within ten (10)
days of delivery of such memorandum in accordance with the terms thereof. If a
claim is being made against Parent, Parent shall deliver funds at the time of
delivery of and in accordance with the terms of such memorandum.
(b) If no such agreement can be reached after good faith
negotiation, either Parent or the Shareholders' Agent may, by written notice to
the other, demand binding arbitration of the matter unless the Damages are at
issue in pending litigation with a third party. If the Damages are at issue in
pending litigation, then the arbitration shall not be commenced
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until such amount is ascertained or both parties agree to arbitration; and in
either such event the matter shall be settled by arbitration in accordance with
the procedures set forth on Exhibit O hereto
(c) Application may also be made to a court of competent
jurisdiction for confirmation of any decision or award of the arbitrator, for an
order of the enforcement and for any other remedies which may be necessary to
effectuate such decision or award. The parties hereto hereby consent to the
jurisdiction of the arbitrator and of such court and waive any objection to the
jurisdiction of such arbitrator and court.
(d) If a dispute is submitted for arbitration as provided in
this Section 9.4 with respect to a claim by a Holder Indemnified Party, the
Escrow Agent shall continue to hold Escrow Shares and other assets in the Escrow
Fund having a value (determined in accordance with Section 2.4 of the Escrow
Agreement) sufficient to cover the Damages related to such dispute (the
"Contested Damages") (but only to the extent that there are Escrow Shares or
other assets remaining in the Escrow Fund) until: (i) delivery of a copy of a
settlement agreement executed by Parent and the Shareholders' Agent setting
forth instructions to the Escrow Agent as to the release of such Escrow Shares
that shall be made with respect to the Contested Damages; (ii) delivery of a
copy of the final decision of the arbitrators setting forth instructions to the
Escrow Agent as to the release of Escrow Shares that shall be made with respect
to the Contested Damages; or (iii) receipt of a court order or judgment
directing the Escrow Agent to act with respect to the distribution of any Escrow
Shares. The Escrow Agent shall thereupon release the Escrow Shares from the
Escrow Fund (to the extent Escrow Shares are then held in the Escrow Fund) in
accordance with such settlement agreement, arbitrator's instructions, court
order or judgment, as applicable, whereupon the Holders shall have no further
liability to Parent with respect to the claim determined by such settlement
agreement, arbitrator's instructions or judgment.. If any controversy arises
involving any party to this Agreement (other than the Escrow Agent) concerning
the subject matter of this Agreement, including Contested Damages, the Escrow
Agent will not be required to resolve the controversy.
(e) If a dispute is submitted for arbitration as provided in
this Section 9.4 with respect to a claim by a Parent Indemnified Party, then
within ten (10) days of (i) execution of a copy of a settlement agreement
executed by Parent and the Shareholders' Agent relating to the amount of the
Damages owed to the Holders; (ii) delivery of a copy of the final decision of
the arbitrators setting forth the amount of Damages owed to the Holders or (iii)
receipt of a court order or judgment directing Parent to pay Damages to the
Holders, Parent shall thereupon deliver a certified check or wire transfer to
the Shareholders' Agent payable to the Shareholders' Agent, as agent for the
Holders, in accordance with such settlement agreement, arbitrator's instructions
or judgment, as applicable, whereupon Parent shall have no further liability to
the Holders with respect to the claim determined by such settlement agreement,
arbitrator's instructions or judgment.
(f) A committee comprised of (i) one representative
designated by the holders of Company Common Stock (who initially shall be Karen
S. Goetz), (ii) one representative designated by the Company Series A Holders
(who initially shall be David J. Robkin), and (iii) one representative
designated by all the holders of Company Capital Stock, acting as a group (who
initially shall be Ross W. Stefano), shall be constituted and appointed as
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agent ("Shareholders' Agent"). The Shareholders' Agent shall act by a majority
vote of its members, for and on behalf of the Holders to give and receive
notices and communications, to authorize delivery to Parent of the Parent
Capital Stock or other property from the Escrow Fund in satisfaction of claims
by Parent, to settle any other claims for indemnification, to object to such
deliveries, to agree to, negotiate, enter into settlements and compromises of,
and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary or
appropriate in the judgment of the Shareholders' Agent for the accomplishment of
the foregoing. Any notices and communications to the Shareholders' Agent shall
be given to each member of the committee constituting the Shareholders' Agent,
and (except for any notices delivered pursuant to Section 2.2(b) hereof) any
notices or communications by the Shareholders' Agent shall be effective if
signed by two (2) of the three (3) members (whether in a single instrument or in
counterparts). A member of the committee constituting the Shareholders' Agent
may be changed by the holders of a majority in interest of the Escrow Fund of
the constituency designating such member, from time to time upon not less than
ten (10) days' prior written notice to Parent. No bond shall be required of the
members of the Shareholders' Agent, and the members of the Shareholders' Agent
shall receive no compensation for their services. Notices or communications to
or from the Shareholders' Agent shall constitute notice to or from each of the
shareholders of the Company. If at any time any constituency is not represented
on the committee which constitutes the Shareholders' Agent, then any action
contemplated to be taken by the Shareholders' Agent hereunder, and any power
granted to the Shareholders' Agent, may be exercised with respect to such
constituency by the vote of the Holders representing a majority of the
beneficial interests of such constituency in the Escrow Fund (in such case, as
used herein "Shareholders' Agent" shall include such Holders as the
representative of such constituency). In the event that any claim, agreement,
negotiation, settlement, compromise or demand for arbitration shall relate
solely to either the Holders of Company Common Stock or the Holders of Company
Series A Preferred, then the Shareholders' Agent shall act with respect to such
claim, agreement, negotiation, settlement, compromise or demand for arbitration
in accordance with the instructions of the committee member designated by the
Holders of Company Common Stock or the Holders of Company Series A Preferred, as
the case may be.
(g) The members of the committee constituting the
Shareholders' Agent shall not be liable for any act done or omitted hereunder as
Shareholders' Agent except in cases of gross negligence or willful misconduct.
The shareholders of the Company shall severally, but not jointly, indemnify the
members of the committee constituting the Shareholders' Agent harmless against
any loss, liability or expense incurred without gross negligence or willful
misconduct on the part of the Shareholders' Agent and arising out of or in
connection with the acceptance or administration of their duties hereunder.
(h) The Shareholders' Agent shall have reasonable access to
information about the Company and the reasonable assistance of the Company's
officers and employees for purposes of performing its duties and exercising her
rights hereunder; provided, that the Shareholders' Agent shall treat
confidentially and not disclose any nonpublic information from or about the
Company to anyone (except on a need to know basis to individuals who agree to
treat such information confidentially).
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9.5 Actions of the Shareholders' Agent. A decision, act, consent or
instruction of the Shareholders' Agent shall constitute a decision of all
shareholders of the Company for whom shares of Parent Capital Stock otherwise
issuable to them are deposited in the Escrow Fund and shall be final, binding
and conclusive upon each such shareholder of the Company, and the Escrow Agent
and Parent may rely upon any decision, act, consent or instruction of the
Shareholders' Agent as being the decision, act, consent or instruction of each
and every such shareholder of the Company. The Escrow Agent and Parent are
hereby relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the Shareholders'
Agent.
9.6 Third-Party Claims.
(a) In the event that a third party asserts or threatens a
claim which Parent believes may result in a demand against the Escrow Fund,
Parent shall notify the Shareholders' Agent of such claim, and the Shareholders'
Agent on behalf of the shareholders of the Company for whom shares of Parent
Capital Stock otherwise issuable or payable to them are deposited in the Escrow
Fund shall be entitled, at such shareholders' expense, to participate in any
defense of such claim. Unless the Shareholders' Agent elects to assume such
defense (with counsel reasonably acceptable to Parent, and, provided, that the
Shareholders' Agent has the reasonable means to put on such a defense), Parent
shall have the right to settle any such claim (with its own counsel); provided,
that Parent may not effect the settlement of any such claim without the consent
of the Shareholders' Agent, which consent shall not be unreasonably withheld. In
the event that the Shareholders' Agent has consented to any such settlement, the
Shareholders' Agent and the former shareholders of the Company shall have no
power or authority to object under Section 9.3 or any other provision of this
Article IX to the amount of any claim by Parent against the Escrow Fund for
indemnity with respect to such settlement.
(b) In the event that a third party asserts or threatens a
claim involving a Parent Indemnifiable Item, Parent shall be entitled to
participate in any defense of such claim. Unless Parent elects to assume such
defense, the Shareholders' Agent shall have the right to settle any such claim
(with counsel reasonably acceptable to Parent); provided, that Shareholders'
Agent may not effect the settlement of any such claim without the consent of the
Parent, which consent shall not be unreasonably withheld.
(c) Notwithstanding any provision of paragraphs (a) and (b)
of this Section 9.6, neither party shall have the right to settle any claim
against the other party without the consent of such other party, which consent
shall not be unreasonably withheld
9.7 Limitations.
(a) The parties hereto understand and agree that the
indemnity obligations under this Article IX shall terminate twelve (12) months
from the Closing Date, except insofar as a claim for indemnification under this
Article IX has been asserted and such claim has not been resolved in accordance
with the terms of the this Agreement, the Escrow Agreement or otherwise;
provided, however, that no party may expand the scope or amount of any such
unresolved claim after the termination of such twelve (12) month period.
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(b) Notwithstanding the foregoing, neither the Parent
Indemnifying Parties nor the Holder Indemnifying Parties shall have any
liability for indemnification under this Article IX unless and until the
aggregate amount of Damages suffered by the Holder Indemnified Parties or the
Parent Indemnified Parties, as the case may be, exceeds $200,000 (the "Threshold
Amount"). The Holder Indemnified Parties or the Parent Indemnified Parties, as
the case may be, shall be indemnified for all Damages in excess of the Threshold
Amount; provided, however, that (i) the indemnification obligations of the
Company and Company Shareholders hereunder shall be limited to an amount equal
to the amount deposited in the Escrow Fund pursuant to Section 2.3 and (ii) the
indemnification obligations of Parent hereunder shall be limited to $2,513,459.
For the purposes of this Article IX, the shares of Parent Capital Stock in the
Escrow Fund shall be deemed to have a value of $2.15 per share. The parties
hereby agree that except (x) as provided in Section 9.7(c) hereof, and (y) for
matters contemplated by Section 9.8 hereof, Parent and the Surviving Corporation
may seek to be made whole for any Damages only from the Escrow Fund and shall
have no other remedy at law or in equity against the Company, the Surviving
Corporation or the Holders other than as set forth in Section 9.7(c).
(c) Notwithstanding any other provision of this Article IX,
the terms of this Article IX shall not apply to any claims arising out of or
resulting from fraud, which shall be actionable by Parent or the Company, as the
case may be, without reference to the provisions of this Article IX.
(d) The liability of Parent and Merger Sub for any breach of
any representation, warranty or covenant if the Merger does not close shall be
limited to the actual costs and expenses (including, without limitation, actual
legal and accounting fees and expenses) incurred by the Company in connection
with the transactions contemplated by this Agreement. The liability of the
Company and the Company Shareholders for any breach of any representation,
warranty or covenant if the Merger does not close shall be limited to the actual
costs and expenses (including, without limitation, actual legal and accounting
fees and expenses) incurred by Parent and Merger Sub in connection with the
transactions contemplated by this Agreement.
(e) Notwithstanding the foregoing, Parent agrees that the
provisions of Section 6.9 hereof may be specifically enforced by the Company in
a court of competent jurisdiction unless the Merger shall have failed to close
(i) as a result of a termination by Parent pursuant to Section 8.1(e) or Section
8.1(f) hereof, or (ii) as the result of a breach of Section 6.14 hereof.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival of Representations, Warranties and Agreements. The
representations and warranties in this Agreement shall terminate twelve (12)
months from the date of the Effective Time or upon the termination of this
Agreement pursuant to Section 8.1, as the case may be. Each party agrees that,
except for the representations and warranties contained in this Agreement, the
Parent Disclosure Schedule, the Company Disclosure Schedule and the other
agreements contemplated by this Agreement, no party hereto has made any other
representations and
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warranties, and each party hereby disclaims any other representations and
warranties made by itself or any of its officers, directors, employees, agents,
financial and legal advisors or other representatives, with respect to execution
and delivery of this Agreement or the Merger contemplated herein,
notwithstanding the delivery or disclosure to any other party or any party's
representatives of any documentation or other information with respect to any
one or more of the foregoing.
10.2 Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses; provided, however, that if the Merger
is consummated, Parent shall pay promptly upon demand the amount of all expenses
incurred by the Company and the Holders prior to the Closing (collectively,
"Company Expenses"), including, without limitation, legal and accounting
expenses up to an amount equal to the difference between (a) $250,000 and (b)
amount of Company Expenses paid by the Company prior to the Closing (the
"Company Expense Fee Cap"); provided, however, that any expenses incurred by the
Company relating to the preparation of a registration statement for Parent
Common Stock shall not be included in the Company Expense Fee Cap. Any Company
Expenses in excess of the Company Expense Fee Cap shall be recoverable by Parent
in accordance with Section 9 hereof.
10.3 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent, to:
Advantix, Inc.
4675 MacArthur Blvd., Suite 1400
Newport Beach, CA 92626
Fax: (949) 862-5412
Attention: John M. Markovich
Executive Vice President
Chief Financial Officer
with a copy to:
Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, CA 92618
Fax: (949) 790-6301
Attention: Bruce Hallett, Esq.
and
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(b) if to the Company, to:
TicketsLive Corporation
344 W. Genessee Street
Syracuse, NY 13202
Fax: (315) 424-9449
Attention: Ross W. Stefano
Chief Executive Officer
with a copy to
Roberts, Sheridan & Kotel
112 East 49th Street, 30th Floor
New York, NY 10017
Fax: (212) 299-8686
Attention: William R. Brennan, Esq.
and to:
CMG @ Ventures II, LLC
100 Brickstone Square, 5th Floor
Andover, MA 01810
Fax: (978) 684-3660
Attention: Guy Bradley
Andrew J. Hajducky III
with a copy to
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Fax: (617) 951-1295
Attention: Thomas M. Camp, Esq.
and to:
Liberty Ventures I, L.P.
200 South Broad Street, 8th Floor
Philadelphia, PA 19103
Fax: (215) 732-4644
Attention: David J. Robkin, Vice President
with a copy to
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
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Boston, MA 02110
Fax: (617) 951-1295
Attention: Thomas M. Camp, Esq.
(c) if to the Shareholders' Agent, to:
Karen S. Goetz
344 W. Genessee Street
Syracuse, NY 13202
Fax: (315) 424-9449
with a copy to
Roberts, Sheridan & Kotel
112 East 49th Street, 30th Floor
New York, NY 10017
Fax: (212) 299-8686
Attention: William R. Brennan, Esq.
and to:
David J. Robkin
Liberty Ventures I, L.P.
200 South Broad Street, 8th Floor
Philadelphia, PA 19103
Fax: (215) 732-4644
with a copy to
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Fax: (617) 951-1295
Attention: Thomas M. Camp, Esq.
and to:
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Ross W. Stefano
344 W. Genessee Street
Syracuse, NY 13202
Fax: (315) 424-9449
with a copy to
Roberts, Sheridan & Kotel
112 East 49th Street, 30th Floor
New York, NY 10017
Fax: (212) 299-8686
Attention: William R. Brennan, Esq.
10.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
(WITHOUT REFERENCE TO CONFLICT OF LAW PRINCIPLES OTHER THAN THOSE DIRECTING
CALIFORNIA LAW) EXCEPT TO THE EXTENT MANDATORILY GOVERNED BY THE LAWS OF THE
STATE OF DELAWARE OR NEW YORK.
10.5 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 Merger 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 a mutually acceptable manner to the fullest extent
permitted by applicable law in order that the Merger may be consummated as
originally contemplated to the fullest extent possible.
10.6 Assignment; Binding Effect; Benefit. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties hereto; provided, however, that
Parent may assign its rights, interests and obligations hereunder to any
successor or parent entity of Parent whose shares are registered under Section
12 of the Exchange Act (or will be so registered at the Effective Time). Subject
to the preceding sentence, this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. Notwithstanding anything contained in this Agreement to the
contrary, other than Section 6.3, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective successors and permitted assigns any rights or remedies under
or by reason of this Agreement.
10.7 Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
58
<PAGE> 64
10.8 Entire Agreement. This Agreement (including the Exhibits,
Schedules, the Parent Disclosure Schedule and the Company Disclosure Schedule)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision of
this Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
10.9 Counterparts. This Agreement may be executed in one or more
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.
59
<PAGE> 65
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to
be executed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
PARENT
ADVANTIX, INC.
By: /s/ W. Thomas Gimple
-------------------------------------
Name: W. Thomas Gimple
Title: President and CEO
MERGER SUB
ADVANTIX ACQUISITION II CORP.
By: /s/ W. Thomas Gimple
-------------------------------------
Name: W. Thomas Gimple
Title: President
COMPANY
TICKETSLIVE CORPORATION
By: /s/ Ross Stefano
-------------------------------------
Name: Ross Stefano
Title: President
[SIGNATURE PAGE TO MERGER AGREEMENT]
60
<PAGE> 66
COMPANY SHAREHOLDERS
/s/ Karen S. Goetz
----------------------------------------
Karen S. Goetz
/s/ Lee H. Goetz
----------------------------------------
Lee H. Goetz
/s/ Donald M. Hellstedt
----------------------------------------
Donald M. Hellstedt
/s/ Christopher G. Smith
----------------------------------------
Christopher G. Smith
Pinsky & Pinsky, P.C.
By: /s/ Roy D. Pinsky
-------------------------------------
Name: Roy D. Pinsky
Title: Vice President
CMG @VENTURES II, LLC
By: /s/ Guy Bradley
-------------------------------------
Name: Guy Bradley
Title: Member
LIBERTY VENTURES I, L.P.
By: Liberty Ventures, Inc.,
By: /s/ David J. Robkin
-------------------------------------
David J. Robkin,
Vice President
[SIGNATURE PAGE TO MERGER AGREEMENT]
61
<PAGE> 67
PROXY AGENT
/s/ Karen S. Goetz
----------------------------------------
Karen S. Goetz, as Proxy Agent
[SIGNATURE PAGE TO MERGER AGREEMENT]
62
<PAGE> 68
LIST OF EXHIBITS
TO
AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION
BY AND AMONG
ADVANTIX, INC.
ADVANTIX ACQUISITION II, CORP.
TICKETS LIVE CORPORATION
AND
CERTAIN OF ITS SHAREHOLDERS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Secured Promissory Note
Exhibit C Form of Shareholder Voting Agreement
Exhibit D Form of Irrevocable Proxy
Exhibit E Form of Second Amended and Restated Stockholders Agreement
Exhibit F Form of Series A Note
Exhibit G Form of Opinion of Company's counsel
Exhibit H Form of Shareholder Representation Agreement
Exhibit I Form of Optionee Market Stand-Off Agreement
Exhibit J Opinion of Parent's counsel
Exhibit K Form of Third Amended and Restated Investor Rights Agreement
Exhibit L Form of Employment Agreement with Karen Goetz
Exhibit M Form of Employment Agreement with Robert Long
Exhibit N Form of Agreement with Ms Goetz
Exhibit O Arbitration Procedures
<PAGE> 1
EXHIBIT 10.12
STOCK PURCHASE AGREEMENT
BY AND AMONG
ADVANTIX, INC.,
PROTIX, INC.
AND
SHAREHOLDERS OF PROTIX, INC.
EFFECTIVE OCTOBER 16, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
1. DEFINITIONS .............................................................. 1
2. SALE AND TRANSFER OF SHARES; CLOSING ..................................... 1
2.1 Shares ........................................................ 1
2.2 Purchase Price ................................................ 1
2.3 Closing ....................................................... 2
2.4 Closing Deliveries ............................................ 3
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............................ 4
3.1 Organization and Good Standing ................................ 4
3.2 Authority; No Conflict ........................................ 5
3.3 Capitalization ................................................ 6
3.4 Financial Statements .......................................... 6
3.5 Books and Records ............................................. 6
3.6 Title to Properties; Encumbrances ............................. 7
3.7 Condition and Sufficiency of Assets ........................... 7
3.8 Accounts Receivable ........................................... 7
3.9 Inventory ..................................................... 8
3.10 No Undisclosed Liabilities .................................... 8
3.11 Taxes ......................................................... 8
3.12 No Material Adverse Change .................................... 8
3.13 Employee Benefits ............................................. 9
3.14 Compliance with Legal Requirements; Governmental Authorizations 9
3.15 Legal Proceedings; Orders ..................................... 10
3.16 Absence of Certain Changes and Events ......................... 11
3.17 Contracts; No Defaults ........................................ 12
3.18 Insurance ..................................................... 15
3.19 Environmental Matters ......................................... 16
3.20 Employees ..................................................... 18
3.21 Labor Relations; Compliance ................................... 18
3.22 Intellectual Property ......................................... 18
3.23 Certain Payments .............................................. 20
3.24 Disclosure .................................................... 21
3.25 Relationships With Related Persons ............................ 21
3.26 Brokers or Finders ............................................ 21
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS ............................ 21
4.1 Title to Shares ............................................... 21
4.2 Authority; No Conflict ........................................ 21
4.3 Restricted Securities ......................................... 22
4.4 Investment Intent ............................................. 22
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
4.5 Questionnaire .............................................. 22
4.6 Purchaser Representations .................................. 23
4.7 Residence .................................................. 23
4.8 Legends .................................................... 23
5. REPRESENTATIONS AND WARRANTIES OF BUYER ............................... 23
5.1 Organization and Good Standing ............................. 23
5.2 Authority; No Conflict ..................................... 24
5.3 Capitalization ............................................. 24
5.4 Financial Statements ....................................... 25
5.5 No Undisclosed Liabilities ................................. 25
5.6 No Material Adverse Change ................................. 25
5.7 Disclosure ................................................. 25
5.8 Investment Intent .......................................... 26
5.9 Brokers or Finders ......................................... 26
6. COVENANTS AND FURTHER AGREEMENTS ...................................... 26
6.1 Sellers' Representative .................................... 26
6.2 Additional Sellers ......................................... 27
6.3 Holdback Agreement ......................................... 27
6.4 Tax Elections .............................................. 27
6.5 Further Assurances ......................................... 28
6.6 Employee Bonuses ........................................... 28
6.7 Rule 144 ................................................... 29
6.8 Termination of Stock Repurchase Agreement .................. 29
7. INDEMNIFICATION; REMEDIES ............................................. 29
7.1 Survival; Right to Indemnification Not Affected by Knowledge 29
7.2 Indemnification and Payment of Damages by the Sellers ...... 30
7.3 Indemnification and Payment of Damages by Buyer ............ 31
7.4 Time Limitations ........................................... 31
7.5 Limitations on Amount--Sellers ............................. 32
7.6 Limitations on Amount--Buyer ............................... 32
7.7 Right of Set-Off ........................................... 32
7.8 Procedure for Indemnification--Third Party Claims .......... 33
7.9 Procedure for Indemnification--Other Claims ................ 34
7.11 Sole Remedy ................................................ 34
8. GENERAL PROVISIONS .................................................... 35
8.1 Public Announcements ....................................... 35
8.2 Notices .................................................... 35
8.3 Dispute Resolution ......................................... 36
8.4 Waiver ..................................................... 36
8.5 Entire Agreement and Modification .......................... 36
8.6 Assignments, Successors, and No Third-Party Rights ......... 37
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
8.7 Severability ............................................... 37
8.8 Section Headings, Construction.............................. 37
8.9 Time of Essence ............................................ 37
8.10 Governing Law .............................................. 37
8.11 Equitable Remedies ......................................... 37
8.12 Effect of Amendment or Waiver............................... 37
8.13 Opportunity to Consult Counsel.............................. 37
8.14 Counterparts ............................................... 37
</TABLE>
3
<PAGE> 5
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of October
16, 1998, by and among Advantix, Inc., a Delaware corporation ("Buyer"), ProTix,
Inc., a Wisconsin corporation ("Company"), and the shareholders of the Company
as listed on the signature pages of this Agreement who become parties to this
Agreement (individually, "Seller", and collectively, "Sellers").
R E C I T A L S
A. Sellers own one hundred percent (100%) of the issued and
outstanding shares of capital stock of the Company.
B. Buyer desires to purchase all of the shares of capital stock of
the Company owned by the Sellers (the "Shares"), and the Sellers desire to sell
the Shares, on the terms and conditions set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the terms set forth in Exhibit 1
shall have the meanings specified or referred to therein.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 Shares. Subject to the terms and conditions of this Agreement,
at the Closing, each of the Sellers will sell and transfer to Buyer, and Buyer
will purchase from Sellers, that number of Shares set forth below each Seller's
respective signature on the signature page hereto, which in the aggregate shall
constitute at least one hundred percent (100%) of the outstanding shares of
capital stock of the Company, in exchange for their pro rata share of the
Purchase Price.
2.2 Purchase Price. The purchase price (the "Purchase Price") for
the Shares will consist of the following:
(a) Cash payments at Closing (the "Closing Cash Payment") which
shall equal the product of (x) the Participating Percentage, times (y) the
result of $1,620,340 (i) plus (an amount equal to the remainder, if any, of
$2,910,746 minus the debt of the Company repaid by Buyer pursuant to Sections
2.4(c) and 2.4(d)), (ii) minus (an amount equal to the remainder, if any, of the
debt of the Company repaid by Buyer pursuant to Sections 2.4(c) and 2.4(d) minus
$2,910,746) and (iii) minus the amount by which Net Working Capital as of the
Closing Date ("Closing Date Net Working Capital") is less than zero. At the
Closing, the Closing Date Net Working Capital will be
4
<PAGE> 6
estimated, by mutual agreement of Buyer and the Company, based on the Company's
Net Working Capital as of September 30, 1998, and the amount paid at the Closing
shall be based on such estimate. Within 60 days after the Closing Date, Arthur
Andersen LLP will determine the actual Closing Date Net Working Capital. If the
Sellers' Representative, on behalf of the Sellers, disputes the determination of
the actual Closing Date Net Working Capital by Arthur Andersen LLP, an
independent public accounting firm mutually agreeable to Buyer and Sellers'
Representative will be selected within 14 days of notice of such dispute and
such firm will determine, at Sellers' expense, the actual Closing Date Net
Working Capital, which determination shall be final and binding on the parties
hereto. If the amount by which the actual Closing Date Net Working Capital is
less than zero is greater than the amount estimated at the Closing, Buyer shall
advise the Sellers' Representative of the amount of such difference (the
"Deferred Cash Shortfall") and shall deduct from the Deferred Cash Payment an
amount equal to the product of the Participating Percentage times the Deferred
Cash Shortfall. If the amount by which the actual Closing Date Net Working
Capital is less than zero is less than the amount estimated at the Closing,
Buyer shall advise the Sellers' Representative of the amount of such difference
and shall, within 10 business days after determination of the actual Closing
Date Net Working Capital, pay to the Sellers' Representative on behalf of the
Sellers the product of the Participating Percentage times the amount of such
difference.
(b) Shares of common stock of Buyer delivered at Closing equal to
the product of (x) the Participating Percentage, times (y) 714,969 (the "Buyer
Stock").
(c) Cash payment on the first anniversary of the Closing Date by
Buyer to the Sellers' Representative on behalf of the Sellers (the "Deferred
Cash Payment") which shall equal the product of (x) the Participating
Percentage, times (y) Four Hundred Thousand Dollars ($400,000).
(d) Warrants to purchase common stock of Buyer delivered at Closing
in substantially the form of Exhibit 2.2(d) (the "Warrants") representing in the
aggregate the right to purchase (subject to vesting) that number of shares equal
to the product of (x) the Participating Percentage, times (y) 1,435,406.
(e) Promissory notes delivered at Closing in substantially the form
of Exhibit 2.2(e) (the "Notes") in the aggregate principal amount equal to the
product of (x) the Participating Percentage, times (y) One Million Two Hundred
Ninety-Seven Thousand Dollars ($1,297,000).
The final Purchase Price determined pursuant to this Section 2.2 shall be
allocated pro rata among the Sellers in proportion to the number of Shares sold
to Buyer.
2.3 Closing. The purchase and sale provided for in this Agreement
(the "Closing") will take place at the offices of Buyer's counsel at 19900
MacArthur Boulevard, Suite 1050, Irvine, California 92612 at 10:00 a.m. (local
time) on October 15, 1998 or at such other time and date as the parties may fix.
For Buyer's purchase accounting and financial reporting purposes, the
acquisition of the Shares by Buyer pursuant to this Agreement shall be deemed to
have occurred on September 30, 1998.
5
<PAGE> 7
2.4 Closing Deliveries. At the Closing:
(a) The Company and Sellers will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers) for transfer to Buyer;
(ii) employment agreements in substantially the forms of
Exhibits 2.4(a)(ii)(1)-(4), executed by Peter D. Hanson, Richard
Graves, Harold Foodman and Bruce A. Foodman (collectively,
"Employment Agreements");
(iii) confidentiality, nondisclosure and noncompetition
agreements in substantially the form of Exhibit 2.4(a)(iii) executed
by Mary Ales, Michael Anderson and Greg Cutshall (collectively,
"Confidentiality Agreements");
(iv) a noncompetition agreement in substantially the form of
Exhibit 2.4(a)(iv), executed by Mark Scioscia (the "Noncompetition
Agreement");
(v) a security agreement in substantially the form of Exhibit
2.4(a)(v) (the "Security Agreement"), executed by the Sellers'
Representative; and
(vi) an opinion of Reinhart, Boerner, Van Deuren, Norris &
Rieselbach in a form reasonably acceptable to Buyer.
(b) Buyer will deliver to the Sellers' Representative on behalf of
the Sellers:
(i) a bank cashier's or certified check payable to each Seller
in an amount equal to such Seller's pro rata share of the Closing
Cash Payment;
(ii) a stock certificate for each Seller equal to such Seller's
pro rata share of the Buyer Stock;
(iii) a warrant for each Seller equal to such Seller's pro rata
share of the Warrants;
(iv) a promissory note for each Seller equal to such Seller's
pro rata share of the Notes;
(v) the Employment Agreements, executed by Buyer or ProTix
Access Control, LLC, as applicable;
(vi) the Confidentiality Agreements, executed by Buyer;
(vii) the Noncompetition Agreement, executed by Buyer;
(viii) the Security Agreement, executed by Buyer and the
Company; and
6
<PAGE> 8
(ix) an opinion of Hewitt & McGuire, LLP in a form reasonably
acceptable to the Company.
(c) Concurrent with, and as a condition to, the Closing, the Buyer
shall repay approximately $430,000 of outstanding debt of the Company due to
certain shareholders of the Company.
(d) Concurrent with, and as a condition to, the Closing, the Buyer
shall pay off an aggregate of approximately $2,600,000 of existing debt of the
Acquired Companies due to Fleet Bank, Firstar Bank of Madison, NA and S&T Bank
under various credit agreements.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company's Schedule (which lists
exceptions to the following representations and warranties and also contains
matters required to be disclosed pursuant to this Section 3, each of which
corresponds to the numbered sections contained in this Section 3), the Company
represents and warrants to Buyer as set forth in this Section 3. The parties
hereto acknowledge and agree that for purposes of this Agreement, if a document
or a matter is disclosed in any Section of the Company's Schedule, such
disclosure shall suffice, without specific repetition and with or without
cross-reference, as a response to any other section of the Company's Schedule if
such response is apparent from such disclosure.
3.1 Organization and Good Standing.
(a) Section 3.1 of the Company's Schedule contains a complete and
accurate list for each Acquired Company of its name, its jurisdiction of
organization, other jurisdictions in which it is qualified to do business, and
its capitalization (including the identity of each stockholder, partner or
member and the number of shares or percentage interest held by each). Except as
set forth in Section 3.1(a) of the Company's Schedule, each Acquired Company is
duly organized, validly existing, and in good standing under the laws of its
jurisdiction of organization, with full corporate, partnership or limited
liability company, as applicable, power and authority to conduct its business as
it is now being conducted and to own or use the properties and assets that it
purports to own or use. Each Acquired Company is duly qualified to do business
as a foreign entity and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned
or used by it, or the nature of the activities conducted by it, requires such
qualification, except where the failure to so qualify will not have a material
adverse effect on the business of such Acquired Company.
(b) The Company has delivered to Buyer copies of the Organizational
Documents of each Acquired Company, as currently in effect.
3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that enforcement may be
7
<PAGE> 9
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general principles of equity. The
Company has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations under this Agreement.
(b) Except as set forth in Section 3.2 of the Company's Schedule,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) materially contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of
the Acquired Companies, or (B) any resolution adopted by the board
of directors or the stockholders of any Acquired Company;
(ii) materially contravene or conflict in any material respect
with, or result in a material violation of, or give any Governmental
Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which any Acquired Company, or
any of the assets owned or used by any Acquired Company, may be
subject;
(iii) materially contravene or conflict in any material respect
with, or result in a material violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by any Acquired Company or that otherwise
relates to the business of, or any of the assets owned or used by,
any Acquired Company;
(iv) materially contravene, materially conflict with, or result
in a material violation or material breach of any provision of, or
give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to
cancel, terminate, or modify, any Applicable Contract, except where
the effect thereof would not, individually or in the aggregate, have
a material adverse effect on the business, financial condition or
results of operations of the Company; or
(v) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by any Acquired
Company.
Except as set forth in Section 3.2 of the Company's Schedule, no Acquired
Company is or will be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated Transactions.
3.3 Capitalization. The authorized equity securities of the Company
consist of 56,000 shares of common stock, par value $1.00 per share, of which
19,517.04 shares (collectively, the "Company Stock") are issued and outstanding
(such issued and outstanding shares are referred to collectively hereinafter as
the "Company Stock"). Each of the Sellers is the record owner of that number of
Shares set forth below their respective signatures on the signature page to this
Agreement.
8
<PAGE> 10
With the exception of the Company Stock, all of the outstanding equity
securities and other securities of each Acquired Company are owned of record and
beneficially by one or more of the Acquired Companies, free and clear of all
Encumbrances. No legend or other reference to any purported Encumbrance appears
upon any certificate representing equity securities of any Acquired Company. All
of the outstanding equity securities of each Acquired Company have been duly
authorized and validly issued and are fully paid and nonassessable, except to
the extent otherwise provided by Section 180.0622 of the Wisconsin Statutes.
Except as set forth in Section 3.3 of the Company's Schedule, there are no
Contracts relating to the issuance, sale, or transfer of any equity securities
or other securities of any Acquired Company. None of the outstanding equity
securities or other securities of any Acquired Company was issued in violation
of the Securities Act or any other Legal Requirement. No Acquired Company owns,
or has any Contract to acquire, any equity securities or other securities of any
Person (other than Acquired Companies) or any direct or indirect equity or
ownership interest in any other business.
3.4 Financial Statements. The Company has delivered to Buyer: (a) an
unaudited consolidated balance sheet of the Acquired Companies as of December
31, 1996, and the related unaudited consolidated statements of income, changes
in stockholders' equity, and cash flow for the fiscal year then ended, (b) an
unaudited consolidated balance sheet of the Acquired Companies as of December
31, 1997 (the "Company Balance Sheet"), and the related unaudited consolidated
statements of income, changes in stockholders' equity, and cash flow for the
fiscal year then ended, and (c) an unaudited consolidated balance sheet of the
Acquired Companies as of July 31, 1998 (the "Company Interim Balance Sheet") and
the related unaudited consolidated statements of income, changes in
stockholders' equity, and cash flow for the seven months then ended. Except as
set forth in Section 3.4 of the Company's Schedule, such financial statements
fairly present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Acquired Companies as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially from those
included in the Company Balance Sheet). The financial statements referred to in
this Section 3.4 reflect the consistent application of such accounting
principles throughout the periods involved. Except as set forth in Section 3.4
of the Company's Schedule, no financial statements of any Person other than the
Acquired Companies are required by GAAP to be included in the consolidated
financial statements of the Company. Immediately prior to the Closing, total
debt and capital lease obligations of the Acquired Companies did not exceed
$3,100,000.
3.5 Books and Records. The books of account, minute books, stock
record books, and other records of the Acquired Companies, all of which have
been made available to Buyer, are complete and correct in all material respects.
The minute books of the Acquired Companies contain, in all material respects,
accurate and complete records of all meetings held of, and corporate action
taken by, the stockholders, the Boards of Directors, and committees of the
Boards of Directors of the Acquired Companies. At the Closing, all such books
and records will be in the possession of the Acquired Companies.
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<PAGE> 11
3.6 Title to Properties; Encumbrances. Section 3.6 of the Company's
Schedule contains a complete and accurate list of all real property, real
property leaseholds, or other interests therein owned by any Acquired Company.
The Acquired Companies own (with good and marketable title in the case of real
property, subject only to the matters permitted by the following sentence) all
the properties and assets (whether real, personal, or mixed and whether tangible
or intangible) that they purport to own, including all of the properties and
assets reflected in the Company Interim Balance Sheet (except for assets held
under capitalized leases disclosed or not required to be disclosed in Section
3.6 of the Company's Schedule and personal property sold since the date of the
Company Interim Balance Sheet, as the case may be, in the Ordinary Course of
Business), and all of the properties and assets purchased or otherwise acquired
by the Acquired Companies since the date of the Company Interim Balance Sheet
(except for personal property acquired and sold since the date of the Company
Interim Balance Sheet in the Ordinary Course of Business and consistent with
past practice). Except as set forth in Section 3.6 of the Company's Schedule,
all material properties and assets reflected in the Company Interim Balance
Sheet are free and clear of all Encumbrances.
3.7 Condition and Sufficiency of Assets. The buildings, plants,
structures, and equipment of the Acquired Companies are in all material respects
in good condition and working order (reasonable wear and tear excepted), and are
adequate for the uses to which they are being put. Except as set forth in
Section 3.7 of the Company's Schedule, to the Knowledge of the Company, none of
such buildings, plants, structures, or equipment is in need of maintenance or
repairs, except for ordinary, routine maintenance and repairs that are not
material in nature or cost.
3.8 Accounts Receivable. All accounts receivable of the Acquired
Companies that are reflected on the Company Interim Balance Sheet or on the
accounting records of the Acquired Companies as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business. Unless paid prior to the Closing Date, the
Accounts Receivable are or will be as of the Closing Date collectible net of the
reserves shown on the accounting records of the Acquired Companies as of the
Closing Date. Except as set forth in Section 3.8 of the Company's Schedule, to
the Knowledge of the Company, there is no contest, claim, or right of set-off,
other than returns in the Ordinary Course of Business, under any Contract with
any obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable. Section 3.8 of the Company's Schedule contains a complete
and accurate list of all Accounts Receivable as of the date of the Company
Interim Balance Sheet, which list sets forth the aging of such Accounts
Receivable.
3.9 Inventory. All inventory of the Acquired Companies reflected in
the Company Balance Sheet, the Company Interim Balance Sheet or acquired since
that date, consists of a quality and quantity usable and salable in the Ordinary
Course of Business, except for obsolete items and items of below-standard
quality, all of which have been written off or written down to net realizable
value in the Company Balance Sheet or the Company Interim Balance Sheet or on
the accounting records of the Acquired Companies as of the Closing Date, as the
case may be. Except as set forth in Section 3.9 of the Company's Schedule, all
inventories not written off have been priced at the lower of cost or market on a
first in, first out basis. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are reasonable in the present
circumstances of the Acquired Companies.
10
<PAGE> 12
3.10 No Undisclosed Liabilities. Except as set forth in Section 3.10
of the Company's Schedule, the Acquired Companies have no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) which in the aggregate are material to the
financial condition, assets, properties or business of the Company taken as a
whole, except for (a) liabilities or obligations reflected or reserved against
in the Company Interim Balance Sheet, (b) current liabilities incurred in the
Ordinary Course of Business since the date thereof and (c) liabilities or
obligations disclosed pursuant to any other Section of the Company's Schedule if
such liabilities are apparent from such disclosure.
3.11 Taxes. Except as set forth in Section 3.11 of the Company's
Schedule, all tax returns and reports required to be filed by the Acquired
Companies, either separately or as a member of a group of corporations
(collectively, the "Returns"), including, without limitation, returns for
applicable Federal, state and local income, franchise, sales, use, gross
receipts, occupation, withholding, transfer, real and personal property,
employment, excise and other taxes with respect to the Acquired Companies and
their operations, collectively ("Taxes"), have been filed. The Returns were
correct and complete in all material respects. Except as set forth in Section
3.11 of the Company's Schedule: (a) all Taxes, charges and levies required to be
paid as of the date hereof by the Acquired Companies, (as reported on the
Returns) have been paid in full before such payment became delinquent and no
deficiencies have been or, to the Knowledge of the Company, will be assessed
with respect thereto; (b) no notice of deficiency or assessment with respect to
Taxes has been received by the Company; (c) no notice of audit or examination
has been received by the Company with respect to the Returns; and (d) there are
no pending audits of the Returns and there are no claims which have been or, to
the Knowledge of the Company, are reasonably expected to be asserted relating to
the Returns. There are no outstanding agreements or waivers extending the
statutory periods applicable for any Returns for any prior period. There is no
tax sharing agreement that will require any payment by any Acquired Company
after the date of the Agreement.
3.12 No Material Adverse Change. Since the date of the Company
Interim Balance Sheet, there has not been any material adverse change in the
business, operations, properties, assets, or financial condition of any Acquired
Company, and, to the Knowledge of the Company, no event has occurred or
circumstance exists that is reasonably expected to result in such a material
adverse change.
3.13 Employee Benefits. Except as set forth in Section 3.13 of the
Company's Schedule:
(a) none of the Acquired Companies or any ERISA Affiliate, has any
actual or contingent, direct or indirect, material liability in respect of any
employee benefit plan or arrangement, including any plan subject to ERISA, other
than to make contributions under or pay benefits pursuant to the plans listed in
Section 3.13 of the Company's Schedule (collectively, the "Plans");
(b) all of the Plans are in material compliance with all applicable
Legal Requirements;
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(c) no Plan (i) is subject to Title IV of ERISA, or is otherwise a
defined benefit plan, or is a multiple employer plan (within the meaning of IRC
ss. 413(c)) or (ii) provides for post-retirement welfare benefits or a
"parachute payment" (within the meaning of IRC ss. 280G(b)); and
(d) the execution and delivery of this Agreement and the
consummation of the Contemplated Transactions (i) will not result in any
prohibited transaction within the meaning of Section 406 of ERISA or IRC ss.
4975 or (ii) in the payment, vesting or acceleration of any benefit.
3.14 Compliance with Legal Requirements; Governmental
Authorizations.
(a) Except as set forth in Section 3.14 of the Company's Schedule:
(i) each Acquired Company is in compliance with all Legal
Requirements, the violation of which would have a material adverse
effect on such Acquired Company;
(ii) No action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been filed,
commenced, or, to the Knowledge of the Company, threatened against
any Acquired Company alleging any failure to so comply.
(b) Section 3.14 of the Company's Schedule contains a complete and
accurate list of each Governmental Authorization that is held by any Acquired
Company. Each Governmental Authorization listed or required to be listed in
Section 3.14 of the Company's Schedule is valid and in full force and effect.
Except as set forth in Section 3.14 of the Company's Schedule, no Acquired
Company has received, at any time since January 1, 1996, any written notice from
any Governmental Body or any other Person regarding:
(i) any actual, alleged or potential violation of or failure to
comply with any term or requirement of any Governmental
Authorization; or
(ii) any actual proposed or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any
Governmental Authorization
(iii) any actual, proposed or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any
Governmental Authorization.
The Governmental Authorizations listed in Section 3.14 of the Company's Schedule
collectively constitute all of the Governmental Authorizations necessary to
permit the Acquired Companies to lawfully conduct and operate their businesses
in the manner they currently conduct and operate such businesses and to permit
the Acquired Companies to own and use their assets in the manner in which they
currently own and use such assets.
3.15 Legal Proceedings; Orders.
(a) Except as set forth in Section 3.15 of the Company's Schedule,
there is no pending Proceeding:
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(i) that has been commenced by or against any Acquired Company
or that otherwise relates specifically to the business of, or any of
the assets owned or used by, any Acquired Company; or
(ii) that challenges, or that is reasonably expected to have the
effect of preventing, delaying, making illegal, or otherwise
materially interfering with, any of the Contemplated Transactions.
To the Knowledge of the Company, (1) no such Proceeding has been Threatened, and
(2) no event has occurred or circumstance exists that is reasonably expected to
give rise to or serve as a basis for the commencement of any such Proceeding.
The Company has delivered to Buyer copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed in Section 3.15 of the
Company's Schedule. The Proceedings listed in Section 3.15 of the Company's
Schedule are not reasonably expected to have a material adverse effect on the
business, operations, assets, condition, or prospects of any Acquired Company.
(b) Except as set forth in Section 3.15 of the Company's Schedule:
(i) there is no Order to which any of the Acquired Companies, or
any of the assets owned or used by any Acquired Company, is subject;
(ii) to the Knowledge of the Company, no officer, director,
agent, or employee of any Acquired Company is subject to any Order
that prohibits such officer, director, agent, or employee from
engaging in the business of any Acquired Company.
(c) Except as set forth in Section 3.15 of the Company's Schedule:
(i) each Acquired Company is, and at all times since January 1,
1997 has been, in compliance with all of the terms and requirements
of each Order to which it, or any of the assets owned or used by it,
is or has been subject;
(ii) to the Knowledge of the Company, no event has occurred or
circumstance exists that may constitute or result in (with or
without notice or lapse of time) a violation of or failure to comply
with any term or requirement of any Order to which any Acquired
Company, or any of the assets owned or used by any Acquired Company,
is subject; and
(iii) no Acquired Company has received, at any time since
January 1, 1997, any written notice or other communication from any
Governmental Body or any other Person regarding any actual, alleged,
or potential violation of, or failure to comply with, any term or
requirement of any Order to which any Acquired Company, or any of
the assets owned or used by any Acquired Company, is or has been
subject.
3.16 Absence of Certain Changes and Events. Except as set forth in
Section 3.16 of the Company's Schedule, since the date of the Company Interim
Balance Sheet, the Acquired
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Companies have conducted their businesses only in the Ordinary Course of
Business and there has not been any:
(a) change in any Acquired Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock of
any Acquired Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by any Acquired Company of any shares of any such capital
stock; or declaration or payment of any dividend or other distribution or
payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of any Acquired
Company;
(c) payment or increase by any Acquired Company of any bonuses,
salaries, or other compensation to any stockholder, director, officer, or,
except in the Ordinary Course of Business, employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
(d) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of any
Acquired Company;
(e) damage to or destruction or loss of any asset or property of any
Acquired Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
the Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to any Acquired Company of at least
$10,000;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of any Acquired
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of any Acquired Company, including the sale,
lease, or other disposition of any of the Intellectual Property;
(h) cancellation or waiver of any claims or rights with a value to
any Acquired Company in excess of $5,000 individually, or $15,000 in the
aggregate;
(i) material change in the accounting methods used by any Acquired
Company; or
(j) agreement by any Acquired Company to do any of the foregoing.
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3.17 Contracts; No Defaults.
(a) Section 3.17 of the Company's Schedule contains a complete and
accurate list, and the Company has delivered to Buyer true and complete copies,
of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by one or more Acquired
Companies of an amount or value in excess of $15,000 annually;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to, or employment by, one
or more Acquired Companies of an amount or value in excess of
$25,000 annually;
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or
receipts of one or more Acquired Companies in excess of $25,000
annually;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of,
or any leasehold or other interest in, any real or personal property
(except personal property leases and installment and conditional
sales agreements having a value per item or aggregate payments of
less than $10,000 annually and with terms of less than one year);
(v) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees,
consultants, or contractors regarding the appropriation or the
non-disclosure of any of the Intellectual Property;
(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative
of a group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by any Acquired Company with any other Person;
(viii) each Applicable Contract containing covenants that
materially restrict the business activity of any Acquired Company or
limit materially the freedom of any Acquired Company to engage in
any line of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or by
any Person based on sales, purchases, or profits, other than direct
payments for goods;
(x) each power of attorney that is currently effective and
outstanding;
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(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express
undertaking by any Acquired Company to be responsible for
consequential damages;
(xii) each Applicable Contract for capital expenditures in
excess of $25,000 annually;
(xiii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by any
Acquired Company other than in the Ordinary Course of Business; and
(xiv) each amendment, supplement and modification in respect of
any of the foregoing.
(b) Except as set forth in Section 3.17(b) of the Company's
Schedule:
(i) no Seller (and no Related Person of any Seller) has or may
acquire any rights under, and no Seller has or may become subject to
any obligation or liability under, any Contract that relates
specifically, and is material, to the business of, or any of the
assets owned or used by, any Acquired Company; and
(ii) to the Knowledge of the Company, no officer, director,
agent, employee, consultant, or contractor of any Acquired Company
is bound by any Contract that purports to limit the ability of such
officer, director, agent, employee, consultant, or contractor to (A)
engage in or continue any conduct, activity, or practice relating to
the business of any Acquired Company, or (B) assign to any Acquired
Company or to any other Person any rights to any invention,
improvement, or discovery.
(c) Except as set forth in Section 3.17(c) of the Company's
Schedule, each Applicable Contract is in full force and effect and is valid and
enforceable in accordance with its terms, except where the failure of such
Applicable Contract to be in full force and effect or valid and enforceable
would not, individually or in the aggregate, have a material adverse effect on
the business, financial condition or results of operations of the Company.
(d) Except as set forth in Section 3.17(d) of the Company's
Schedule:
(i) each Acquired Company is, and at all times since January 1,
1997 has been, in material compliance with all applicable terms and
requirements of each Applicable Contract, except where the failure
to be in such compliance would not, individually or in the
aggregate, have a material adverse effect on the business, financial
condition or results of operations of the Company;
(ii) to the Knowledge of the Company, each other Person that has
or had any obligation or liability under any Applicable Contract,
and at all times since January 1, 1997 has been, in material
compliance with all applicable terms and requirements of such
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Applicable Contract, except where the failure to be in such
compliance would not, individually or in the aggregate, have a
material adverse effect on the business, financial condition or
results of operations of the Company;
(iii) to the Knowledge of the Company, no event has occurred or
circumstance exists that (with or without notice or lapse of time)
will materially contravene, conflict with, or result in a material
violation or material breach of, or give any Acquired Company or
other Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to
cancel, terminate, or modify, any Applicable Contract, except where
the effect thereof would not, individually or in the aggregate, have
a material adverse effect on the business, financial condition or
results of operations of the Company; and
(iv) no Acquired Company has given to or received from any other
Person, at any time since January 1, 1997, any notice regarding any
actual, alleged, possible, or potential violation or breach of, or
default under, any Contract, except where the effect of such a
violation, breach or default would not, individually or in the
aggregate, have a material adverse effect on the business, financial
condition or results of operations of the Company.
(e) There are no renegotiations of, or outstanding rights to
renegotiate any material amounts paid or payable to any Acquired Company under
any Applicable Contracts with any Person and, to the Knowledge of the Company,
no such Person has made written demand for such renegotiation.
(f) The Applicable Contracts relating to the sale, design,
manufacture, or provision of products or services by the Acquired Companies have
been entered into in the Ordinary Course of Business.
3.18 Insurance.
(a) The Company has delivered to Buyer:
(i) true and complete copies of all policies of insurance to
which any Acquired Company is a party or under which any Acquired
Company, or any director of any Acquired Company, is or has been
covered at any time within the three years preceding the date of
this Agreement;
(ii) true and complete copies of all pending applications for
policies of insurance; and
(iii) any statement by the auditor of any Acquired Company's
financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
(b) Section 3.18(b) of the Company's Schedule describes:
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(i) any written self-insurance arrangement by or affecting any
Acquired Company, including any reserves established thereunder; and
(ii) all obligations of the Acquired Companies to third parties
with respect to insurance (including such obligations under leases
and service agreements) and identifies the policy under which such
coverage is provided.
(c) Section 3.18(c) of the Company's Schedule sets forth, by year,
for the current policy year and the preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance policy
for an amount in excess of $10,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all claims
that were self-insured, including the number and aggregate cost of
such claims.
(d) Except as set forth in Section 3.18(d) of the Company's
Schedule:
(i) All policies to which any Acquired Company is a party or
that provide coverage to any Acquired Company, or any director or
officer of an Acquired Company:
(A) are, to the Knowledge of the Company, valid,
outstanding, and enforceable;
(B) are, to the Knowledge of the Company, issued by an
insurer that is financially sound and reputable;
(C) are sufficient for compliance with all Legal
Requirements and Contracts to which any Acquired Company is a
party or by which any of them is bound;
(D) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(E) do not provide for any retrospective premium adjustment
or other experienced-based liability on the part of any Acquired
Company.
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(ii) No Acquired Company has received (A) any refusal of
coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full
force or effect or will not be renewed or that the issuer of any
policy is not willing or able to perform its obligations thereunder.
(iii) The Acquired Companies have paid all premiums due, and, to
the Knowledge of the Company, have otherwise performed all of their
respective obligations, under each policy to which any Acquired
Company is a party or that provides coverage to any Acquired Company
or director thereof.
(iv) To the Knowledge of the Company, the Acquired Companies
have given notice to the insurer of all claims that may be insured
thereby.
3.19 Environmental Matters. Except as set forth in Section 3.19 of
the Company's Schedule:
(a) Each Acquired Company is, and at all times has been, in material
compliance with, and has not been and is not in violation of or liable under any
Environmental Laws, except for violations which are not reasonably expected to
have a material adverse effect on any Acquired Company or its business. The
Company has not received any notice, nor does the Company have any Knowledge,
that any Acquired Company is not in material compliance with any Environmental
Laws.
(b) There are no actions pending, or to the Knowledge of the
Company, actions, claims or investigations threatened against any Acquired
Company, which in any case asserts or alleges that:
(i) such Acquired Company violated any Environmental Law or
Environmental Permit or is in default with respect to any
Environmental Permit or any order, writ, judgment, variance, award
or decree of any government authority;
(ii) such Acquired Company is required to clean up or take
remedial or other responsive action due to the disposal, discharge
or other release of any Hazardous Substance on the Real Property or
elsewhere; or
(iii) such Acquired Company is required to contribute to the
cost of any past, present or future clean up or remedial or other
response action which arises out of or is related to the disposal,
discharge or other release of any Hazardous Substance by an Acquired
Company.
No Acquired Company is subject to any judgment, stipulation, order, decree or
other agreement arising under any Environmental Laws.
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(c) With respect to the period during which one or more of the
Acquired Companies occupied the real property described in Section 3.4 of the
Company's Schedule (the "Real Property") and, to the Knowledge of the Company,
with respect to the time before one or more of the Acquired Companies owned or
occupied the Real Property:
(i) no Hazardous Substances has been treated, recycled or
disposed of (intentionally or unintentionally) on, under or at the
Real Property in violation of Environmental Laws;
(ii) there has been no release or threatened release of any
Hazardous Substance at, on or from the Real Property in violation of
Environmental Laws;
(iii) there has not been nor are there now any materials
containing asbestos or PBC on the Real Property; and
(iv) there have been no activities on the Real Property which
would subject Buyer or any subsequent owner or lessee of the Real
Property to material damages, penalties, injunctive relief, or
cleanup costs under any Environmental Laws. To the Knowledge of the
Company, no property currently abutting the Real Property has every
been used for the treatment, recycling or disposal ( intentional or
unintentional) of Hazardous Substances, nor has there been a release
or threatened release of any Hazardous Substances from such
currently abutting property.
(d) The Company has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by any Acquired Company pertaining to hazardous materials or hazardous
activities in, on, or under the Facilities, or concerning compliance by any
Acquired Company, or any other Person for whose conduct they are or may be held
responsible, with Environmental Laws.
3.20 Employees.
(a) Section 3.20 of the Company's Schedule contains a complete and
accurate list of the following information for each employee or director of the
Acquired Companies, including each employee on leave of absence or layoff
status: employer; name; job title; current compensation paid (except part-time
employees); and vacation accrued.
(b) To the Knowledge of the Company, no employee or director of any
Acquired Company is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or proprietary
rights agreement, between such employee or director and any other Person
("Proprietary Rights Agreement") that materially adversely affects or will
materially and adversely affect (i) the performance of his duties as an employee
or director of the Acquired Companies, or (ii) the ability of any Acquired
Company to conduct its business. To the Knowledge of the Company, no director,
officer, or other key employee of any Acquired Company intends to terminate his
employment with such Acquired Company.
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3.21 Labor Relations; Compliance. Since January 1, 1997, no Acquired
Company has been or is a party to any collective bargaining or other labor
Contract. Since January 1, 1997, there has not been, there is not presently
pending or existing, and, to the Knowledge of the Company, there is not
Threatened: (a) any strike, slowdown, picketing, work stoppage, or employee
grievance process; (b) any Proceeding against any Acquired Company relating to
the alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting any of the Acquired
Companies or their premises; or (c) any application for certification of a
collective bargaining agent. To the Knowledge of the Company, no event has
occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by any
Acquired Company, and no such action is contemplated by any Acquired Company. To
the Knowledge of the Company, each Acquired Company has complied in all material
respects with all Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing. No Acquired Company is liable for the
payment of any compensation, damages, taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the foregoing Legal
Requirements.
3.22 Intellectual Property.
(a) Except as set forth in Section 3.22 of the Company's Schedule,
each of the Acquired Companies is the owner of, or has a valid license or right
to use, sell and license all of, the Copyrights, Patents, Trade Secrets,
Trademarks, Internet Assets, Software and its other proprietary rights
(collectively, "Intellectual Property") that are used in connection with its
business in the manner currently being used, sold or licensed, free and clear of
all Encumbrances.
(b) Section 3.22 of the Company's Schedule sets forth all of the (i)
Copyrights material to the business of the Acquired Companies, Trademarks and
Patents owned by, and filings and applications for any of the above filed by,
any of the Acquired Companies, and (ii) all Software applications developed by
the Acquired Companies that are material to the business of the Acquired
Companies. None of the Intellectual Property listed in Section 3.22 of the
Company's Schedule (except as specified thereon) is subject to any outstanding
Order, and no Proceeding is pending or, to the Knowledge of the Company,
Threatened, which challenges the validity, enforceability, use or ownership of
the item.
(c) Section 3.22 of the Company's Schedule sets forth all
Intellectual Property licenses, sublicenses and other agreements under which any
Acquired Company is either a licensor or licensee, except such licenses,
sublicenses and other agreements (i) relating to off-the-shelf software and
which are commercially available on a retail basis or (ii) that provide for the
license by the Acquired Company to any customer thereof that involve an amount
less than $5,000 annually and are otherwise not material to the business of the
Acquired Companies. Each Acquired Company has substantially performed all
obligations imposed upon it to date thereunder, and no Acquired Company is, nor
to the Knowledge of the Company is any other party thereto, in breach of or
default
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thereunder in any respect, nor is there any event which with notice or
lapse of time or both would constitute a default thereunder. All of the
Intellectual Property licenses listed in Section 3.22 of the Company's Schedule
are valid, enforceable and in full force and effect, and will continue to be so
on substantially identical terms immediately following the Closing except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity relating to enforceability (regardless of whether
considered in a proceeding at law or in equity).
(d) To the Knowledge of the Company, other than as set forth in
Section 3.22 of the Company's Schedule none of the Intellectual Property
currently sold or licensed by the Acquired Companies to any Person or used by or
licensed to the Acquired Companies violates any Intellectual Property rights of
others.
(e) No Proceeding is pending and no written claim has been made
against any Acquired Company or, to the Knowledge of the Company, is Threatened,
contesting the right of an Acquired Company to sell or license to any Person or
use the Intellectual Property presently sold or licensed to such Person or used
by the Acquired Companies.
(f) Except as set forth in Section 3.22 of the Company's Schedule,
to the Knowledge of the Company, no Person is infringing upon or otherwise
violating the Intellectual Property rights of any Acquired Company.
(g) Except as set forth in Section 3.22 of the Company's Schedule,
no Acquired Company is a party to or bound by, any license or other agreement
requiring the payment of any material royalty payment, excluding such agreements
relating to software licensed for use solely on the computers of the Acquired
Companies.
(h) Except as described in Section 3.22 of the Company's Schedule,
none of the Acquired Companies has entered into any agreement, license or
release that restricts the right of any of the Acquired Companies to use the
ProTix Products in any material way. The Software within the ProTix Products is
fully eligible for protection under applicable copyright law and has not been
forfeited to the public domain and the source code and system specifications
have been maintained in confidence, except where the failure to be so eligible
or where the failure to maintain such confidence would not have a materially
adverse effect on the Company. As used in this Agreement, "ProTix Products"
means products currently marketed or proposed to be marketed, in connection with
the performance of ticketing services or other business of the Acquired
Companies, including without limitation the Prologue Ticketing System.
(i) Except as set forth in Section 3.22 of the Company's Schedule,
to the Knowledge of the Company, none of the Trade Secrets, wherever located,
the value of which is contingent upon maintenance of confidentiality thereof,
has been disclosed to any Person other than employees, representatives and
agents of the Acquired Companies, except as required by law or pursuant to the
filing of a patent application by the Acquired Companies, where such disclosure
would have a material adverse effect on the business, financial condition or
results of operations of the Company.
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(j) Except as set forth in Section 3.22 of the Company's Schedule,
(a) the Software utilized by the Acquired Companies in their ticketing services
will deliver, receive, store and process date information in the same manner
before, during and after January 1, 2000 and (b) no material expenditures are
contemplated by the Acquired Companies or, to the Company's Knowledge, are
necessary to remediate such Software in connection with processing date
information.
3.23 Certain Payments. Since January 1, 1995, no Acquired Company or
director, officer, agent or employee of any Acquired Company or, to the
Knowledge of the Company, any other Person associated with or acting for or on
behalf of any Acquired Company, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment in violation of any Legal Requirement to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of any Acquired Company or any
Affiliate of an Acquired Company, or (iv) in violation of any Legal Requirement,
(b) established or maintained any fund or asset that has not been recorded in
the books and records of the Acquired Companies.
3.24 Disclosure. No representation or warranty of Sellers or the
Company in this Agreement and no statement in the Company's Schedule omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading.
3.25 Relationships With Related Persons. No Seller or any Related
Person of Sellers or of any Acquired Company has, or has had, any interest in
any material property (whether real, personal, or mixed and whether tangible or
intangible), used in or pertaining to the Acquired Companies' businesses. Except
as set forth in Section 3.25 of the Company's Schedule, to the Knowledge of the
Company, no Seller or any Related Person of Sellers or of any Acquired Company
is, or since January 1, 1997 has owned (of record or as a beneficial owner) an
equity interest or any other material financial or profit interest in, a Person
that has (a) had business dealings or a material financial interest in any
transaction with any Acquired Company, or (b) engaged in competition with any
Acquired Company with respect to any line of the products or services of such
Acquired Company (a "Competing Business") in any market presently served by such
Acquired Company except for less than one percent of the outstanding capital
stock of any Competing Business that is publicly traded on any recognized
exchange or in the over-the-counter market. Except as set forth in Section 3.25
of the Company's Schedule, no Seller or any Related Person of Sellers or of any
Acquired Company is a party to any Contract with, or has any claim or right
against, any Acquired Company.
3.26 Brokers or Finders. Sellers, the Acquired Companies and their
agents have incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement.
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4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller severally represents and warrants to Buyer as follows:
4.1 Title to Shares. Seller is the owner of the number of Shares
indicated below such Seller's signature on the signature page to this Agreement.
No other person or entity has any right, title, or interest, beneficially or of
record, in or to the Shares owned by such Seller and such Shares are free and
clear of any claims, liens, encumbrances, security agreements, equities,
options, charges, or restrictions, and can be delivered and surrendered to Buyer
pursuant hereto without obtaining the consent or approval of any other person or
governmental authority. Upon the transfer and delivery of such Shares to Buyer
in accordance with this Agreement and payment therefor, Buyer will become the
owner and holder of all of such Shares free and clear of all liens,
encumbrances, pledges, claims, charges and restrictions on transfer.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable against such Seller in accordance with its
terms, except that enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and by general principles of equity. Upon the execution and delivery by Seller
of the Noncompetition Agreement (collectively, the "Seller's Closing
Documents"), the Seller's Closing Documents will constitute the legal, valid,
and binding obligations of Seller, enforceable against Seller in accordance with
their respective terms. Seller has the right, power, authority, and capacity to
execute and deliver this Agreement and the Seller's Closing Documents and to
perform its or his obligations under this Agreement and the Seller's Closing
Documents.
(b) To the Knowledge of Seller, neither the execution and delivery
of this Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time) contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which Seller, or any of the assets owned or used by
Seller, may be subject.
(c) Such Seller is not required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
4.3 Restricted Securities. Seller understands that the Buyer Stock,
the Notes, the Warrants, the shares of common stock of Buyer issuable upon
exercise of the Warrants, and any other securities issued by Buyer under this
Agreement (collectively, the "Securities") will be issued by Buyer without
registration under the Securities Act and without qualification and/or
registration under applicable state securities laws pursuant to exemptions from
registration and/or qualification contained in the Securities Act and applicable
state securities laws. Such Seller understands that the foregoing exemptions
depend upon, among other things, the bona fide nature of such Seller's
investment intent as expressed herein. None of the Securities nor any interest
in the Securities will
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<PAGE> 26
be sold, transferred, or otherwise disposed of by such Seller without
registration and/or qualification under the Securities Act and applicable state
securities laws unless the sale or other disposition is made in compliance with
exemptions from such registration and qualification requirements with respect to
such resale or disposition and, upon the request of Buyer, such Seller, prior to
consummation of any such resale or disposition, provides Buyer an opinion of
counsel reasonably satisfactory to Buyer to the effect that the contemplated
transfer may be made without violating the Securities Act or applicable state
securities laws.
4.4 Investment Intent. Seller is acquiring the Securities for
investment purposes only, for Seller's own account and not with a view to or for
sale in connection with any distribution of the Securities to others within the
meaning of the Securities Act.
4.5 Questionnaire. The information contained in the Confidential
Offeree Questionnaire provided by Seller to the Company in connection with this
transaction is true and correct as of the date hereof and Buyer may rely upon
such information in determining whether exemptions from registration under
federal and applicable state securities laws are available in connection with
any issuance of Securities under this Agreement.
4.6 Purchaser Representations. Seller has received all of the
information Seller considers necessary or appropriate to evaluate the risks and
merits of an investment in Buyer, including, but not limited to, Buyer's
Confidential Private Offering Memorandum, dated September 30, 1998, and has had
an opportunity to discuss Buyer's business, management, financial affairs and
prospects with Buyer's management. Seller is able to bear the economic risks
related to a purchase of the Securities. Seller, together with Seller's
purchaser representative, if applicable, have such Knowledge and experience in
financial and business matters that will enable Seller to use the information
made available to Seller in connection with the Contemplated Transactions to
evaluate the merits and risks of acquiring the Securities.
4.7 Residence. Seller's principal residence is shown below such
Seller's signature on the signature page to this Agreement.
4.8 Legends. Seller acknowledges that the certificates representing
any of the Securities to be issued to such Seller will contain legends which
prohibit an offer to transfer or a transfer of all or any portion of the
Securities unless the Securities are registered under the Securities Act or
unless an exemption from registration is available with respect to such resale
or disposition.
Buyer need not register, and may instruct its transfer agent not to effect, a
transfer of any Securities unless the conditions set forth in this Section 4 are
satisfied.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the Buyer's Schedule (which lists exceptions
to the following representations and warranties and also contains matters
required to be disclosed pursuant to this Section 5, each of which corresponds
to the numbered sections contained in this Section 5), Buyer represents and
warrants to Sellers as set forth in this Section 5. The parties hereto
acknowledge and
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agree that for purposes of this Agreement, if a document or a matter is
disclosed in any Section of the Buyer's Schedule or in Buyer's Confidential
Private Offering Memorandum dated September 30, 1998, such disclosure shall
suffice, without specific repetition and with or without cross-reference, as a
response to any other section of the Buyer's Schedule if such response is
apparent from such disclosure.
5.1 Organization and Good Standing.
(a) Buyer is a corporation duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use. Buyer is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(b) Buyer has delivered to the Company copies of its Organizational
Documents as currently in effect.
5.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
except that enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and by general principles of equity. Upon the execution and delivery by Buyer of
the Employment Agreements and the Warrants (collectively, the "Buyer's Closing
Documents"), the Buyer's Closing Documents will constitute the legal, valid, and
binding obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the Buyer's
Closing Documents.
(b) Except as set forth in Section 5.2 of the Buyer's Schedule,
neither the execution and delivery of this Agreement by Buyer nor the
consummation or performance of any of the Contemplated Transactions by Buyer
will give any Person the right to prevent, delay, or otherwise interfere with
any of the Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be
subject; or
(iv) any Contract to which Buyer is a party or by which Buyer
may be bound.
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Except as set forth in Section 5.2 of the Buyer's Schedule, Buyer is not and
will not be required to obtain any Consent from any Person in connection with
the execution and delivery of this Agreement or the consummation or performance
of any of the Contemplated Transactions.
5.3 Capitalization. The authorized equity securities of the Buyer
consist of 100,000,000 shares of common stock, par value $.0001, of which
15,424,094 shares are issued and outstanding, (ii) 8,440,002 shares of Series A
Preferred Stock of the Buyer, par value $.0001, of which 8,440,002 shares are
issued and outstanding, and which are convertible into 8,440,002 shares of
common stock of the Buyer, (iii) 9,500,000 shares of Series B Preferred Stock of
the Buyer, par value $.0001, of which 9,499,874 shares are issued and
outstanding, and which are convertible into 9,499,874 shares of common stock of
the Buyer, and (iv) 11,597,112 shares of Series C Preferred Stock of the Buyer,
par value $.0001, of which 11,597,112 shares are issued and outstanding, and
which are convertible into 11,597,112 shares of Common Stock of the Buyer.
Except as set forth in Section 5.3 of the Buyer's Schedule, there are no
options, warrants, conversion privileges, preemptive rights, subscription or
purchase rights presently outstanding to purchase or otherwise acquire any
authorized but unissued, unauthorized or treasury shares of the Buyer's capital
stock. The Buyer Stock is duly authorized, and when issued and sold to the
Sellers pursuant to this Agreement, will be validly issued, fully paid and
nonassessable. The shares of common stock of Buyer issuable upon conversion of
the Warrants are duly authorized and, when issued in compliance with the terms
thereof, will be validly issued, fully paid and nonassessable.
5.4 Financial Statements. The Buyer has delivered to the Company:
(a) a consolidated balance sheet of Buyer as of December 31, 1997 (including the
notes thereto, the "Buyer Balance Sheet"), and the related consolidated
statements of income, changes in stockholders' equity, and cash flow for the
fiscal year then ended, together with the report thereon of Arthur Andersen LLP,
independent certified public accountants, and (b) an unaudited consolidated
balance sheet of Buyer as of June 30, 1998 (the "Buyer Interim Balance Sheet")
and the related unaudited consolidated statements of income, changes in
stockholders' equity, and cash flow for the six months then ended, including in
each case the notes thereto. Such financial statements and notes fairly present
the financial condition and the results of operations, changes in stockholders'
equity, and cash flow of Buyer as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP, subject,
in the case of interim financial statements, to normal recurring year-end
adjustments (the effect of which will not, individually or in the aggregate, be
materially adverse) and the absence of notes (that, if presented, would not
differ materially from those included in the Buyer Balance Sheet); the financial
statements referred to in this Section 5.4 reflect the consistent application of
such accounting principles throughout the periods involved. No financial
statements of any Person other than Buyer are required by GAAP to be included in
the consolidated financial statements of the Buyer.
5.5 No Undisclosed Liabilities. Except as set forth in Section 5.5
of the Buyer's Schedule, Buyer has no liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent, or
otherwise) which in the aggregate are material to the financial condition,
assets, properties or business of Buyer taken as a whole, except for liabilities
or obligations reflected or reserved against in the Buyer Balance Sheet or the
Buyer Interim Balance
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Sheet and current liabilities incurred in the Ordinary Course of Business since
the respective dates thereof.
5.6 No Material Adverse Change. Since the date of the Buyer Balance
Sheet, there has not been any material adverse change in the business,
operations, properties, prospects, assets, or condition of Buyer, and no event
has occurred or circumstance exists that may result in such a material adverse
change.
5.7 Disclosure. No representation or warranty of Buyer in this
Agreement and no statement in the Buyer's Schedule or the Confidential Private
Offering Memorandum contains an untrue statement of material fact or omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading.
5.8 Investment Intent. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.
5.9 Brokers or Finders. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold Sellers harmless from any such
payment alleged to be due by or through Buyer as a result of the action of Buyer
or its officers or agents.
6. COVENANTS AND FURTHER AGREEMENTS
6.1 Sellers' Representative.
(a) In order to administer efficiently the rights and obligations of
the Sellers under this Agreement, the Sellers hereby designate and appoint Mark
O. Scioscia as the Sellers' Representative, to serve as the Sellers' agent and
attorney-in-fact for the limited purposes set forth in Section 6.1(b) of this
Agreement.
(b) Each of the Sellers hereby appoints the Sellers' Representative
as such Seller's agent, proxy and attorney-in-fact, with full power of
substitution, for all purposes set forth in this Agreement, including, without
limitation, the full power and authority on such Seller's behalf (i) to
consummate the transactions contemplated by this Agreement, (ii) to disburse any
funds received hereunder to the Sellers, (iii) to execute and deliver any
certificates representing the Shares and execution of such further instruments
of assignment as Buyer shall reasonably request, (iv) to enter into the Security
Agreement on behalf of the Sellers, (v) to execute and deliver on behalf of each
Seller any amendment or waiver under this Agreement, the Notes, Warrants or
Security Agreement, (vi) to retain legal counsel and other professional
services, at the expense of the Sellers, in connection with the performance by
the Sellers' Representative of this Agreement, (vii) to execute financing
statements, termination statements and other documents on behalf of Sellers
under the Security Agreement, (viii) to do each and every act and exercise any
and all rights which such Seller or Sellers are permitted or required to do or
exercise under this Agreement and the other agreements, documents and
certificates executed in connection herewith. Each of the Sellers agrees that
such
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agency and proxy are coupled with an interest, are therefore irrevocable
without the consent of the Sellers' Representative and shall survive the death,
bankruptcy or other incapacity of any Seller.
(c) Each of the Sellers hereby agrees that any amendment or waiver
under this Agreement, the Security Agreement or the Securities, and any action
taken on behalf of the Sellers to enforce the rights of the Sellers under this
Agreement, the Notes and the Warrants, and any action taken with respect to any
indemnification claim pursuant to Section 7 (including any action taken to
object to, defend, compromise or agree to the payment of such claim), shall be
effective if approved in writing by the Sellers' Representative and the holders
of a majority of the Shares (including any Shares held by the Sellers'
Representative), or, in the case of any amendment or waiver made or given or
action taken after the Closing, if so approved by persons who were the holders
of a majority of the Shares immediately prior to the Closing, and that each and
every action so taken shall be binding and conclusive on every Seller, whether
or not such Seller had notice of, or approved, such amendment or waiver.
(d) Upon signing of this Agreement, each Seller shall deliver to the
Sellers' Representative a certificate or certificates representing the Shares
being sold by such Seller under this Agreement, duly endorsed (or accompanied by
duly executed stock powers), with signatures guaranteed by a commercial bank or
by a member of the New York Stock Exchange for delivery by the Sellers'
Representative to Buyer at the Closing.
(e) Mark O. Scioscia shall serve as the Sellers' Representative
until he resigns or is otherwise unable or unwilling to serve. In the event that
a Sellers' Representative resigns from such position or is otherwise unable or
unwilling to serve, the remaining Sellers shall select, by the vote of the
holders of a majority of the Shares, a successor representative to fill such
vacancy, shall provide prompt written notice to Buyer of such change and such
substituted representative shall then be deemed to be the Sellers'
Representative for all purposes of this Agreement.
6.2 Additional Sellers. The parties agree that additional
shareholders of the Company may become parties to this Agreement after the
Closing Date. In such event, (i) each such shareholder shall become a "Seller"
for purposes of this Agreement and entitled to all of the rights and subject to
all of the obligations of a Seller under this Agreement, (ii) the Participating
Percentage shall be adjusted to reflect the inclusion of such shareholder, (iii)
such shareholder shall immediately receive a cash payment equal to such
shareholder's ratable interest in the Closing Cash Payment, shares of common
stock of Buyer equal to such shareholder's ratable interest in the Buyer Stock,
a promissory note equal to such shareholder's ratable portion of the Notes, and
a warrant equal to such shareholder's ratable portion of the Warrants.
6.3 Holdback Agreement. If and to the extent requested by the
managing underwriter in the case of an underwritten public offering by the Buyer
of its common stock, each Seller agrees not to affect any sale, short sale,
loan, grant any option for the purchase of, or otherwise dispose of any Buyer's
Stock or any shares of Buyer's Common Stock received upon exercise of the
Warrants, including a sale pursuant to Rule 144 under the Securities Act of
1933, as amended, during (i) with respect to an initial public offering, the
180-day period or such shorter period agreed upon by such Seller and the
requesting underwriter or (ii) in any other case the 90- day period or such
shorter
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period agreed upon by such Seller and any underwriter, beginning on the
effective date of the applicable registration statement. The Buyer may impose
stop-transfer instructions with respect to such securities subject to the
foregoing registration until the end of such period.
6.4 Tax Elections. With respect to the acquisition of Shares
hereunder, Buyer shall make a timely election under Section 338(g) of the IRC
and Sellers and Buyer shall jointly make an election under Section 338(h)(10) of
the Code (and any corresponding elections under state or local tax law)
(collectively, a "Section 338(h)(10) Election"). Sellers and Buyer shall (i)
take, and cooperate with each other to take, all actions necessary and
appropriate (including filing such forms, returns, elections, schedules and
other documents as may be required ) to effect and preserve a timely Section
338(h)(10) Election in accordance with Section 338 of the IRC and the temporary
regulation thereunder, or any successor provisions as promptly as practicable
following the Closing Date, but not later than the date which is the latest date
for making such Section 338(h)(10) Election, and from time to time thereafter,
and (ii) Sellers and Buyer shall report the sale of the Shares pursuant to this
Agreement consistent with the Section 338(h)(10) Election and shall take no
position contrary thereto or inconsistent therewith in any tax return, any
discussion with or proceeding before any taxing authority, or otherwise. Sellers
and Buyer agree to use reasonable efforts to minimize any adverse tax
consequences to Sellers resulting from the election contemplated by this Section
6.4, specifically including allocating the Purchase Price among the Acquired
Companies' assets in such a way as to eliminate, to the maximum extent legally
permissible, the treatment of the Sellers' gain on receipt of the Purchase Price
as ordinary income rather than capital gain; provided, however, that in no event
shall Buyer be required to take any action, other than such allocation of the
Purchase Price, which could result in any adverse consequences to the Buyer.
6.5 Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
6.6 Employee Bonuses.
(a) Buyer agrees that, no later than May 15, 2000, Buyer shall cause
the Company to pay cash bonuses to the employees of the Company named below,
which in the aggregate equal the product of (i) $140,000 times (ii) the
percentage of total Warrants issued pursuant to this Agreement which vest and
become exercisable pursuant to their terms (the "Cash Bonus"). The Cash Bonus
shall be allocated among the following employees based on the percentage set
forth opposite their respective names; provided, however, that no employee shall
be entitled to receive their share of the Cash Bonus if they do not remain
employees of the Company through March 31, 2000.
Name %
---- ---
Michael Anderson 16.67
Greg Cutshall 13.89
Tina Hatch 13.89
Thomas Reynolds 11.11
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Mary Ales 5.55
Paul Peressini 4.16
Alan Fahrner 4.16
Jami Spencer 2.78
Michele Bernard 2.78
Dean Cohan 2.78
Sue Edward 2.78
Tami Fox 2.78
Kris Romain 2.78
Ken Thompson 2.78
David Lucas 2.78
Rod Edmiston 1.67
William Krog 1.39
Andy Brolin 1.39
Amy Peressini 1.39
Wensheng Peng .83
Kristin Yunger .83
Lisa Poehler .83
------
100.00%
To the extent that the aggregate bonuses earned and paid pursuant hereto, plus
the related employer portion of payroll taxes, are less than $150,000, the
difference between the aggregate amount of such bonuses and related payroll
taxes and $150,000 shall be paid by Buyer to the Sellers' Representative on
behalf of the Sellers for distribution to the Sellers in an amount equal to each
Seller's pro rata share of the Purchase Price.
(b) Buyer agrees to cause the Company to pay the employee bonuses of
approximately $210,000, which were accrued but not paid prior to the Closing, no
later than the end of the first full pay period of the Company following the
Closing.
6.7 Rule 144. Buyer agrees that after its initial public offering,
it will file the reports required to be filed by it under the Securities Act,
and the Securities Exchange Act of 1934, as amended, and the rules and
regulations adopted by the Securities and Exchange Commission thereunder, and
will take such further action as any Seller may reasonably request, all to the
extent required from time to time to enable such Seller to sell the Buyer Stock
and the shares of Buyer Common Stock issuable upon exercise of the Warrants
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.
6.8 Termination of Stock Repurchase Agreement. The Company and
certain of the Sellers are parties to a Stock Repurchase Agreement dated
September 18, 1991 (the "Repurchase Agreement"). The Company and those Sellers
who are a party to the Repurchase Agreement hereby waive any claim with respect
to prior breaches thereof, consent to the transaction contemplated by this
Agreement and agree that, pursuant to Section 18 of the Repurchase Agreement,
immediately prior to the Closing, the Repurchase Agreement shall terminate and
be of no further force or effect.
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7. INDEMNIFICATION; REMEDIES
7.1 Survival; Right to Indemnification Not Affected by Knowledge.
Except for the representations and warranties set forth in Sections 3.3, 3,10,
3.11, 3.13, 3.17, 3.19, 4.1, 5.3 or 5.5 or in the Company's Schedule or the
Buyer's Schedule relating to the foregoing Sections, which shall survive the
Closing for a period of three (3) years as provided in Section 7.4, all
representations and warranties in this Agreement, the Company's Schedule, the
Buyer's Schedule, and any other certificate or document delivered pursuant to
this Agreement will survive the Closing for a period of one year as provided in
Section 7.4 below. Upon expiration of such representations and warranties, no
party shall have any right to make a claim or seek indemnification under this
Section 7, or otherwise, with respect to such expired representations or
warranties, except with respect to claims for indemnification which were timely
made in accordance with Section 7.4. All covenants and obligations in this
Agreement and the agreements executed and delivered pursuant to this Agreement
will survive the Closing indefinitely. The right to indemnification, payment of
Damages (as defined below) or other remedy based on such representations,
warranties, covenants, and obligations will not be affected by any investigation
conducted with respect to, or any Knowledge acquired (or capable of being
acquired) at any time, whether before or after the execution and delivery of
this Agreement, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant, or obligation. The waiver of
any condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
7.2 Indemnification and Payment of Damages by the Sellers. Each
Seller (pro rata in accordance with the percentage of the Purchase Price
received by each such Seller with respect to paragraphs (a), (c), (e) and (f) of
this Section 7.2, but such Seller shall be solely responsible for all of the
Damages with respect to the indemnification obligations of such Seller under
paragraphs (b) and (d) of this Section 7.2) will indemnify and hold harmless
Buyer, the Acquired Companies, and their respective Representatives,
stockholders, controlling persons, and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage, expense (including reasonable costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving a third-party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by the Company
in this Agreement, the Company's Schedule, or any other certificate or document
delivered by the Company pursuant to this Agreement;
(b) any Breach of any representation or warranty made by such Seller
in Section 4 of this Agreement;
(c) any Breach by the Company of any covenant or obligation of the
Company in this Agreement;
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(d) any Breach by such Seller of any covenant or obligation of such
Seller in this Agreement;
(e) any Deferred Cash Shortfall in excess of the Deferred Cash
Payment; or
(f) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with any Seller or any Acquired
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
Except as expressly provided in this Section 7.2, after the Closing the Company
and Sellers shall have no obligation or liability to Buyer or the other
Indemnified Persons, and such parties shall have no claim or recourse against
the Company or any Seller, arising out of or in connection with the transactions
contemplated by this Agreement, it being understood and agreed by the parties
that the remedies provided in this Section 7.2 shall be the sole and exclusive
remedies for any such claim by Buyer and/or any other Indemnified Person for any
such matters, whether such claims are framed in contract, tort or otherwise.
7.3 Indemnification and Payment of Damages by Buyer. Buyer will
indemnify and hold harmless the Sellers, and will pay to Sellers the amount of
any Damages arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Buyer in
this Agreement, the Buyer's Schedule or in any certificate or document delivered
by Buyer pursuant to this Agreement;
(b) any Breach by Buyer of any covenant or obligation of Buyer in
this Agreement; or
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
Except as expressly provided in this Section 7.3, after the Closing the Company
and Buyer shall have no obligation or liability to Sellers, and such parties
shall have no claim or recourse against the Company or the Buyer, arising out of
or in connection with the transactions contemplated by this Agreement, it being
understood and agreed by the parties that the remedies provided for in this
Section 7.3 shall be the sole and exclusive remedies for any such claim by
Sellers for any such matters, whether such claims are framed in contract, tort
or otherwise.
7.4 Time Limitations. Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
other than those in Sections 3.3, 3.10, 3.11, 3.13, 3.17, 3.19 or 4.1, unless on
or before October 15, 1999, Buyer notifies Sellers' Representative of a claim in
writing specifying the factual basis of that claim in reasonable detail,
together with a good faith estimate of the amount of such claim, to the extent
then known by Buyer. Sellers will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, in
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Sections 3.3, 3.10, 3.11, 3.13, 3.17, 3.19 or 4.1, unless on or before October
15, 2001, Buyer notifies Sellers' Representative of a claim in writing
specifying the factual basis of that claim in reasonable detail, together with a
good faith estimate of the amount of such claim, to the extent then known by
Buyer. Buyer will have no liability (for indemnification or otherwise) with
respect to any representation or warranty, other than those in Sections 5.3 or
5.5, unless on or before October 15, 1999 Seller notifies Buyer of a claim in
writing specifying the factual basis of that claim in reasonable detail,
together with a good faith estimate of the amount of such claim, to the extent
then known by Sellers. Buyer will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, in Sections 5.3 or
5.5, unless on or before October 15, 2001, Sellers notify Buyer of a claim in
writing specifying the factual basis of that claim in reasonable detail,
together with a good faith estimate of the amount of such claim, to the extent
then known by Sellers.
7.5 Limitations on Amount--Sellers. The Sellers will have no
liability hereunder (for indemnification or otherwise) until the total of all
Damages with respect to such matters exceeds $75,000 plus one-half of the amount
of any positive Closing Date Net Working Capital (such amount in the aggregate
is referred to hereinafter as the "Basket"), and then only for the amount by
which such Damages exceed the Basket. Furthermore, any liability of the Sellers
hereunder (for indemnification or otherwise) shall terminate at such time as the
aggregate amount of Damages paid to Buyer by Sellers equals $7,452,000 less (a)
an amount equal to (i) $2,511,961 times (ii) the percentage of total Warrants
issued pursuant to this Agreement which expire without vesting pursuant to
paragraph 4 of Annex B of the Warrants, and (b) if the fair market value of the
Common Stock of Buyer on the date the applicable claim for indemnification is
made is less than $1.75 per share, the product of (i) the number of shares of
Buyer Stock issued pursuant to Section 2.2(b) of this Agreement plus the number
of Warrants which have not expired without vesting pursuant to paragraph 4 of
Annex B of the Warrants times (ii) the difference between $1.75 and the fair
market value of the Common Stock of Buyer on such date, (such amount being
referred to herein as the "Cap"). Each Seller's liability hereunder (for
indemnification or otherwise) shall be limited to such Seller's pro rata share
of the Cap (in accordance with the percentage of the Purchase Price received by
such Seller, the "Percentage Interest"). Other than claims for indemnification
pursuant to Section 7.2(b) or (d), each Seller's liability for any claim for
indemnification shall be limited to the Seller's Percentage Interest with
respect to such claim.
7.6 Limitations on Amount--Buyer. Buyer will have no liability
hereunder (for indemnification or otherwise) until the total of all Damages with
respect to such matters exceeds $75,000, and then only for the amount by which
such Damages exceed $75,000. Furthermore, any liability of the Buyer hereunder
(for indemnification or otherwise) shall terminate at such time as the aggregate
amount of Damages paid to Sellers by Buyer equals $7,452,000 less an amount
equal to (i) $2,511,961 times (ii) the percentage of total Warrants issued
pursuant to this Agreement which expire without vesting pursuant to paragraph 4
of Annex B of the Warrants.
7.7 Right of Set-Off. Upon written notice to Sellers' Representative
specifying in reasonable detail the basis for such set-off and Buyer's
reasonable good faith estimate of the amount of such claim, Buyer may set-off
such amount against (i) amounts otherwise payable under Section 2.2(c) and (ii)
amounts, up to a maximum of $150,000, payable under the Notes issued pursuant to
Section 2.2(e), provided that any set-off against the Notes shall be pro rata
among the
34
<PAGE> 36
Sellers in accordance with the principal amount of Notes held and no
right of set-off shall exist for an amount in excess of the $150,000 maximum.
Notwithstanding the foregoing, if Buyer wishes to set-off any amount to which it
may be entitled under this Section 7 against amounts otherwise payable under
Section 2.2(c) or (e) (a "Set-Off") and the Sellers' Representative notifies
Buyer within 20 days of receiving notice from the Buyer specifying the basis for
such Set-Off that Sellers' Representative disputes such claim, the amount of the
Set-Off sought shall be placed in escrow by the Buyer with an independent third
party acceptable to Buyer and Sellers' Representative until such dispute is
resolved. Except as provided in this Section 7, Buyer shall have no right of
set-off against amounts otherwise payable to Sellers pursuant to this Agreement.
Neither the exercise of nor the failure to exercise such right of set-off will
constitute an election of remedies or limit Buyer in any manner in the
enforcement of any other remedies that may be available to it.
7.8 Procedure for Indemnification--Third Party Claims.
(a) Promptly after receipt by an indemnified party under Section 7.2
or 7.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnified party's failure to give
such notice.
(b) If any Proceeding referred to in Section 7.8(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will, unless the
claim involves Taxes, be entitled to participate in such Proceeding and, to the
extent that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate due to a probable conflict of interest in
the defenses available to the parties, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 7 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) no compromise or
settlement of such claims may be effected by the indemnifying party without the
indemnified party's consent unless (A) there is no finding or admission of any
violation of Legal Requirements or any violation of the rights of any Person and
no effect on any other claims that may be made against the indemnified party,
and (B) the sole relief provided is monetary damages that are paid in full by
the indemnifying party; and (ii) the indemnified party will have no liability
with respect to any compromise or settlement of such claims effected without its
consent. If notice is given to an indemnifying party of the commencement of any
Proceeding and the indemnifying party does not, within twenty days after the
indemnified party's notice is given, give notice to the
35
<PAGE> 37
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party; provided that no
compromise or settlement of the claim may be effected without the indemnifying
party's consent, which will not be unreasonably withheld. Notwithstanding the
foregoing, notice of any claim made against the Company or the Sellers, other
than those arising as result of a breach of the representations and warranties
made in Section 4, shall be provided to the Sellers' Representative, who shall
have sole authority to respond to and compromise such claim in accordance with
the foregoing provisions. Likewise, the Sellers' Representative shall have the
sole authority to seek indemnification from Buyer pursuant to this Section 7 on
behalf of the Sellers.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction of any
court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agree that
process may be served on Sellers with respect to such a claim anywhere in the
world.
7.9 Procedure for Indemnification--Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by written notice to the party from whom indemnification is sought.
7.10 No Contribution. Each Seller waives, and acknowledges and
agrees that such Seller shall not have and shall not exercise or assert or
attempt to exercise or assert, any right of contribution or right of indemnity
or any right or remedy against the Acquired Companies in connection with any
indemnification obligation or any other liability to which such Seller may
become subject under this Agreement or otherwise in connection with any of the
Contemplated Transactions, except for any right or remedy against the Acquired
Companies arising out of a breach of any covenant or agreement, which breach
occurs after the Closing.
7.11 Sole Remedy. The remedies provided in this Section 7 will be
the exclusive remedy of the parties hereto with respect to the Contemplated
Transaction and this Agreement.
8. GENERAL PROVISIONS
8.1 Public Announcements. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Buyer and the
Shareholders' Representative mutually determine. The Company and Sellers'
Representative will consult with each other concerning the means by which the
Acquired
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<PAGE> 38
Companies' employees, customers, and suppliers and others having
dealings with the Acquired Companies will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
8.2 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
To Buyer: Advantix, Inc.
4675 MacArthur Court, Suite 1400
Newport Beach, CA 92660
Attention: President
Fax No: (949) 862-5412
with a copy to: Hewitt & McGuire, LLP
19900 MacArthur Boulevard, Suite 1050
Irvine, CA 92612
Attention: Paul A. Rowe
Fax No: (949) 798-0511
To the Company: ProTix, Inc.
4513 Vernon Blvd.
Madison, WI 53705
Attention: President
Fax No: (608) 231-6703
with a copy to: Reinhart, Boerner, Van Deuren, Norris &
Rieselbach
1000 North Water Street, Suite 2100
Milwaukee, WI 53202
Attention: Jim Bedore
Fax No: (414) 298-8097
To the Sellers: At the address for each
such Seller shown on
the signature page
37
<PAGE> 39
To the Sellers' Mark O. Scioscia
Representative: c/o AccuGlass
2911 Duss Avenue
Building 17
Ambridge, PA 15003
Fax No: (724) 266-4467
8.3 Dispute Resolution. Any controversy, dispute, or claim arising
out of or relating to the interpretation, performance or breach of this
Agreement shall be finally determined, at the request of any party, by binding
arbitration conducted in accordance with the then existing rules for commercial
arbitration of the American Arbitration Association, and judgment upon any award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Such arbitration shall be conducted in Orange County, California. The
arbitrator shall award to the prevailing party, in addition to the costs of the
proceeding, that party's reasonable attorney's fees.
8.4 Waiver. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
8.5 Entire Agreement and Modification. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letters of Intent between Buyer and the Company dated July 2,
1998 and September 15, 1998) and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may be amended or modified in whole or in part at any time by an agreement in
writing among Buyer, the Company and the Sellers' Representative.
8.6 Assignments, Successors, and No Third-Party Rights. No party may
assign any of its rights under this Agreement without the prior consent of the
other parties, which will not be unreasonably withheld. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any provision of
this Agreement. This Agreement and all of its provisions and
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<PAGE> 40
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
8.7 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
8.8 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
8.9 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
8.10 Governing Law. This Agreement will be governed by the laws of
the State of California without regard to conflicts of laws principles.
8.11 Equitable Remedies. In addition to legal remedies, to the
extent allowed pursuant to this Agreement or by law, in recognition of the fact
that remedies at law may not be sufficient, the parties hereto (and their
successors) shall be entitled to equitable remedies including, without
limitation, specific performance and injunction.
8.12 Effect of Amendment or Waiver. Each Seller acknowledges that by
operation of Sections 6.1 and 8.5, the Sellers' Representative will have the
right and power to diminish or eliminate rights of such Seller under this
Agreement.
8.13 Opportunity to Consult Counsel. Each Seller acknowledges that
such Seller has had full and adequate opportunity to have this Agreement
reviewed by such Seller's independent counsel and to discuss this Agreement with
such counsel.
8.14 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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<PAGE> 41
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement effective as of the date first written above.
"BUYER"
Advantix, Inc., a Delaware corporation
By: /S/ John M. Markovich
--------------------------------------
Print Name: John M. Markovich
-------------------------------
Title: EVP, Finance & Chief Financial
------------------------------------
Officer
"COMPANY"
ProTix, Inc., a Wisconsin corporation
By: /S/ Pete D. Hanson
--------------------------------------
Print Name: Pete D. Hanson
-------------------------------
Title: President
------------------------------------
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<PAGE> 42
The undersigned Sellers have executed this Agreement effective as of
the Closing Date.
"SELLERS"
/s/ Mark O. Scioscia
--------------------------------------------
Signature of Seller
Printed Name: Mark O. Scioscia
Number of Shares Owned: 4,181.83
Address: 330 Shields Lane
Sewickley, PA 15143
/s/ Richard C. Graves
--------------------------------------------
Signature of Seller
Printed Name: Richard C. Graves
Number of Shares Owned: 3,770.00
Address: 1787 Council Bluff Drive N.E.
Atlanta, GA 30345
/s/ Peter D. Hanson
--------------------------------------------
Signature of Seller
Printed Name: Peter D. Hanson
/s/ Mary P. Hanson
--------------------------------------------
Signature of Seller's Spouse
Printed Name: Mary P. Hanson
Number of Shares Owned: 3,163.35
Address: 1423 Willow Trail
Middleton, WI 53562
41
<PAGE> 43
/s/ John R. O'Keefe, Jr.
--------------------------------------------
Signature of Seller
Printed Name: John R. O'Keefe, Jr.
Number of Shares Owned: 1,518.18
Address: 162 Orchard Spring Road
Pittsburgh, PA 15220
/s/ Frances S. Kincaid
--------------------------------------------
Signature of Seller
Printed Name: Frances S. Kincaid
Number of Shares Owned: 1,454.54
Address: 406 Midway Island
Clearwater, FL 38767
/s/ Paul S. McGrath, Jr.
--------------------------------------------
Signature of Seller
Printed Name: Paul S. McGrath, Jr.
Number of Shares Owned: 427.27
Address: 1346 Navahoe Drive
Pittsburgh, PA 15228
42
<PAGE> 44
/s/ Douglas W. Caves
--------------------------------------------
Signature of Seller
Printed Name: Douglas W. Caves
/s/ Sherry A. Caves
--------------------------------------------
Signature of Seller's Spouse
Printed Name: Sherry A. Caves
Number of Shares Owned: 572.73
Address: 2250 Rugby Row
Madison, WI 53705
/s/ John A. Kincaid, Jr.
--------------------------------------------
Signature of Seller
Printed Name: John A. Kincaid, Jr.
Number of Shares Owned: 245.45
Address: 406 Midway Island
Clearwater, FL 38767
/s/ Oreste S. Scioscia
--------------------------------------------
Signature of Seller
Printed Name: Oreste S. Scioscia
Number of Shares Owned: 545.45
Address: 4 Covington Park
Hilton Head Island, SC 29928
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<PAGE> 45
/s/ Diane Christensen
--------------------------------------------
Signature of Seller
Printed Name: Diane Christensen
/s/ Laurits R. Christensen
--------------------------------------------
Signature of Seller's Spouse
Printed Name: Laurits R. Christensen
Number of Shares Owned: 477.28
Address: 1711 Kendall Avenue
Madison, WI 53705
/s/ Laurits R. Christensen
--------------------------------------------
Signature of Seller
Printed Name: Laurits R. Christensen
/s/ Dianne Christensen
--------------------------------------------
Signature of Seller's Spouse
Printed Name: Dianne Christensen
Number of Shares Owned: 477.27
Address: 1711 Kendall Avenue
Madison, WI 53705
/s/ James J. Laurion
--------------------------------------------
Signature of Seller
Printed Name: James J. Laurion
Number of Shares Owned: 252.50
Address: 7220 Island Green Drive
Boulder, CO 80301
44
<PAGE> 46
/s/ Richard P. Nehls
--------------------------------------------
Signature of Seller
Printed Name: Richard P. Nehls
/s/ Barbara N. Nehls
--------------------------------------------
Signature of Seller's Spouse
Printed Name: Barbara N. Nehls
Number of Shares Owned: 252.50
Address: 305 Everglade Drive
Madison, WI 53717
/s/ Thomas G. Tierney
--------------------------------------------
Signature of Seller
Printed Name: Thomas G. Tierney
/s/ Mary Joan Tierney
--------------------------------------------
Signature of Seller's Spouse
Printed Name: Mary Joan Tierney
Number of Shares Owned: 252.50
Address: 1010 Harrison Street
Madison, WI 53711
45
<PAGE> 47
/s/ Robert J. Schoofs
--------------------------------------------
Signature of Seller
Printed Name: Robert J. Schoofs
/s/ Mary E. Schoofs
--------------------------------------------
Signature of Seller's Spouse
Printed Name: Mary E. Schoofs
Number of Shares Owned: 208.34
Address: 530 West Conrad Drive
Medford, WI 54451
/s/ Michael T. Pepke
--------------------------------------------
Signature of Seller
Printed Name: Michael T. Pepke
N/A
--------------------------------------------
Signature of Seller's Spouse
Printed Name:
Number of Shares Owned: 208.33
Address: 633 West McIntosh Lane
Mequon, WI 53092
/s/ Daniel M. Kincaid
--------------------------------------------
Signature of Seller
Printed Name: Daniel M. Kincaid
Number of Shares Owned: 181.82
Address: 406 Midway Island
Clearwater, FL 38767
46
<PAGE> 48
/s/ John A. Kincaid, III
--------------------------------------------
Signature of Seller
Printed Name: John A. Kincaid, III
Number of Shares Owned: 181.82
Address: 406 Midway Island
Clearwater, FL 38767
/s/ James E. Rose
--------------------------------------------
Signature of Seller
Printed Name: James E. Rose
/s/ Terri L. Rose
--------------------------------------------
Signature of Seller's Spouse
Printed Name: Terri L. Rose
Number of Shares Owned: 158.70
Address: 418 Junction Road
Madison, WI 53717
/s/ Paul W. Schnetzky
--------------------------------------------
Signature of Seller
Printed Name: Paul W. Schnetzky
Signature of Seller's Spouse
Printed Name: Karen U. Schnetzky
Number of Shares Owned: 150.00
Address: 10163 N. Lake Shore Drive
Mequon, WI 53092
47
<PAGE> 49
/s/ Gregor E. Nigh
--------------------------------------------
Signature of Seller
Printed Name: Gregor E. Nigh
/s/ Leslie Ann Nigh
--------------------------------------------
Signature of Seller's Spouse
Printed Name: Leslie Ann Nigh
Number of Shares Owned: 56.50
Address: 3649 Marigold Circle
Middleton, WI 53562
/s/ Harold Foodman
--------------------------------------------
Signature of Seller
Printed Name: Harold Foodman
Number of Shares Owned: 390.34
Address: 34 Berndale Drive
Westport, CT 06880
/s/ Bruce A. Foodman
--------------------------------------------
Signature of Seller
Printed Name: Bruce A. Foodman
Number of Shares Owned: 390.34
Address: 2 Little River Lane
Redding, CT 06896
48
<PAGE> 50
EXHIBIT 1
"ACQUIRED COMPANIES"--the Company and its Subsidiaries,
collectively.
"APPLICABLE CONTRACT"--any Contract to which an Acquired Company is
a party.
"BASKET"--as defined in Section 7.5.
"BEST EFFORTS"--the reasonable efforts that a prudent Person
desirous of achieving a result would use in similar circumstances to ensure that
such result is achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this Agreement.
"BUYER BALANCE SHEET"--as defined in Section 5.4.
"BUYER'S CLOSING DOCUMENTS"--as defined in Section 5.2(a).
"BUYER'S SCHEDULE"--the schedule delivered by Buyer to the Company
and Sellers concurrently with the execution and delivery of this Agreement.
"BUYER STOCK"--as defined in Section 2.2.
"CLOSING"--as defined in Section 2.3.
"CLOSING CASH PAYMENT"--as defined in Section 2.2.
"CLOSING DATE"--the date and time as of which the Closing actually
takes place.
"COMPANY"--as defined in the first paragraph of this Agreement.
"COMPANY BALANCE SHEET"--as defined in Section 3.4.
"COMPANY INTERIM BALANCE SHEET"--as defined in Section 3.4.
"COMPANY STOCK"--as defined in Section 3.3.
"COMPANY'S SCHEDULE"--as defined in the introductory language to
Section 3.
1
<PAGE> 51
"CONSENT"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Shares by Sellers to Buyer and the sale of the
Buyer Stock and Warrants by Buyer to Sellers;
(b) the execution, delivery, and performance of the Employment
Agreements, the Confidentiality Agreements, the Noncompetition Agreements,
Sellers' Releases, and the
Warrants;
(c) the performance by Buyer, the Company and Sellers of their
respective covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares and exercise of
control over the Acquired Companies.
"CONTRACT"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"COPYRIGHTS" --any foreign or United States copyright registrations
and applications for registration thereof, and any non-registered copyrights.
"DAMAGES"--as defined in Section 7.2.
"DEFERRED CASH PAYMENT"--as defined in Section 2.2.
"EMPLOYMENT AGREEMENTS"--as defined in Section 2.4(a)(iii).
"ENCUMBRANCE"--any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership, except for such imperfections of title and encumbrances, if any, that
are not insubstantial in character, amount or extent, and do not individually or
in the aggregate materially detract from the value, or interfere with the
present or intended use, of the property or assets subject thereto or affected
thereby, or otherwise materially impair the business of the Acquired Companies,
and except for tax liens for amounts not yet due or liens with respect to
indebtedness shown on the financial statements described in Section 3.4 hereof.
"ENVIRONMENTAL LAWS"--any Legal Requirement designed to minimize,
prevent, punish or remedy the consequences of actions that damage or threaten
the environment or public health and safety.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
2
<PAGE> 52
"ERISA AFFILIATE"--any person that, together with the Company, would
be treated as a single employer under IRC ss. 414.
"FACILITIES"--any real property, leaseholds, or other interests
currently or formerly owned or operated by any Acquired Company and any
buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by any Acquired
Company.
"GAAP"--generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Company Balance Sheet
and the other financial statements referred to in Section 3.4(b) were prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"HAZARDOUS SUBSTANCES"--all hazardous and toxic materials or wastes
(including, without limitation, petroleum products, asbestos and raw materials
which include hazardous constituents), fumes, smoke, soot, acids, alkalis,
chemicals, liquids, gases, vapors, wastes and materials; any pollutants or
contaminants; and any other similar substances or materials which are regulated
under Environmental Laws.
"INTELLECTUAL PROPERTY"--as defined in Section 3.22.
"INTERNET ASSETS"--any registered internet domain names and other
proprietary computer used identifiers and any proprietary rights in and to sites
on the worldwide web, including rights in and to any text, graphics, audio and
video files and html or other code incorporated in such sites.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
3
<PAGE> 53
"KNOWLEDGE"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter. The Company will be deemed to have "Knowledge" of a
particular fact or other matter if Peter D. Hanson, Mark O. Scioscia, Richard
Graves, Tami Fox, Mary Ales, Michael Anderson, Harold Foodman or Bruce Foodman
has, or at any time had, Knowledge of such fact or other matter. Buyer will be
deemed to have "Knowledge" of a particular fact or other matter if W. Thomas
Gimple, John M. Markovich, Thomas O. Pascoe or Michael Rodriguez has, or at any
time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"NET WORKING CAPITAL"--total consolidated current assets of the
Acquired Companies minus total consolidated current liabilities of the Acquired
Companies, determined in accordance with GAAP, except that total consolidated
current assets of the Acquired Companies will exclude notes receivable, accounts
receivable from, and advances to Related Persons and shareholders of the
Acquired Companies and total consolidated current liabilities of the Acquired
Companies will exclude all amounts related to notes payable and obligations
under capital leases and $224,000 of accrued bonus and the employer portion of
payroll taxes and matching 401(k) contributions related thereto.
"NONCOMPETITION AGREEMENTS"--as defined in Section 2.4(a)(iv).
"ORDER"--any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be specifically authorized by the
parent company (if any) of such Person; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a
4
<PAGE> 54
limited partnership; (d) any charter or similar document adopted or filed in
connection with the creation, formation, or organization of a Person; and (e)
any amendment to any of the foregoing.
"PARTICIPATING PERCENTAGE"--the percentage of the issued and
outstanding shares of capital stock of the Company as of the Closing Date which
are sold to Buyer under the Agreement.
"PATENTS"-- any foreign or United States patents and patent
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified or resubmitted.
"PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN"--as defined in Section 3.13.
"PROCEEDING"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"PROPRIETARY RIGHTS AGREEMENT"--as defined in Section 3.20.
"PURCHASE PRICE"--as defined in Section 2.2.
"REAL PROPERTY"--as defined in Section 3.19.
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
5
<PAGE> 55
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as
a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person who
is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 5% of the outstanding
voting power of a Person or equity securities or other equity interests
representing at least 5% of the outstanding equity securities or equity
interests in a Person.
"REPRESENTATIVE"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECTION 338(h)(10) ELECTION"--as defined in Section 6.5.
"SECURITIES ACT"--the Securities Act of 1933 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
"SELLERS"--as defined in the first paragraph of this Agreement.
"SELLER'S CLOSING DOCUMENTS"--as defined in Section 4.2.
"SHARES"--as defined in the Recitals of this Agreement.
"SOFTWARE" -- any computer software programs, source code, object
code, data and documentation related thereto.
"SUBSIDIARY"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company. The term "Subsidiary" shall include ProTix
Connecticut General Partnership, a Wisconsin general partnership; ProTix Limited
Partnership I, a Wisconsin limited partnership; ProTix Access Control, LLC, a
Wisconsin limited liability company; and ProTix Australia Pty, Ltd., an
Australian corporation.
6
<PAGE> 56
"TAX RETURN"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THREATENED"--a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"TRADEMARKS"-- any foreign or United States trademarks, service
marks, trade dress, trade names, brand names, designs and logos, corporate
names, product or service identifiers, whether registered or unregistered, and
all registrations and applications for registration thereof.
"TRADE SECRETS"-- any trade secrets, including, without limitation,
proprietary research records, processes, procedures, manufacturing formulae,
technical know-how, technology, blue prints, designs, plans, inventions (whether
patentable and whether reduced to practice), invention disclosures and
improvements thereto.
"WARRANTS"--as defined in Section 2.2.
7
<PAGE> 57
LIST OF EXHIBITS
TO
STOCK PURCHASE AGREEMENT
BY AND AMONG
ADVANTIX, INC.,
PROTIX, INC.
AND
SHAREHOLDERS OF PROTIX, INC.
Exhibit 1 Definitions
Exhibit 2.2(d) Common Stock Purchase Warrant
Exhibit 2.2(e) Non-Negotiable Promissory Note
Exhibit 2.4(a)(ii)(1) Hanson Employment Agreement
Exhibit 2.4(a)(ii)(2) Graves Employment Agreement
Exhibit 2.4(a)(ii)(3) H. Foodman Employment Agreement
Exhibit 2.4(a)(ii)(4) B. Foodman Employment Agreement
Exhibit 2.4(a)(iii) Confidentiality Agreement
Exhibit 2.4(a)(iv) Noncompetition Agreement
Exhibit 2.4(a)(v) Security Agreement
8
<PAGE> 1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED PROVISIONS OF
THIS AGREEMENT. THE REDACTED PROVISIONS ARE IDENTIFIED BY THREE ASTERISKS AND
ENCLOSED BY BRACKETS. THE CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.13
STOCK PURCHASE AGREEMENT
BY AND AMONG
ADVANTIX, INC.,
BAY AREA SEATING SERVICE, INC.
AND
SHAREHOLDERS OF BAY AREA SEATING SERVICE, INC.
EFFECTIVE SEPTEMBER 18, 1997
<PAGE> 2
STOCK PURCHASE AGREEMENT
------------------------
This STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as
of the 18th day of September, 1997 by and among Advantix, Inc., a Delaware
corporation ("Buyer"), Bay Area Seating Service, Inc., a California corporation
(the "Company"), and the shareholders of the Company as listed on the signature
pages of this Agreement who become parties to this Agreement (the
"Shareholders").
R E C I T A L S
---------------
A. The Shareholders own at least ninety-five percent (95%) of the
issued and outstanding shares of common stock of the Company.
B. Buyer desires to purchase all of the shares of common stock of the
Company owned by the Shareholders, and the Shareholders desire to sell such
shares, on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and agreements contained herein, the parties hereto agree as follows.
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale. Subject to the terms and conditions set forth in
this Agreement, at the Closing, each of the Shareholders shall transfer to Buyer
that number of shares of the Company common stock which are identified below
their respective signatures on the signature page hereto, which in the aggregate
shall constitute at least ninety-five percent (95%) of the outstanding shares of
the Company common stock at the Closing, in exchange for their pro rata share of
the Purchase Price.
1.2 Purchase Price and Payment. The purchase price (the "Purchase
Price") to be paid by Buyer to the Shareholders for the Shares shall consist of
the following:
(a) (i) Cash payments at Closing (the "Closing Cash Payment")
which shall equal the product of (x) the Participating Percentage, times (y) the
sum of Ten Million Dollars ($10,000,000) plus the amount by which Closing Date
current assets exceed, or minus the amount by which Closing Date current assets
fall short of, the sum of (i) Closing Date current liabilities plus (ii)
$1,050,000. At the Closing, the Closing Date current assets and Closing Date
current liabilities will be estimated, by mutual agreement of Advantix and the
Company, based on the Company's current assets and current liabilities as of
August 31, 1997, and the amount paid at the Closing shall be based on such
estimate. Within 60 days after the Closing Date, the Company will determine the
actual Closing Date current assets and the actual Closing Date current
liabilities. If the amount by which the actual Closing Date current assets
exceeds the actual Closing Date current liabilities plus $1,050,000 is greater
than the amount estimated at the Closing, Buyer shall advise the Shareholders'
Representative of the amount of
<PAGE> 3
the excess and shall promptly pay to each Shareholder such Shareholder's
respective share of the product of (i) the Participating Percentage, times (ii)
the sum of the amount of the excess plus the amount of the Cost Allowance
Excess, if any, determined in accordance with Section 1.2(a)(ii). If the amount
by which the actual Closing Date current assets exceed the actual Closing Date
current liabilities plus $1,050,000 is less than the amount estimated at the
Closing, Buyer shall advise the Shareholders' Representative of the amount of
such difference and shall deduct an amount equal to the product of the
Participating Percentage times the amount of such difference (the "Negative
Difference") from one or both of the payments described in Sections 1.2(a)(ii)
and (iii). If the Negative Difference exceeds the total amount due the
Shareholders under the next two paragraphs, the amount of such excess shall be
deducted from the payments due under Sections 1.2(b) and (d) until paid.
(ii) Costs and expenses related to the transactions
incurred by the Company and the Shareholders, to the extent not paid prior to
the Closing, shall be paid by the Company, up to a maximum of $500,000, at or
within 60 days after the Closing. Such costs and expenses shall be approved by
the Shareholders' Representative, and shall be paid promptly after such
approval. If at the end of 60 days, such costs and expenses are less than
$500,000, the amount by which they are less than $500,000 (which amount is
subject to reduction on account of the Negative Difference) shall be the Cost
Allowance Excess. The Company shall pay the Cost Allowance Excess to the
Shareholders in accordance with Section 1.2(a)(i). The Company shall have no
obligation to pay for any such costs or expenses either in excess of $500,000 or
submitted after such 60-day period.
(iii) On the Closing Date, the Company shall segregate
$300,000 of the Company's cash in a separate general ledger account (the
"Working Capital Account") to be used only for the purposes described in this
Section 1.2(a)(iii). Between the Closing Date and the first anniversary of the
Closing Date ("Anniversary Date"), once each week on the same day each week (the
"Balance Day") the Company shall determine the amount of its Free Cash. If on
any Balance Day the amount of the Company's Free Cash is less than zero, the
Company may withdraw funds from the Working Capital Account in an amount
sufficient to increase the Company's Free Cash to zero. If at any time after
January 31, 1998 and before the Anniversary Date, Free Cash surpasses $600,000
on a Balance Day, the remaining balance in the Working Capital Account shall be
adjusted in accordance with Section 1.2(a)(iv) and, after such adjustment shall
(subject to any reduction on account of the Negative Difference) be paid ratably
to the Shareholders within thirty (30) days of such date. If the Working Capital
Balance is not repaid pursuant to the preceding sentence, then on the
Anniversary Date, the balance in the Working Capital Account shall be adjusted
in accordance with the Section 1.2(a)(iv) and, after such adjustment, shall
(subject to any reduction on account of the Negative Difference) be paid ratably
to the Shareholders within thirty (30) days of the Anniversary Date.
(iv) Prior to January 31, 1998, the Company shall
determine the amount of the royalties due [***] under Section 3 of
that certain [***] Agreement dated as of [***], as amended, for the period
from the Closing Date through December 31, 1997, and shall advise the
Shareholders' Representative of such amount. Prior to January 31, 1998, the
Company may deduct such amount from the Working Capital Account.
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
2
<PAGE> 4
(b) Promissory notes delivered at Closing in substantially the
form attached hereto as Exhibit A (the "Notes") in the aggregate principal
amount equal to the product of Six Million Dollars ($6,000,000) times the
Participating Percentage;
(c) Warrants to purchase Buyer Common Stock delivered at
Closing in substantially the form attached hereto as Exhibit B (the "Warrants")
representing in the aggregate the right to purchase that number of shares of
Buyer Common Stock equal to the product of 3,000,000 times the Participating
Percentage;
(d) (i) A cash payment equal to the Initial Disbursement
Amount, which amount shall be paid by the Buyer to First Trust of California
(the "Disbursement Agent") under the Disbursement Agent Agreement, in
substantially the form attached hereto as Exhibit C. The Initial Disbursement
Amount will be held and disbursed in accordance with the procedures set forth in
the Disbursement Agent Agreement and this Agreement;
(ii) Each of the Shareholders hereby, jointly and
severally, unconditionally guarantees and covenants to Buyer that the Net
Revenue of the Company for the twelve consecutive calendar quarters beginning on
the first day of the first month beginning after the Closing Date (the
"Measurement Period") will equal or exceed $[***]. If Net Revenue of the Company
for the Measurement Period does not equal or exceed $[***], the Shareholders
agree that in satisfaction of their guarantee the Disbursement Agent shall pay
the Guarantee Shortfall to Buyer as provided in Section 1.2(d)(iii) below. The
Buyer agrees that its sole recourse with respect to the guaranty and covenants
set forth in this Section 1.2(d)(ii), and the breach thereof, shall be payment
of the Guarantee Shortfall at the end of the Measurement Period as provided in
Section 1.2(d)(iii), and no Shareholder shall be personally liable with respect
thereto, whether under Section 8.2 or otherwise, unless the Guarantee Shortfall
otherwise payable to the Buyer shall have been paid to anyone other than Buyer,
in which event the Shareholders shall have joint and several liability for such
amount so paid or distributed. Without limiting the generality of the preceding
sentence, no Shareholders shall have personal liability for any amount by which
Net Revenues during the Measurement Period are less than $[***], except to the
extent of the Guarantee Shortfall, nor shall any Shareholder be liable for
incidental or consequential damages if Net Revenues during the Measurement
Period are less than such amount.
(iii) Within sixty (60) days after the end of each fiscal
quarter during the Measurement Period, the Buyer shall notify the Shareholders'
Representative and the Disbursement Agent of the Net Revenues of the Company
during such quarter. If the Shareholders' Representative disputes the Buyer's
calculation and the Buyer and the Shareholders' Representative are unable to
resolve such dispute, such dispute shall be resolved by arbitration pursuant to
Section 9.5. Promptly after receipt of such notice from the Buyer, the
Disbursement Agent shall disburse to the Shareholders an amount equal to the
product of (i) Net Revenue for that fiscal quarter times (ii) the then
applicable Adjusted Payout Factor (the "Quarterly Payment"); provided, however,
that such payments shall be reduced by the dollar amount of any damages claimed
by Buyer as set forth in a Claim pursuant to Section 8.4. If the Shareholders'
Representative disputes such Claim and it is ultimately determined that Buyer is
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
3
<PAGE> 5
not entitled to such claimed amount, the Disbursement Agent shall immediately
pay and distribute such amount to the Shareholders. If the Buyer fails to
deliver such notice and the Shareholders' Representative notifies the
Disbursement Agent and Buyer of such delinquency, then on the fifth (5th) day
after notice of the delinquency is given to Buyer, if Buyer has not cured the
delinquency, the Disbursement Agent shall pay to the Shareholders an amount
equal to one-twelfth of the Initial Disbursement Amount or the then remaining
balance of the Disbursement Account if less than one-twelfth of the Initial
Disbursement Amount remains after all disbursements pursuant to this Section,
less any Buyer Claim. The aggregate disbursements to the Shareholders under this
Section 1.2(d) shall in no event exceed the Initial Disbursement Amount plus
interest earned on the Initial Disbursement Amount, subject to reduction
pursuant to Section 8.6. After all Quarterly Payments have been made for the
Measurement Period, Buyer shall be paid the Guarantee Shortfall, along with any
other amounts held by the Disbursement Agent, to satisfy the Shareholders'
obligations set forth in Section 1.2(d)(ii) above, provided however that if at
that time any amount otherwise due the Shareholders under this Section have been
withheld pursuant to Section 8.6, and it is later determined that such amount
should be paid to the Shareholders, the Disbursement Agent shall pay such amount
to the Shareholders upon such determination.
(iv) On each Adjustment Date (as defined below), for the
purpose of calculating future quarterly disbursements to the Shareholders from
the Initial Disbursement Amount under this Section 1.2(d), the Payout Factor
shall be recalculated (the "Adjusted Payout Factor") as (x) the Adjusted
Disbursement Amount divided by (y) the product of (i) the quotient of (12 minus
the number of full quarters during the Measurement Period through that
Adjustment Date) divided by four, multiplied by (ii) $[***]. An "Adjustment
Date" shall be the first day of each quarter during the Measurement Period.
(v) The Buyer, the Company and the Shareholders
acknowledge that upon deposit with the Disbursement Agent, the Disbursement
Agent shall be deemed to hold legal title to the Initial Disbursement Amount and
the Shareholders shall be deemed to hold equitable title to their proportionate
interest in the Initial Disbursement Amount, subject to the right of the Buyer
to make claims against, and to receive disbursements from, the Initial
Disbursement Amount as provided in this Agreement. Consistent with such
equitable title, the Shareholders shall bear all taxes on income earned on the
amounts held by the Disbursement Agent. If for any reason a court of competent
jurisdiction should hold that, notwithstanding the intention of the parties set
forth in the preceding sentence, the Buyer is the owner of the Initial
Disbursement Amount, then the Buyer hereby grants to the Shareholders'
Representative, on behalf of the Shareholders, a first priority security
interest in the Initial Disbursement Amount, and the Shareholders'
Representative shall have all of the rights and remedies of a secured party
under the Uniform Commercial Code with respect thereto. Such security interest
shall terminate automatically and without further action by the Shareholders'
Representative with respect to any and all amounts paid or due to the Buyer from
the Initial Disbursement Amount pursuant to Section 1.2(d)(iii) or Section 8.6
of this Agreement. At the Closing, the Buyer shall execute a Uniform Commercial
Code financing statement relating to the Initial Disbursement Amount, which the
Shareholders' Representative may file as a protective measure and shall not be
deemed
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
4
<PAGE> 6
by a court to constitute evidence that the parties intended to create a
security interest rather than to vest equitable ownership of the Initial
Disbursement Amount in the Shareholders.
(vi) No later than January 31 of each year, the
Disbursement Agent shall distribute to the Shareholders on a pro rata basis an
amount equal to forty percent (40%) of the income earned on amounts held by the
Disbursement Agent for the prior year. In addition, within thirty (30) days
after the end of the Measurement Period, Disbursement Agent shall distribute to
the Shareholders on a pro rata basis an amount equal to (I) the product of (x)
income earned on amounts held by the Disbursement Agent for the Measurement
Period (the "Measurement Period Income") times, (y) net revenue for the
Measurement Period divided by $[***], less (II) any amounts previously
distributed to the Shareholders pursuant to the preceding sentence; provided,
however, in no event shall such distribution to the Shareholders exceed
Measurement Period Income less any amounts previously distributed to the
Shareholders pursuant to the preceding sentence.
(e) Incentive Payments pursuant to Section 1.3.
The final Purchase Price determined pursuant to this Section 1.2 shall be
allocated pro rata among the Shareholders in proportion to the number of shares
owned, subject to Section 9.11 hereof.
1.3 Incentive Payment. If at the end of any fiscal quarter during the
Measurement Period, the Company's actual cumulative Net Revenue to date during
the Measurement Period exceeds $[***], Buyer shall pay to the Shareholders
(i) with respect to the fiscal quarter during which such event occurs, an amount
equal to such excess multiplied by 1/2 times the Payout Factor, and (ii) with
respect to each fiscal quarter thereafter during the Measurement Period, an
amount equal to the Net Revenue of the Company for that period multiplied by 1/2
times the Payout Factor. Amounts payable under this Section 1.3 shall be made
within sixty (60) days of the end of the quarter for which an Incentive Payment
is earned.
1.4 Shared Transition Costs.
(a) Buyer and the Shareholders agree to share, on an equal
basis, both (i) all costs and expenses incurred by the Company or Buyer in
connection with the one-time software conversion of the Company, its clients,
and its retail outlets to Buyer's software, and (ii) all Extraordinary (as
defined below) rebates and costs that the Company or Buyer become obligated to
pay within eighteen (18) months after the Closing in connection with the renewal
or extension of any contract existing as of the Closing, or execution of a new
contract, with a Significant Client of the Company (collectively, (i) and (ii)
are the "Transition Costs"); provided that the Shareholders in the aggregate
would not be obligated to pay more than a total of [***] Dollars ($[***]) of the
Transition Costs, and any Transition Costs in excess of [***] Dollars ($[***])
would be borne exclusively by Buyer; and provided further, the Shareholders'
portion of the Transition Costs shall be funded out of the Transition Costs
Account described in Section 1.4(b). Notwithstanding the foregoing, "Transition
Costs" shall not include any amounts subject to indemnification under Section
8.2. For purposes of this Section 1.4, a rebate or cost
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
5
<PAGE> 7
shall be deemed "Extraordinary" if it is either (a) paid in connection with
obtaining a Significant Client's consent to the transactions contemplated by
this Agreement, or (b) otherwise incurred to maintain a Significant Client as a
client of the Company during the 18-month period and is of a type or amount that
it is different or unusual compared to the Company's historical practices with
respect to that client. Any dispute between the parties as to whether a rebate
or cost is Extraordinary which cannot be resolved within thirty (30) days shall
be submitted to binding arbitration before Raymond Ward, or a successor mutually
agreed to by the parties.
(b) At the Closing, the Company shall put [***] Dollars
($[***]) into a separate account in its name (the "Transition Costs Account") to
fund the Shareholders' portion of the Transition Costs. Any disbursement from
the Transition Costs Account shall require a signature from the Company and the
Shareholders' Representative. The Company or Buyer shall notify the
Shareholders' Representative of any Transition Costs that it pays (in the case
of Transition Costs described in Section 1.4(a)(i)) or documents (in the case of
Transition Costs described in Section 1.4(a)(ii)). The Shareholders'
Representative shall within five (5) business days of receipt of such
notification either (i) authorize the disbursement from the Transition Costs
Account to fund the Shareholders' fifty percent (50%) portion of such Transition
Costs or (ii) submit such calculation of Transition Costs to binding arbitration
pursuant to Section 1.4(a). If any amount remains in the Transition Costs
Account after eighteen (18) months after the Closing Date, and no dispute exists
regarding any Transition Costs, such amount shall be delivered to the
Shareholders' Representative to be distributed ratably to the Shareholders.
1.5 Special Indemnification Account. At the Closing, the Company shall
put [***] Dollars ($[***]) into a separate account in the name of the
Shareholders' Representative (the "Special Indemnification Account"). Any
disbursement from this Special Indemnification Account shall require a signature
from the Shareholders' Representative and Buyer. The funds in this account shall
be used to pay any indemnification Claims of Buyer under Section 8.2(ii). Buyer
shall notify Shareholders' Representative of any such Claim pursuant to Section
8.4 and such Claim shall be handled in accordance with Section 8.4. Upon any
determination in accordance with that Section that a Claim has been accepted,
the amount of such Claim shall be disbursed from the Special Indemnification
Account to Buyer or its designee. If any amount remains in the Special
Indemnification Account on April 1, 1999, or such earlier date as Buyer and
Shareholders' Representative shall agree, and if no dispute exists regarding any
Claim under Section 8.2(ii) at that time, such amount shall be delivered to the
Shareholders' Representative to be distributed ratably to the Shareholders.
1.6 Closing. The closing of the transactions contemplated by this
Agreement ("Closing") shall take place in the offices of Hewitt & McGuire LLP,
19900 MacArthur Boulevard, Suite 1050, Irvine, California, at 10:00 a.m. on
September __, 1997, or at such other time and date as the parties may fix
("Closing Date").
1.7 Closing Obligations. At the Closing:
(a) The Company and the Shareholders will deliver to Buyer:
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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(i) certificates representing the Shares being sold by
them under this Agreement, duly endorsed (or accompanied by duly executed stock
powers), along with satisfactory evidence of authority to execute this Agreement
and transfer the Shares (in the case of non-individual Shareholders, for
transfer to Buyer;
(ii) a certificate of the President of the Company
pursuant to Section 6.1(a);
(iii) a general release, in form and substance
satisfactory to Buyer, from each officer and director of the Company releasing
the Company from all obligations under any indemnification agreements, the
charter documents of the Company, or otherwise, arising out of or relating to
this Agreement or the consummation of the transactions contemplated thereby,
other than obligations arising after the Closing Date under this Agreement and
the other agreements described in this Section to which the Company is a party,
provided that such release shall not release any rights that any such officer or
director may have against any insurance carrier;
(iv) an employment agreement in substantially the form of
Exhibit D, executed by Doug Levinson and the Company;
(v) a consulting agreement in substantially the form of
Exhibit E, executed by David Mendelsohn and the Company;
(vi) noncompetition agreements in substantially the form
of Exhibit F, executed by the Company and each of Gerald Seltzer, Harold Silen
and David Mendelsohn;
(vii) a security agreement in substantially the form of
Exhibit G (the "Security Agreement"), executed by the Shareholders'
Representative;
(viii) a noncompetition agreement in substantially the
form of Exhibit H, executed by the Company and Doug Levinson;
(ix) an opinion of Shartsis, Friese & Ginsburg LLP, dated
the Closing Date, substantially in the form of Exhibit I;
(x) a subordination agreement in substantially the form of
Exhibit K executed by each of the Shareholders; and
(xi) an amended investor right agreement, dated the
Closing Date (the "Rights Agreement"), substantially in the form of Exhibit M.
(b) Buyer will deliver to the Shareholders' Representative on
behalf of the Shareholders:
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(i) a bank cashier's or certified check for each
Shareholder equal to their pro rata amount of the Closing Cash Payment;
(ii) a Note for each Shareholder equal to their pro rata
amount of the Notes;
(iii) a Warrant for each Shareholder equal to their pro
rata share of the right to purchase Common Stock;
(iv) a certificate of the President of Buyer pursuant to
Section 6.2(a);
(v) an opinion of Hewitt & McGuire LLP, dated the Closing
Date, substantially in the form of Exhibit J; and
(vi) a security agreement in substantially the form of
Exhibit G, executed by Buyer and the Company.
(c) Buyer, the Shareholders and the Disbursement Agent shall
enter into the Disbursement Agent Agreement and Buyer shall deposit the Initial
Disbursement Amount with the Disbursement Agent by bank cashier's or certified
check.
(d) The Company and Doug Levinson shall enter into a
disbursement agreement in substantially the form of Exhibit L and the Company
shall deposit Six Hundred Thousand Dollars ($600,000) with the Disbursement
Agent by bank cashier's or certified check.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the attached Schedule II (which lists exceptions
to the following representations and warranties and also contains matters
required to be disclosed pursuant to this Article II, each of which corresponds
to the numbered sections contained in this Article II), Buyer represents and
warrants to the Company and the Shareholders as follows:
2.1 Organization; Qualification. Buyer (a) is a corporation duly
incorporated, validly existing and in good standing under the laws of the state
of Delaware; (b) has the corporate power and authority to carry on its business
as now conducted; (c) has no subsidiaries or affiliates and owns no securities
or other interests in any other corporation or other entity (except for Buyer's
ownership of all of the outstanding equity securities of each Buyer Subsidiary
as disclosed in Schedule 2.3); (d) has delivered to the Company complete and
correct copies of its certificate of incorporation and by-laws as currently in
effect; and (e) is qualified to do business and is in good standing in the State
of California and in each other jurisdiction in which the property owned, leased
or operated by it or the business conducted by it makes such qualification
necessary.
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2.2 Capital Stock of Buyer. The authorized capital stock of Buyer
consists of 100,000,000 shares of common stock, 8,440,002 shares of Series A
Preferred Stock, and 6,000,000 shares of Series B Preferred Stock, of which
14,095,640 shares of Common Stock, 8,440,002 shares of Series A Preferred Stock
and 2,094,174 shares of Series B Preferred Stock are issued and outstanding.
There are no (a) preemptive or other subscriptive rights with respect to the
outstanding shares of Buyer common stock, (b) treasury shares or any other
authorized or outstanding equity securities of Buyer, or (c) outstanding rights,
options, warrants, contracts, understandings, arrangements or commitments
providing for issuance of, or granting of rights to acquire, any capital stock
of Buyer or securities convertible into or exchangeable for capital stock of
Buyer.
2.3 Capital Stock of Buyer Subsidiaries. Section 2.3 of the Schedule
lists all subsidiaries, direct or indirect, of Buyer (hereinafter collectively
the "Buyer Subsidiaries" or individually a "Buyer Subsidiary"). Such Schedule
correctly sets forth, as to each of the Buyer Subsidiaries, (a) the jurisdiction
of incorporation; (b) the jurisdictions, if any, in which such Buyer Subsidiary
is qualified to do business as a foreign corporation; (c) the number of shares
of each Buyer Subsidiary's authorized capital; (d) the number of shares thereof
issued and outstanding; and (e) the names of the holders of such outstanding
shares and the amounts they own. Neither Buyer nor any Buyer Subsidiary has any
outstanding investment in or advance of cash or is otherwise under any
obligation to purchase or subscribe to any investments in, or incur obligations
with respect to, any corporation, limited liability company, partnership or
other entity other than Buyer or the Buyer Subsidiaries. There are no
outstanding rights or options to acquire, or any outstanding securities
convertible into, stock of any class of any Buyer Subsidiary. Each Buyer
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such qualification is necessary to the transaction of
its business, all of which jurisdictions are listed on Section 2.3 of the
Schedule hereto, and has corporate power to own all of its property and assets
and carry on its business as it is now being conducted.
2.4 Authority. Buyer has full corporate power and authority to execute
and deliver this Agreement, and to perform Buyer's obligations under, and to
consummate the transactions contemplated by, this Agreement, and all corporate
action of Buyer necessary for such execution, delivery and performance has been
duly and validly taken as required by law or under the Certificate of
Incorporation or Bylaws of Buyer. This Agreement constitutes the legal, valid
and binding obligation of Buyer enforceable in accordance with its terms against
Buyer subject, as to enforcement of remedies, to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting creditors'
rights generally and to general equitable principles. The execution and delivery
of this Agreement by Buyer do not, and the performance and consummation by Buyer
of the transactions contemplated by this Agreement will not (a) conflict with,
constitute or result in a breach or violation of, or default under, any of the
terms, conditions or provisions of any material note, bond, mortgage, indenture,
lease, license, agreement, contract or other instrument or obligation to which
Buyer or any Buyer Subsidiary is a party or by which any of their respective
assets or properties is bound; (b) violate any judgment, order, injunction,
decree, statute, rule, or regulation applicable to Buyer or any Buyer Subsidiary
or any of their respective assets or properties; (c) contravene, violate or be
impermissible under the Certificate of Incorporation or Bylaws of Buyer or any
Buyer
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Subsidiary; or (d) permit any party to terminate any lease, contract, agreement
or other instrument to which Buyer or any Buyer Subsidiary is a party or to
accelerate the maturity of any indebtedness or other obligation of Buyer or any
Buyer Subsidiary. Except as set forth in Section 2.4 of the Schedule, Buyer is
not and will not be required to give any notice to or obtain any consent from
any Person in connection with the execution and delivery of this Agreement and
the consummation by Buyer of the transaction contemplated by this Agreement.
2.5 Compliance With Law. Buyer and each Buyer Subsidiary holds all
licenses, franchises, permits and authorizations necessary for the lawful
conduct of its business and has complied and is currently in compliance, in all
material respects, with all applicable statutes, laws, ordinances, rules and
regulations of all federal, state, local and foreign governmental bodies,
agencies and subdivisions having, asserting or claiming jurisdiction over it or
over any part of its operations.
2.6 No Governmental Consents. Except as contemplated by this
Agreement, neither the execution of this Agreement, nor the consummation of the
transactions contemplated hereby, require the consent or approval of, or
declaration, filing or registration with, any governmental authority.
2.7 Properties. Attached as Section 2.7 of the Schedule is a summary
schedule of all real estate interests and leaseholds, equipment, machinery,
vehicles, improvements and other tangible properties or assets owned or leased
by Buyer or the Buyer Subsidiaries or otherwise used in, or required for, the
business of Buyer or the Buyer Subsidiaries. Each of Buyer and the Buyer
Subsidiaries owns (beneficially and of record) and has good and marketable title
to all of its properties and assets, and none of such properties or assets is
subject to any mortgage, pledge, lien, security interest, lease, charge,
encumbrance or joint ownership other than equipment leases entered into in the
ordinary course of business. All such properties and assets and their use
conform in all material respects to all applicable building, zoning, fire,
health and other laws, ordinances or regulations and no notice of any violation
with respect thereto has been received by either Buyer or Buyer Subsidiary. All
such properties and assets are in good condition (except for normal wear and
tear), fit for the purposes for which they are being used. Each of Buyer and the
Buyer Subsidiaries has valid and enforceable leasehold interests in all
properties and assets which it purports to lease. Buyer or one or more of the
Buyer Subsidiaries is, or shall be prior to the Closing, the party-lessee on all
real and personal property leases covering all or any portion of the premises or
any personal property used by Buyer or any Buyer Subsidiary in the operation of
its business. All leases to which Buyer or any Buyer Subsidiary is a
party-lessee are in full force and effect and neither Buyer nor any Buyer
Subsidiary, nor, to the knowledge of Buyer, the other party thereto, is in
default thereunder, and the transactions contemplated by this Agreement shall
not affect their validity or enforceability.
2.8 Financial Information. Buyer has delivered to the Company true
copies of the consolidated financial statements of Buyer for the fiscal year
ended December 31, 1996, with any interim consolidated financial statements
through June 30, 1997. Such consolidated financial statements of Buyer shall
hereinafter be referred to collectively as the "Buyer Financial Information."
The Buyer Financial Information (a) is complete and correct in all material
respects, (b) has been prepared in conformity with generally accepted accounting
principles
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consistently applied, and (c) presents fairly the consolidated financial
condition of Buyer at the dates presented and the consolidated results of
operations of Buyer for the period covered subject to year end adjustments for
any interim financial statements. There does not exist any fact, event,
condition, claim or latent claim, known to Buyer, which would cause an adverse
change in the Buyer Financial Information as presented other than as set forth
therein.
2.9 Absence of Change. Since June 30, 1997, there has been no adverse
change in the financial condition, results of operations, assets, liabilities or
business of Buyer and the Buyer Subsidiaries, taken as a whole, and no event or
condition has occurred which Buyer believes has adversely affected or shall
adversely affect the financial condition, results of operations, assets,
liabilities or business of Buyer and the Buyer Subsidiaries, taken as a whole.
2.10 Taxes. Buyer and each Buyer Subsidiary have prepared and filed
all federal, state and local tax returns and tax reports required to be filed to
date with appropriate governmental agencies in all jurisdictions in which such
returns and reports are required to be filed. All taxes and estimated taxes
(including any penalties or interest) imposed by or payable to any governmental
taxing authority with respect to the operations or ownership of property and
assets of Buyer or any Buyer Subsidiary have been fully paid or adequately
provided for in the Buyer Financial Information, except taxes based on
operations since that date. All tax returns and reports to date are true and
correct.
2.11 Licenses, Permits, Etc. Each of Buyer and the Buyer Subsidiaries
has all approvals, authorizations, consents, licenses, orders, franchises,
rights, governmental security clearances and registrations and permits of all
governmental agencies, whether federal state or local, United States or foreign,
required to permit the operation of its businesses as presently conducted, the
absence of which would have an adverse effect on the financial condition, assets
or business of Buyer and the Buyer Subsidiaries, taken as a whole.
2.12 Contracts and Commitments. Neither Buyer nor any Buyer Subsidiary
is a party to any: (i) agreement or indenture relating to the borrowing of money
or to mortgaging, pledging or otherwise placing a lien on any of the assets of
Buyer or any Buyer Subsidiary; or (ii) guaranty of any obligation for borrowed
money or otherwise, other than endorsements made for collection.
2.13 No Default. Buyer and each Buyer Subsidiary is not in violation,
breach or default, and no event exists that, with notice or lapse of time or
both, would constitute such a violation, breach or default under any loan
agreement, indenture, bond, resolution, agreement, lease, contract or other
instrument to which Buyer or any Buyer Subsidiary is a party or to which Buyer
or any Buyer Subsidiary or its properties and assets are bound.
2.14 Litigation. There is no governmental or private litigation,
investigation, arbitration or proceeding of any kind whatsoever pending or, to
the knowledge of Buyer, threatened against Buyer or any Buyer Subsidiary.
Neither Buyer nor any Buyer Subsidiary is aware of any facts which might
reasonably result in matters described in this Section.
2.15 No Undisclosed Liabilities. Except as and to the extent
specifically reflected or reserved against in the Buyer Financial Information or
otherwise disclosed herein,
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neither Buyer nor any Buyer Subsidiary has any liabilities or obligations of any
nature, whether absolute, accrued or contingent, and whether due or to become
due (including, without limitation, any liability for taxes and interest,
penalties and other charges payable with respect to any such liability or
obligation) which in the aggregate are material to the financial condition,
assets, properties or business of Buyer and the Buyer Subsidiaries, taken as a
whole.
2.16 No Broker or Finder. Neither Buyer nor any Buyer Subsidiary has
had discussions with, negotiated with, been represented by or employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finder's fees to any individual or entity in connection with this Agreement
or any of the transactions contemplated hereby.
2.17 No Adverse Developments. Neither Buyer nor any Buyer Subsidiary
has knowledge of any development of any kind in any applicable federal or state
law, regulation or ordinance relating to the business of Buyer or any Buyer
Subsidiary which would have an adverse effect upon the financial condition,
assets or business of Buyer or any Buyer Subsidiary.
2.18 Conversion Shares. Any shares of common stock of Buyer issued
upon conversion of the Notes will be duly and validly issued, fully paid and
nonassessable.
2.19 Disclosure. The information relating to and concerning Buyer and
each Buyer Subsidiary contained in this Agreement, any Schedule hereto or in any
other certificate, instrument or other document given by Buyer in connection
with this Agreement (including each representation and warranty contained herein
or therein, or in the Joint Information Statement to be provided to the
Shareholders of the Company and the stockholders of Buyer (the "Joint
Information Statement")) is true, correct and complete and contains no untrue
statement of material fact or omits or will omit to state material facts
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SHAREHOLDERS
Except as set forth in the attached Schedule III (which lists
exceptions to the following representations and warranties and also contains
matters required to be disclosed pursuant to this Article III, each of which
corresponds to the numbered sections contained in this Article III), the Company
and each of the Shareholders jointly and severally represent and warrant to
Buyer as follows:
3.1 Organization; Qualification. The Company (a) is a corporation
duly organized, validly existing and in good standing under the laws of the
state of California; (b) has the corporate power and authority to carry on its
business as now conducted; (c) has no subsidiaries or affiliates and owns no
securities or other interests in any other corporation or other entity (except
for the Company's direct or indirect ownership of all the outstanding equity
securities of the Company Subsidiaries as disclosed in Section 3.3 of the
Schedule); (d) has delivered to Buyer complete and correct copies of its
articles of incorporation and bylaws as
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currently in effect; and (e) is qualified to do business and is in good standing
in the state of California and in each other jurisdiction in which the property
owned, leased or operated by it or the business conducted by it makes such
qualification necessary.
3.2 Capital Stock. The authorized capital stock of the Company
consists of 500,000 shares of common stock, of which 221,083 shares
(collectively, the "Company Shares") are issued and outstanding. All of the
Company Shares have been duly authorized and validly issued and are fully paid
and non-assessable, and were sold pursuant to, and within the limitations
contained in, appropriate and effective permits, qualifications or consents of
all applicable government authorities to the extent required. There are no (a)
preemptive or other subscriptive rights with respect to any of the Company
Shares, (b) treasury shares or any other authorized or outstanding equity
securities of the Company or (c) outstanding rights, options, warrants,
contracts, understandings, arrangements or commitments providing for issuance
of, or granting of rights to acquire, any capital stock of the Company or
securities convertible into or exchangeable for capital stock of the Company.
3.3 Subsidiaries. Section 3.3 of the Schedule lists all subsidiaries,
direct or indirect, of the Company (hereinafter collectively the "Company
Subsidiaries" or individually a "Company Subsidiary"). Such Schedule correctly
sets forth, as to each of the Company Subsidiaries, (a) the jurisdiction of
incorporation; (b) the jurisdictions, if any, in which such Company Subsidiary
is qualified to do business as a foreign corporation; (c) the number of shares
of each Company Subsidiary's authorized capital; (d) the number of shares
thereof issued and outstanding; and (e) the names of the holders of such
outstanding shares and the amounts they own. Neither the Company, nor any
Company Subsidiary, has any outstanding investment in or advance of cash or is
otherwise under any obligation to purchase or subscribe to any investments in,
or incur obligations with respect to, any corporation, limited liability
company, partnership or other entity other than the Company or the Company
Subsidiaries. There are no outstanding rights or options to acquire, or any
outstanding securities convertible into, stock of any class of any Company
Subsidiary. Each Company Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where such qualification is necessary to
the transaction of its business, all of which jurisdictions are listed on
Section 3.3 of the Schedule hereto, and has corporate power to own all of its
property and assets and carry on its business as it is now being conducted.
3.4 Authority. The Company has full corporate power and authority to
execute and deliver this Agreement, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement, and all corporate
action of the Company necessary for such execution, delivery and performance has
been duly and validly taken as required by law or under the Articles of
Incorporation or Bylaws of the Company. This Agreement constitutes the legal,
valid and binding obligation of the Company enforceable in accordance with its
terms against the Company subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting
creditors' rights generally and to general equitable principles. The execution
and delivery of this Agreement by the Company do not, and the performance and
consummation by the Company of the transactions contemplated by this Agreement
will not (a) conflict with, constitute or result in a breach or violation of, or
default under, any of the terms, conditions or provisions of any material note,
bond, mortgage,
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indenture, lease, license, agreement, contract or other instrument or obligation
to which the Company or any Company Subsidiary is a party or by which any of
their respective assets or properties is bound; (b) violate any judgment, order,
injunction, decree, statute, rule, or regulation applicable to the Company or
any Company Subsidiary or any of their respective assets or properties; (c)
contravene, violate or be impermissible under the Articles of Incorporation or
Bylaws of the Company or any Company Subsidiary; or (d) permit any party to
terminate any lease, contract, agreement or other instrument to which the
Company or any Company Subsidiary is a party or to accelerate the maturity of
any indebtedness or other obligation of the Company or any Company Subsidiary.
Except as set forth in Section 3.4 of the Schedule, the Company is not and will
not be required to give any notice to or obtain any consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated by this Agreement.
3.5 Compliance With Law. The Company and each Company Subsidiary hold
all licenses, franchises, permits and authorizations necessary for the lawful
conduct of its business and has complied and is currently in compliance, in all
material respects, with all applicable statutes, laws, ordinances, rules and
regulations of all federal, state, local and foreign governmental bodies,
agencies and subdivisions having, asserting or claiming jurisdiction over it or
over any part of its operations.
3.6 No Governmental Consents. Except as contemplated by this
Agreement, neither the execution of this Agreement, nor the consummation of the
transactions contemplated hereby, require the consent or approval of, or
declaration, filing or registration with any governmental authority.
3.7 Properties. Attached as Section 3.7 of the Schedule is a summary
schedule of all real estate interests and leaseholds, equipment, machinery,
vehicles, improvements and other tangible properties or assets owned or leased
by the Company or the Company Subsidiaries or otherwise used in, or required
for, the business of the Company or the Company Subsidiaries. The Company and
each Company Subsidiary own (beneficially and of record) and has good and
marketable title to all of its properties and assets, and none of such
properties or assets is subject to any mortgage, pledge, lien, security
interest, lease, charge, encumbrance or joint ownership other than equipment
leases entered into in the ordinary course of business, the principal terms of
which are summarized on Section 3.7 of the Schedule. All such properties and
assets and their use conform in all material respects to all applicable
building, zoning, fire, health and other laws, ordinances or regulations and no
notice of any violation with respect thereto has been received by any of the
Company or the Company Subsidiaries. All such properties and assets are in good
condition (except for normal wear and tear), fit for the purposes for which they
are being used. Each of the Company and the Company Subsidiaries has valid and
enforceable leasehold interests in all such properties and assets which it
purports to lease. The Company or one or more of the Company Subsidiaries is, or
shall be prior to the Closing, the party-lessee on all real and personal
property leases covering all or any portion of the premises or any personal
property used by the Company or any Company Subsidiary in the operation of its
business. All leases to which the Company or any Company Subsidiary is a
party-lessee are in full force and effect and neither the Company nor any
Company Subsidiary nor, to the knowledge of the Company and the Shareholders,
the other party thereto, is in default
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thereunder, and the transactions contemplated by this Agreement shall not affect
their validity or enforceability.
3.8 Financial Information. The Company has delivered to Buyer true
copies of the consolidated financial statements of the Company for the fiscal
year ended March 31, 1997, with any interim consolidated financial statements
through August 31, 1997. Such consolidated financial statements of the Company
shall hereinafter be referred to collectively as the "Company Financial
Information". The Company Financial Information (a) is complete and correct in
all material respects, (b) has been prepared in conformity with generally
accepted accounting principles consistently applied, and (c) presents fairly the
consolidated financial condition of the Company at the dates presented and the
consolidated results of operations of the Company for the period covered subject
to year end adjustments for any interim financial statements. There does not
exist any fact, event, condition, claim or latent claim, known to the Company
which would cause an adverse change in the Company Financial Information as
presented other than as set forth therein.
3.9 Absence of Change. Since August 31, 1997:
(a) There has been no adverse change in the financial
condition, results of operations, assets, liabilities or business of the Company
and the Company Subsidiaries, taken as a whole, and no event or condition has
occurred which the Company believes has adversely effected or shall adversely
effect the financial condition, results of operations, assets, liabilities or
business of the Company and the Company Subsidiaries, taken as a whole;
(b) There have been no short term or long term liabilities or
obligations incurred by or on behalf of the Company or any Company Subsidiary,
except in the normal course of business, and no such liability in the ordinary
course exceeds $10,000 in any one instance or $25,000 in the aggregate;
(c) There have been no dividends, redemptions, share dividends
or other distributions in respect of shares to the shareholders of the Company
or any Company Subsidiary declared, set aside or paid;
(d) There has been no sale, transfer or distribution of any
asset of the Company or any Company Subsidiary or any other transaction with
respect to the Company or any Company Subsidiary entered into other than in the
regular and customary course of business, and there has been no forgiveness,
waiver or compromise of debt;
(e) There has been no loss, damage, or destruction of property
or assets of the Company or any Company Subsidiary not fully covered by
insurance and no waiver of any rights of material value;
(f) No capital expenditure with respect to the Company or any
Company Subsidiary or any of the properties or assets of any of them has been
made in excess of $10,000 in the aggregate;
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(g) There has been no change in the employment contract or
pension plan of any officer, director, employee or consultant of the Company or
any Company Subsidiary, and no such person has received any bonus or option to
purchase any equity security of the Company or any Company Subsidiary; and
(h) Since August 31, 1997, the Company has not reclassified or
otherwise caused an increase in its current assets or decrease in its current
liabilities, other than in the normal course of the Company's business as
conducted over the prior three months, and in no event will the Company increase
any long-term indebtedness resulting in either an increase in current assets or
decrease in current liabilities or sell or otherwise dispose of its non-current
assets.
3.10 Taxes. The Company and each Company Subsidiary have prepared and
filed all federal, state and local tax returns and tax reports required to be
filed to date with appropriate governmental agencies in all jurisdictions in
which such returns and reports are required to be filed. All taxes and estimated
taxes (including any penalties or interest) imposed by or payable to any
governmental taxing authority with respect to the operations or ownership of
property and assets of the Company or any Company Subsidiary have been fully
paid or adequately provided for in the Company Financial Information, except
taxes based on operations since that date. All tax returns and reports to date
are true and correct.
3.11 Licenses, Permits, Etc. The Company and each of the Company
Subsidiaries have all approvals, authorizations, consents, licenses, orders,
franchises, rights, governmental security clearances and registrations and
permits of all governmental agencies, whether federal, state or local, United
States or foreign, required to permit the operation of its businesses as
presently conducted, the absence of which would have an adverse effect on the
financial condition, assets or business of the Company and the Company
Subsidiaries, taken as a whole.
3.12 Intellectual Property. Section 3.12 of the Schedule is a list of
all names, trade names, patents, trademarks, franchises and copyrights used by
the Company and the Company Subsidiaries; and, except as set forth in Section
3.12 of the Schedule, the Company or a Company Subsidiary owns, and has the
legal right to use, such names, trade names, patents, trademarks, franchises and
copyrights. Nothing has come to the attention of the Company or any Shareholder
to the effect that any such use may infringe on any rights owned, held, or
asserted by any other person or that any such rights are not valid and
enforceable.
3.13 Contracts and Commitments.
(a) Neither the Company nor any Company Subsidiary is a party
to any: (i) agreement or indenture relating to the borrowing of money or to
mortgaging, pledging or otherwise placing a lien on any of the assets of the
Company or any Company Subsidiary; (ii) guaranty of any obligation for borrowed
money or otherwise, other than endorsements made for collection; (iii) contract
or group of related contracts with the same party for the purchase of products
or services, under which the undelivered balance of such products and services
has a selling price in excess of $10,000 in the aggregate; (iv) contract or
group of related contracts with the same party for the sale of products or
services under which the undelivered balance of
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such products or services has a sales price in excess of $10,000 in the
aggregate; (v) other contract or group of related contracts with the same party
continuing over a period of more than six months from the date or dates thereof,
not terminable by it on 30 days or less notice without penalty, or involving
more than $10,000 in the aggregate; (vi) contract which prohibits the Company or
any Company Subsidiary from freely engaging in business anywhere in the world;
(vii) contract, agreement or understanding with any shareholder, officer,
director or employee of the Company or any Company Subsidiary (other than for
employment on customary terms); (viii) any joint venture or partnership contract
or arrangement or any other agreement involving the sharing of profits or
expenses; or (ix) other agreement material to the business of the Company or any
Company Subsidiary or other agreement not entered into in the ordinary course of
business.
(b) Buyer has been supplied with a true and correct copy of
all written contracts which are referred to on Section 3.13 of the Schedule,
together with all amendments, waivers or other changes thereto.
3.14 No Default. The Company and each Company Subsidiary are not in
violation, breach or default, and no event exists that, with notice or lapse of
time or both, would constitute such a violation, breach or default under any
loan agreement, indenture, bond, resolution, agreement, lease, contract or other
instrument to which the Company or any Company Subsidiary is a party or to which
the Company or any Company Subsidiary or its properties and assets are bound.
3.15 Insurance. Section 3.15 of the Schedule attached hereto lists
and briefly describes each insurance policy maintained by the Company or the
Company Subsidiaries with respect to their properties, assets or business
operations. All of such insurance policies are in full force and effect, and
neither the Company nor any Company Subsidiary is in default with respect to its
obligations under any of such insurance policies.
3.16 Bank Accounts. Section 3.16 of the Schedule attached hereto
contains a list of each bank account, including safe deposit boxes, maintained
by the Company or any Company Subsidiary and the names of the persons authorized
to draw upon or have access thereto.
3.17 Litigation. There is no governmental or private litigation,
investigation, arbitration or proceeding of any kind whatsoever pending or, to
the knowledge of the Company, threatened against the Company or any Company
Subsidiary, other than proceedings with no more than $10,000 in dispute which do
not aggregate more than $50,000 in dispute. Neither the Company nor any
Shareholder is aware of any facts which might reasonably result in matters
described in this Section.
3.18 No Undisclosed Liabilities. Except as and to the extent
specifically reflected or reserved against in the Company Financial Information
or otherwise disclosed herein, neither the Company nor any Company Subsidiary
has any liabilities or obligations of any nature, whether absolute, accrued or
contingent, and whether due or to become due (including, without limitation, any
liability for taxes and interest, penalties and other charges payable with
respect to any such liability or obligation) which in the aggregate are material
to
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the financial condition, assets, properties or business of the Company and the
Company Subsidiaries, taken as a whole.
3.19 Labor Contracts and Employment Agreements. Section 3.19 of the
Schedule identifies (i) each collective bargaining agreement and other labor
agreement to which the Company or any Company Subsidiary is a party or by which
it is bound; (ii) each employment, profit sharing, deferred compensation, bonus,
stock option, stock purchase, pension, retainer, consulting, retirement, health,
welfare, commissions, or incentive plan or contract to which the Company or any
Company Subsidiary is a party, or by which it is or may be bound; and (iii) each
plan and agreement under which "fringe benefits" (including, but not limited to,
vacation plans or programs, sick leave plans or programs, dental or medical
plans or programs, insurance, hospitalization, and related or similar benefits)
are afforded to employees of the Company or any Company Subsidiary. All these
contracts, agreements and arrangements are in full force and effect. The Company
and each Company Subsidiary are not and, to the best knowledge of the Company or
the Shareholders, no other party to any such agreement, plan, program or
contract is, in default with respect to any material term or condition thereof,
nor has any event occurred which through the passage of time or the giving of
notice, or both, would constitute a default thereunder or would cause the
acceleration of any obligation of any party thereto. The Company and each
Company Subsidiary have complied in all material respects with all applicable
laws, rules and regulations relating to the employment of labor, including those
relating to wages, hours, collective bargaining and the payment and withholding
of taxes and other sums as required by appropriate governmental authorities.
Except as set forth in Section 3.19 of the Schedule:
(a) No unfair labor practice complaint is pending against the
Company or any Company Subsidiary before the National Labor Relations Board or
any state or local agency, no labor strike or other labor trouble affecting the
Company or any Company Subsidiary is pending, and no labor related grievance is
pending against the Company or any Company Subsidiary;
(b) No organization or representation question is pending
respecting the employees of the Company or any Company Subsidiary, and no such
question has been raised within the three (3) year period prior to the date of
this Agreement; and
(c) No arbitration proceeding arising out of or under any
collective bargaining agreement to which the Company or any Company Subsidiary
is a party is pending, and to the best knowledge of the Company and the
Shareholders no basis for any such proceeding exists.
3.20 Corporate Records. The corporate minute book and stock records
of the Company and each Company Subsidiary, presented to Buyer and its counsel
for review, are complete and accurate. The meetings of directors and
shareholders referred to therein were duly called and held and signatures
contained on all documents therein are the true signatures of the persons
purporting to have signed them.
3.21 No Adverse Developments. Except as disclosed on Section 3.21 of
the Schedule, neither the Company nor any Company Subsidiary has knowledge of
any development
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of any kind in any applicable federal or state law, regulation or ordinance
relating to the business of the Company or any Company Subsidiary which would
have an adverse effect upon the financial condition, assets or business of the
Company or any Company Subsidiary.
3.22 No Broker or Finder. Neither the Company nor any Company
Subsidiary has had discussions with, negotiated with, been represented by or
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finder's fees to any individual or entity in connection with this
Agreement or any of the transactions contemplated hereby.
3.23 Environmental Matters. Neither the Company nor any Company
Subsidiary is in violation of any environmental law or regulation, the
correction of or compliance with which will or could entail expenditures in
excess of $5,000 per occurrence, or $10,000 in the aggregate, or otherwise
adversely affect business operations as previously conducted.
3.24 Agreements in Full Force and Effect. With respect to the Company
and, to the knowledge of the Company and the Shareholders, the other parties
thereto, all contracts, leases, policies and licenses referred to in this
Article III, and the Schedules hereto, are valid and in full force and effect.
3.25 Disclosure. The information relating to and concerning the
Company and the Company Subsidiaries contained in this Agreement, any Schedule
hereto or in any other certificate, instrument or other document given by the
Company in connection with this Agreement (including each representation and
warranty contained herein or therein), or in the Joint Information Statement is
true, correct and complete and contains no untrue statement of material fact or
omits or will omit to state material facts necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder severally represents and warrants to Buyer as follows:
4.1 Title to Shares. Such Shareholder is the owner of the number of
Shares indicated on such Shareholder's respective signature page. No other
person or entity has any right, title, or interest, beneficially or of record,
in or to the Shares owned by such Shareholder and such Shares are free and clear
of any claims, liens, encumbrances, security agreements, equities, options,
charges, or restrictions, and can be delivered and surrendered to Buyer pursuant
hereto without obtaining the consent or approval of any other person or
governmental authority. Upon the transfer and delivery of such Shares to Buyer
in accordance with this Agreement and payment therefor, Buyer will become the
owner and holder of all of such Shares free and clear of all liens,
encumbrances, pledges, claims, charges and restrictions on transfer.
4.2 Authority. This Agreement constitutes the legal, valid, and
binding obligation of such Shareholder enforceable in accordance with its terms,
subject, as to
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enforcement of remedies, to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting creditors' rights generally and to
general equitable principles. The consummation of the transactions contemplated
by this Agreement and fulfillment of the terms hereof will not breach any of the
terms and provisions of, or constitute a default by such Shareholder under, any
agreement or instrument to which such Shareholder is a party or by which such
Shareholder is bound, or any statute, ruling, decree, judgment, order or
regulation of any governmental authority having jurisdiction over such
Shareholder or such Shareholder's property; and no consent, approval,
authorization or order of any court or governmental agency or body is required
for the consummation by such Shareholder of the transactions on such
Shareholder's part contemplated hereby. Except set forth in Schedule 4.2 of the
Schedule, such Shareholder will not be required to give any notice to or obtain
any consent from any Person in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated by this
Agreement.
4.3 Restricted Securities. Such Shareholder understands that the Notes,
the Warrants, the shares of Buyer common stock issuable upon exercise of the
Warrants, and any other securities issued by Buyer under this Agreement
(collectively, the "Securities") will be issued by Buyer without registration
under the Act and without qualification and/or registration under applicable
state securities laws pursuant to exemptions from registration and/or
qualification contained in the Act and applicable state securities laws. Such
Shareholder understands that the foregoing exemptions depend upon, among other
things, the bona fide nature of such Shareholder's investment intent as
expressed herein. None of the Securities nor any interest in the Securities will
be sold, transferred, or otherwise disposed of by such Shareholder without
registration and/or qualification under the Act and applicable state securities
laws unless the sale or other disposition is made in compliance with exemptions
from such registration and qualification requirements with respect to such
resale or disposition and, upon the request of Buyer, such Shareholder, prior to
consummation of any such resale or disposition, provides Buyer an opinion of
counsel satisfactory to Buyer to the effect that the contemplated transfer may
be made without violating the Act or applicable state securities laws.
4.4 Investment Intent. Such Shareholder is acquiring the Securities
for investment purposes only, for such Shareholder's own account and not with a
view to or for sale in connection with any distribution of the Securities to
others within the meaning of the Act.
4.5 Questionnaire. The information contained in the Investor
Questionnaire provided by such Shareholder to the Company in connection with
this transaction is true and correct as of the date hereof and Buyer may rely
upon such information in determining whether exemptions from registration under
federal and applicable state securities laws are available in connection with
any issuance of Securities under this Agreement.
4.6 Purchaser Representations. Such Shareholder has received all of
the information Shareholder considers necessary or appropriate to evaluate the
risks and merits of an investment in Buyer, and has had an opportunity to
discuss Buyer's business, management, financial affairs and prospects with
Buyer's management. Such Shareholder is able to bear the economic risks related
to a purchase of the Securities. Such Shareholder either has a pre-existing
personal or business relationship with Buyer or any of its officers, directors
or controlling persons, or by reason of such Shareholder's business or financial
experience or the
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business or financial experience of its professional advisor who is not
affiliated with and is not compensated by Buyer or any affiliated or selling
agent of Buyer, directly or indirectly, has the capacity to protect such
Shareholder's own interests in connection with the subject transactions.
4.7 Residence. Such Shareholder's principal residence is shown below
such Shareholder's signature on the signature page.
4.8 Legends. Such Shareholder acknowledges that the certificates
representing any of the Securities to be issued to such Shareholder will contain
legends which prohibit an offer to transfer or a transfer of all or any portion
of the Securities unless the Securities are registered under the Act or unless
an exemption from registration is available with respect to such resale or
disposition.
Buyer need not register, and may instruct its transfer agent not to transfer, a
transfer of any Securities unless the conditions set forth in this Article IV
are satisfied.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 Conduct of Business by the Company. The Company, the Management
Shareholders and the Shareholders, as applicable, agree that from the date
hereof until the Closing, except as otherwise approved in writing by Buyer:
(a) The Management Shareholders shall cause the Company to,
and the Company shall, carry on its business and operations diligently and
substantially in the manner carried on as of the date hereof and shall not make
or institute any material changes in its methods of purchase, sale, management,
accounting or operation.
(b) No Shareholder shall pledge, assign or otherwise transfer
any portion of such Shareholder's interest in the Shares.
(c) The Management Shareholders shall cause the Company to,
and the Company shall, take such reasonable action as may be necessary to
maintain, preserve, renew and keep in effect the existence, rights and
franchises of the Company and shall use its reasonable efforts to preserve the
business organization of the Company intact, to keep available to Buyer the
present officers and employees, and to preserve for Buyer its present
relationships with suppliers and customers and others having business
relationships with the Company.
(d) The Management Shareholders shall cause the Company to
not, and the Company shall not, enter into any new sales representative, dealer
or distributor contracts, or amend any existing contracts, without the prior
written consent of Buyer, regardless of the fact that any such individual
contract or amendment might otherwise be in the ordinary course of business.
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(e) The Management Shareholders shall cause the Company to
not, and the Company shall not, amend its Articles of Incorporation or Bylaws or
make any changes in authorized or issued capital stock, including, without
limitation, any issuance of additional shares or granting of any rights, options
or warrants to acquire any capital stock of the Company.
(f) The Management Shareholders shall cause the Company to,
and the Company shall, maintain all of the insurance in effect as of the date
hereof.
(g) The Management Shareholders shall cause the Company to,
and the Company shall, use, operate, maintain and repair all property of the
Company in the ordinary course of business.
(h) The Management Shareholders shall cause the Company to,
and the Company shall, promptly provide Buyer with interim monthly financial
statements and other management reports as and when they are available.
(i) Other than certain bonuses paid to Doug Levinson in
connection with this Agreement, the Management Shareholders shall cause the
Company to not, and the Company shall not: (i) declare, set aside or pay any
dividend or any other distribution; engage in any redemption, purchase or other
acquisition by the Company of any capital stock of the Company, or any security
relating thereto; or make any other payment to any Shareholder (other than
compensation on a basis consistent with past practice of the Company); or (ii)
increase any compensation, salaries or wages payable or to become payable to any
employee or agent of the Company (including, without limitation, any increase or
change pursuant to any bonus, pension, profit sharing, retirement or other plan
or commitment), or any bonus or other employee benefit granted made or accrued,
except compensation increases which have been committed to previously by the
Company or made in the ordinary course of business.
(j) The Management Shareholders shall cause the Company to
not, and the Company shall not, make any change (whether or not material) in the
Company's accounting procedures, methods, policies or practices or the manner in
which the Company maintains its records.
(k) The Management Shareholders shall cause the Company to
not, and the Company shall not, make any capital expenditures other than in the
ordinary course of business.
(l) The Management Shareholders shall cause the Company to
not, and the Company shall not, file any federal, state or local tax return
without the prior written consent of Buyer.
(m) Except as expressly provided in this Agreement, the
Management Shareholders shall cause all indebtedness owed to the Company by any
Shareholder or any Affiliate of any Shareholder to be paid in full prior to
Closing.
(n) The Management Shareholders shall cause the Company to
not, and the Company shall not, reclassify or otherwise cause an increase in its
current assets or decrease
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in its current liabilities, other than in the normal course of the Company's
business as conducted over the prior three months, and in no event will the
Company increase any long-term indebtedness resulting in either an increase in
current assets or decrease in current liabilities or sell or otherwise dispose
of its non-current assets.
5.2 Access and Information; Confidentiality. Each of the Company and
Buyer shall afford to the other and to the other's accountants, counsel and
other representatives full access during normal business hours (and at such
other times as the parties may mutually agree) throughout the period prior to
the Closing Date to all of its properties, books, contracts, commitments,
records and personnel and, during such period, each shall furnish promptly to
the other all other information concerning its business, properties and
personnel as the other may reasonably request. Each of the Company and Buyer
shall hold, and shall cause their respective employees and agents to hold, in
confidence all such information in accordance with the terms of the
Confidentiality Agreements dated May 23, 1997 between the Company and Buyer.
Upon termination of this Agreement, each of the Company and Buyer will, if so
requested in writing by the other party, promptly return to the other party or
destroy all documents or other materials received from the other party.
5.3 Shareholders' Representative.
(a) In order to administer efficiently the rights and
obligations of the Shareholders under this Agreement, the Shareholders hereby
designate and appoint Harold Silen as the Shareholders' Representative, to serve
as the Shareholders' agent and attorney-in-fact for the limited purposes set
forth in Section 5.3(b) of this Agreement.
(b) Each of the Shareholders hereby appoints the Shareholders'
Representative as such Shareholder's agent, proxy and attorney-in-fact, with
full power of substitution, for all purposes set forth in this Agreement,
including, without limitation, the full power and authority on such
Shareholder's behalf (i) to consummate the transactions contemplated by this
Agreement, (ii) to disburse any funds received hereunder to the Shareholders,
(iii) to enter into the Disbursement Agent Agreement, Rights Agreement and
Security Agreement on behalf of the Shareholders, (iv) to execute and deliver
any certificates representing the Shares and execution of such further
instruments of assignment as Buyer shall reasonably request, (v) to execute and
deliver on behalf of each Shareholder any amendment or waiver under this
Agreement, (vi) to retain legal counsel and other professional services, at the
expense of the Shareholders, in connection with the performance by the
Shareholders' Representative of this Agreement, (vii) to execute financing
statements, termination statements and other documents on behalf of the
Shareholders under the Security Agreement and (viii) to do each and every act
and exercise any and all rights which such Shareholder or Shareholders are
permitted or required to do or exercise under this Agreement and the other
agreements, documents and certificates executed in connection herewith. Each of
the Shareholders agrees that such agency and proxy are coupled with an interest,
are therefore irrevocable without the consent of the Shareholders'
Representative and shall survive the death, bankruptcy or other incapacity of
any Shareholder; provided that such agency and proxy shall terminate if this
Agreement is terminated pursuant to its terms.
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(c) Each of the Shareholders hereby agrees that any amendment
or waiver under this Agreement, the Disbursement Agent Agreement, the Rights
Agreement, the Security Agreement or the Securities, and any action taken on
behalf of the Shareholders to enforce the rights of the Shareholders under this
Agreement and the Notes or the Warrants, and any action taken with respect to
any indemnification claim pursuant to Section 8.4 (including any action taken to
object to, defend, compromise or agree to the payment of such claim), shall be
effective if approved in writing by the Shareholders' Representative and the
holders of a majority of the Shares (including any Shares held by the
Shareholders' Representative), or, in the case of any amendment or waiver made
or given or action taken after the Closing, if so approved by persons who were
the holders of a majority of the Shares immediately prior to the Closing, and
that each and every action so taken shall be binding and conclusive on every
Shareholder, whether or not such Shareholder had notice of, or approved, such
amendment or waiver.
(d) Upon signing of this Agreement, each Shareholder shall
deliver to the Shareholders' Representative a certificate or certificates
representing the Shares being sold by such Shareholder under this Agreement,
duly endorsed (or accompanied by duly executed stock powers), for delivery by
the Shareholders' Representative to Buyer at the Closing. Upon termination of
this Agreement for any reason, such certificates shall be returned by the
Shareholders' Representative to the Shareholders.
(e) Harold Silen shall serve as the Shareholders'
Representative until he resigns or is otherwise unable or unwilling to serve. In
the event that a Shareholders' Representative resigns from such position or is
otherwise unable or unwilling to serve, the remaining Shareholders shall select,
by the vote of the holders of a majority of the Shares, a successor
representative to fill such vacancy, shall provide prompt written notice to
Buyer of such change and such substituted representative shall then be deemed to
be the Shareholders' Representative for all purposes of this Agreement.
5.4 Notice of Breach. Each of the Buyer, the Company and the
Shareholders shall promptly give written notice to the others upon becoming
aware of the occurrence or, to its, her or his knowledge, impending or
threatened occurrence, of any event which would cause or constitute a breach of
any of its, her or his representations, warranties or covenants contained or
referenced in this Agreement and will use its, her or his reasonable efforts to
prevent or promptly remedy the same.
5.5 Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use all reasonable and diligent
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement.
5.6 Board Representation. Effective upon the Closing, Buyer shall
appoint one representative of the Shareholders (which representative shall be
designated by the Shareholders' Representative) to the board of directors of
Buyer. In addition, from the period beginning on the Closing Date and ending on
the earlier of (a) the closing of an initial public offering by Buyer, and (b)
the later of (i) payment of all amounts due under Section 1.2(d) and 1.3 and
(ii) repayment in full of the Notes, Buyer shall nominate one representative of
the Shareholders (which representative shall be designated by the Shareholders'
Representative) for election by
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the stockholders of Buyer to the board of directors of Buyer at any annual
meeting of the stockholders of Buyer held during such period. Buyer shall cause
the Stockholders Voting Agreement dated May 31, 1996, as amended (the "Voting
Agreement"), by and among the Company and certain stockholders of the Company to
be amended to provide that during the period set forth in this Section the
parties to that Voting Agreement shall vote their shares covered by that Voting
Agreement in favor of the individual so designated by the Shareholders'
Representative.
5.7 No Negotiations. Until such time, if any, as this Agreement is
terminated pursuant to Section 7, the Company and the Shareholders will not,
directly or indirectly solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, or provide any non-public information
to, any Person (other than Buyer) relating to any transaction involving the sale
of the business or assets (other than in the ordinary course of business) of the
Company, or any of the capital stock of the Company, or any merger,
consolidation, business combination, or similar transaction involving the
Company. The Company will promptly notify Buyer of any proposal or inquiry,
including the identity of the Person and its Affiliates making the same, that it
may receive in respect of any such transaction, or of any such information
requested from it or any such negotiations or discussions being sought to be
initiated with it.
5.8 Announcements. The notices to the general public and the press
relating to the transactions contemplated by this Agreement shall be made only
at such time and in such manner as may be mutually agreed upon by Buyer and the
Shareholders' Representative; provided, however, that any party shall be
entitled to make a public announcement about such transactions if, in the
opinion of its counsel, such announcement is required to comply with any
applicable law, rule or regulation. Information provided by either party to
third parties whose assistance and cooperation may, in the judgment of such
informing party, be required to the successful consummation of the transactions
contemplated by this Agreement, and information provided by either party to its
employees with respect to such transactions, shall not be construed as a general
notice, release, statement or communication within the meaning or intent of this
section.
5.9 General Release by Shareholders. Each Shareholder hereby fully
releases and discharges the Company and its directors, officers, agents and
employees from all rights, claims and actions, known or unknown, of any kind
whatsoever, which such Shareholder now has or may hereafter have against the
Company and its directors, officers, agents and employees, arising out of or
relating to events arising prior to or on the Closing Date, except (a) as may be
described in written contracts disclosed in the Schedule hereto and expressly
described and specifically excepted from this release in the Schedule, (b) in
the case of Shareholders who are employees of the Company, compensation for
current periods expressly described and excepted from such releases, and (c) for
the obligations of the Company arising after the Closing Date under this
Agreement and the other agreements described in Section 1.7 to which the Company
is a party. Specifically, but not by way of limitation, each Shareholder waives
any right of indemnification, contribution or other recourse against the Company
which it now has or may hereafter have against the Company with respect to
representations, warranties or covenants made in this Agreement by the Company.
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Each Shareholder hereby waives and relinquishes all rights and benefits
afforded by Section 1542 of the California Civil Code, which states as follows:
"A general release does not extend to claims to which
the creditor does not know or suspect to exist in his
favor at the time of executing the release, which if
known by him must have materially affected his
settlement with the debtor."
Each Shareholder understands and acknowledges the significance and consequence
of this waiver of Section 1542 and nevertheless elects to, and does, release
those claims described in this Section 5.9, known or unknown, that it may have
now or in the future arising out of or relating to any event arising on or prior
to the date of this Agreement.
5.10 Additional Shareholders. The parties agree that additional
shareholders of the Company may become parties to this Agreement after the
Closing Date. In such event, (i) each such shareholder shall become a
"Shareholder" for purposes of this Agreement and entitled to all of the rights
and subject to all of the obligations of a Shareholder under this Agreement,
(ii) the Participating Percentage shall be adjusted to reflect the inclusion on
such shareholder, (iii) such shareholder shall immediately receive a cash
payment equal to such shareholder's ratable interest in the Closing Cash Payment
and a Note and a Warrant equal to such shareholder's ratable portion of the
Notes and Warrants, and (iv) the Initial Disbursement Amount shall be increased
by an amount equal to $6,500,000 times the percentage of issued and outstanding
shares of common stock of the Company held by such shareholder as of the Closing
Date.
5.11 Maintain Directors and Officers Liability Insurance. The Buyer
shall cause the Company to maintain in effect for a period of two years after
the Closing Date the directors and officers liability insurance in effect on the
Closing Date.
5.12 Legend Removal. The Company and the Shareholders will use their
best efforts to either (i) obtain an order from the California Commissioner of
Corporations approving the sale of the Shares to the Buyer or (ii) cause the
removal of all legends imposed by the California Commissioner of Corporations
from any certificates representing Shares being transferred under this
Agreement.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Buyer's Obligations to Close. The obligation of
Buyer to purchase the Shares from the Shareholders and to take other actions
required to be taken by Buyer at the Closing shall be subject to the fulfillment
at or prior to the Closing Date of the additional following conditions, any of
which may be waived in whole or in part by Buyer only in writing:
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(a) The Company and each of the Shareholders shall have
performed in all material respects their agreements contained in this Agreement
required to be performed on or prior to the Closing Date and the representations
and warranties of the Company and the Shareholders contained in this Agreement
shall be true in all material respects when made and on and as of the Closing
Date as if made on and as of such date, and Buyer shall have received a
certificate of the President of the Company to that effect.
(b) Each of the consents identified in Section 3.4 of the
Schedule must have been obtained and must be in full force and effect.
(c) No circumstances shall have occurred which, in the
reasonable judgment of Buyer, constitute a material adverse change in the
business, assets or prospects of the Company.
(d) The issuance of any Securities to each Shareholder under
this Agreement shall, in the reasonable judgment of Buyer, be exempt from
registration under the Act and from registration and/or qualification under
applicable state securities laws.
(e) All approvals required from the stockholders of Buyer,
whether required under Buyer's charter documents or contract, for the
consummation of the transactions contemplated by this Agreement shall have been
obtained.
(f) Buyer shall have obtained on terms and conditions
reasonably acceptable to Buyer debt and/or equity financing in the amount of at
least $24 million.
(g) Receipt of an order from the California Commissioner of
Corporations, if required in the reasonable opinion of counsel for the Company,
approving the sale of the Shares to the Buyer or, alternatively, removing any
restrictions on transfer imposed by the Commissioner.
(h) The Company and the Shareholders shall have delivered each
of the documents required to be delivered at the Closing under Section 1.7(a).
6.2 Conditions to Shareholders' Obligation to Close. The obligations
of the Shareholders to sell their Shares and to take other actions required to
be taken by them at the Closing shall be subject to the fulfillment at or prior
to the Closing Date of the additional following conditions, any of which may be
waived in whole or in part by the Shareholders' Representative only in writing:
(a) Buyer shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Closing Date and the representations and warranties of Buyer contained in
this Agreement shall be true in all material respects when made and on and as of
the Closing Date as if made on and as of such date, and the Shareholders shall
have received a certificate of the President of Buyer to that effect.
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(b) Buyer shall represent to the Shareholders that as of the
Closing Date it has no debt outstanding senior to the Notes other than any
indebtedness incurred to pay the Purchase Price.
(c) No circumstances shall have occurred which, in the
reasonable judgment of Shareholders' Representative, constitute a material
adverse change in the business, assets or prospects of Buyer, other than such
circumstances which relate to the Company.
(d) Buyer shall have delivered each of the documents required
to be delivered at the Closing under Section 1.7(b) and (c).
(e) The Amended Investor Rights Agreement dated March 31, 1997
among certain stockholders of Buyer shall have been amended to provide that the
Shareholders shall have the registration rights set forth in that Agreement with
respect to any shares of common stock issued upon exercise of the Warrants.
(f) The Voting Agreement shall be amended as provided in
Section 5.6.
(g) Receipt of an order from the California Commissioner of
Corporations, if required in the reasonable opinion of counsel for the Company,
approving the sale of the Shares to the Buyer or, alternatively, removing any
restrictions on transfer imposed by the Commissioner.
(h) Buyer shall have obtained a waiver from each of Fantastix
Ticket Company, LLC and Playhouse Square Foundation deferring their right to
require Buyer to repurchase shares of Buyer Common Stock until such time as the
Notes have been repaid.
ARTICLE VII
TERMINATION
7.1 Termination Events. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either Buyer or the Company if a material breach of any
representation, warranty, covenant or agreement contained in this Agreement has
been committed by the other party and such breach has not been cured within ten
(10) days following receipt of written notice;
(b) (i) by Buyer if any of the conditions in Section 6.1 has
not been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived such condition on
or before the Closing Date; or (ii) by the Company, if any of the conditions in
Section 6.2 has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of the
28
<PAGE> 30
Company or any Shareholder to comply with their obligations under this
Agreement) and the Company has not waived such condition on or before the
Closing Date;
(c) by mutual consent of Buyer and the Company; or
(d) by either Buyer or the Company if the Closing has not
occurred (other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before November 30, 1997, or such later date as the parties may agree upon.
7.2 Effect of Termination. Each party's right of termination under
Section 7.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 7.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Section 5.2, Section 5.8, Article VIII, Section 9.5 and
Section 9.11 will survive; provided, however, that if this Agreement is
terminated by a party because of the breach by the other party or because one or
more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES: INDEMNIFICATION
8.1 Survival of Representations and Warranties. The representations
and warranties of each of the parties contained herein shall survive the signing
of this Agreement and remain in full force and effect after the Closing Date,
regardless of any investigation by the other parties or their agents; provided,
however, such representations and warranties shall terminate at the later of (i)
such time as all payments have been made under Section 1.2(d) and Section 1.3,
and (ii) the maturity date of the Notes.
8.2 Indemnification by the Company and the Shareholders. The Company
and each of the Shareholders, jointly and severally, shall indemnify and hold
harmless Buyer, its officers, agents, directors, employees, affiliates
(including the Company, after the Closing), successors and assigns
(collectively, the "Buyer Indemnified Parties") from and against any and all
expenses (including, without limitation, attorneys' fees and costs), damages,
liabilities or other monetary loss resulting from any and all claims, demands or
threats thereof arising out of or relating to (i) any breach of the
representations, warranties, covenants or agreements of the Company or the
Shareholders contained in this Agreement; or (ii) that certain [***] Agreement
dated [***], by and between [***], and the Company, as amended by Amendment No.
1 to [***] Agreement dated [***], and Amendment No. 2 to [***] Agreement dated
[***] (the "[***] Agreement"), including but not limited to, payment obligations
thereunder (excluding only (x) any amounts due for enhancements or support under
Section 12 of the [***] Agreement accruing
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
29
<PAGE> 31
after the Closing, (y) the payment of $[***] in quarterly royalty payments
pursuant to Section 2 of the [***] Agreement through December 31, [***] and (z)
the payment of Additional Royalties pursuant to Section 3 of the [***] Agreement
for calendar years after 1997 if, and only if, such Additional Royalties are due
as a result of tickets actually sold by the Company using the [***]), or the
breach, alleged breach or termination of the [***] Agreement; provided, however,
that, with respect to clause (ii) above, once the Shareholders have indemnified
the Buyer Indemnified Parties for an aggregate of $[***] under clause (ii), the
next $[***] for which indemnification would otherwise be due Buyer Indemnified
Parties thereunder shall not be indemnifiable, but any amount thereafter shall
again be indemnifiable by the Shareholders; and provided further, however, that
upon the Closing, the Company shall cease to have any indemnification
obligations pursuant to this Section 8.2 and the Shareholders shall have no
right of contribution from the Company with respect to their indemnification
obligations. Notwithstanding the foregoing, the Shareholders shall not have any
indemnification obligation to Buyer pursuant to this Section 8.2(ii) with
respect to the [***] Agreement for any breach or alleged breach thereof
occurring after the Closing if such breach or alleged breach is not in
connection with the Acquisition and is the result of actions by the Company not
contemplated by the Buyer and the Company at the time of the Closing.
8.3 Indemnification By Buyer. Buyer shall indemnify and hold
harmless the Company and the Shareholders, their officers, agents, directors,
employees, affiliates, successors and assigns from and against any and all
expenses (including, without limitation, attorneys' fees and costs), damages,
liabilities or other monetary loss resulting from any and all claims, demands or
threats thereof made or brought against the Company or the Shareholders arising
out of any breach of the representations, warranties, covenants or agreements of
Buyer contained in this Agreement.
8.4 Procedure for Indemnification. In the event a party (the
"Indemnified Party") shall seek indemnification pursuant to this Article VIII,
it shall, with reasonable promptness, provide the other party (the "Indemnifying
Party") with written notice of any facts which may give rise to a Claim for
indemnification (a "Claim"). Within thirty (30) days after delivery of such
notice, the Indemnifying Party shall deliver written notice to the Indemnified
Party indicating that the Claim is either accepted or rejected, in whole or in
part, and if not accepted in whole, either proposing a reasonable settlement of
the Claim or stating the reasons why the Claim (or portion thereof) is rejected.
Any such Claim notice from the Indemnified Party which is not answered within
such thirty (30) day period in the manner set forth above by the Indemnifying
Party shall be conclusively presumed to be accepted by the Indemnifying Party,
and the Indemnified Party may seek immediate indemnification from the
Indemnifying Party. In the event that the Indemnified Party has complied with
the foregoing notice procedure and the Indemnifying Party has rejected, in whole
or in part, such a Claim by the Indemnified Party, and the parties have
otherwise been unable to reach a mutually satisfactory agreement respecting the
alleged breach or default, either party may submit the issue to binding
arbitration as provided in Section 9.5 hereof; provided, however, that the scope
of the issues which shall be submitted to arbitration pursuant to Section 9.5
shall be limited to a determination of (a) whether a basis for indemnification
is present or has occurred, (b) whether the Indemnified Party has suffered or
could reasonably be expected to suffer any loss, damage, claim, liability or
expense pursuant
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
30
<PAGE> 32
to Section 8.2 or Section 8.3 hereof as a result, and if so, the amount of such
loss, damage, claim, liability or expense, and (c) whether (and to what extent)
actions taken by the Indemnified Party shall have contributed thereto. The
arbitrators shall also award attorneys' fees and costs for the proceedings, in
their discretion. Notwithstanding the foregoing, notice of any Claim made
against the Company or the Shareholders, other than those arising as result of a
breach of the representations and warranties made in Article IV, shall be
provided to the Shareholders' Representative, who shall have sole authority to
respond to and compromise such Claim in accordance with the foregoing
provisions. Likewise, the Shareholders' Representative shall have the sole
authority to seek indemnification from Buyer pursuant to this Article VIII on
behalf of the Shareholders.
8.5 Defense of Claims. In connection with any Claim asserted by a third
party which may give rise to a Claim for indemnification under this Article
VIII, the Indemnifying Party shall be entitled to participate in the defense of
such action and may assume, undertake and pay for the defense thereof and select
legal counsel to conduct the defense of such Claims; provided, however, the
Indemnifying Party may assume and undertake the defense of such a third party
Claim only upon written agreement by the Indemnifying Party that the
Indemnifying Party is obligated to fully indemnify the Indemnified Party with
respect to such action; in the event the Indemnifying Party assumes and
undertakes a defense of a third-party Claim, the Indemnifying Party shall not be
liable to the Indemnified Party for any counsel's fees and expenses subsequently
incurred by the Indemnified Party in connection with such matter; provided,
however, that the Indemnified Party shall have the right to participate in the
defense of any such action and to employ separate counsel in connection
therewith, but the fees, costs and expenses related to such participation shall
be at the expense of and paid by the Indemnified Party. Any payments to be made
pursuant to this Article VIII, including any payment for legal fees or other
expenses, shall be made within 30 days after the receipt of the invoice therefor
from the Indemnified Party. The Indemnifying Party shall have the right to
settle or compromise any such action on terms satisfactory to it provided that
it immediately satisfies any obligations imposed by such settlement. No
settlement of any Claim for which indemnification is or will be claimed shall be
made by the Indemnified Party unless such settlement is approved by the
Indemnifying Party, which approval shall not be unreasonably withheld. Any such
settlement not approved may be settled by the Indemnified Party provided such
settlement shall be submitted to binding arbitration as provided in Section 9.5
hereof to determine whether such settlement under the circumstances at the time
such settlement was made was reasonable, and will constitute a full and complete
release by the Indemnified Party of the Indemnifying Party of all damages,
losses, claims, liabilities and expenses relating to such claim.
8.6 Offset Right. The right of the Buyer Indemnified Parties to
indemnification under this Agreement shall include, but not be limited to, the
right to offset against and have deducted from (i) any payment under the Notes,
(ii) any amounts held by the Disbursement Agent, and (iii) any Incentive
Payments, the amount of any Claim by any Buyer Indemnified Party. The exercise
of such right of offset by the Buyer Indemnified Parties in good faith, whether
or not ultimately determined to be justified, will not constitute a default
under this Agreement, the Disbursement Agent Agreement, the Notes or any
instrument securing the Notes. Except as provided in Section 1.2(d)(ii), nothing
in this Section 8.6 shall be construed as limiting
31
<PAGE> 33
the liability of the Shareholders under this Agreement to the amounts which the
Buyer Indemnified Parties are entitled to set off, deduct or recoup, nor shall
such amounts be considered as liquidated damages for any breach under this
Agreement. Buyer agrees to seek the offset and deduction remedies set forth in
this Section 8.6 with respect to payments under the Notes and amounts held by
the Disbursement Agent before pursuing other legal remedies it may have against
the Shareholders. This shall in no way preclude the Buyer from pursuing any
equitable remedies it may have against the Shareholders at any time.
8.7 Limitations on Indemnification.
(a) No amount shall be payable in indemnification under this
Article VIII unless the aggregate amount of claims for which the Indemnified
Party is entitled to indemnification exceeds One Hundred Fifty Thousand Dollars
($150,000) (the "Minimum Amount"); provided, however, the Minimum Amount shall
not apply to any Claim (i) based on fraud; (ii) pursuant to Section 1.2(a); or
(iii) pursuant to Section 8.2 (ii). In the event that the claims exceed the
Minimum Amount, the Indemnified Party shall be entitled to seek indemnifications
only for the aggregate amount of the claims which exceed the Minimum Amount.
(b) In the absence of fraud, no Shareholder's liability under
this Article VIII shall exceed in the aggregate the total Purchase Price paid by
Buyer to all Shareholders; provided, however, that the aggregate liability of a
Non-Management Shareholder shall not exceed the sum of all sums paid to that
Shareholder; and provided further that Buyer shall have the right to offset or
have deducted amounts still payable to a Shareholder (under the Notes or
otherwise) against any liability of the Shareholder for Claims in excess of
amounts paid to that Shareholder.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices, demands, requests, consents, approvals or
other communications (collectively "Notices") required or permitted to be given
hereunder or which are given with respect to this Agreement shall be in writing
and may be personally served or may be deposited in the United States mail,
registered or certified, return receipt requested, postage prepaid, addressed as
follows:
To Buyer: Advantix, Inc.
4675 MacArthur Court, Suite 1540
Newport Beach, CA 92660
Attn: President
With Copy To: Hewitt & McGuire LLP
19900 MacArthur Boulevard, Suite 1050
Irvine, CA 92612
Attention: Paul A. Rowe
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<PAGE> 34
To the Company: Bay Area Seating Service, Inc.
1855 Gateway, Suite 630
Concord, CA 94520
Attn: Douglas Levinson
With Copy To: Shartsis, Friese & Ginsburg, LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Attention: Robert D. Evans
To the Shareholders: At the address for each
such Shareholders shown on
their signature page
To the Shareholders' Harold Silen
Representative: 8 Buckeye Way
Kentfield, CA 94904
or such other address as such party shall have specified most recently by
written notice. Notice mailed as provided herein shall be deemed given on the
fifth business day following the date so mailed or on the date of actual
receipt, whichever is earlier.
9.2 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute but one and the same instrument.
9.3 Governing Law. This Agreement shall be governed by, interpreted
under, and construed and enforced in accordance with the laws of the State of
California.
9.4 Entire Agreement. The terms of this Agreement are intended by the
parties as a final expression of their agreement with respect to such terms as
are included in this Agreement and may not be contradicted by evidence of any
prior or contemporaneous agreement. The parties further intend that this
Agreement constitutes the complete and exclusive statement of its terms and that
no extrinsic evidence whatsoever may be introduced in any judicial proceeding,
if any, involving this Agreement.
9.5 Dispute Resolution. Any controversy, dispute, or claim arising out
of or relating to the interpretation, performance or breach of this Agreement
shall be finally determined, at the request of any party, by binding arbitration
conducted in accordance with the then existing rules for commercial arbitration
of the American Arbitration Association, and judgment upon any award rendered by
the arbitrator may be entered in any court having jurisdiction thereof. Such
arbitration shall be conducted in Orange County, California if brought by the
Company (prior to Closing), the Shareholders' Representative or the
Shareholders, and in San Francisco County if brought by Buyer. The arbitrator
shall award to the prevailing party, in addition to the costs of the proceeding,
that party's reasonable attorney's fees.
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<PAGE> 35
9.6 Exhibits and Schedules. Each of the Exhibits and Schedules
referred to herein and attached hereto is an integral part of this Agreement and
is incorporated herein by this reference.
9.7 Further Assurances. The parties agree to do such further acts and
things and to execute and deliver such additional agreements and instruments as
the other party may reasonably require to consummate, evidence, or confirm the
agreements contained herein in the manner contemplated hereby.
9.8 Successors and Assigns. This Agreement and the provisions hereof
shall be binding upon and inure to the benefit of each of the parties and their
respective successors and assigns.
9.9 Attorneys' Fees. In the event any action in law or equity,
arbitration or other proceeding is brought for the enforcement of this Agreement
or in connection with any of the provisions of this Agreement, the prevailing
party or parties shall be entitled to its attorneys' fees and other costs
reasonably incurred in such action or proceeding.
9.10 Equitable Remedies. In addition to legal remedies, to the extent
allowed pursuant to this Agreement or by law, in recognition of the fact that
remedies at law may not be sufficient, the parties hereto (and their successors)
shall be entitled to equitable remedies including, without limitation, specific
performance and injunction.
9.11 Expenses. Each party hereto shall pay its own expenses incident
to the negotiation and preparation of this Agreement and all other documents
necessary or appropriate to consummate the transactions contemplated hereby, and
shall bear its own costs and expenses incurred in closing and carrying out the
transactions contemplated by this Agreement, including any broker's or finder's
fees and the expenses of its representatives. Such costs and expenses incurred
by the Company and unpaid at the Closing shall reduce the cash portion of the
Purchase Price payable under Section 1.2(a). The Shareholders acknowledge that
for its services in connection with the transactions contemplated by this
Agreement, Vrolyk & Company ("Vrolyk") is to be paid a fee of $300,000 from the
funds reserved pursuant to Section 1.2(a)(ii) and two percent (2%) of all sums
to be paid to the Shareholders pursuant to Section 1.2(a)(ii), Section
1.2(a)(iii), Section 1.5, the Notes, from the Initial Disbursement Amount and
the Incentive Payments and two percent of the Warrants, less any amounts offset
against any such payments pursuant to Section 8.6. Accordingly, the Shareholders
hereby each assign to Vrolyk the right to receive two percent (2%) of each such
payment. In the case of the Notes and the Warrants, the Shareholders further
authorize Buyer to reduce the principal amount of the Note deliverable to each
Shareholder by two percent and to reduce the number of shares issuable pursuant
to the Warrant deliverable to each Shareholder by two percent, and instead to
deliver to Vrolyk a Note in a principal amount equal to two percent (2%) of the
principal amount of all of the Notes and a Warrant to purchase a number of
shares of Buyer Common Stock equal to two percent (2%) of all of the shares of
Buyer Common Stock subject to the Warrants.
9.12 Amendment. This Agreement may be amended or modified in whole or
in part at any time prior to the Closing Date by an agreement in writing among
Buyer, the Company and the Shareholders' Representative.
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<PAGE> 36
9.13 Effect of Amendment or Waiver. Each Shareholder acknowledges that
by operation of Sections 5.3 and 9.12, the Shareholders' Representative will
have the right and power to diminish or eliminate rights of such Shareholders
under this Agreement.
9.14 Opportunity to Consult Counsel. Each Shareholder acknowledges
that such Shareholder has had full and adequate opportunity to have this
Agreement reviewed by such Shareholder's independent counsel and to discuss this
Agreement with such counsel. Each Shareholder acknowledges that Shartsis, Friese
& Ginsburg LLP has acted only as counsel for the Company and for the Management
Shareholders in connection with the transactions contemplated by this Agreement,
and has not represented any of the other Shareholders.
Buyer and the Company have executed this Agreement as of the day and
year first set forth above.
"BUYER"
Advantix, Inc., a Delaware corporation
By: /s/ W. THOMAS GIMPLE
----------------------------------
Print Name: W. Thomas Gimple
--------------------------
Title: President & CEO
-------------------------------
"COMPANY"
Bay Area Seating Service, Inc., a
California corporation
By: /s/ HAROLD SILEN
----------------------------------
Print Name: Harold Silen
--------------------------
Title: President
-------------------------------
35
<PAGE> 37
The undersigned Shareholders have executed this Agreement effective as
of the Closing Date.
"SHAREHOLDERS"
--------------------------------------
Signature of Shareholder
--------------------------------------
Print Name of Shareholder
Number of Shares Owned:
--------------
Address:
----------------------------
----------------------------
----------------------------
36
<PAGE> 38
SCHEDULE A
DEFINITIONS
For purposes of the foregoing Agreement, the following definitions
shall apply:
"Adjusted Disbursement Amount" as of a particular date means the
Initial Disbursement Amount, less (i) cumulative quarterly disbursements to the
Shareholders under Section 1.2(d) as of that date, (ii) one-half of the amount
of any compensation and reimbursement to which the Disbursement Agent is
entitled under the Disbursement Agent Agreement.
"Adjusted Payout Factor" shall have the meaning set forth in Section
1.2(d)(iv).
"Adjustment Date" shall have the meaning set forth in Section
1.2(d)(iv).
"Affiliate" means, with respect to any Person, a Person that directly,
or indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person.
"Buyer" shall have the meaning set forth in the Preamble.
"Closing" means the consummation of the transaction contemplated by
this Agreement. The time, "Closing Date" and place of the Closing are set forth
in Section 1.6.
"Closing Cash Payment" shall have the meaning set forth in Section
1.2(a).
"Company" shall have the meaning set forth in the Preamble.
"Disbursement Agent" means First Trust of California, or any successor
disbursement agent under the Disbursement Agent Agreement.
"Disbursement Agent Agreement" shall mean the disbursement agent
agreement entered into by and among the Disbursement Agent, Buyer and the
Shareholders in substantially the form of Exhibit C.
"Final Adjustment Date" shall have the meaning set forth in Section
1.4(b).
"Free Cash" shall mean the cash balance of the Company that results
directly, and only, from revenue and expenditures from the Company's normal and
recurring operations on and after the Closing Date, plus any amounts previously
released from the Working Capital Account to offset a Free Cash Deficit. Free
Cash will start with a balance on the first day after the Closing at zero
dollars ($0), and be increased (or decreased) thereafter by the net cash
generated (expended) from the Company's normal revenues and expenditures for
such week. In calculating Free Cash, normal and recurring operations will be
understood to exclude expenditures and/or cash flows meeting the following
criteria:
SCHEDULE A
<PAGE> 39
(a) All expenditures for:
(i) Transition Costs;
(ii) [***] license fees;
(iii) Ticketmaster litigation;
(iv) Acquisition transaction fees of the Shareholders paid
pursuant to Section 1.2(a)(ii); and
(v) One-half of Doug Levinson's salary;
(b) Capital expenditures, excluding capital expenditures for
Transition Costs, in excess of $400,000 prior to the
Anniversary Date; and
(c) Any cash amounts transferred to, and/or received from,
Buyer as part of an intercompany funds transfers.
"Free Cash Deficit" shall mean the amount by which Free Cash is less
than zero on any Balance Day.
"Guarantee Shortfall" means (i) the Adjusted Disbursement Amount at the
end of the Measurement Period, plus (ii) any income earned on amounts held by
the Disbursement Agent and not distributable to shareholders pursuant to Section
1.2(d)(vi), plus (iii) if Net Revenue for the Measurement Period is less than
$[***], the product of (A) any amounts deducted from amounts held by the
Disbursement Agent and distributed to Buyer pursuant to Section 8.6, times (B)
Net Revenue for the Measurement Period divided by $[***].
"Incentive Payment" means any amounts payable to the Shareholders
pursuant to Section 1.3.
"Initial Disbursement Amount" means (A) the product of $6,500,000 times
the Participating Percentage, minus (B) $600,000.
"Management Shareholders" means Harold Silen, Gerald Seltzer, David
Mendelsohn and Douglas Levinson, individually, and any Shareholder which is a
trust for which any of them serve as a trustee.
"Net Revenue" means (A) all ticketing service revenues of the Company
and Buyer from (1) those venues serviced by the Company's operations centers as
of the Closing, and (2) those venues listed on Schedule B, less (B) any rebates
to venues, performers or promoters.
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
SCHEDULE A
<PAGE> 40
"Non-Management Shareholders" means all Shareholders other than the
Management Shareholders.
"Notes" shall have the meaning set forth in Section 1.2(b).
"Participating Percentage" means the percentage of the issued and
outstanding shares of common stock of the Company as of the Closing Date which
are sold to Buyer under this Agreement.
"Payout Factor" shall be equal to the Initial Escrow Amount, divided by
$[***].
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization.
"Purchase Price" shall have the meaning set forth in Section 1.2.
"Shareholders" shall have the meaning set forth in the Preamble.
"Shareholders' Representative" shall be Harold Silen or his successor
as appointed pursuant to Section 5.4.
"Shares" means the shares of Common Stock of the Company being sold by
the Shareholders under this Agreement.
"Significant Client" means those clients of the Company listed on
Schedule C.
"Special Indemnification Account" shall have the meaning set forth in
Section 1.5.
"Transition Costs" shall have the meaning set forth in Section 1.4(a).
"Transition Costs Account" shall have the meaning set forth in Section
1.4(b).
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
SCHEDULE A
<PAGE> 41
LIST OF EXHIBITS
TO STOCK PURCHASE AGREEMENT
AMONG ADVANTIX, INC.,
BAY AREA SEATING SERVICE, INC.,
AND
SHAREHOLDERS OF BAY AREA SEATING SERVICE, INC.
Exhibit A - Promissory Note
Exhibit B - Warrant
Exhibit C - Disbursement Agent Agreement
Exhibit D - Employment Agreement (Levinson)
Exhibit E - Consulting Agreement (Mendelsohn)
Exhibit F - Noncompetition Agreements
Exhibit G - Security Agreement
Exhibit H - Noncompetition Agreement (Levinson)
Exhibit I - Opinion of Company and Shareholders' Counsel
Exhibit J - Opinion of Buyer's Counsel
Exhibit K - Subordination Agreement
Exhibit L - Disbursement Agent Agreement (Levinson)
Exhibit M - Amended and Restated Investor Rights Agreement
32
<PAGE> 1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED PROVISIONS OF
THIS AGREEMENT. THE REDACTED PROVISIONS ARE IDENTIFIED BY THREE ASTERISKS AND
ENCLOSED BY BRACKETS. THE CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.20
COMMERCIAL APPLICATION PARTNER (CAP) AGREEMENT
This Agreement is made effective April 6, 1998 between SYBASE, INC.
("Sybase") with offices at 6475 Chirstie Avenue, Emeryville, California 94608
(or SYBASE CANDA LIMITED, with offices at 1 Robert Speck Parkway, Suite 800,
Mississauga, Ontario, Canada L4Z 3M3), and Advantix, Inc. and its wholly-owned
subsidiaries Advantix (Ohio), Inc. and Bay Area Seating Service, Inc.
("Partner"), with offices at 4675 MacArthur Court, Suite 1400, Newport Beach, CA
92660.
1. LICENSE GRANT. Subject to the terms and conditions below, Sybase grants to
Partner a nonexclusive and nontransferable license to market and distribute
copies of unmodified object code versions of those Sybase and/or Powersoft
software products identified in the attached initial Schedules along with
accompanying documentation ("Programs") to Partner's customers ("End-Users") who
will use the Programs only for their own internal business purposes in the
applicable territory described in each Schedule A, provided that the programs
are distributed for use with computer application programs developed by Partner
for commercial distribution to more than one third party and containing
significant added functionality over the Programs ("Applications Software").
Partner shall license to each End-User the same number of copies of the Programs
and the same number of Seats/Named Users for such Programs as Partner licenses
to such End-User for its Application Software. In addition to being able to
distribute "full use" copies of the Programs, "full use" Seats and "full use"
Names Users, Partner may also distribute, with respect to certain Programs
identified in Sybase's then-current price list, Application Deployment Copies,
Application Deployment Seats and Application Deployment Named Users (which are
restricted licenses defined in the Sybase license agreement accompanying each
copy of the Program ("Sybase Shrinkwrap")). Partner may also sell to End-Users
certain Sybase services as described in the Schedules(s). Notwithstanding the
above, if the Territory includes any of the Prohibited Countries set forth in
Sybase's then current "Prohibited Country List") a current copy of which has
been provided to Partner), Parnter may not market or distribute Programs for use
in such Prohibited Countries. The Partner shall not be authorized to use or
allow its End-Users to use the Programs for timesharing, rental or service
bureau purposes on behalf of any third party. In connection with the
distribution rights granted above, Partner may appoint distributors to
distribute the Programs to End-Users within the Territory. The appointment of
distributors shall be by contracts which require that the distributor market the
Programs only in accordance with the terms of this Agreement and on a basis
which protects the proprietary interests of Sybase in and to the Programs to the
same extent that Partner's proprietary interests in its own products are
protected (but in any event no less than a reasonable extent). Partner may order
under this Agreement (a) copies of the Programs for its own internal production
purposes and/or developing and supporting the Application Software ("Internal
Use Copies"), (b) copies of the Programs which may only be used for developing
and supporting the Applications Software ("Development Copies"), (c) copies of
the programs which may be distributed to End-Users for evaluation purposes and
for up to the number of days designated in the applicable Schedule A, after
which they must be returned to Partner ("Evaluation Copies"), and (d) up to that
number of copies of the Programs shown on Schedule A for purposes of Partner
providing demonstrations and training for the Application Software
("Demonstration Copies"). Partner is authorized to incorporate into the
documentation for the Application Software portions of the documentation for the
Program to the extent such portions are necessary to document usage for the
Program in conjunction with the Application Software.
2. FEES AND PAYMENT TERMS. For the first year of this Agreement, Partner shall
be responsible for paying to Sybase a non-refundable program fee shown in
Schedule A ("Initial Fee'). The Initial Fee is due upon execution of this
Agreement by Partner. For each additional year, a non-refundable annual program
renewal fee ("Annual Renewal Fee") as set forth in such Schedule is due and
payable upon each anniversary of the date of this Agreement. Fees as set forth
in the attached Schedule(s) shall be due to Sybase for each copy of the Programs
and each service ordered by Partner; such fees shall be based on Sybase's
then-current price list for the country in which the Programs are to be issued
or the services are to be delivered ("Price List"). The license fee for
Development Copies is the same as the fee for Internal Use Copies unless Sybase
designated otherwise in its Price List. The license fee for Demonstration
Copies, if any, is set forth in the Schedule(s). Notwithstanding the above,
there is no charge for authorized Evaluation Copies distributed to End-Users.
License fees for Internal Use Copies, Development Copies, Demonstration Copies,
and copies of the Programs which Sybase ships to Partner for distribution to
End-Users shall be due and payable to Sybase with Partner's order for the
Programs or, upon Sybase credit approval of Partner, 30 days after the date of
Sybase's invoice for the Programs. Any past-due invoice may subject Partner to
credit hold at the sole discretion of Sybase. All fees under this Agreement are
stated in the United States.
3. OWNERSHIP. Programs are owned by Sybase or its licensors and are protected by
copyright law, trade secret laws and international conventions. All rights in
and to patents copyrights, trademarks and trade secrets in the Programs are and
shall remain with Sybase and its licensors. No title or ownership of the
Programs is transferred to Partner or End-User. Partner shall not translate,
localize or modify any portion of the Programs without the prior written consent
of Sybase.
CAP Agreement 62310
<PAGE> 2
4. ORDERING AND DELIVER. Internal Use Copies, Development Copies, Demonstration
Copies, Evaluation Copies and copies of the Programs for distribution directly
or indirectly to End-Users shall be ordered from Sybase and delivered by Sybase
to Partner (or in the case of Evaluation Copies and copies for distribution to
End-Users, Sybase shall deliver the copies directly to the End-Users if so
instructed by Partner). Partner will use the "Exhibit A" form adopted by Sybase
from time to time (or a Purchase Order containing the same information) to order
Programs from Sybase. All shipments are FOB origin, and Partner is responsible
for all shipping charges. Except for taxes on Sybase's income, Partner shall be
responsible for any sales, use, excise or any other form of taxes resulting from
this Agreement.
5. LICENSE ACCOMPANYING PROGRAMS. If Partner uses the Programs, Partner agrees
to be bound by terms and conditions of the Sybase Shrinkwrap. Notwithstanding
the above, Development Copies and Demonstration Copies shall only be used for
the purposes outlined in Section 1 above and shall be returned to Sybase upon
expiration or termination of this Agreement. Partner shall ensure that the
End-User's use of the Programs is either subject to the terms and conditions of
(a) the Sybase Shrinkwrap or (b) an executed license agreement or shrinkwrap
agreement between Partner and End-User which is substantially similar to, and no
less restrictive in protecting Sybase's interest than, the Sybase Shrinkwrap. If
Evaluation Copies are being licensed, the Sybase Shrinkwrap or license agreement
between Partner and End-User (as applicable) shall be modified by a written
commitment from End-User to use the Programs for a period not to exceed the
number of days designated in the applicable schedule to this Agreement. If a
conflict arises between this Agreement and any such license agreement, the terms
of this Agreement shall prevail. Partner shall undertake reasonable efforts to
enforce the terms of any license agreement between Partner and an End-User as it
relates to the Programs.
6. REPORTS. Partner shall keep or cause to be kept full and accurate accounts
and records of all transactions made by it and by its authorized distributors
under this Agreement (including Evaluation Copies) in form such that all amounts
owing hereunder to Sybase may be readily and accurately determined. Partner
shall undertake to assure that its distributors are (a) accurately reporting to
Partner all sales to End-Users and (b) otherwise complying with this Agreement.
Partner shall allow Sybase to examine its records to determine compliance with
this Agreement. Any examination shall be at the expense of Sybase, shall occur
during regular business hours at Partner's offices and shall not interfere
unreasonably with Partner's regular activities. Sybase shall give Partner 30
days or more prior written notice of the date of each such examination and the
name of the accountant who will be conducting the examination. All information
obtained from conducting the examinations shall be maintained as Confidential
Information. Partner agrees to pay Sybase any amounts owing as a result of
Partner's non-compliance with the payment provisions of this Agreement within 30
days of the date of the examination report which details such non-compliance. In
the event such amounts owed by Partner to Sybase exceeds 5% of total royalties
due, Partner shall pay the costs of such examination.
7. SUPPORT & MAINTENANCE. Partner shall be solely responsible for providing
End-User technical support and service of warranty claims for Partner's
Application Software, including the Programs, provided that Partner may also
sell Sybase technical support services for the programs only, on the terms
described in the attached Schedules. Partner may distribute to End-Users to whom
it has licensed Application Deployment Copies of Program updates to such Program
which are made generally available by Sybase so long as Partner has paid Sybase
all applicable Application Deployment Maintenance Fees.
8. INDEPENDENT CONTRACTORS. Partner and Sybase are independent contractors and
are not agents or representatives of each other. Partner does not have the right
to bind Sybase and shall not misstate or misinterpret its relationship to
Sybase.
9. ADVERTISING; TRADEMARKS. Sybase may identify Partner as a Commercial
Application Partner in Sybase advertising and marketing materials. Partner shall
not make any representations concerning the Programs which are inconsistent with
Sybase's marketing materials and advertising. Partner may utilize applicable
Sybase trademarks and logos only in accordance with Sybase's then-current
published guidelines, and trademarks shall remain the exclusive property of
Sybase or its licensors. Partner shall suitably feature the Programs and related
trademarks and Sybase's ownership of the Program in any advertising, marketing
literature, product documentation and packaging of the Application Software.
Partner shall give appropriate recognition in the Application Software of
Sybase's proprietary rights in the Programs in the same manner, places and times
and no less conspicuously than the recognition of the proprietary rights of
other including Partner in the Application Software.
10. TERMS AND RIGHTS UPON TERMINATION. This Agreement will become effective as
of the date first shown above and shall continue in force for period of 3 years,
subject to (a) Partner's payment of all fees owing hereunder, or (b) termination
under Section 11 below. Thereafter, this Agreement shall automatically renew for
additional one-year terms subject to payment of Sybase's then-current Annual
Renewal Fee and provided that Partner is not then in default of this Agreement,
unless written notice of termination is given by either party at least 30 days
prior to the expiration of the term then in effect. No expiration or termination
of the Agreement shall impair of affect (i) Internal Use Copies, which shall
continue so long as Partner is not in breach of the Sybase Shrinkwrap or (ii)
copies of Programs distributed by Partner to End-Users in accordance with this
Agreement prior to the effective date of the expiration or termination of this
Agreement. All Demonstration Copies shall be returned to Sybase. Termination or
expiration shall not release either party from its liability to pay any fees
accruing prior to the date of the termination or expiration. Sections 3, 5, 10,
11, 12, 13 14 and 18 of this Agreement shall survive any expiration or
termination of this Agreement.
11. DEFAULT. Either party may immediately terminate this Agreement or any
license granted hereunder by written notice to the other if such other party
breaches any term or condition of this Agreement, including but not limited to
failure to pay when due any fee hereunder, and does not remedy such breach
within 30 days written notice thereof from the non-breaching party. Each party
CAP Agreement 62310
<PAGE> 3
will reimburse the other party for all reasonable costs incurred by the other
party (including attorney's fees) in collecting past due amounts hereunder. Any
breach which by its nature cannot be remedied shall entitle the non-breaching
party to terminate this Agreement immediately upon written notice to the other
party. This remedy shall not be an exclusive remedy and shall be in addition to
any other remedies which the non-breaching party may have under this Agreement
or otherwise.
12. CONFIDENTIAL INFORMATION. Each party will not disclose or use any business
and/or technical information of the other designated orally or in writing as
"Confidential" or "Proprietary" (together, "Confidential Information") without
the prior written consent of the other party. Such restrictions do not extend to
any item of information which (a) is not or later becomes available in the
public domain without the fault of the receiving party; (b) is disclosed or made
available to the receiving party by a third party without restrictions and
without breach of any relationship of confidentiality; (c) is independently
developed by the receiving party without access to the disclosing party's
Confidential Information, (d) is known to the recipient at the time of
disclosure, or (e) is produced in compliance with applicable law or court order,
provided that the disclosing party is given reasonable notice of such law or
order and opportunity to attempt to preclude or limit such production. Upon
termination or expiration of this Agreement, each party shall immediately return
all copies of Confidential Information received from the other party. Partner
shall not release the results of any benchmark of the Programs to any third
party without the prior written approval of Sybase for each such release.
13. DISCLAIMER OF WARRANTY; LIMITATION OF LIABILITY. Except as expressly
provided in the Sybase Shrinkwrap, NO EXPRESS OR IMPLIED WARRANTY OR CONDITION
IS MADE WITH RESPECT TO THE PROGRAMS OR SERVICES SUPPLIED BY SYBASE OR ITS
SUBSIDIARIES, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. The aggregate liability to
Sybase and its subsidiaries, if any, for any losses or damages arising out of or
in connection with this Agreement, whether the claim is in contract, tort or
otherwise, shall not exceed the amount paid by Partner to Sybase under this
Agreement for the affected Programs or services. UNDER NO CIRCUMSTANCES SHALL
SYBASE, ITS SUBSIDIARIES OR ITS LICENSORS BE LIABLE FOR SPECIAL, INDIRECT,
EXEMPLARY, INCIDENTAL AND/OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED
TO, LEGAL FEES, LOSS OF PROFITS, LOSS OR INACCURACY OF DATA OR LOSS RESULTING
FROM BUSINESS DISRUPTION, EVEN IF SYBASE HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
14. INDEMNIFICATION. Partner indemnifies and holds harmless Sybase, its
affiliates, directors, employees and agents from all third party claims,
including court costs and reasonable fees of attorneys and expert witnesses,
arising in connection with (a) a breach by Partner of its agreement with an
End-User or distributor (unless such breach was caused by Sybase's breach of
this Agreement or the Sybase Shrinkwrap), or (b) use of the Application Software
if liability is not caused by the programs as provided by Sybase. Sybase
indemnifies and holds harmless Partner, its affiliates, directors, employees and
agents from all third party claims, including court costs and reasonable fees of
attorneys and expert witnesses, arising in connection with (i) a breach by
Sybase of the Sybase Shrinkwrap or (ii) use of the Programs as provided by
Sybase if liability is not caused by the Application Software.
15. EXPORT RESTRICTIONS. Partner shall not transfer, directly or indirectly, any
restricted Programs or technical data received from Sybase or its subsidiaries,
or the direct product of such data, to any destination subject to export
restrictions under U.S. law, unless prior written authorization is obtained from
the appropriate U.S. agency.
16. ASSIGNMENT. This Agreement may not be assigned (by operation of law or
otherwise) or otherwise transferred in whole or in part by Partner unless
Partner has received prior written permission from Sybase, such permission not
to be unreasonably denied by Sybase. To the extent Partner is permitted to
assign this Agreement, all provisions of this Agreement shall be binding upon
Partner's successors or assigns.
17. NOTICES. All notices under this Agreement shall be in writing and either
delivered personally, sent by first class mail, express carrier or by confirmed
facsimile transmission to the address of the party set forth above (and if to
Sybase, to the attention of the General Counsel). All notices shall be deemed
given on the business day actually received.
18. OTHER. This Agreement, the initialed Schedules, and any documents explicitly
referred to therein, constitute the entire agreement between the parties,
supersede any and all previous agreements authorizing Partner to distribute the
Programs to third parties and no representations, condition, understanding or
agreement of any kind, oral or written, shall be binding upon the parties unless
incorporated herein. This Agreement may not be modified or amended, nor will the
rights of either party be deemed waived, except by an agreement in writing
signed by authorized representatives of Partner and Sybase. Purchase orders
shall be binding as to the products and services ordered, and the site for
delivery of Programs or performances of services as set forth on the face side
of or a special attachment to the purchase order. Other terms and preprinted
terms on or attached to any purchase order shall be void. This Agreement shall
be governed by, and construed in accordance with, the laws of California if
Partner is located in the United States and the laws of Ontario if Partner is
located in Canada without regard to their conflict of laws rules or the United
Nations Convention on the International Sale of Goods. If any provision of this
Agreement is held to be unenforceable, the parties shall substitute for the
affected provision an enforceable provision which approximates the intent and
economic effect of the provision. The parties have requested that this Agreement
and all documents contemplated hereby be drawn up in English. For Quebec
Province transactions: Les parties aux presentes ont exige que cette entente et
tous autres documents envisages par les presentes soient rediges en anglais.
CAP Agreement 62310
<PAGE> 4
ACCEPTED AND AGREED ON BEHALF OF:
Advantix, Inc. ("Partner") Sybase, Inc. ("Sybase")
- ---------------------------------- (or Sybase Canada Limited,
if applicable)
/s/ Tom Pascoe /s/ Glen Germanowski
- ---------------------------------- -----------------------------------
(Authorized Signature) (Authorized Signature)
Tom Pascoe Glen Germanowski
- ---------------------------------- -----------------------------------
(Printed Name) (Printed Name)
Chief Operating Officer Senior Corporate Counsel
- ---------------------------------- -----------------------------------
(Title) (Date) (Title) (Date)
3/31/98 Apr 6 - 1998
CAP Agreement 62310
<PAGE> 5
ADDENDUM TO COMMERCIAL APPLICATION PARTNER AGREEMENT
This Addendum (the "Addendum") entered into on March 31, 1998 supplements and
amends the terms of the Commercial Application Partner Agreement dated April 6,
1998 (the "CAP Agreement") between Sybase, Inc. ("Sybase") and Advantix, Inc.
and its wholly-owned subsidiaries Advantix (Ohio), Inc. and Bay Area Seating
Service, Inc. ("Partner"). Capitalized terms not otherwise defined shall have
the meaning set forth in the Agreement.
1. Past Royalties. Partner agrees to pay Sybase past royalties in a total of
$[***] due for remarketing of Sybase Programs as follows: A payment of $[***]
net thirty (30) days after the first sale of Application Software (in
conjunction with the Sybase Programs below) in 1998. A second payment of $[***]
net (30) days after the second sale of such Application Software in 1998.
2. Software. The CAP Agreement is for remarketing by Partner of the Sybase
Programs Adaptive Server Enterprise (also known as Sybase SQL Server) and Open
Server only, only in conjunction with Partner's Application Software Artsoft and
Sportsoft.
3. Prepaid Royalties; Fee Arrangement. Partner will pay Sybase a non-refundable
royalty amount of $[***] due net sixty (60) days from the date of this
Addendum. In consideration of such prepaid amount, the royalty fees under the
CAP Agreement Schedule A are changed to the following arrangement which is based
on Partner's local country price list ("Partner's List Price"), Partner will pay
Sybase [***] percent ([***]%) of Partner's List Price for license fees for the
Application Software containing the above Sybase Program or Programs, provided
that for each copy of the Application Software, partner will pay Sybase a
minimum of $[***] (U.S.) or $[***] (outside U.S.). The current (U.S). Partner's
price list shall be submitted by Partner within 15 days after the signing of
this Addendum. In the event Partner changes its price list, Partner agrees to
give Sybase 60 days prior notice. In the event of material changes to Partner's
prices, Sybase shall have the right to review the above minimums. If Sybase
requires review and adjustment of minimums as a result of a price change by
Partner and the parties are unable to agree to new minimum prices, the minimum
prices shall not be decreased from those in effect immediately prior to
Partner's price change.
If the Application Software (licensed with the Sybase Programs) is offered with
services or support or bundled with hardware (in either case "Combined Offer"),
Partner must show that the portion of the revenues for the Combined Offer
allocated to the software portion is fair, equitable and representative of the
value of the software portion, provided that in no event shall the amount
allocated to the software portion be less than 30% of the total price for the
Combined Offer.
4. Report; Payment; End-User Support Fees. Partner will submit to Sybase reports
as set forth in the attached Master Disk Addendum, as the $[***] prepaid royalty
set forth above is used. Partner shall enclose with each report a check or
purchase order, for [***]% of the license fee owed (as determined in Section 3
above) for right to pass on updates and support to End-Users. After such $[***]
is fully used, Partner shall submit to Sybase a report and check or purchase
order for license fees and the right to pass on update fees. Partner shall
provide first level support as set forth in the CAP Agreement.
5. The parties agree that no prepaid royalty balance remains under the Value
Added Remarketer Agreement between Sybase and Artsoft (now known as Advantix,
Inc.) dated May 28, 1989. Once the $[***] set forth in Section 1 is paid, all
past due royalties owed from such Value Added Remarketer Agreement will have
been paid per the terms set forth in Schedule B.
Except as amended above, the Agreement shall remain in full force and effect.
Sybase, Inc. Advantix, Inc.
By: /s/ Glen Germanowski By: /s/ Tom Pascoe
-------------------- ---------------
Name: Glen Germanowski Name: Tom Pascoe
---------------- ----------
Title: Senior Corporate Counsel Title: Chief Operating Officer
------------------------ -----------------------
Apr 6 - 1998
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 6
Schedule B
1. Dispute Settlement. A dispute has arisen between Partner and
Sybase relating to the certain Value Added Remarketer Agreement originally
between Sybase and Artsoft, which was subsequently transferred to Advantix,
Inc., dated May 28, 1989 (the "Prior Agreement") regarding prepaid royalties,
past due royalties and certain other matters. In order to settle this dispute,
and in full and complete satisfaction of any and all claims by either party
relating to the Prior Agreement, Partner agrees to pay Sybase a total of $[***]
for remarketing of Sybase programs as follows: A payment of $[***] net thirty
(30) days after the first sales of Application Software (in conjunction with the
Sybase Programs below) in 1998. A second payment of $[***] net thirty (30) days
after the second sale of such Application Software 1998. In addition, each of
Partner and Sybase, on behalf of itself, its affiliates, assigns and successors
hereby fully releases and discharges the other party and the parties affiliates,
assigns and successors from any rights, claims and actions, known or unknown, of
any kind whatsoever, which each party now has or may hereafter have against the
other party, arising out of or relating to the Prior Agreement.
2. Unknown Claims. Each party expressly waives and relinquishes all
rights and benefits afforded in Section 1542 of the California Civil Code which
provides:
"A general release does not extend to claims which
the creditor does not know or suspect to exist in his
favor at the time of executing the release which is
known by him must have materially affected the
settlement with the debtor.
Each party understands and acknowledges the significance and consequences of
this waiver of Section 1542 and nevertheless elects to, and does, release those
claims described in this Agreement, known or unknown, that it may have now or in
the future arising out of any act, omission, cause or thing, relating to the
Prior Agreement.
Sybase, Inc.
LEGAL APPROVED
BY /s/ Glen Germanowski
------------------------------------
DATE 4/1/98
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED PROVISIONS OF
THIS AGREEMENT. THE REDACTED PROVISIONS ARE IDENTIFIED BY THREE ASTERISKS AND
ENCLOSED BY BRACKETS. THE CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.21
GEOCITIES PAGES THAT PAY MERCHANT AGREEMENT
This Merchant Agreement ("Agreement") is entered as of March 1, 1999
(the "Effective Date") by and between GeoCities, a California corporation, with
its principal place of business at 1918 Main Street, Suite 300, Santa Monica,
California 90405 ("GeoCities"), and Tickets.com, Inc., a Delaware corporation,
with its principal place of business at 4061 Glencoe Avenue, Marina del Rey, CA
90292 ("Merchant").
WHEREAS, GeoCities operates a leading community-oriented World Wide Web
("Web") site (the "GeoCities Site", deemed to include successor and related Web
sites) and has organized a GeoCities-branded affiliates programs under the name
"pages That Pay" comprising a network of affiliated Web sites and a
corresponding network of merchant Web sites whereby certain affiliate sites are
linked to certain merchant Web sites and merchants compensate such affiliates
for certain commercial activities on such merchant sites which result from user
traffic for which the affiliates are directly responsible;
WHEREAS, GeoCities has entered into an agreement with Be Free, Inc.
("Be Free"), for, among other things, Be Free to administer such affiliates
program using its leading edge proprietary technology and services (the "Be Free
Agreement");
WHEREAS, the parties hereto desire that Merchant participate in the
GeoCities affiliates program as a merchant;
AND WHEREAS, GeoCities is willing to enroll Merchant in the affiliates
program under the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. DEFINITIONS.
1.1 "Affiliate(s)" means an individual or legal entity which GeoCities
deems eligible to participate in the Program, agrees to certain terms and
conditions of membership, and places a Qualifying Link on its own Website for
the purpose of referring sales to Merchant for a Commission.
1.2 "Affiliate Pageview" means the successful move of a Visitor from an
Affiliate's Website to Merchant's Website directly through the use of a
Qualifying Link.
1.3 "Banner Impression" means a Web page containing a Merchant
advertising banner, Merchant text mention or hyperlink to the Merchant Website
transmitted by the GeoCities Site in response to a request from a third-party
Internet user entitled to interact with the GeoCities Site (whether or not such
user receives the tramitted Web page).
1
<PAGE> 2
1.4 "Confidential Information" of a Disclosing Party shall mean the
following, to the extent previously, currently or subsequently disclosed to the
other party hereunder or otherwise: information relating to products, services
or technology of the Disclosing Party or the properties, composition, structure,
organization, use or processing thereof, or systems therefor, or to the
Disclosing Party's business (including, without limitation, computer programs,
code, algorithms, schematics, data, know-how, processes, ideas, inventions
(whether patentable or not), names and expertise of employees and consultants
and other technical, business, financial, customer and product development
plans, forecasts, strategies and information). In particular, but without
limitation, Program Technology and modifications or improvements thereto by
whomever made shall be considered Confidential Information of GeoCities.
1.5 "Commission(s)" shall mean the fee(s) Merchant shall pay to
Affiliates for Qualifying Transactions under this Agreement as specified in
Addendum No. 1 to this Agreement (attached hereto).
1.6 "Customer Data" means any and all information reasonably obtainable
in connection with commercial transactions enabled or facilitated through the
Program concerning GeoCities Members, Affiliates Visitors and/or merchants,
whether in separately identifiable or aggregated form, including, without
limitation, first or last name; e-mail or other address; postal code; gender or
other demographic characteristics; year or date of birth; social security or
other tax identification number; occupation or other socio-economic or financial
information; nature, subject matter, date or amount paid in any commercial
transaction(s); number or identification of viewed/downloaded Website(s);
preferences or habits; and any other identifying information, whether or not
actually provided, collected, derived or deducted, and regardless or its
accuracy or completeness.
1.7 "Disclosing Party" shall mean a party hereto that discloses its
Confidential Information to the other party.
1.8 "FTC Order" means that certain "Agreement Containing Consent Order"
issued by the U.S. Federal Trade Commission on June 11, 1998, attached hereto as
Exhibit B as well as any and all subsequent or related official materials,
regulations, laws judgement or orders.
1.9 "GeoCities Member" means a GeoCities customer or other individual
or entity which, according to GeoCities' then-current policies and procedures is
entitled to participate in the Program as an Affiliate.
1.10 "Program" means the network of participating affiliates and
merchants, subject to the terms of applicable separate agreements, in GeoCities'
"Pages That Pay" affiliates program wherein (a) affiliates are enabled to
generate hypertext links ("Links") from their personalized Web pages to
participating merchant Web sites, (b) encourage/enable Visitors to affiliate Web
pages to use Links to make purchases and otherwise interact with merchant
Websites, and (c) receive compensation on an agreed upon basis with respect to
commercial activity generated by such Link.
2
<PAGE> 3
1.11 "Program Technology" means any software (in object code form
only), hardware or other technology provided to Merchant by BeFree or GeoCities
relating to the Program, and all updates, improvements, patches, upgrades, and
bug fixes thereof.
1.12 "Qualifying Link" means a graphics or textual link from an
Affiliate's Web page to Merchant's Website which effectuates a Qualifying
Transaction. The link will establish a direct hyperlink connection enabling
Visitors to move from Affiliate's Web page to Merchant's Website using a single
keystroke.
1.13 "Qualifying Transaction" means a sale or other event as described
in Addendum No. 1 to this Agreement (attached hereto) completed directly after a
hyperlink transfer from Affiliate's Web page to Merchant's Website through a
Qualifying Link that triggers an obligation on Merchant to pay such Affiliate a
Commission under this Agreement. All disputes regarding determinations of
Qualifying Transaction will be resolved mutually between GeoCities and Merchant.
1.14 "Receiving Party" shall mean a person or entity that receives
Confidential Information of another party.
1.15 "Visitor(s)" means, with respect to an Affiliate's Web page or
Merchant Website, a third party Internet user entitled to interact with such
Website (such as by viewing or downloading material).
1.16 "Website" or "Site" or "Web page" means a URL site or page on the
Web.
2. PROGRAM IMPLEMENTATION AND OPERATION.
2.1 Subject to the terms and conditions of this Agreement, GeoCities
shall have the sole right and responsibility to solicit merchants and affiliates
for participation in the Program, except as provided in Addendum No. 1.
2.2 Merchant agrees to use best efforts to assist (including but not
limited to the commitment of adequate technical personnel) Be Free and GeoCities
in the expeditious installation and testing of software and/or hardware
necessary to add Merchant to the Program and participate fully in the Program,
including, but not limited to, any materials needed to allow for accurate and
timely reporting of Qualifying Transaction data into the Be Free system and as
further specified in Exhibit A.
2.3 GeoCities shall compensate Be Free for the reasonable installation
costs of adding Merchant to the Program under this Agreement.
3. PROGRAM MANAGEMENT.
3.1 GeoCities will provide Merchant with reasonable program management
tools that will provide Merchant with comprehensive information relating to
Qualifying Links, Qualifying
3
<PAGE> 4
Transactions and other relevant data. Merchant shall have access to regular
reports reasonably necessary to allow Merchant generally to monitor Qualifying
Transactions and Commissions owed to Affiliates.
3.2 Merchant shall make available in a timely manner at no charge to
GeoCities all software, technical data, files, documentation, sample output or
other information and resources reasonably required by GeoCities or BeFree for
the operation of the Program. Merchant will be solely responsible for and
assumes the risk of any problems resulting from, the content, accuracy,
completeness and consistency of such data, materials and information supplied by
Merchant.
3.3 Merchant shall not operate a site, nor will GeoCities permit the
operation of any sites within its community, which: promotes sexually explicit
materials; promotes violence; promotes discrimination based on race, gender,
religion, ethnicity, nationality, disability, sexual orientation or age;
promotes illegal activities; or violates intellectual property rights. GeoCities
and Merchant represent and warrant that they shall each comply with all
applicable laws of all applicable jurisdictions (including, without limitation,
those relating to the protection of intellectual property, export restrictions,
consumer protection and taxation).
3.4 In addition to GeoCities' standard terms and conditions of the
Program, any Affiliate of Merchant shall also be required to comply with the
specific requirements set forth in Exhibit C (the "Merchant Terms and
Conditions"). Merchant represents and warrants that the enforcement of Merchant
Terms and Conditions in connection with the Program, will not violate any laws,
regulations or rights of Affiliates, GeoCities Members or other third parties.
Except as expressly set forth above, Merchant may not impose any additional
requirements or restrictions on Affiliates without the prior written consent of
GeoCities. GeoCities or Merchant shall have the right, upon ten (10) business
days notice to the other, to amend Exhibit C by removing a particular aspect of
Merchant Terms and Condition if either party determines, in its reasonable
discretion, that such aspect is unfair, offensive or otherwise objectionable.
Merchant represents and warrants that it will apply Merchant Terms and
Conditions in a fair and even manner.
3.6 Merchant shall automatically approve each and every GeoCities
Member that wishes to establish a Qualifying Link and become an Affiliate on a
preliminary basis. Merchant shall have the right to review Affiliate Sites and
reject the Affiliate, within five (5) business days of Merchant's discovery of a
Disqualification Fact. "Disqualification Fact" shall mean any demonstrable fact
relating to an Affiliate that puts such Affiliate in violation of any GeoCities
Program requirement or Merchant Terms and Conditions. Notwithstanding the
foregoing, Merchant shall provide notice to GeoCities at least two (2) business
days prior to notifying the Affiliate that it has been rejected by Merchant.
Such notice shall identify the rejected Affiliate, the URL of the Affiliate
Site, and a detailed explanation describing the Disqualification Fact and any
other bases for rejecting the Affiliate. Notwithstanding the disqualification of
an affiliate under this Section, Merchant shall, under the terms of this
Agreement, pay such affiliate any Commissions earned by the Affiliate for
Qualifying Transactions that occurred prior to the Affiliate's disqualification.
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3.7 GeoCities and BeFree shall have the sole right and responsibility
to host all Web pages relating to link generation, reporting, account management
and other functions of the Program. If Merchant wishes to add certain Program
functionality (e.g., link generations, profile management, etc.) to its Website,
it shall submit a written request to GeoCities. Merchant shall have the right to
add such functionality to its Website only with the consent of both GeoCities
and BeFree, such consent which shall not be unreasonably withheld by either
party, and only on terms and conditions to be negotiated by the parties.
4. PAYMENT TERMS.
4.1 Merchant shall pay Commissions to Affiliates on a quarterly basis
according to the terms of the BeFree payment system implemented by GeoCities, in
its sole discretion, as part of the Program (the "payment System")/ Such
payments shall be made within fifteen (15) days after the applicable calendar
quarter.
4.2 GeoCities shall be responsible for transmitting any payments
directly to Affiliates in the form of a check, or by other means that GeoCities,
in its sole discretion, deems appropriate, including but not limited to consumer
credits or merchant points.
4.3 GeoCities shall provide documentation as reasonably required under
the Payment System to substantiate payments to Affiliates.
4.4 The parties shall use best efforts to correct payment errors,
whether such errors result in overpayment or underpayment.
4.5 All late payments by Merchant under this Agreement will be assessed
a service fee of one and one-half percent (1.5%) of the amount due per month, to
the extent allowed by law. Additionally, Merchant shall pay any collection
costs, including reasonable attorneys' fees, incurred by GeoCities in the course
of collecting on such overdue or unpaid amounts.
5. SUPPORT AND MAINTENANCE.
5.1 BeFree shall provide standard support and maintenance for the
program pursuant to the BeFree Agreement. The Program Technology shall, from
time to time, be upgraded at no additional cost to Merchant; provided, however,
that Merchant uses best efforts to assist (including but not limited to the
commitment of adequate technical personnel) Be Free and GeoCities in the
expeditious installation and testing of software and/or hardware necessary to
implement such upgrades in a timely fashion.
5.2 GeoCities shall work diligently with BeFree to address technical
problems with Qualifying Links or other aspects of Program. In the event
equipment failure, human error or other technical problems prevent all
Qualifying Link from operating for more than twenty-four (24) consecutive hours,
GeoCities will compensate Merchant as follows: GeoCities will provide Merchant
with one Banner Impression for each Affiliate Pageview estimated to be lost as a
result of the total outage; the estimated number of Affiliate Pageviews lost
shall be calculated by
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multiplying the average number of Affiliate Pageviews per day for the
immediately preceding seven (7) calendar days by the number of days of complete
outage. Additionally, if such technical problems prevent all Qualifying Links
from operating for more than an aggregate of seventy-two (72) hours each month
for three (3) consecutive months, Merchant shall have the additional right,
within ten (10) days of the end of such period, to terminate this Agreement upon
thirty (30) days' notice. The compensation and termination right, if any, set
forth in this Section 5.2 shall be Merchant's sole and exclusive remedy for any
failures under this Section or errors in Qualifying Links or interruption of
services under the program due to equipment failure, human error or other
technical problems.
6. AFFILIATE INFORMATION.
6.1 Subject to the terms and conditions of this Agreement and any
applicable laws, rules or regulations, GeoCities shall provide Merchant with
Customer Data, and information relating to Affiliates as reasonably necessary to
accomplish the purposes of this Agreement ("Affiliate Information").
6.2 Merchant and GeoCities represent and warrant that they will not
resell any Affiliate Information or Customer Data or use Affiliate Information
or Customer Data or engage in any other conduct in violation of the FTC Order.
Merchant shall cooperate fully with GeoCities, and follow and comply with all
reasonable instructions and directions of GeoCities, to ensure compliance with
the FTC Order.
6.3 Merchant shall provide a readily-visible, accessible and otherwise
reasonable mechanism on its Site for Affiliates to request the removal of all
personally-identifiable information relating to such Affiliate from Merchant's
database and other records.
7. ADVERTISING, PROMOTION AND TRADEMARKS.
7.1 Merchant shall participate in the Program at the participation
level set forth in Addendum No. 1 to this Agreement (the "Participation Level").
As a condition to participating in Program at the Participation Level, Merchant
shall pay the participation fee as specified in Addendum No. 1 to this Agreement
(the "Participation Fee").
7.2 Merchant will use commercially reasonable efforts to provide art,
copy and other materials necessary for the creation of Qualifying Links and
other hyperlinks pursuant to this Agreement. Additionally, if Merchant chooses
to participate in any promotions in the Program, Merchant shall provide any
materials reasonably required by GeoCities for such participation.
7.3 Subject to all the terms and conditions of this Agreement, Merchant
hereby grants GeoCities and Affiliates a nonexclusive, non-transferable,
non-sublicensable license to use the Merchant Marks on their respective Websites
solely in connection with the activities contemplated herein. "Merchant Marks"
shall mean solely the Merchant name, logo, tag lines, and any other service
marks in the form provided by Merchant to GeoCities for use in the Program under
this Agreement; provided, however, that Merchant, from time to time, may
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change the appearance and/or style of the Merchant Marks. GeoCities hereby
acknowledges and agrees that (i) the Merchant Marks are owned solely and
exclusively by Merchant, (ii) except as set forth herein, GeoCities has no
rights, title or interest in or to the Merchant Marks and (iii) all use of the
Merchant Marks by GeoCities shall inure to the benefit of Merchant. GeoCities
agrees not to apply for registration of the Merchant Marks (or any mark
confusingly similar thereto) anywhere in the world.
7.4 Merchant shall have the right to promote the Program on its Website
provided however, that the form and substance of such promotion shall be subject
to GeoCities' prior review and written consent which consent shall not be
unreasonably withheld. Subject to all the terms and conditions of this Agreement
and to GeoCities' right to prior review and approval set forth in this Section,
GeoCities hereby grants Merchant a nonexclusive, non-transferable,
non-sublicensable license to use the GeoCities Marks on its Websites and in its
related off-line collateral solely in connection with the promotion of the
Program under this Section. "GeoCities Marks" shall mean solely GeoCities' name,
logo and tag lines in the form provided by GeoCities to Merchant for promoting
the Program under this Agreement; provided, however, that GeoCities, from time
to time, may change the appearance and/or style of the GeoCities Marks. Merchant
hereby acknowledges and agrees that (i) the GeoCities Marks are owned solely and
exclusively by GeoCities, (ii) except as set forth herein, Merchant has no
rights, title or interest in or to the GeoCities Marks and (iii) all use of the
GeoCities Marks by Merchant shall inure to the benefit of GeoCities. Merchant
agrees not to apply for registration of the GeoCities Marks (or any mark
confusingly similar thereto) anywhere in the world.
8. LICENSES.
8.1 Subject to the terms and conditions of this Agreement, GeoCities
hereby grants Merchant a nonsublicenseable, non-exclusive, non-transferable
worldwide right and license during the term of this Agreement to use the Program
Technology internally only to participate in the Program as set forth herein and
only as set forth in the documentation provided therewith. Merchant has no right
to receive, use or examine any source code or design documentation relating to
the Program Technology.
8.2 Other than the rights and licenses expressly granted to Merchant in
this Agreement, no rights or licenses, express or implied, are granted or deemed
granted hereunder or in connection herewith.
9. OWNERSHIP.
9.1 As between the parties, GeoCities, BeFree and their licensors
retain all title to, and all right to Program Technology and any intellectual
property rights thereto, all copies and derivative works thereof by whomever
made, and all related documentation and materials. GeoCities shall have all
right, title and interest in and to all Customer Data, Affiliate Information and
content created by or otherwise provided by GeoCities in conjunction with the
Program.
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9.2 Merchant represents, warrants and agrees not to (i) disassemble,
decompile or otherwise reverse engineer the Program Technology or otherwise
attempt to learn the source code, structure, algorithms or ideas underlying the
Program Technology, to the maximum extent allowed under applicable law, (ii)
rent, lease or otherwise provide temporary access to Program Technology, (iii)
copy, alter or modify the Program Technology, or (iv) allow others to do any of
the foregoing.
10. TERMS AND TERMINATION.
10.1 The Term of this Agreement and the rights granted herein is set
forth in Addendum No. 1 to this Agreement (attached hereto).
10.2. The Agreement may terminate immediately upon the following
events:
(i) if any party ceases to do business, or otherwise
terminates its business operation.; or
(ii) if any party materially breaches any material provisions
of this Agreement and fails to cure such breach within thirty (30) days
of written notice describing the breach; or
(iii) if any party becomes insolvent or seeks protection under
any bankruptcy, receivership, trust deed, creditors arrangement,
composition or comparable proceeding.
10.3 Either party shall have the right immediately to terminate this
Agreement in the event the other party commits fraud or violates any law,
statue, ordinance or regulation (including without limitation those governing
export control, consumer protection, unfair competition, anti-discrimination or
false advertising).
10.4 Additional termination rights of the parties, if any, are set
forth in Addendum No. 1 to this Agreement (attached hereto).
10.5 Upon any termination of this Agreement by either party, (I) all
rights and licenses granted to the other party under this Agreement shall
terminate, (ii) each party will immediately cease using and return to the other
party and/or destroy all of the other party's Confidential Information, Program
Technology, and other confidential materials in its possession, custody or
control in whichever form held (including without limitation all documents or
media containing any of the foregoing and all copies, extracts or embodiments
thereof), (iii) each party shall immediately pay al sums lawfully due the other
under this Agreement, (iv) Merchant shall not, directly or indirectly, initiate
or solicit contact with Affiliates or GeoCities Members for any purpose, and (v)
all other obligations and rights under this Agreement shall terminate except
Sections, 1, 4, 6, 9, 10, 11, 12, 13, 14, 16 (as applicable) of this Agreement
will continue in accordance with their terms.
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10.6 Each party understands that the rights of termination hereunder
are absolute. Neither party shall incur any liability whatsoever for any damage,
loss or expenses of any kind suffered or incurred by the other (or for any
compensation to the other) arising from or incident to any termination of this
Agreement by such party which complies with the terms of the Agreement whether
or not such party is aware of any such damage, loss or expenses. Termination is
not the sole remedy under this Agreement and, whether or not termination is
effected, all other remedies will remain available.
11. CONFIDENTIALITY.
11.1 Each party recognizes that the Confidential Information of the
other party (and the confidential nature thereof) are critical to the business
of the other party and that it would not enter into this Agreement without
assurance that such technology and information and the value thereof will be
protected as provided in this Section 11 and elsewhere in this Agreement.
11.2 The Receiving Party agrees (I) to hold the Disclosing Party's
Confidential Information in confidence and to take all reasonable precautions to
protect such Confidential Information (including, without limitation, all
precautions the Receiving Party employs with respect to its confidential
materials, (ii) not to divulge any such Confidential Information or any
information derived therefrom to any third person, (iii) not to make any use
whatsoever at any time of such Confidential Information except as expressly
authorized in this Agreement, and (iv) shall comply with all export laws,
restrictions, national security controls and regulations of the United States or
other applicable foreign agency or authority, and not to export or re-export, or
allow the export or re-export of any such Confidential Information or any copy
or direct product thereof in violation of any such restrictions, laws or
regulations, or to any Group D:1 or E:2 country (or any national of such
country) specified in the then current Supplement No. 1 to Part 740, or, in
violation of the embargo provisions in Part 746, of the U.S. Export
Administration Regulations (or any successor regulations or supplement), except
in compliance with and with all licenses and approvals required under applicable
export laws and regulations, including without limitation, those of the U.S.
Department of Commerce.
11.3 Any employee, contractor or other person given access to any such
Confidential Information must have a legitimate "need to know" and shall be
similarly bound in writing. Without granting any right or license, the
Disclosing Party agrees that the foregoing clauses (i), (ii) and (iii) shall not
apply with respect to information the Receiving Party can document (A) is in or
(through no improper action or inaction by the Receiving Party, agent or
employee) enters the public domain (and is readily available without substantial
effort), (B) was rightfully in its possession or known by it prior to receipt
from the Disclosing Party, (C) was rightfully disclosed to it by another person
without restriction, (D) was independently developed by it by persons without
access to such information and without use of any Confidential Information of
the Disclosing Party or (E) was required to be disclosed in accordance with
applicable law provided that reasonable efforts are undertaken by the Receiving
Party to minimize the extent of any required disclosure and to obtain an
undertaking from the recipient to maintain the confidentiality thereof. Each
party's obligations under this Section 11 (except under clause (iv)
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of Section 11.2) shall terminate, with respect to any particular information,
ten (10) years after the date of disclosure of such information.
11.4 The Receiving Party acknowledges and agrees that due to the unique
nature of the Disclosing Party's Confidential Information, there can be no
adequate remedy at law for any breach of its obligations hereunder, that any
such breach may allow the Receiving Party or third parties unfairly to compete
with the Disclosing Party resulting in irreparable harm to the Disclosing Party,
and therefore, that upon any such breach or any threat thereof, the Disclosing
Party shall be entitled to appropriate equitable relief in addition to whatever
remedies it might have at law and to be indemnified by the Receiving Party from
any loss or harm, including, without limitation, lost profits and attorney's
fees, in connection with any breach or enforcement of the Receiving Party's
obligations hereunder or the unauthorized use or release of any such
Confidential Information. The Receiving Party will notify the Disclosing Party
in writing immediately upon the occurrence of any such unauthorized release or
other breach. Any breach of this Section 11 will constitute a material breach of
this Agreement.
12. INCIDENTAL AND CONSEQUENTIAL DAMAGES. EXCEPT FOR A BREACH OF SECTION 11,
GEOCITIES WILL NOT BE LIABLE UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR
OTHER THEORY FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING
WITHOUT LIMITATION LOST PROFITS) WITH RESPECT TO ANY SUBJECT MATTER OF THIS
AGREEMENT.
13. LIMITATION OF LIABILITY; DISCLAIMER.
13.1 GEOCITIES MAKES NO REPRESENTATIONS THAT THE OPERATIONS OF THE
SERVICE WILL BE UNINTERRUPTED OR ERROR FREE. GEOCITIES HAS NO RESPONSIBILITY FOR
THE CONTENT, QUALITY AND ACCURACY OF THE PRODUCTS, SERVICES OR WEBSITES OF
MERCHANT, AFFILIATES OR BEFREE. UNDER NO CIRCUMSTANCES WILL GEOCITIES BE
RESPONSIBLE FOR THE TRANSACTIONS OR NEGLIGENCE OF EITHER MERCHANT OR AFFILIATES.
13.2 GEOCITIES MAKES NO EXPRESS OR IMPLIED WARRANTIES WITH RESPECT TO
THE SUBJECT MATTER OF THIS AGREEMENT INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.
13.3 GEOCITIES WILL NOT BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF
THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY
FOR COST OF PROCUREMENT OF SUBSTITUTE GOODS, SERVICES, TECHNOLOGY OR RIGHTS OR
FOR ANY AMOUNTS AGGREGATING IN EXCESS OF AMOUNTS PAID TO IT HEREUNDER IN THE
TWELVE MONTH (12) PERIOD BEFORE THE CAUSE OF ACTION AROSE.
14. Indemnification. Each party will defend and hold harmless the other party
against any claim or suit against the other part and its shareholders,
directors, officers, employees,
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contractors and agents from any claims, liability, damage, cost and expense
(including attorneys' fees and costs of suite) to the extent they arise out of
disputes involving the indemnifying party's breach of its obligations herein.
Each party shall indemnify and hold harmless the other party, its shareholder,
directors, officers, employees, contractors and agents against and from damages,
costs, expenses and attorneys' fees, if any, finally awarded in such suit or the
amount of the settlement thereof. Neither party is authorized to agree to any
settlement, compromise or the like which would require that the other party make
any payment, or bear other obligations.
15. Audit. Each party shall keep and maintain detailed and accurate books and
records with regard to its performance hereunder. Each party or its independent
certified public accountant shall be entitled to review and audit such books and
records twice a year during normal business hours upon reasonable notice to the
other party and at the requesting party's expense; provided that the audited
party will bear such expense fully if the review or audit shows any
non-compliance (in excess of five (5) percent) with the terms of this Agreement.
All books and records relating to each party's obligations under this Agreement
shall be retained by the party's for five years after the termination or
expiration of this Agreement.
16. General
16.1 Assignability. Merchant shall not, directly or indirectly, assign,
transfer, divide, share or sublicense this Agreement, or any or all of its
performance, rights or obligations hereunder to any third party without
GeoCities' prior written consent, which consent shall not be unreasonably
withheld. Any attempt to do so in violation of this Section shall be null and
void. This Agreement will inure to the benefit of and be biding upon the parties
and their respective successors and permitted assigns.
16.2 Waiver. Any failure on the part of any party to enforce at any
time, or for any period of time, any of the provisions of this Agreement shall
not be deemed or construed to be a waiver of such provisions or of the right of
such party thereafter to enforce each and every such provision. No waiver will
be binding unless executed in writing by the party making the waiver.
16.3 Severability. If a court of law finds any provision of this
Agreement unenforceable, the parties agree to replace the offending provision
with an enforceable provision that most nearly achieves the intent and economic
effect of the unenforceable provision and all other terms shall remain in full
force and effect.
16.4 Force Majeure. No party shall be liable hereunder by any reason of
any failure or delay in the performance of its obligations hereunder (except
payment of money) on account of strikes, riots, insurrection, fires, floods,
storms, explosions, war, governmental action, labor conditions, earthquakes,
material shortages or any other cause which is beyond the reasonable control of
such party.
16.5 No Third Party Beneficiaries. Except as otherwise expressly
provided herein, the provisions of this Agreement are for the benefit of the
parties hereto and not for any other person or entity. This Agreement shall not
provide any non-party with any remedy, claim, liability.
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reimbursement, claim of action or other right in excess of those existing
without reference hereto.
16.6 Notice. All notices, requests, demands, applications, services of
process, and other communications which are required to be or may be given under
this Agreement will be in writing and will be deemed to have been duly given if
sent by telecopy or facsimile transmission, answer back requested, or delivered
by courier or mailed, certified first class mail, postage prepaid, return
receipt requested, to the parties to this Agreement at the following addresses:
If to Merchant: Adam Epstein
VP Business Development & Counsel
Tickets.com, Inc.
4061 Glencoe Avenue
Marina del Rey, CA 90292
If to GeoCities: Michael Barrett
Senior Vice President of Advertising and Strategic Development
1065 Avenue of the Americas
New York, NY 10018
(212) 381-6810 (Direct)
(212) 381-6801 (fax)
cc: Greg Williams
Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, CA 92618
(949) 790-6301 (fax)
(949) 790-6300 (voice)
or to such other address as either party will have furnished to the other by
notice given in accordance with this Section. Such notice will be effective, (i)
if delivered in person or by courier, upon actual receipt by the intended
recipient, or (ii) if sent by telecopy or facsimile transmission, on the date of
transmission unless transmitted after normal business hours, in which case on
the following date, (iii) if mailed, upon the date of first attempted delivery.
16.7 Modification. No alteration of or modification to this Agreement
shall be effective unless made in writing and executed by the authorized
representative of both parties.
16.8 Relationship of Parties. The parties hereto are independent
contractors and nothing contained in this Agreement shall be deemed or construed
to create a partnership, joint venture, employment, franchise, or agency
relationship between the parties.
16.9 Governing Law. This Agreement will be governed by and construed
under, and the legal relations between the parties hereto will be determined in
accordance with, the laws of
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the State of California, without giving effect to such state's conflict of law
principles. The parties hereby submit to the personal jurisdiction of, and agree
that any legal proceeding with respect to or arising under this Agreement will
be brought in, the state and federal courts sitting in the State of California.
16.10 Attorneys' Fees. If any suit is brought, or an attorney retained
to collect any money due under this Agreement, or to collect a judgement for
breach of this Agreement, the prevailing party will be entitled to recover, in
addition to any other remedy, reimbursement for reasonable attorneys' fees,
courts costs, investigation costs and other related expenses incurred in
connection therewith.
16.11 Entire Agreement. This Agreement, together with all Exhibits
attached hereto, constitutes the entire agreement between the parties with
respect to the subject matter thereof, and supersedes all prior agreements,
understandings and other communications between the parties with respect to the
subject matter hereof.
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IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this agreement the day and year first above written.
GEOCITIES MERCHANT: TICKETS.COM, INC.
By: /s/ Charles J. Barrett By: /s/ Adam Epstein
-------------------------------- -----------------------------
Name: Charles J. Barrett Name: Adam Epstein
-------------------------------- -----------------------------
Title: Advertising Director West Title: SVP Bus. Develop. & Counsel
-------------------------------- -----------------------------
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EXHIBIT A
INSTALLATION AND OPERATIONAL REQUIREMENTS
To be established by GeoCities, according to GeoCities' reasonable discretion
and the BeFree Agreement.
<PAGE> 16
EXHIBIT B
FTC ORDER
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
IN THE MATTER OF
GEOCITIES, A CORPORATION.
FILE NO. 9823015
AGREEMENT CONTAINING CONSENT ORDER
The Federal Trade Commission has conducted an investigation of certain acts and
practices of GeoCities, a corporation ("proposed respondent"). Proposed
respondent, having been represented by counsel, is willing to enter into an
agreement containing a consent order resolving the allegations contained in the
attached draft complain. Therefore,
IT IS HEREBY AGREED by and between GeoCities, by its duly authorized officer,
and counsel for the Federal Trade Commission that:
1. Proposed respondent GeoCities is a California corporation with its principal
office or place of business at 1918 Main Street, Suite 300, Santa Monica,
California 90405.
2. Proposed respondent admits all the jurisdictional facts set forth in the
draft complaint.
3. Proposed respondent waives:
(a) Any further procedural steps;
(b) The requirement that the Commission's decision contain a statement
of findings of fact and conclusions of law; and
(c) All rights to seek judicial review or otherwise to challenge or
contest the validity of the order entered pursuant to this agreement.
4. This agreement shall not become part of the public record of the proceeding
unless and until it is accepted by the Commission. If this agreement is accepted
by the Commission, it, together with the draft complaint, will be placed on the
public record for a period of sixty (60) days and information about it publicly
released. The Commission thereafter may either withdraw its acceptance of this
agreement and so
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notify proposed respondent, in which event it will take such action as it may
consider appropriate, or issue and serve its complaint (in such form as the
circumstances may require) and decision in disposition of the proceeding.
5. This agreement is for settlement purposes only and does not constitute an
admission by proposed respondent that the law has been violated as alleged in
the draft complaint, or that the facts as alleged in the draft complaint, other
than the jurisdictional facts, are true.
6. This agreement contemplates that, if it is accepted by the Commission, and if
such acceptance is not subsequently withdrawn by the Commission pursuant to the
provisions of Section 2.34 of the Commission's Rules, the Commission may,
without further notice to proposed respondent, (1) issue its complaint
corresponding in form and substance with the attached draft complaint and its
decision containing the following order in disposition of the proceeding, and
(2) make information about it public. When so entered, the order shall have the
same force and effect and may be altered, modified, or set aside in the same
manner and within the same time provided by statue for other orders. The order
shall become final upon service. Delivery of the complaint and the decision and
order to proposed respondent's address as stated in this agreement by any means
specified in Section 4.4 (a) of the Commission's Rules shall constitute service.
Proposed respondent waives any right it may have to any other manner of service.
The complaint may be used in construing the terms of the order. No agreement,
understanding, representation, or interpretation not contained in the order or
the agreement may be used to vary or contradict the terms of the order.
7. Proposed respondent has read the draft complaint and consent order. It
understands that it may be liable for civil penalties in the amount provided by
law and other appropriate relief for each violation of the order after it
becomes final.
ORDER
DEFINITIONS
For purposes of this order, the following definitions shall apply:
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1. "Child" or "children" shall mean a person of age twelve (12) or under.
2. "Parents" or "parental" shall mean a legal guardian, including, but not
limited to, a biological or adoptive parent.
3. "Personal identifying information" shall include, but is not limited to,
first and last name, home or other physical address (e.g., school), e-mail
address, telephone number, or any information that identifies a specific
individual, or any information which when tied to the above becomes identifiable
to a specific individual.
4. "Disclosure" or "disclosed to third party(ies)" shall mean (a) the release of
information in personally identifiable form to any other individual, firm, or
organization for any purpose or (b) making publicly available such information
by any means including, but not limited to, public posting on or through home
pages, pen pal services, e-mail services, message boards, or chat rooms.
5. "Clear(ly) and prominent(ly)" shall mean in a type size and location that are
not obscured by any distracting elements and are sufficiently noticeable for an
ordinary consumer to read and comprehend, and in a typeface that contrasts with
the background against which it appears.
6. "Archived" database shall mean respondent's off-site "back-up" computer tapes
containing member profile information and GeoCities Web site information.
7. "Electronically verifiable signature" shall mean a digital signature or other
electronic means that ensures a valid consent by requiring: (1) authentication
(guarantee that the message has come from the person who claims to have sent
it); (2) integrity (proof that the message contents have not been altered,
deliberately or accidentally, during transmission); and (3) non-repudiation
(certainty that the sender of the message cannot later deny sending it).
8. "Express parental consent" shall mean a parent's affirmative agreement that
is obtained by any of the following means: (1) a signed statement transmitted by
postal mail or facsimile: (2) authorizing a charge to a credit card via a secure
server; (3) e-mail accompanied by an electronically verifiable signature; (4) a
procedure that is specifically authorized by statue, regulation, or guideline
issued by the Commission; or (5) such other procedure that ensures verified
parental consent and ensures the identity of the parent, such as the use of a
reliable certifying authority.
9. Unless otherwise specified, "respondent" shall mean GeoCities, its successors
and assigns and its officers, agents, representatives, and employees.
10."Commerce" shall mean as defined in Section 4 of the Federal Trade Commission
Act, 15 U.S.C.Section 44.
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IT IS ORDERED that respondent, directly or through any corporation, subsidiary,
division, or other device, in connection with any online collection of personal
identifying information from consumers, in or affecting commerce, shall not make
any misrepresentation, in any manner, expressly or by implication, about its
collection or use of such information from or about consumers, including, but
not limited to, what information will be disclosed to third parties and how the
information will be used.
II.
IT IS FURTHER ORDERED that respondent, directly or through any corporation,
subsidiary, division, or other device, in connection with any online collection
of personal identifying information from consumers, in or affecting commerce,
shall not misrepresent, in any manner, expressly or by implication, the identity
of the party collecting any such information or the sponsorship of any activity
on its Web site.
III.
IT IS FURTHER ORDERED that respondent, directly or through any corporation,
subsidiary, division, or other device, in connection with the online collection
of personal identifying information from children, in or affecting commerce,
shall not collect personal identifying information from any child if respondent
has actual knowledge that such child does not have his or her parent's
permission to provide the information to respondent. Respondent shall not be
deemed to have actual knowledge if the child has falsely represented that (s)he
is not a child and respondent does not knowingly possess information that such
representation is false.
IV.
IT IS FURTHER ORDERED that respondent, directly or through any corporation,
subsidiary, division, or other device, in connection with the online collection
of personal identifying information, in or affecting commerce, shall provide
clear and prominent notice to consumers, including the parents of children, with
respect to respondent's practices with regard to its collection and use of
personal identifying information. Such notice shall include, but is not limited
to, disclosure of:
A. what information is being collected (e.g., "name," "home address,"
"e-mail address," "age," "interests");
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<PAGE> 20
B. it's intended use(s);
C. the third parties to whom it will be disclosed (e.g., "advertisers
of consumer products," mailing list companies," "the general public");
D. the consumer's ability to obtain access to or directly access such
information and the means by which (s)he may do so;
E. the consumer's ability to remove directly or have the information
removed from respondent's databases and the means by which (s) he may
do so; and
F. the procedures to delete personal identifying information from
respondent's databases and any limitations related to such deletion.
Such notice shall appear on the home page of respondent's Web site(s) and at
each location on the site(s) at which such information is collected.
Provided that, respondent shall not be required to include the notice at the
locations at which information is collected if such information is limited to
tracking information and the collection of such information is described in the
notice required by this Part.
Provided further that, for purposes of this Part, compliance with all of the
following shall be deemed adequate notice: (a) placement of a clear and
prominent hyperlink or button labeled PRIVACY NOTICE on the home page(s), which
directly links to the privacy notice screen(s); (b) placement of the information
required in this Part clearly and prominently on the privacy notice screen(s),
followed on the same screen(s) with a button that must be clicked on to make it
disappear; and (c) at each location on the site at which any personal
identifying information is collected, placement of a clear and prominent
hyperlink on the initial screen on which the collection takes place, which links
directly to the privacy notice and which is accompanied by the following
statement in bold typeface:
NOTICE: We collect personal information on this site. To lean more
about how we use your information click here.
V.
IT IS FURTHER ORDERED that respondent, directly or through any corporation,
subsidiary, division, or other device, in connection with the online collection
of personal identifying information from children, in or affecting commerce,
shall maintain a procedure by which it obtains express parental consent prior to
collecting and using such information.
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<PAGE> 21
Provided that, respondent may implement the following screening procedure that
shall be deemed to be in compliance with this Part. Respondent shall collect and
retain certain personal identifying information from a child, including birth
date and the child's and parent's e-mail addresses (hereafter "screening
information"), enabling respondent to identify the site visitor as a child and
to block the child's attempt to register with respondent without express
parental consent. If respondent elects to have the child register with it,
respondent shall: (1) give notice to the child to have his/her parent provided
express parental consent to register; and/or (2) sent a notice to the parent's
e-mail address for the purpose of obtaining express parental consent. The notice
to the child or parent shall provide instructions for the parent to: (1) go to a
specific URL on the Web site to receive information on respondent's practices
regarding its collection and use of personal identifying information from
children and (2) provide express parental consent for the collection and use of
such information. Respondent's collection of screening information shall be by a
manner that discourages children from providing personal identifying information
in addition to the screening information. All personal identifying information
collected from a child shall be held by respondent in a secure manner and shall
not be used in any manner other than to effectuate the notice to the child or
parent, or to block the child from further attempts to register or otherwise
provide personal identifying information to respondent without express parental
consent. The personal identifying information collected shall not be disclosed
to any third party prior to the receipt of express parental consent. If express
parental consent is not received by twenty (20) days after respondent's
collection of the information from the child, respondent shall remove all such
personal identifying information from its databases, except such screening
information necessary to block the child from further attempts to register or
otherwise provide personal identifying information to respondent without express
parent consent.
VI.
IT IS FURTHER ORDERED that respondent GeoCities, and its successors and assigns,
shall provide a reasonable means for consumers, including the parents of
children, to obtain removal of their or their children's personal identifying
information collected and retained by respondent and/or disclosed to third
parties, prior to the date of service of this order, as follows:
7
<PAGE> 22
A. Respondent shall provide a clear and prominent notice to each
consumer over the age of twelve (12) from whom it collected personal
identifying information and disclosed that information to CMG
Information Services, Inc., describing such consumer's options as
stated in Part VI.C and the manner in which (s)he may exercise them.
B. Respondent shall provide a clear and prominent notice to the parent
of each child from whom it collected personal identifying information
prior to May 20, 1998, describing the parent's options as stated in
Part VI.C and the manner in which (s)he may exercise them.
C. Respondent shall provide the notice within thirty (30) days after
the date of service of this order by e-mail, postal mail, or facsimile.
Notice to the parent of a child may be to the e-mail address of the
parent and, if not known by respondent, to the em-mail address of the
child. The notice shall include the following information:
1. the information that was collected (e.g., "name," "home
address," "e-mail address," "age," "interests"); its use(s)
and/or intended use(s); and third parties to whom it was or
will be disclosed (e.g., "advertisers of consumer products,"
"mailing list companies," "the general public") and with
respect to children, that the child's personal identifying
information may have been made public through various means,
such as by publicly posting on the child's personal home page
or disclosure by the child through the use of an em-mail
account;
2. the consumer's and child's parents right to obtain access
to such information and the means by which (s)he may do so;
3. the consumer's and child's parent's right to have the
information removed from respondent's or a third party's
databases and the means by which (s)he may do so;
4. a statement that children's information will not be
disclosed to third parties, including public posting, without
express parental consent to the disclosure or public posting;
5. the means by which express parental consent may be
communicated to the respondent permitting disclosure to third
parties of a child's information; and
6. a statement that the failure of a consumer over the age of
twelve (12) to request removal of the information from
respondent's databases will be deemed as approval to its
continued retention and/or disclosure to third parties by
respondent.
D. Respondent shall provide to consumers, including the parents of
children, a reasonable and secure means to request access to or
directly access their or their children's personal identifying
information. Such means may include direct access through password
protected personal profile, return e-mail bearing an electronically
verifiable signature, postal mail, or facsimile.
E. Respondent shall provide to consumers, including the parents of
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<PAGE> 23
children, a reasonable means to request removal of their or their
children's personal identifying information from respondent's and/or
the applicable third party's databases or an assurance that such
information has been removed. Such means may include e-mail, postal
mail, or facsimile.
F. The failure of a consumer over the age of twelve (12) to request the
actions specified above within twenty (20) days after his/her receipt
of the notice required in Part VI.A shall be deemed to be consent to
the information's continued retention and use by respondent and any
third party.
G. Respondent shall provide to the parent of a child a reasonable means
to communicate express parental consent to the retention and/or
disclosure to third parties of his/her child's personal identifying
information. Respondent shall not use any such information or disclose
it to any third party unless and until it receives express parental
consent.
H. If, in response to the notice required in Part VI.A, respondent has
received a request by a consumer over the age of twelve (12) that
respondent should remove from its databases the consumer's personal
identifying information or has not received the express consent of a
parent of a child to the continued retention and/or disclosure to third
parties of a child's personal identifying information by respondent
within twenty (20) days after the parent's receipt of the notice
required in Part VI.B, respondent shall within ten (10) days:
1. Discontinue its retention and/or disclosure to third
parties of such information, including but not limited to (1)
removing from its databases all such information, (b) removing
all personal home pages created by the child, and (c)
terminating all e-mail accounts for the child; and
2. Contact all third parties to whom respondent has disclosed
the information, requesting that they discontinue using or
disclosing that information to other third parties, and remove
the information from their databases.
With respect to any consumer over the age of twelve (12) or
any parent of a child who has consented to respondent's
continued retention and use of personal identifying
information pursuant to this Part, such consumer's or parent's
continuing right to obtain access to his/her or a child's
personal identifying information or removal of such
information from respondent's databases shall be as specified
in the notice required by part IV of this order.
I. Within thirty (30) days after the date of service of this order,
respondent shall obtain from a responsible official of each third party
to whom it has disclosed personal identifying information and from each
GeoCities Community Leader a statement stating that (s)he has been
advised of the terms of this order and of respondent's obligations
under this Part, and that (s)he agrees, upon notification from
respondent, to discontinue using or disclosing a consumer's or child's
personal identifying information to other third parties and to remove
any such information from its databases.
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<PAGE> 24
J. As may be permitted by law, respondent shall cease to do business
with any third party that fails within thirty (30) days of the date of
service of this order to provide the statement set forth in Part VI.I
or whom respondent knows or has reason to know has failed at any time
to (a) discontinue using or disclosing a child's personal identifying
information to other third parties, or (b) remove any such information
from their databases. With respect to any GeoCities Community Leader,
the respondent shall cease the Community Leader status of any personal
who fails to provide the statement set forth in Part VI.I or whom
respondent knows or has reason to know has failed at any time to (a)
discontinue using or disclosing a child's personal identifying
information t other third parties, or (b) remove any such information
from their databases.
For purposes of this Part: "third party(ies)" shall mean each GeoCities
Community Leader, CMG Information Services, Inc., Surplus Software, Inc.
(Surplus Direct/Egghead Computer), Sage Enterprises, Inc. (GeoPlanet/Planetall),
Netopia, Inc. (Netopia), and InfoBeat/Mercury Mail (InfoBeat).
VII.
IT IS FURTHER ORDERED that for the purposes of this order, respondent shall not
be required to remove personal identifying information from its archived
database if such information is retained solely for the purposes of Web site
system maintenance, computer file back-up, to block a child's attempt to
register with or otherwise provide personal identifying information to
respondent without express parental consent, or to respond to requests for such
information from law enforcement agencies or pursuant to judicial process.
Except as necessary to respond to requests from law enforcement agencies or
pursuant to judicial process, respondent shall not disclose to any third party
any information retained it its archived database. In any notice required by
this order, respondent shall include information, clearly and prominently, about
its policies for retaining information in its archived database.
VIII.
IT IS FURTHER ORDERED that for five (5) years after the date of this order,
respondent GeoCities, and its successors and assigns, shall place a clear and
prominent hyperlink within its privacy statement which states as follows in bold
typeface:
NOTICE: Click here for important information about safe surfing from
the Federal Trade Commission.
The hyperlink shall directly link to a hyperlink/URL to be
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<PAGE> 25
provided to respondent by the Commission. The Commission may change the
hyperlink/URL upon thirty (30) days prior written notice to respondent.
IX.
IT IS FURTHER ORDERED that respondent GeoCities, and its successors and assigns,
shall maintain and upon request make available to the Federal Trade Commission
for inspection and copying the following:
A. For five (5) years after the last date of dissemination of a notice
required by this order, a print or electronic copying in HTML format of
all documents relating to compliance with Parts IV through VIII of this
order, including, but not limited to, a sample copy of every
information collection form, Web page, screen, or document containing
any representation regarding respondent's information collection and
use practices, the notice required by Parts IV through VI, any
communication to third parties required by Part VI, and every Web page
or screen linking to the Federal Trade Commission Web site. Each Web
page copy shall be accompanied by the URL of the Web page where the
material was posted online. Electronic copies shall include all text
and graphics files, audio scripts, and other computer files used in
presenting information on the World Wide Web; and
Provided that, after creation of any Web page or screen in compliance
with this order, respondent shall not be required to retain a print or
electronic copy of any amended Web page or screen to the extent that
the amendment does not affect respondent's compliance obligations under
this order.
B. For five (5) years after the last collection of personal identifying
information from a child, all materials evidencing the express parental
consent given to respondent.
X.
IT IS FURTHER ORDERED that respondent GeoCities, and its successors and assigns,
shall deliver a copy of this order to all current and future principals,
officers, directors, and managers, and to all current and future employees,
agents, and representatives having responsibilities with respect to the subject
matter of this order. Respondent shall deliver this order to current personnel
within thirty (30) days after the date of service of this order, and to future
personnel within thirty (30) days after the person assumes such position or
responsibilities.
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<PAGE> 26
XI.
IT IS FURTHER ORDERED that respondent GeoCities, and its successors and assigns,
shall establish an "information practices training program" for any employee or
GeoCities Community Leader engaged in the collection or disclosure to third
parties of consumers' personal identifying information. The program shall
include training about respondent's privacy policies, information security
procedures, and disciplinary procedures for Violations of its privacy policies.
Respondent shall provide each such current employee and GeoCities Community
Leader with information practices training materials within thirty (30) days
after the date of service of this order, and each such future employee or
GeoCities Community Leader such materials and training within thirty (30) days
after (s) he assumes his/her position or responsibilities.
XII.
IT IS FURTHER ORDERED that respondent GeoCities, and its successors and assigns,
shall notify the Commission at least thirty (30) days prior to any change in the
corporation that may affect compliance obligations arising under this order,
including, but not limited to, a dissolution, assignment, sale, merger, or other
action that would result in the emergence of a successor corporation; the
creation or dissolution of a subsidiary, parent, or affiliate that engages in
any acts or practices subject to this order; the proposed filing of a bankruptcy
petition; or a change in the corporate name or address. Provided, however, that,
with respect to any proposed change in the corporation about which respondent
learns less than thirty (30) days prior to the date such action is to take
place, respondent shall notify the Commission as soon as is practicable after
obtaining such knowledge. All notices required by this Part shall be sent by
certified mail to the Associate Director, Division of Enforcement, Bureau of
Consumer Protection, Federal Trade Commission, Washington, D.C. 20580.
XIII.
IT IS FURTHER ORDERED that respondent GeoCities, and its successors and assigns,
shall, within sixty (60) days after service of this order, and at such other
times as the Federal Trade Commission may require, file with the Commission a
report, in writing, setting forth in detail the manner and form in which they
have complied with this order.
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<PAGE> 27
XIV.
This order will terminate twenty (20) years from the date of its issuance, or
twenty (20) years from the most recent date that the United States or the
Federal Trade Commission files a complaint (with or without an accompanying
consent decree) in federal court alleging any violation of the order, whichever
comes later; provided, however, that the filing of such a complaint will not
affect the duration of:
A. Any Part in this order that terminates in less than twenty (20)
years;
B. This order's application to any respondent that is not named as a
defendant in such complaint; and
C. This order if such complaint is filed after the order has terminated
pursuant to this Part.
Provided, further, that if such complaint is dismissed or a federal court rules
that the respondent did not violate any provision of the order, and the
dismissal or ruling is either not appealed or upheld on appeal, then the order
will terminate according to this Part as though the complaint had never been
filed, except that the order will not terminate between the date such complaint
is filed and the later of the deadline for appealing such dismissal or ruling
and the date such dismissal or ruling is upheld on appeal.
In the matter of GeoCities FTC File No. 9823015
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<PAGE> 28
EXHIBIT C
MERCHANT TERMS AND CONDITIONS
Each Affiliate shall provide its name, address, e-mail address to GeoCities
which will then make such information available to Merchant, subject to any
applicable laws and/or regulations. Merchant shall have the right to communicate
directly with Affiliates via e-mail in a reasonable fashion consistent with
industry-accepted practices regarding commercial e-mail frequency and content.
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<PAGE> 29
ADDENDUM NO. 1
(1) DEFINITION OF "QUALIFYING TRANSACTION(S)": To be established based upon
the mutual agreement of the parties no later than March 1, 1999.
(2) DEFINITION OF "COMMISSION(S)": To be established based upon the mutual
agreement of the parties no later than March 1, 1999.
(3) DEFINITION OF "MERCHANT PARTICIPATION LEVEL": Subject to Merchant's
payment of the Merchant Participation Fee, GeoCities shall promote
Merchant in the Program as follows:
a) Merchant shall be featured at the PREMIER merchant partner level,
the highest level of promotion in the Program.
b) PREMIER merchant partner status provides that Merchant shall receive
at least the same level or promotion from GeoCities as all other PREMIER status
merchants in the Program.
c) Merchant shall receive three million (3,000,000) Banner Impressions
a month from GeoCities.
d) Subject to the terms and conditions of this Agreement and GeoCities'
reasonable policies regarding promotional materials, Merchant shall have a
one-time opportunity to deliver a live link message of up to thirty (30) words
to current GeoCities customers promoting Merchant's participation in the
Program.
e) GeoCities shall, from time to time, send e-mails to Affiliates
relating to the Program (the "Affiliate E-mails"). Subject to the terms and
conditions of this Agreement and GeoCities' reasonable policies regarding
promotional materials, Merchant shall have the right to prime placement in up to
six (6) Affiliate E-mails in which Merchant may message Affiliates regarding
specific programs of a commercial nature and, in addition, Merchant may state in
its Affiliate terms and conditions that it has the right to directly e-mail its
Affiliates with specific programs and promotions on a periodic basis.
f) GeoCities shall create an "Entertainment and Sports Ticket Booth"
(rotating mentions in designated neighborhoods) dedicated to highlighting
Merchant offers as well as showcasing the best "Fan Sites" within the GeoCities
Site.
(4) DEFINITION OF "MERCHANT PARTICIPATION FEE": Merchant shall pay the
following Merchant Participation Fee:
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<PAGE> 30
a) Beginning on the Effective Date, Merchant shall pay [***] dollars
($[***]) for months one and two, and [***] per calendar month for months three
through twelve to GeoCities, which shall be billed by GeoCities and paid by
Merchant on a monthly basis.
b) Merchant shall also pay GeoCities a one time bounty acquisition fee
(the "Bounty Acquisition Fee") based on the following schedule:
<TABLE>
<CAPTION>
# of Affiliates Bounty Fee
--------------- ----------
<S> <C>
Affiliate Nos. 0-10,000 $[***] per Affiliate
Affiliate Nos. 10,001-50,000 $[***] per Affiliate
Affiliate Nos. 50,001 and over $[***] per Affiliate
</TABLE>
For example, if Merchant has 75,000 total Affiliates during the term of this
Agreement, Merchant shall owe a total Bounty Acquisition Fee according to the
above schedule of [***] dollars ($[***]) calculated as follows: $[***] per
Affiliate for the first 10,000 Affiliates, $[***] per Affiliate for the next
40,000 Affiliates, and $[***] per Affiliate for the next 25,000 Affiliates.
Merchant shall make Bounty Acquisition Fee payments to GeoCities on a quarterly
basis.
c) In addition to the fees set forth in (4)(a)&(b) above, Merchant
shall also pay GeoCities an "Active Affiliate Fee" The breakdown is as follows:
<TABLE>
<CAPTION>
# of Active Affiliate
Transfers or Transaction One Time Bounty Fee
------------------------ -------------------
<S> <C>
0-20,000 $[***]
20,000-40,000 $[***]
Over 40,000 $[***]
</TABLE>
For the purposes of this Agreement, "Active Affiliate" shall mean an
Affiliate responsible for at least an aggregate of [***] Affiliate
Pageviews or who is responsible for at least one Qualifying
Transaction. GeoCities shall be entitled only to one Active Affiliate
Fee per Active Affiliate during the term of this Agreement. Merchant
shall make Active Affiliate Fee payments to GeoCities on a quarterly
basis.
(5) Term of Agreement: This Agreement shall have a term of one year from
the Effective Date and Merchant will have an exclusive option (which
will terminate one month after this Agreement expires) to renew the
Agreement upon terms to be presented to Merchant no later than thirty
days prior to the expiration of year one.
(6) Additional Termination Right: Merchant shall have a one-time right, at
any time within sixty (60) days of the Effective Date, to terminate
this Agreement on sixty (60) days'
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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<PAGE> 31
written notice to GeoCities if GeoCities fails to implement the Program as set
forth in this Agreement. The parties expressly understand and acknowledge that
Merchant's decision to terminate the Agreement under this additional termination
right may not be based, in whole or in part, on the fact that an insufficient
number of GeoCities Members have become Affiliates or that an insufficient
number of Qualifying Transactions have resulted from the Program.
(7) Category Exclusivity: For the term of this Agreement, GeoCities shall
not allow Excluded Companies or other merchants (except "GeoShop"
merchants who do not have in excess of $[***] total annual revenue from
the sale of sports, travel, and/or entertainment tickets) primarily in
the business of marketing, distributing or selling tickets to travel,
live entertainment or sporting events to participate in the Program by
allowing affiliates in the Program to establish Links to such
merchants' Websites for the purpose of effectuating the sale of tickets
to live entertainment or sporting events. For the purposes of this
Agreement, "Excluded Companies" shall include, but not be limited to,
Ticketmaster, Inc., Ticketmaster Online Citysearch, Inc., USA Networks,
Lycos, ETM, Advantix, Inc., TicketStop, LaserGate, Schubert,
Nederlander, Paciolan, BASS, Protix, TicketsLive, Fantastix,
CultureFinder, Capital Tickets, Dillards, TicketWeb, Bill Graham
Presents, Center State, TicketWeb, and SFX.
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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<PAGE> 1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED PROVISIONS OF
THIS AGREEMENT. THE REDACTED PROVISIONS ARE IDENTIFIED BY THREE ASTERISKS AND
ENCLOSED BY BRACKETS. THE CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.22
MP3.com, Inc.
P.O. BOX 910091
San Diego, CA 92191
(619) 558-9390
SPONSORSHIP AGREEMENT
This Sponsorship Agreement ("Agreement") is made an entered into on February 17,
1999 ("Effective Date"), by and between Tickets.com, Inc., a Delaware
corporation, located at 4061 Glencoe Ave., Marina del Rey, CA 90292 ("Tickets")
and MP3.com, Inc., having an address at P.O. Box 910091, San Diego, CA
92191-0091 ("MP3.com"). MP3.com owns and operates the website located at
www.mp3.com (the "Website").
1. Form of Sponsorship. During the term of this Agreement, Tickets shall be
MP3.com's exclusive partner/source for sports, entertainment, and travel
tickets, and MP3.com shall include a Tickets Portal on the "Music" page and the
"Pop," "Rock" and "Alternative" genre pages on the Website. A "Portal" is
defined as a web graphic with the dimensions not to exceed 125 x 125 pixels and
20Kb in size. The content of the Portal shall be supplied by Tickets and shall
conform with reasonable technical and content specifications supplied by
MP3.com.
2. Impressions. MP3.com agrees to deliver a guaranteed minimum of 3,000,000
Impressions per month for the term of this Agreement. An "Impression" is defined
as the display of the Tickets Portal to a user on one of the above referenced
pages.
3. Sponsor Fees. Tickets agrees to pay MP3.com, during the term of this
Agreement, as follows: (i) $[***] payable on the Effective Date; (ii) $[***]
payable on or before one month subsequent to the Effective Date; (iii) $[***]
payable on or before two months subsequent to the Effective Date; (iv) $[***]
payable on or before three months subsequent to the Effective Date; (v) $[***]
payable on or before four months subsequent to the Effective Date; (vi) $[***]
payable on or before five months subsequent to the Effective Date. Any late
payments under this Agreement will be assessed a service fee of one and one-half
percent (1.5%) per month, to the extent allowed by law.
4. Term and Termination. This Agreement shall commence on the Effective Date and
shall remain in full force and effect until one (1) year subsequent to the
Effective Date, provided however, that Tickets may terminate this Agreement for
any reason upon thirty (30) days' notice to MP3. com at any time prior to the
expiration of sixty (60) days subsequent to the Effective Date. Furthermore, for
a thirty (30) day period, beginning thirty (30) days prior to the first
anniversary of this Agreement, Tickets shall have the right to renew the
Agreement for another year with Sponsor Fees that do not exceed a [***] percent
increase over the existing Sponsor Fees. Any payments which have accrued prior
to the date of termination shall remain due and payable. Sections 6, 7, and 8
shall survive termination of this agreement.
5. Measurement. Upon request, Tickets shall have access to pertinent statistics
related to Impressions covering the period of this contract. Tickets agrees to
accept MP3.com's measurement of Impressions (the "Count") according to MP3.com's
logs and other tracking devices and/or software MP3.com may use, provided
however, that Tickets shall have the right to audit MP3.com's records in this
regard. If Tickets reasonably disputes the Count pursuant to this Agreement,
then Tickets shall have the right to select the independent auditor of its
choice to conduct an audit of MP3.com's records (the "Audit"). The Audit will be
conducted in such a way so as not to interfere to any material extent with
MP3.com's operations. If, for any applicable period, the independent auditor
determines that MP3.com overstated the Count by more than five percent (5%),
than MP3.com shall pay the cost of the Audit and shall refund Tickets the
difference between the amount originally paid and the amount which should have
been paid, or MP3.com shall credit the appropriate amount of Impressions to
Tickets' account.
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 2
6. Representations and Warranties. Each party is solely responsible for any
legal liability arising out of or relating to the content of its site and any
material to which users can link through the sites. Each party represents and
warrants that its sites will not: (i) infringe upon any third party's copyright,
patent, trademark, trade secret or other proprietary rights or rights of
publicity or privacy; (ii) violate any law, statue, ordinance or regulation,
including without limitation any laws regarding unfair competition,
antidiscrimination or false advertising; (iii) be pornographic or obscene; (iv)
be defamatory or trade libelous; or (v) contain viruses other harmful
programming routines. Each party agrees to defend, indemnify and hold harmless
the other and its shareholders, directors, officers, agents and employees for
any and all losses, costs, liabilities or expenses (including without limitation
reasonable attorneys' and expert witnesses' fees) incurred or arising from: (a)
any breach of the foregoing representations or warranties; (b) any claim arising
from the sale or license of either party's goods or services; or (c) any other
act, omission or representation by either party. Either party may participate in
the defense of itself at its option and expense.
7. No Consequential Damages. Except for claims arising under section 6, in no
event will either party be liable for any special, indirect, incidental or
consequential damages.
8. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without reference to
conflict of law principles thereof. Any claim arising out of or related to this
Agreement must be brought exclusively in the state or federal courts located in
San Diego County, California, and each party hereby consent to the jurisdiction
thereof. In any action to enforce this Agreement the prevailing party will be
entitled to costs and attorneys' fees. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior discussions, documents, agreements and prior course of
dealing, and shall not be effective until signed by both parties. This Agreement
may not be assigned by Tickets without MP3.com's written consent, which shall be
promptly granted or denied and not unreasonably withheld, except that Tickets
may assign this Agreement without MP3.com's consent if another entity acquires
substantially all the assets of Tickets. The parties to this Agreement are
independent contractors, and no agency, partnership, joint venture or
employee-employer relationship is created by this Agreement. MP3.com intends to,
and does, bind its successors and assigns to the terms of this Agreement.
/s/ Greg Flores /s/ Adam Epstein
- ----------------------------------- -----------------------------------
Representative of MP3.com Representative of Tickets.com, Inc.
/s/ Greg Flores, VP Sales Adam Epstein, SVP Counsel
- ----------------------------------- -----------------------------------
Printed Name & Position Printed Name & Position
- ----------------------------------- -----------------------------------
Date Date
<PAGE> 1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED PROVISIONS OF
THIS AGREEMENT. THE REDACTED PROVISIONS ARE IDENTIFIED BY THREE ASTERISKS AND
ENCLOSED BY BRACKETS. THE CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.23
AGREEMENT
---------
This Agreement (the "Agreement") is made as of November 1, 1998 by and
between Advantix, Inc. with offices at 4675 MacArthur Court, Suite 1400, Newport
Beach, California 92660 ("ADVANTIX") and International Merchandising Corporation
with offices at IMG Center, Suite 100, 1360 East 9th Street, Cleveland, Ohio
44114 ("IMC").
WITNESSETH:
WHEREAS, IMC is a member of the International Management Group of
companies and IMC and its affiliates have expertise in the management, marketing
and television production of various sports and leisure activities and events;
WHEREAS, ADVANTIX is a leading provider of automated ticketing
solutions to sports and entertainment venues worldwide; utilizing a proprietary
ticketing system which enables the capture and analysis of patron information;
and
WHEREAS, ADVANTIX and IMC desire to enter an agreement whereby (i) IMC
will provide certain marketing consulting services to ADVANTIX and assist
ADVANTIX in offering ticketing and marketing services to sports and
entertainment organizers, as well as information services to corporate sponsors
and (ii) ADVANTIX will assist IMC in developing its sponsorship consulting
business.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. TERM. The term of this Agreement shall begin as of November 1, 1998 and shall
remain in effect through April 30, 1999 unless this Agreement is terminated
earlier in accordance with the provisions of Paragraph 6 (the "Term"). The Term
may be extended for an additional six-month period by mutual written agreement
of the parties.
2. IMC SERVICES.
(a) During the Term, IMC shall assist ADVANTIX in developing and preparing a
comprehensive sales and marketing plan which identifies strategies for the
expansion of ADVANTIX's business (the "Plan"). To facilitate the foregoing,
ADVANTIX's
<PAGE> 2
representatives shall meet (in person or via conference call) from time to time
with appropriate personnel from different IMC divisions and regions at mutually
agreeable times and locations.
(b) Subject to Paragraph 10(b), IMC shall provide ADVANTIX with the opportunity
to discuss serving as the ticketing service for certain IMC-owned or controlled
events, as deemed appropriate by IMC. In addition, IMC shall, as it deems
appropriate after consultation with ADVANTIX, offer ADVANTIX's database
information services and software packages to certain new and existing IMC event
sponsors and/or introduce ADVANTIX to such sponsors in order to facilitate a
business relationship between the parties.
(c) The parties agree that IMC shall determine in its sole discretion the means
and methods for performing its services hereunder. IMC shall devote such time,
attention and energies it deems necessary to perform the services requested of
it hereunder. If at any time during the Term, IMC determines that a ADVANTIX
request of IMC services hereunder requires an unreasonable devotion of time,
attention or energies by IMC, IMC shall so notify ADVANTIX and the parties shall
negotiate in good faith in a timely manner to determine (i) whether additional
remuneration shall be paid to IMC for such services; (ii) whether ADVANTIX's
in-house personnel shall share in the performance of such services or (iii) such
other mutually acceptable resolution of the matter.
(d) IMC shall not be authorized or entitled to bind or commit ADVANTIX to any
agreement. Any and all agreements or arrangements with IMC clients, sponsors or
other third parties binding or committing ADVANTIX shall be set forth in a
written document executed by an authorized representative of ADVANTIX and
ADVANTIX shall be solely responsible for all obligations under such agreements.
3. COMPENSATION TO IMC/EXPENSES. (a) In consideration of all of the services
rendered by IMC hereunder, ADVANTIX shall pay IMC the following amounts on a
monthly basis:
- - $[***] payable in advance on the first day of each month during the Term
(the "Retainer")
- - [***] percent ([***]%) of the Net Service Charge per ticket over $[***]
(but in no event less than [***] percent ([***]%) of the Net Service Charge
per ticket) received by ADVANTIX under any ticketing service arrangements
effected or substantially negotiated during the Term in connection with (i)
an IMC owned, controlled or represented event or (ii) any event that
ADVANTIX obtains the right to provide ticketing services for as a direct
result of the efforts of IMC and for which ADVANTIX did not have a previous
contractual arrangement (the "Service Charge Commission"). "Net Service
Charge" as used in the preceding sentence, means the gross revenue received
by ADVANTIX as an administrative fee, set up fee, service
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
2
<PAGE> 3
charge, convenience charge, commission, handling fee or like fee, minus any
revenue-sharing paid to the venue, promoter, producer or team, commissions
or fees to retail outlet, and the credit card merchant discount fee, where
applicable. ADVANTIX shall be entitled to credit the Retainer amounts paid
to IMC hereunder against all amounts owed to IMC as a Service Charge
Commission.
- - [***] percent ([***]%) of the gross revenues received by ADVANTIX for
providing software packages and/or database information or services to IMC
event sponsors, clients or other third parties pursuant to arrangements
effected or substantially negotiated during the Term with the assistance of
IMC (the "Database Commission").
(b) ADVANTIX shall pay IMC the Service Charge Commission and the Database
Commission on a monthly basis within 30 days following the end of each month.
Together with such payments, ADVANTIX shall provide IMC with a full, complete
and accurate itemized statement setting forth all revenues generated hereunder
as well as a calculation of IMC's commissions. ADVANTIX's obligation to pay the
Service Charge Commission and the Database Commission to IMC shall survive the
termination of this Agreement and continue for so long as ticketing, software or
database revenues are payable under contracts with third parties, including
under any extensions, modifications and renewals thereof.
(c) Unless otherwise specified by IMC, all payments shall be made by check
payable to International Merchandising Corporation and mailed to IMG Center,
Suite 100, 1360 East 9th Street, Cleveland, Ohio 44114, Attn: IMG Accounts
Receivable. Past due payments shall bear interest at the rate of (i) one and one
half percent (1.5%) per month or fraction thereof that payment is late or (ii)
the maximum interest rate permissible under law, whichever is less.
(d) ADVANTIX shall also reimburse IMC for all pre-approved travel and living
expenses which may be incurred by IMC representatives in the course of providing
services to ADVANTIX. Any travel by IMC representatives must be pre-approved in
writing by ADVANTIX. Such travel and living expenses will be billed separately,
and will be payable upon receipt of IMC's invoice and appropriate supporting
documentation.
4. ADVANTIX SERVICES/COMPENSATION.
(a) During the Term, ADVANTIX shall assist IMC in developing its sponsorship
consulting business by referring to IMC ADVANTIX's venue and event clients who
are interested in selling sponsorship rights. In furtherance of the foregoing,
ADVANTIX agrees to recommend IMC's services to such clients and, where
appropriate and as requested by IMC, use reasonable efforts to arrange meetings
between IMC and such clients.
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
3
<PAGE> 4
(b) ADVANTIX shall not be authorized or entitled to bind or commit IMC to any
agreement. Any and all agreements binding or committing IMC shall be set forth
in a written document executed by an authorized representative of IMC and IMC
shall be solely responsible for all obligations under such agreements.
(c) As consideration for ADVANTIX's services under this Paragraph 5, IMC shall
pay ADVANTIX [***] percent ([***]%) of the gross revenues actually received by
IMC (excluding expense reimbursement) under any sponsorship consulting
arrangements effected or substantially negotiated during the Term as a direct
result of the efforts of ADVANTIX with third parties with whom IMC did not have
a previous contractual or other relationship (the "Advantix Referral Fee"). IMC
shall pay ADVANTIX the Advantix Referral Fee within 30 days after receiving the
related consulting fees from the client. Together with such payments, IMC shall
provide ADVANTIX with a full, complete and accurate itemized statement setting
forth all revenues generated hereunder as well as a calculation of the Advantix
Referral Fee. IMC's obligation to pay the Advantix Referral Fee to Advantix
shall survive the termination of this Agreement and continue for so long as the
related consulting fees are payable under contracts with clients, including
under any extensions, modifications and renewals thereof. Past due payments
shall bear interest at the rate of (i) one and one half percent (1.5%) per month
or fraction thereof that payment is late or (ii) the maximum interest rate
permissible under law, whichever is less.
5. REPRESENTATIONS AND WARRANTIES. IMC and ADVANTIX each warrant and represent
that they have all rights, power and authority necessary to enter into and
perform this Agreement and that neither has granted to any third party any
rights inconsistent with the rights granted herein. Each party further
represents and warrants that it will maintain accurate and complete books and
records of account covering all transactions relating to the calculation of the
other party's commissions hereunder. Each party shall have the right during the
effectiveness of this Agreement and for two years thereafter, upon reasonable
prior notice to the other, to inspect and make copies of the books and records
of the other insofar as they shall relate to the computation of any compensation
payable hereunder.
6. DEFAULT/TERMINATION. If either party fails to perform its obligations
hereunder, then, without prejudice to its other available legal remedies, the
non-defaulting party may terminate this Agreement provided that it notifies the
defaulting party in writing of the specific default hereunder and the defaulting
party fails to cure such default within ten (10) days after it receives such
notice.
7. GOVERNING LAW; ARBITRATION. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio, disregarding any rules
relating to the choice or conflict of laws. In the event a dispute or
controversy arises
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
4
<PAGE> 5
under this Agreement which cannot be resolved, such dispute or controversy shall
be submitted to arbitration and resolved by a single arbitrator (who shall be a
lawyer) in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect. All such arbitration shall take place at
the office of the American Arbitration Association located in or closest to
Cleveland, Ohio. Each party is entitled to depose one (1) fact witness and any
expert witness retained by the other party, and to conduct such other discovery
as the arbitrator deems appropriate. These arbitration provisions do not prevent
any party from obtaining temporary or injunctive or other equitable relief from
a court of competent jurisdiction to enforce the obligations of the other party.
The arbitrator has authority to award any remedy or relief that a court of
competent jurisdiction could grant under applicable law, including attorneys'
fees. The award or decision by the arbitrator shall be final, binding and
conclusive and judgment may be entered upon such award by any court.
8. INDEMNIFICATION.
(a) IMC agrees to indemnify, defend and hold harmless ADVANTIX (including its
officers, directors, employees, shareholders, affiliates, successors and
assigns) from and against any and all claims, damages, liabilities, losses, and
costs and expenses, including reasonable outside attorneys' fees and costs of
suit arising out of: (i) any material breach of this Agreement by IMC, or (ii)
any negligent act or omission by it in the performance of its duties under this
Agreement.
(b) ADVANTIX agrees to indemnify, defend and hold harmless IMC (including its
officers, directors, employees, shareholders, affiliates, successors and
assigns) from and against any and all claims, damages, liabilities, losses and
costs and expenses, including reasonable outside attorneys' fees and costs of
suit, arising out of: (i) liabilities, obligations or any third party claims
(including without limitation, personal injury or property damage) relating to
ADVANTIX's products or services and any advertising, promotional or marketing
materials relating thereto, (ii) ADVANTIX's failure or alleged failure to
perform under any third party contract, or (iii) any material breach of this
Agreement by ADVANTIX.
9. LIMITATION OF LIABILITY. Notwithstanding anything to the contrary contained
herein, in the event either party incurs any expenses, damages or other
liabilities (including, without limitation, reasonable attorneys' fees) in
connection herewith, either Party's liability to the other hereunder (including
pursuant to any indemnification obligations hereunder) shall not exceed the
compensation (excluding reimbursement for expenses) actually paid to such party
hereunder. In no event shall either party be liable for any indirect,
incidental, reliance, special, punitive or consequential damages arising out of
its performance or non-performance under this Agreement, whether such liability
is asserted on the basis of contract, tort or otherwise and whether or not such
party had been advised of the possibility of such damages.
5
<PAGE> 6
10. IMC/ADVANTIX BUSINESS. (a) ADVANTIX acknowledges that IMC and certain of its
affiliates are engaged in the business of representing sports personalities and
organizing entities, organizing and creating events and programs and
representing and providing services to others in connection with the acquisition
and sale of various kinds of rights associated with sporting events and venues.
ADVANTIX agrees that nothing herein contained is intended to or shall restrict
the continuation of such activities, except that, during the Term, IMC agrees
not to serve as the exclusive marketing consultant to any other ticketing
service entity. ADVANTIX hereby grants IMC the right to use ADVANTIX's name and
identifying marks in IMC's corporate promotional materials to identify ADVANTIX
as a client of IMC.
(b) ADVANTIX further acknowledges that IMC and/or its affiliated companies
(collectively, "IMG") do have existing and may have future obligations to third
parties with respect to ticketing services for IMG-owned or represented events
and venues. ADVANTIX agrees that in such circumstances, ADVANTIX will not be
given any preferred position in relation to such properties and, as to all other
properties owned by IMG, such rights may be made generally available to all
prospective ticket companies for competitive bidding.
(c) IMC acknowledges that ADVANTIX and certain of its affiliates are engaged in
the business of providing ticketing services to various sporting events, venues
and event promoters and producers. IMC agrees that nothing herein contained is
intended to or shall restrict the continuation of such activities. IMC hereby
grants ADVANTIX the right to use IMC's name and identifying marks in ADVANTIX's
corporate promotional materials to identify IMC as a client of ADVANTIX. All
other uses of IMC's name and identifying marks by ADVANTIX shall be subject to
IMC's prior written consent.
11. USE OF IMC SERVICES. All services, materials, reports, analyses, studies,
recommendations and other information provided to ADVANTIX by IMC hereunder (the
"Work") are submitted on a confidential basis for use solely by ADVANTIX and its
employees and representatives. ADVANTIX agrees to maintain the confidentiality
of the Work. The Work may not be reproduced for or disclosed to third parties in
whole or in part and its use for any purpose other than by ADVANTIX in
connection with the marketing of its products and services is not authorized. No
estimate, projection, recommendation or other statement by IMC contained in the
Work shall be construed as a guarantee of any revenues or other benefits to
ADVANTIX. Unless otherwise expressly provided herein, the failure of ADVANTIX to
consummate any third party transactions relating to sponsorship, marketing,
programming or other areas on which IMC is consulting shall not relieve ADVANTIX
of its obligation to pay IMC the compensation set forth in paragraph 4 hereof.
12. NOTICES. All notices or other communications provided for by this Agreement
shall be made in writing and shall be deemed properly delivered when delivered
(a) personally, (b) by the mailing of such notice to the parties entitled
thereto, registered or certified mail, postage prepaid to the parties at the
following addresses (or to such address
6
<PAGE> 7
designated in writing by one party to the other) or (c) by confirmed fax at the
number indicated below:
If to ADVANTIX:
Advantix, Inc.
4675 MacArthur Court
Suite 1400
Newport Beach, CA 92660
Attn: Randy Kenworthy
John Markovich
Fax: (949) 862-5412
If to IMC:
International Merchandising Corporation
22 East 71st Street
New York, New York 10021
Attn: Chip Campbell
Fax: (212) 772-2617
with a copy to:
IMG Legal Department
22 East 71st Street
New York, New York 10021
Attn: Corporate Representation Attorney
Fax: (212) 772-2617
13. MISCELLANEOUS.
(a) Nothing in this Agreement is intended to create a partnership, association,
employment relationship or joint venture between IMC and ADVANTIX. Neither party
has the right to obligate or bind the other in any manner or enter into any
agreements on behalf of the other, and nothing contained in this Agreement is
intended to create any rights of any kind in any third party.
(b) Neither party may assign this Agreement without the prior consent of the
other, except that (i) ADVANTIX may assign this Agreement and all of ADVANTIX's
rights and obligations hereunder to any party acquiring all or substantially all
of ADVANTIX's capital stock or assets and (ii) IMC may assign its obligations
under this Agreement to any member of the International Management Group of
companies, as appropriate to carry out the services required hereunder.
7
<PAGE> 8
(c) This Agreement contains all of the terms and conditions agreed upon by the
parties hereto with respect to the matter contained herein and supersedes all
prior agreements and understandings, whether oral or written. This Agreement may
only be modified by written agreement signed by the parties. No waiver of any
provision hereof shall be valid unless in writing. No waiver of a particular
provision shall constitute a waiver of enforcement of such provision in the
future, or a waiver of any other provision hereof (whether or not similar).
(d) If any provision of this Agreement shall be declared illegal, void, invalid
or unenforceable under law, the validity of any other provision and of the
entire Agreement shall not be affected thereby.
(e) This instrument will not be considered an agreement or contract nor will it
create any obligation on the part of IMC or ADVANTIX, or either of them, until
it has been signed by representatives of both parties and delivery is made of a
fully signed original. Acceptance of the offer made herein is expressly limited
to the terms of the offer.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date and
year first above written.
ADVANTIX, INC. INTERNATIONAL MERCHANDISING
CORPORATION
By: /s/ J. M. Markovich By: /s/ Chip Campbell
-------------------------------- --------------------------------
Name: J. M. Markovich Name: Chip Campbell
Title: EVP Finance & CFO Title: Vice President
8
<PAGE> 9
AMENDMENT TO AGREEMENT
This is an amendment to that certain Agreement (the "Agreement") between
Advantix, Inc. (ADVANTIX") and International Merchandising Corporation ("IMC")
which was entered into as of November 1, 1998.
WHEREAS, the parties desire to extend the Term of the Agreement for an
additional six-month period and to amend certain provisions of the Agreement.
NOW THEREFORE, the Agreement is hereby amended and modified as follows:
1. The Term of the Agreement is hereby extended through October 31, 1999.
2. During the Term, IMC may assist ADVANTIX in securing third party sponsors
and advertisers for Tickets.com or other ADVANTIX ticketing services. For
each such arrangement effected or substantially negotiated during the Term
as a direct result of the efforts of IMC with third parties with whom
ADVANTIX did not have a previous contractual or other relationship, the
parties will negotiate an appropriate commission to be paid to IMC based
on a percentage of the gross revenues actually received by ADVANTIX under
such sponsorship arrangement (the "IMC Sponsorship Fee"). ADVANTIX shall
pay IMC the IMC Sponsorship Fee within 30 days after receiving the related
sponsorship fees from the third party. Together with such payments,
ADVANTIX shall provide IMC with a full, complete and accurate itemized
statement setting forth all revenues generated hereunder as well as a
calculation of the IMC Sponsorship Fee. ADVANTIX' obligation to pay the
IMC Sponsorship Fee to IMC shall survive the termination of this Agreement
and continue for so long as the related sponsorship fees are payable under
contracts with clients, including under any extensions, modifications and
renewals thereof.
3. ADVANTIX shall pay IMC an amount equal to [***] percent ([***]%) of the
Gross Profit from all sales of merchandise by ADVANTIX, where the source of
such merchandise was referred or introduced to ADVANTIX by IMC or secured
with the assistance of IMC during the Term (the "Merchandise Fee"). The
Merchandise Fee payable with respect to Proteam.com shall be an amount
equal to [***] percent ([***]%) of the Gross Profit. ADVANTIX shall also
pay IMC an amount equal to [***] percent ([***]%) of the fees and charges
(the "Auction Fee") received by ADVANTIX from the auction or sale of
tickets and/or items (i) provided to ADVANTIX by IMC or (ii) relating to
events referred or introduced to ADVANTIX by IMC or secured with the
assistance of IMC during the Term, provided however, IMC's commission on
ticketing arrangements where ADVANTIX is compensated on a per-ticket basis
shall be governed by Paragraph 3(a) of the Agreement. ADVANTIX shall pay
IMC the Merchandise Fee and Auction Fee on a quarterly basis, within 30
days after the end of each calendar quarter. Together with such payments,
ADVANTIX shall provide IMC with a full, complete and accurate itemized
statement setting forth all revenues generated hereunder as well as a
calculation of the Merchandise Fee and Auction Fee. ADVANTIX' obligation to
pay the Merchandise Fee and Auction
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
1 of 2
<PAGE> 10
Fee to IMC shall survive the termination of this Agreement and continue for
so long as such merchandise is continued to be sold or such auctions are
held by ADVANTIX.
4. The term "Gross Profit," as used in the preceding section means the gross
sales price for the merchandise sold net of sales tax, shipping charges,
returns and any revenue-sharing payments less the actual cost of such
merchandise, provided however, if the merchandising arrangement is such
that ADVANTIX receives fees from the manufacturer/distributor on a
per-item-sold basis, as a percentage of net or gross receipts, or
otherwise, "Gross Profit" shall mean the gross fees actually received by
ADVANTIX, without deduction.
5. ADVANTIX shall be entitled to credit Retainer payments made to IMC (and
which were not previously credited against other amounts owed to IMC or
applied to the Rebate (as defined below)) against the Sponsorship Fee, the
Merchandise Fee and the Auction Fee payable to IMC.
6. In the event that ADVANTIX purchases sponsorship rights for an IMC-owned or
represented property during the Term, IMC shall rebate to ADVANTIX [***]
percent ([***]%) of the gross payments actually paid by ADVANTIX for such
sponsorship rights (the "Rebate"). The Rebate shall not exceed the
aggregate of the Retainer amounts paid by ADVANTIX and not otherwise
credited as provided herein. The Rebate shall be paid within thirty (30)
days after the expiration of the Term.
Except as expressly modified hereinabove, all of the terms and conditions
contained in the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and effective upon the date that both Advantix and IMC have signed it.
Advantix, Inc. International Merchandising Corporation
Signature /s/ J. M. Markovich Signature /s/ Chip Campbell
---------------------------- ------------------------------
Title EVP Finance & CFO Title Vice President
-------------------------------- ----------------------------------
Date 5/26/99 Date 5/26/99
--------------------------------- -----------------------------------
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
2 of 2
<PAGE> 1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED PROVISIONS OF
THIS AGREEMENT. THE REDACTED PROVISIONS ARE IDENTIFIED BY THREE ASTERISKS AND
ENCLOSED BY BRACKETS. THE CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.28
CHANNEL PARTNER AGREEMENT
-------------------------
THIS CHANNEL PARTNER AGREEMENT ("AGREEMENT") is made as of the 20th day of April
1999 by and between Sitematic Corporation, a California corporation located at
10350 Science Center Drive, Suite 140, San Diego, California 92121 ("Sitematic")
and Tickets.com, Inc., a Delaware Corporation, having its principal place of
business at 4061 Glencoe Avenue, Marina Del Rey, CA 90292 ("Partner").
WHEREAS, Partner is a purveyor of tickets and information about tickets
("Partner's Service") which operates a Web site located at www.tickets.com
("Partner's Site); and
WHEREAS, Sitematic is a provider of services that permit endusers to create
high-impact, customized Internet websites ("Sitematic Service"), and operates a
Web site currently located at www. Sitematic.com ("Sitematic Site"); and
WHEREAS, Partner desires to engage Sitematic to host a Web site publishing and
hosting solution through which Partner subscribers can have direct access to
customized version of Sitematic Site ("Custom Site"), which customized version
shall be updated together with any updates in the Systematic Site, and shall be
consistent with the "look and feel" of the Sitematic Site, and Sitematic desires
to host such a Custom Site, all subject to the terms, conditions and
restrictions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereby agree as follows:
1. TERM. The term of this Agreement will commence on the date of this Agreement
and, unless earlier terminated as provided herein, will continue for a period of
one (1) year, at which time the term of this Agreement will automatically renew
for successive periods of one year, unless either party notifies the other in
writing at least thirty (30) days prior to the expiration of the then-current
term of its desire not to renew the Agreement.
2. CUSTOM WEB SITE.
a. CONTENTS/DELIVERY DATE. The Custom Site shall contain a version of the
Sitematic Site customized for use within the Partner Site, developed and
maintained in accordance with the guidelines set forth below. Sitematic will
complete development of, and provide to Partner for testing, the Custom Site on
or before May 31, 1999.
b. DESIGN/RESTRICTIONS. The parties acknowledge and agree that Sitematic shall
customize the Custom Site to conform to the "look and feel" of the Sitematic
Site and the Sitematic service, except as described in Exhibit A below,
provided, however, that Partner acknowledges and agrees that it may not publish
or otherwise require Sitematic to publish anything on the Custom Site which is
offensive, objectionable, or otherwise detrimental to the reasonable business
interests of Sitematic. Similarly, Sitematic may not publisher otherwise require
Partner to publish anything on the Custom Site, or elsewhere, which is
offensive, objectionable, or otherwise detrimental to the reasonable business
interests of Partner.
c. HOSTING. Sitematic shall install, maintain, and host the Custom Site on its
own servers, and systems, at its own expense.
d. TESTING. All pages to be included in the Custom shall be reviewed, and
approved by Partner before they appear live on the Custom Site.
e. UPGRADES/CHANGES. Sitematic will periodically perform maintenance on and
upgrades to both all its software code and network infrastructure. This
maintenance/release schedule and associated procedures shall be determined by
Sitematic at its sole discretion. In some instances, Sitematic may at its sole
discretion define a specific service change as "significant". In the event of a
"significant" service change, Sitematic will make reasonable efforts to notify
Partner prior to change, and ensure that Sitematic's Service hereunder is not
materially disrupted.
Upgrades to the service or to the Custom Site which have new fees associated
with them will be discussed in good faith if these enhanced services should be
included in a future release and under what terms.
Expenses for Partner requested changes, custom development, or alterations to
any part of the Custom Site will be borne by Partner; fees and schedule will be
mutually agreed before project commencement.
f. CUSTOMER AND TECHNICAL SUPPORT. Sitematic will provide all customer and
technical support for the Custom Site. Standard hours of operation shall be
Monday through Friday (excluding holidays) from 8am to 5pm PST. Customer support
shall be conducted via email and phone support in the same manner Sitematic
provides service for its direct customers. The parties will work together in
good faith to develop procedures for transfers between customer service
personnel and other policies and practices aimed at service personnel and other
policies and practices aimed at providing high quality customer services to
end-users. Sitematic will have a dedicated customer support phone line
represented as Tickets.com/Sitematic.
When Sitematic makes the Event Form (as defined in Exhibit A) available for use
by venue customers, Sitematic will be responsible for all active sites being
`upgraded' to new event form. Sitematic has the right to use direct email to
request the venue customer upgrades the web site themselves, but for upgrades
not made within 30 days of availability. Sitematic will be responsible for edits
to new Event Form.
g. TELESALES CAMPAIGN. Sitematic will initiate an outbound telesales campaign
into a Partner-supplied list of venues for the purpose of selling them a
co-branded website as described in Exhibit C. The costs of the telesales
campaign will be shared among the parties as described in Exhibit C. The parties
agree to evaluate the telesales campaign no later than three (3) months after
its start in order to review progress, and assess performance.
h. EXCLUSIVITY. In recognition of the investments and efforts of Sitematic under
this Agreement, Partner agrees not to engage with any other company for the
creation of venue websites or promotion of venue websites services to its
customer base or its potential customer base, or to do such initiative
internally, during the term of agreement, without the prior written consent of
Sitemmatic, which consent may be withheld in its sole discretion.
3. PRICING AND BILLING.
a. TERMS TO PARTNER SERVICE SUBSCRIBERS. On the Custom Site, Partner Service
subscribers will be offered the opportunity to
<PAGE> 2
purchase the Sitematic services listed in Exhibit A, and any other products or
services upon which the parties may mutually agree to in writing. The parties
agree that Partner retains the right to approve or reject any products and/or
services which Sitematic proposes to include on the Custom Site prior to their
appearing on the Custom Site.
b. BILLING. Sitematic will directly bill Partner Service subscribers for any
purchase of Sitematic products or services, using commercially reasonable
billing methods, provided that any methodology shall reflect the payee as
Sitematic/Tickets.com. Sitematic acknowledges and agrees that Partner shall
have no liability whatsoever for any fee or charge incurred by any Partner
Service subscriber.
5. PROMOTIONAL/MARKETING ACTIVITES.
a. PRESS RELEASES. The parties agree to an announcement and/or a press release
related to this Agreement with Sitematic within thirty (30) days after
execution of Agreement. Any such press release must first be submitted for
the other party's consent, which consent shall not be unreasonably withheld
or delayed. Any other or subsequent publicity related to the Sitematic and
Partner relationship must be approved in writing by both parties prior to
release.
b. MARKETING REPORTS. Sitematic agrees to periodically provide reports (no less
than once each month) to Partner that indicate information concerning, among
other things, usage of the Custom Site by venue customers (usage defined as
log-ons) including aggregate information detailing sale of Sitematic products
and/or services.
6. COMMISSIONS.
a. PAYMENT AND REPORTING OF SALES COMMISSION. During the term of this
Agreement, Sitematic shall pay Partner a sales commission ("Sales Commission")
on the user subscription revenue Sitematic collects from each end user who
successfully subscribes to the Sitematic Custom Service and is electronically
traced by Sitematic's tracking system back to Partner via reference to Partner's
Sitematic -assigned Partner Identification Number (PIN) code or other identifier
by Sitematic ("Eligible Accounts"), Partner must cause its unique identifier to
be electronically submitted simultaneously with the potential order for accounts
to be considered Eligible Accounts. Sitematic shall pay Partner a sales
commission on the user subscription revenue Sitematic collects from
Sitematic/Tickets.com telesales efforts. Sales Commissions due shall be
calculated on a calendar month basis by multiplying the funds collected by
Sitematic on eligible Accounts from the first day of the month through the last
day of the month by the percentages indicated in Exhibit B.
Sitematic reserves the right to deny Sales Commissions on orders for use of the
Sitematic Service by Partner and its agents and employees. OTHER THAN EXPRESSLY
PROVIDED FOR HEREIN, NO ORDERS OR OTHER TRANSACTIONS SHALL QUALIFY FOR SALES
COMMISSIONS.
b. PAYMENT OF SALES COMMISSION. Except as otherwise provided herein, Sales
Commissions payable to Partner shall be paid by Sitematic check (in United
States Dollars), and mailed to Partner no later than forty-five (45) days after
the last day of each calendar month during which funds generating Sales
Commissions were collected by Sitematic. Partner acknowledges and agrees that
Sitematic's liability for payment of Sales Commissions arises from and relates
solely to, funds collected by Sitematic. Sitematic shall have no liability
whatsoever to Partner for Sales Commissions arising from or relating to any
orders for which the licensee has not paid Sitematic. Partner acknowledges and
agrees that no interest shall accrue on Sales Commissions pending payment.
Provided that this Agreement has not been terminated in the then-current month,
Sales Commissions due to Partner totaling less than One Hundred Dollars
($100.00) shall be retained by Sitematic and payment shall be postponed until
the first subsequent month in which the total Sales Commission due to partner
exceeds One Hundred Dollars ($100.00).
c. GENERAL CONDITIONS APPLICABLE TO SALES COMMISSIONS. PARTNER ACKNOWLEDGES
AND AGREES THAT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN:
(I) SITEMATIC SHALL HAVE THE RIGHT FOR ANY REASON IN ITS SOLE REASONABLE
DISCRETIONS TO REJECT ANY ORDER OBTAINED BY PARTNER WHICH SITEMATIC IN ITS
SOLE DISCRETION DEEMS UNDESIRABLE, FINACIALLY IMPRUDENT OR OTHERWISE
UNSUITABLE; (II) ANY PAYMENTS TO SITEMATIC ARISING UNDER THIS AGREEMENT SHALL
ONLY BECOME DUE AND PAYABLE OUT OF FUNDS ACTUALLY COLLECTED BY SITEMATIC;
(III) SITEMATIC SHALL AT ALL TIMES HAVE SOLE AND ABSOLUTE DISCRETION TO SET
THE SUBSCRIPTION PRICE OF THE SERVICE INCLUDING WITHOUT LIMITATION THE RIGHT
TO OFFER FREE PERIODS, CHARGE NO SUBSCRIPTION FEES, OR SET ANY OTHER PRICING
POLICIES IT SO DEEMS APPROPRIATE AND TO CHANGE SUCH PRICES AT ANY TIME
PROVIDED HOWEVER THAT SITEMATICE AGREES TO JOINTLY REVIEW ANY CHANGES TO THE
PRICES INCLUDED IN EXHIBIT B WITH PARTNER AND WILL NOT CHANGE SUCH PRICES
WITHOUT PARTNER'S CONSENT, WHICH CONSENT WILL NOT BE UNREASONABLY WITHHELD BY
PARTNER; (IV) SITEMATIC SHALL AT ALL TIMES HAVE THE SOLE AND ABSOLUTE
DISCRETION TO CANCEL, SUSPEND OR MODIFY THE ACCOUNT OF ANY USER OF THE
SERVICE, SUBJECT ONLY TO THE TERMS OF THE TERM OF SERVICE IN EFFECT AT TIME
OF SAID CANCELLLATION, SUSPENSION OR MODIFICATION, PROVIDED HOWEVER THAT
SITEMATIC WILL USE COMMERCIALLY REASONABLE JUDGEMENT AND GOOD FAITH IN THE
EXERCISE OF THIS DISCRETION.
d. PARTNER CO-FUNDING OF NEW TICKETS.COM/SITEMATIC SITES. During the term of
this Agreement, Tickets.com will pay Sitematic a development fee for each new
product created for a venue customer. See Exhibit A for lists of products and
Exhibit B for a list of prices.
e. TERMS AND OPERATION OF THE SITEMATIC SERVICE. Sitematic shall at all times
have the absolute right, in its sole discretion, to establish all prices,
charges, terms and conditions governing the sale of Sitematic Service. Except
as otherwise provided herein, Sitematic shall at all times have the exclusive
authority over all billing, service and support relating to the Sitematic
Service. Notwithstanding the above, Sitematic shall use commercially
reasonable judgment and good faith in the exercise of this discretion. Any
changes to site content will be jointly reviewed with Partner and Sitematic
will not change such content without Partner's consent, which consent will
not be unreasonably withheld by Partner. Partner shall not make any
representations or warranties whatsoever (written or oral) to any party with
respect to the Sitematic Service beyond those already expressly stated in
Sitematic provided sales materials.
f. ADVERTISING REVENUES. Any advertising revenues derived from the Custom
Site and the co-branded venue customer sites will be apportioned between the
parties as described in Exhibit B.
7. AUDITS RIGHTS. Sitematic will maintain accurate records with respect to sales
of services during the term of this Agreement. Partner may, upon reasonable
request (but not more than once every twelve (12) months), audit Sitematic's
records during regular business
2
<PAGE> 3
hours for the purpose of verifying the accuracy of any information provided in
any commission reports provided hereunder, or the amount of any other charges or
payment obligations arising under this Agreement. All costs and expenses
incurred in connection with any such audit and inspection will be borne by
Partner, unless the audit reveals an underpayment in excess of the greater of
$500 or five percent (5%) of the amount that should have been paid. In the event
of such underpayment, Sitematic shall be solely responsible for all reasonable
costs and expenses incurred by the other in connection with such audit, and
shall further pay the other the full amount of the underpayment revealed by the
audit.
8. PRIVACY. Both parties agree to respect and maintain the privacy of
subscribers to their respective services, and will keep confidential, and not
market, sell or otherwise provide third- party access to any personally
identifiable user data, unless required by law without the prior written consent
of the other party. Nothing contained in this Agreement, nor the absence or
presence of any existing relationship between Sitematic and a prospective,
existing or former user of the Partner Service shall be construed to grant
Sitematic rights in any user data independently collected and maintained by
Partner. All such data shall be the sole and exclusive property of the Partner.
9. CUSTOM OWNERSHIP. The parties acknowledge that customers will be customers of
each party with regard to their respective services, and agree that control over
the customers during the term of this agreement shall be joint. Each party shall
have the right to review and approve sales and marketing communications prior to
distribution to the customer base; such approval shall not be unreasonably
withheld. All such communications shall be co-branded. Upon the termination of
this Agreement, each party may continue to offer their respective services to
the customer separately, and each customer may decide individually whether or
not to continue to purchase service from one party or the other.
10. TERMINATION FOR CAUSE
a. Either Party may immediately terminate this Agreement should the other Party
breach any of its representations, warranties or obligations hereunder unless
such breach is cured to the satisfaction of the non-breaching Party after ten
(10) days written notice thereof.
b. Partner may terminate this Agreement without cause for its convenience, upon
the giving of sixty (60) days written notice to terminate. Both parties will be
responsible for their respective obligations up through the date of termination.
In addition, Partner will be required to pay Sitematic a cancellation fee of as
follows: $[***] for notice given within the first 3 months of this Agreement;
$[***] for notice given within the second 3 months of this Agreement; $[***]
for notice given within the third 3 months of the Agreement, and $[***] for
notice given within the fourth 3 months of this Agreement. For notice given
hereunder after the expiration of 12 months from execution of this agreement, no
additional fee shall be owing to Sitematic.
11. CONFIDENTIALITY. Unless required by law, neither party shall disclose the
specific terms and conditions of this Agreement to any third-party; provided,
however, either party may disclose such terms and conditions to any bona fide
prospective or existing lender, investor, or acquirer provided such lender,
investor or acquirer has executed a non-disclosure agreement containing
customary disclosure restrictions, including restricting use of the information
solely for the purpose of evaluating such loan, investment or purchases.
Notwithstanding the foregoing, the parties may disclose the general nature of
this Agreement to any third-party, subject to the limitations concerning press
releases as set forth in Section 5(b) hereof.
12. OTHER OBLIGATIONS, REPRESENTATIONS AND WARRANTIES.
a. Execution, Delivery and Performance. Both parties have all requisite power
and authority and hold all licenses, permits and other required authorizations
from governmental authorities necessary (if any) to fulfill its respective
obligations under this Agreement. Each party represents and warrants that it has
undertaken all necessary action to ensure that the execution, delivery and
performance of this Agreement is duly authorized. This Agreement constitutes the
legal, valid and binding agreement of both parties, enforceable in accordance
with its terms.
b. LIMITED LICENSE TO USE TRADENAMES, TRADEMARKS AND SERVICE MARKS. Each party
grants to the other a limited, non-exclusive, non-transferable, license to use
each other's tradenames, trademarks, and servicemarks (collectively, "Marks") in
connection with the performance of this Agreement. Marks shall only be used in
accordance with the specifications provided by the party whose Marks are being
used. In the event that such specifications are not provided, neither party
shall use any of the other party's Marks for any purpose without first obtaining
the prior advance written consent of the party whose Marks are contemplated to
be used. Each party shall retain ownership of all of its Marks and other
intellectual property rights.
c. OBLIGATIONS UPON TERMINATION. Upon termination (for any reason) each party
shall promptly return to the other all papers, materials and other property tot
the other party then in its possessions.
13. IDEMNIFICATION Each party will indemnify and hold harmless the other party
(the "Indemnified Party") and the other party's officers, directors,
shareholders and employees (collectively, together with the Indemnified Party,
the "Indemnified Persons") from and against any demand, suit, action or
proceeding brought by any third party arising in connection with a violation by
such party (the "Indemnifying Party") or any of the provisions of this Agreement
(including, without limitation, any of the representations or warranties of the
Indemnifying Party set forth in this Agreement) or the negligence or willful
misconduct of the Indemnifying Party, in each case to the extent not
attributable to a breach by the Indemnified Party of any of the provisions of
this Agreement or the negligence or willful misconduct of any of the Indemnified
Persons (collectively, the "Indemnified Claims"), and all damages, costs and
expenses (including , without limitation, reasonable attorneys' fees and
settlement costs, as applicable) sustained or incurred by Indemnified Person in
relation thereto.
14. LIMITATION OF LIABILITY/DISCLAIMER OF WARRANTY
THE PARTIES AGREE TO LIMIT THEIR LIABILITY TO EACH OTHER TO DIRECT DAMAGES ONLY.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN NEITHER PARTY SHALL
HAVE ANY LIABILITY FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES OR ANY LOSSS OF REVENUE OR PROFITS ARISING UNDER OR RELATING TO THIS
AGREEMENT, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO
EVENT SHALL SITEMATIC'S LIABILITY EXCEED THE COMMISSIONS PAYABLE TO THE PARTNER
PURSUANT TO THIS AGREEMENT. EACH PARTY HEREBY DISCLAIMS ALL WARRANTIES TO THE
OTHER AND ALL THIRD-PARTIES, EXPRESS, IMPLIED, STATORY OR OTHERWISE, WITH
RESPECT TO THE SITEMATIC SERVICE, THE CUSTOMIZED SERVICE AND THE PARTNER
SERVICE, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR PARTICULAR PURPOSE.
15. DISPUTE RESOLUTION
a. INJUNCTIVE RELIEF. The parties agree that the breach by either of them of
their respective obligations regarding the other's trademarks,
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
3
<PAGE> 4
trade names, service marks or confidential information would result in
irreparable injury for which there is no adequate remedy at law. Therefore, in
the event of any breach or threatened breach by any party of its obligations
regarding trademarks, trade names, or service marks of confidential information
of the other, then the other party will be entitled to seek temporary and
permanent injunctive relief, in addition to any other remedies to which it may
be entitled at law or in equity.
16. FORCE MAJURE Neither party hereto shall be considered in default in
performance of its obligations hereunder if performance of such obligations is
prevented or delayed by acts of God or government, or other events beyond the
reasonable control of the party. Time of performance of either party's
obligations hereunder shall be extended by the time period reasonably necessary
to overcome the effects of such occurrences.
17. YEAR 2000 COMPLIANCE. Sitematic warrants that the Sitematic Site and the
Custom Site furnished pursuant to this Agreement shall, when used in accordance
with any applicable documentation, be able to accurately process date/time data
(including, but not limited to, calculating, comparing, and sequencing) from,
into, and between the twentieth and twenty-first centuries, and the years 1999
and 2000, including leap year calculations. This warranty shall apply to the
Custom Site operating as part of the Partner Service as contemplated by this
Agreement. In the event of any breach of this warranty, Sitematic shall restore
the Sitematic Site and/or the Custom Site to the same level of performance as
warranted herein, or repair or replace the same so as to minimize interruption
to Partner's ongoing business processes, time being of the essence, at
Sitematic's sole cost and expense. This warranty does not extend to correction
of Partner's errors in data entry or data conversion. Nothing in this warranty
shall be construed to limit any rights or remedies otherwise available under
this Agreement.
18. GENERAL Neither party shall assign its rights or delegate any of its duties
hereunder without the advance written consent of Sitematic, which consent shall
not be unreasonably withheld or delayed, provided however, that this restriction
shall not apply to an assignment as part of a merger or sale of company or
substantially all of the assets of the company. The terms and conditions of this
Agreement shall be binding upon and shall inure to the benefits of the parties
and their respective successors and permitted assigns. This Agreement shall not
be amended or modified except as by a written document signed by both parties.
This Agreement shall be governed by and construed in accordance with the laws of
the State of California, without reference to principles of conflicts of laws.
All notices hereunder shall be in writing and shall be deemed given upon
personal delivery or when sent by certified mail, postage prepaid, return
receipt requested, at above. A party may change such address for notice upon
written notice given in accordance with the provisions hereof. The headings used
herein are inserted for convenience only and are in no way intended to describe,
interpret, define or limit the scope, extend or intent of this Agreement. If any
provision of this Agreement is determined by a court of competent jurisdiction
to be unenforceable, such provision shall be automatically reformed and
construed so as to be valid, operative and enforceable to the maximum extent
permitted by law or equity while preserving its original intent. The invalidity
of any part of this Agreement shall not render invalid the remainder of this
Agreement. Waiver by a party of a breach of a provision of this Agreement shall
not operate as nor be construed as a waiver of any subsequent breach thereof.
Notwithstanding anything to the contrary contained herein, the parties
acknowledge and agree that their obligations pursuant to Section 8,9,11,13 and
14, and those which by their nature should survive termination of this
Agreement. Each party to this Agreement represents, agrees and warrants that it
will perform all other acts and execute and deliver all other documents that may
be necessary or appropriate to carry out the intent and purposes of this
Agreement. This Agreement constitutes the entire agreement between the parties
regarding the subject matter contained herein and supersedes all prior and
contemporaneous undertakings and agreements of the parties, whether written or
oral, with respect to the subject matter herein.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the date
first set forth above.
TICKETS.COM, INC. SITEMATIC CORPORATION
By: /s/ Adam Epstein By: /s/ Peter J. Shaw
---------------------------- ----------------------------
Name: Adam Epstein Name: Peter J. Shaw
Title: S.V.P. & Counsel Title: President
Date: 4/28/99 Date: 4/20/99
4
<PAGE> 5
Exhibit A
PRODUCTS/SERVICE TO BE INCLUDED ON Custom Site
Product A
- ---------
"Bronze"
* See Specification Release 1 - Venue site.
* Date Applicable: May 31, 1999
* 4 pages including:
- Home Page
- Contact Page
- Location Page
- Event Page (DOES NOT include schedule piece; body copy only)
- Manual email sent to Tickets.com informing creation of new site;
no email to database transfer of venue data
* Six mutually agreed upon currently available Sitematic Styles available
for use by Tickets.com venue customers.
* All sites will be Tickets.com branded
* Sitematic to offer free transfer of existing domain name,
www.venue.tickets.com name for free.
* Sitematic to handle all customer support activities
* Sitematic to build all 4 page sites per venue customer information &
requirements
* Link to tickets.com included on all venue customer sites
Product B
- ---------
See Specification Release 1 - Venue site
Sitematic will create a co-branded Tickets.com-Sitematic for use by all
Tickets.com venue customers. This site will be their destination when making
edits/changes to their accounts.
Product C
- ---------
See Specification Release 2-Event page.
Sitematic will create a due date determined and mutually agreeable by both
parties, and Event Form to be used by all Tickets.com-Sitematic venue customers.
The Event Form will contain an event scheduler with email to database
capabilities that allow information to go from venue customers web sites
directly to the Tickets.com database.
5
<PAGE> 6
Tickets.com-Sitematic Product Specification
- --------------------------------------------------------------------------------
Specification - Venue Site Release 1
- ------------------------------------
* Co-Based on Sitematic 2.2. release (4/30/99 est.)
* URLS to be determined
- Co-band on info page: URL Tickets.com-Sitematic
* No demo or information site
- URL for the non-domain accounts: TBD (x).tcvenue.com (??)
* Site is frames compatible should Tickets.com decide to deliver in frame
* 1 plan, 4 pages
- Catalog upgrade available -
* Logo Graphic on every page bottom
- Powered by Sitematic
- Tickets.com TDB
* Template site creation
- Pre-population of graphics into `template' site
- Menu graphic and link (both specified to t.c.)
- Header graphic and link (both specified to t.c)
- (see figure 1)
* New Page type `events' based on current custom page
- Title in control panel = events
- Pre-populate body with ASCII text
* Site allows additional flexibility with multiple body blocks (graphic and
text) per page
* Site is `frame compatible' should Tickets.com decide to frame link from
tickets.com
Administration
* User Agreement - Tickets.com to specific additions and changes
* Reports to Tickets.com
- Monthly subscriber report for revenue share
- Weekly report detailing tickets.com subscribers and last publish date,
contact info
* Tickets.com customer service access to tickets.com-Sitematic sites
Specification - Venue Site Release 2
- ------------------------------------
* Partner ID in database for manual capture of Tickets.com Venue ID
* Events page with Tickets.com requested for functionality
- Standardized input of event data (Start Date, End Date, Time,
Name of Event, Genre, Event Description
- Add/modify/delete function of event data
- Real-time communication via email of event data change including venue
ID, name, zip
* Header or footer area will accept ad banner html code from Tickets.com
ad server
* Graphic field `lockout' by brand Tickets.com) ensuring menu and/or
header graphic/links/html are not changeable by customer.
Specification - Venue Site Release 1
Figure 1 - default graphics applied to all pages in 4 page Tickets.com template.
Note: Venue Use Agreement will be written to specify that removing the
Tickets.com logo or removing the link to Tickets.com would be constitute a
violation of the Venue Use agreement. Sitematic and Partner agree to coordinate
a policy to respond to such actions when and if they occur.
6
<PAGE> 7
EXHIBIT B
PRODUCTS/SERVICE PRICING AND COMMISSIONS
A. Fees to be paid by venue customer:
Bronze Website Monthly $[***]
6 Month Contract $[***]
12 Month Contract $[***]
Website Change Fee: $[***] per graphic change
$[***] per text change
B. Fees to be paid by tickets.com:
Telesales Marketing Calls; $[***] per call (maximum of
3 calls per customer)
Website Creation Fee: $[***] per site
Co-branded site development Fee: $[***] (one-time)
Event Form development Fee: $[***] (one-time)
Sitematic will pay to Tickets.com a sales commission of [***]% of the user
subscription revenue Sitematic collects from each venue customer who
successfully subscribes to Sitematic and becomes a paying customer for Product A
(See Exhibit A).
Tickets.com will pay Sitematic a $[***] site development fee for each
Tickets.com venue customer web site that is built by Sitematic. Within 30 days
of completion of the customer site or approval by the customer for the web site,
whichever comes first, Sitematic will charge venue customers for edits made to
their respective web sites. Charges incur as follows: $[***] for graphic changes
(includes scanning, downloading and/or uploading images into the web site) and
for $[***] for text changes. These charges will be added to the customer's bill
directly by Sitematic.
Tickets.com will pay Sitematic for telesales efforts. Payments will be broken
down as follows: $[***] for each proactive phone call made (this does not
include wrong phone numbers, wrong contact person). This does include all phone
calls made to the decision maker in the buying process and will not exceed three
phones calls per Tickets.com venue customer lead.
Tickets.com will pay Sitematic $[***] to develop a co-branded Tickets.com-
Sitematic website (Product B) for all Tickets.com venue customers to use when
accessing their web site (Exhibit A).
Sitematic will create, at a date to be determined and mutually agreed upon by
both parties, an Event Form to be used by paying Tickets.com venue customers.
Tickets.com will pay Sitematic $[***] for the creation and use of this Event
Form by Tickets.com venue customers. (See Exhibit A.)
C. `GRANDFATHERED' TICKETS.COM WEB SITES
- ----------------------------------------
Tickets.com has the right to `give' grandfathered Sitematic web sites to its key
accounts. Tickets.com will pay Sitematic for each site created according to one
of the two options listed below. Payment structure for these sites will
Offer#1: free 4pg site creation plus free service, hosting and support for 12
months-price*:
* $[***] per web site for any number up to and less than 250 sites
* $[***] per web site for any number up to 500 and more than 251
* $[***] per web site for any number of web sites over 501
Offer#2: free 4pg site creation plus free service, hosting and support for 6
months-price*:
* $[***] per web site for any number up to and less than 250 sites
* $[***] per web site for any number up to 500 and more than 251
* $[***] per web site for any number of web sites over 501
Offer #3 free 4 pg site creation plus 50/50 of ongoing monthly fees -price *:
* $[***] for 1>250 sites
* $[***] for 251>500
* $[***] for 501+
*Assumes no scanning and cropping
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
7
<PAGE> 8
D. COMMISSIONS
1. For all gross revenues collected under Schedule A, Sitematic will pay
Partner a commission of [***] percent ([***]%).
2. For all revenues collected from advertising on the Tickets.com-
Sitematic site, Partner will pay Sitematic a commission of [***]
percent ([***]%).
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
8
<PAGE> 9
EXHIBIT C
---------
TELEMARKETING CAMPAIGN
----------------------
Sitematic will obtain the list of venues with all relevant information including
phone number from Tickets.com and use this list to make proactive phone calls.
Sitematic will place up to three calls to each lead, fax/mail information upon
information upon request to the customer, send Welcome Kits and build the web
site once it has been sold to the customer. Telesales campaign will be preceded
by a direct marketing piece executed by Tickets.com to the venue customer
database list. Co-Branded Welcome Kit to include color sheet that allows choice
of six style templates, registration and web content & information pages to be
filled out by customer. Member Agreement which outlines the service and price
and Rules of the Road which include web site legal information pertinent to the
Sitematic business.
Partner will do the following:
1. Supply list.
2. Execute a direct marketing mailing to the venue customer database prior to
the start of the telemarketing campaign.
3. Help develop script and answers to frequently asked questions regarding
Partner.
4. Provide method to link new customers to Tickets.com website.
5. Reimburse Sitematic for up to 3 calls per lead at a cost of $[***] per call.
Note: For the purpose of item 5, a "call" shall include a call which is answered
by a live person and will exclude calls to wrong numbers, calls picked up by the
wrong contact person, and calls which are picked up by voice mail or answering
machine.
Sitematic will do the following:
1. Telemarket into Partner-supplied list.
2. Place a targeted number of 1000 calls per week (based on the assumption
of 2 telemarketing reps placing calls at a rate of 100 calls each per
day). The numbers of reps can be increased based on mutual agreement,
based on a review of the initial response to the campaign.
3. Develop a welcome kit containing 6 custom templates to be mailed to leads who
express interest in signing up for the service.
4. Create the initial Website for each venue customer for the fee described in
Exhibit B.
[***] Confidential treatment has been requested for redacted portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
9
