<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED
SEPTEMBER 30, 1999
Commission file number 0-26337
NETIVATION.COM, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 82-0514605
(State or jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
806 West Clearwater Loop, Suite N, Post Falls, ID 83854
(208) 777-4203
(Address and telephone number of principal executive offices and
principal place of business)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
periods that the registrant was required to file such reports ), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Outstanding Shares
CLASS as of November 10, 1999
----- -----------------------
Common Stock, par value $.01 per share 9,196,305
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
NETIVATION.COM, INC.
FORM 10-QSB
September 30, 1999
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets at September 30, 1999 and December 31, 1998.
Condensed Statements of Operations for the Three Month Periods and Nine
Month Periods Ended September 30, 1999 and 1998.
Condensed Statements of Cash Flows for the Nine Month Periods Ended
September 30, 1999 and 1998.
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Change in Securities and Use of Proceeds
SIGNATURE
EXHIBITS
Exhibit 2 Agreement and Plan of Merger and Reorganization dated September
17, 1999 among Netivation.com, Inc., Netivation.com Merger Two
Corp., MEDMarket, Inc. and Selling Shareholders of MEDMarket, Inc.
EXHIBITS:
Exhibit A - Selling Stockholders
Exhibit B - Certain Definitions
Exhibit C - Director and Officer of Surviving Corporation
Exhibit D - Allocation of Merger Consideration
Exhibit E - Form of Legal Opinion
Exhibit F - Form of Employment and Noncompetition Agreement
Exhibit G - Form of Escrow Agreement
SCHEDULES:
SCHEDULE 2.6 - Liabilities
SCHEDULE 2.7 - Agreements; Action
SCHEDULE 2.8 - Obligations to Related Parties
SCHEDULE 2.9 - Absence of Changes
SCHEDULE 2.10 - Title to Properties and Assets; Liens, Etc.
SCHEDULE 2.15 - Employees
Exhibit 27 Financial Data Schedule
NETIVATION.COM, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
2
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<TABLE>
<CAPTION>
Condensed Balance Sheets
Dollars in thousands September 30, 1999 December 31, 1998
Unaudited
------------------ -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents $19,634 $ 1,907
Short-term investments 880
Subscription receivable for preferred stock 1,183
Accounts receivable 113
Prepaids & other 504 35
------- -------
Total current assets 20,251 4,005
Other assets:
Equipment & furniture, net 473 94
Intangible assets, net 3,320
Long-term investments 525
Deposits 12
------- -------
Total assets $24,581 $ 4,099
======= =======
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 820 $ 172
Accrued compensation 125 163
Accrued expenses 180 28
Deferred revenue 61
Convertible note payable to stockholder, net 501
Advances from stockholders 95
------- -------
Total current liabilities 1,186 959
Mandatorily redeemable common stock option 391
Other long-term liabilities 7 24
------- -------
Total liabilities 1,193 1,374
------- -------
</TABLE>
3
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Stockholders' equity:
8% Convertible preferred stock 3,317
Subscription receivable 1,183
Common stock & additional paid in capital 31,136 628
Retained earnings (deficit) (7,748) (2,403)
-------- --------
Total stockholders' equity 23,388 2,725
-------- --------
Total liabilities & stockholders' equity $ 24,581 $ 4,099
======== ========
See notes to Financial Statements
Condensed Statement of Operations
Dollars in thousands, except per share
data
<TABLE>
<CAPTION>
Three Month Nine Month Three Month Nine Month
Period Ended Period Ended Period Ended Period Ended
Sept. 30, 1999 Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1998
Unaudited Unaudited Unaudited Unaudited
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 434 $ 563 $ 0 $ 0
Cost of revenues 349 369 0 0
----------- ----------- ----------- -----------
Gross profit 85 194 0 0
Operating expense:
Sales & marketing 706 1,486 125 331
General & administrative 843 1,511 187 477
Product development 231 922 125 190
Stock compensation 1,232
Amortization of goodwill 304 331
----------- ----------- ----------- -----------
Total operating expenses 2,084 5,482 437 998
Loss from operations (1,999) (5,288) (437) (998)
Interest-net 154 158 0 (57)
----------- ----------- ----------- -----------
Loss before income taxes (1,845) (5,130) (437) (1,055)
Provision for income taxes 0 0 0 0
----------- ----------- ----------- -----------
Net loss (1,845) (5,130) (437) (1,055)
Preferred stock dividend 0 (209) 0 0
----------- ----------- ----------- -----------
Net loss available to
common stock ($ 1,845) ($ 5,339) ($ 437) ($ 1,055)
=========== =========== =========== ===========
Historical weighted average shares
outstanding used to
compute loss per share 8,615,055 5,377,642 3,472,455 3,411,265
=========== =========== =========== ===========
Basic loss per share ($0.21) ($0.99) ($0.13) ($0.31)
=========== =========== =========== ===========
</TABLE>
See notes to Financial Statements
4
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Condensed Statement of Cash Flows
Dollars in thousands Nine Months Nine Months
Ended Ended
Sept. 30, 1999 Sept. 30, 1998
Unaudited Unaudited
-------------- --------------
Cash flows from operating activities:
Net (loss) ($ 5,130) ($ 1,055)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation 52 10
Amortization of goodwill 331
Expense associated with issuance of stock options 1,338
Changes in assets and liabilities:
Accounts receivable (113) (4)
Prepaids/Other (469) 270
Deposits (12)
Accounts payable 525 121
Other Current Liabilities 175
Long-Term Liabilities (518) 77
Loans from Shareholders 76
-------- --------
Net cash used by operating activities (3,821) (505)
Cash flows from investing activities:
Purchase of equipment and furniture (431) (61)
Investment in EBOnline (525)
Acquisition of Businesses (300)
-------- --------
Net cash flows from investing activities (1,256) (61)
Cash flows from financing activities:
Proceeds from Britannia Holdings Loan 550
Equipment Loans and Leases 23
Issuance of common stock for cash 20,808 126
Proceeds for short-term investments 880
Proceeds from sale of 8% preferred stock 1,582
Repay advances from shareholders (95)
Repurchase preferred shares (113)
Payment of Interest on Convertible Note (49)
Payment of Preferred Dividends (209)
--------
Net cash provided by financing activities 22,804 699
Net increase in cash and equivalents 17,727 133
Cash and cash equivalents at beginning of period 1,907 46
-------- --------
Cash and cash equivalents at end of period $ 19,634 $ 179
-------- ========
See notes to Financial Statements
5
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NETIVATION.COM, INC.
Notes to Financial Statements
September 30, 1999
Note 1 - Netivation.com, Inc. and Basis of Presentation
Description of Netivation.com, Inc.
Netivation.com, Inc. ("Netivation") develops and operates topic specific
("vertical") Internet portals designed to permit persons and businesses that
share a common interest to access our suite of services, the resources of the
Internet and e-commerce. We currently operate two Internet portals, Votenet, a
public policy and political portal and Medinex, a healthcare focused portal.
On June 22, 1999, Netivation completed its initial public offering ("IPO") of
2,500,000 shares of its common stock at $10.00 per share. Aggregate net proceeds
to Netivation were approximately $20.8 million (net of the underwriters'
commission and offering expenses, totaling nearly $4.2 million). As of the
closing date of the IPO, all of the convertible preferred stock outstanding was
converted into 2,280,000 shares of common stock. Simultaneous with the
effectiveness of the IPO, Netivation completed the acquisitions of Interlink
Services, Inc. and The Online Medical Bookstore, Inc.
The accompanying unaudited condensed financial statements as of September 30,
1999 and for both the three month periods and nine month periods ended September
30, 1999 and September 30, 1998, included in this report, have been prepared by
Netivation, pursuant to the rules and regulations of the Securities and Exchange
Commission. Management believes the accompanying unaudited interim financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the results of Netivation's operations
for the three month periods and nine month periods and cash flows for the nine
month periods ended September 30, 1999 and September 30, 1998.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations relating
to interim financial statements. Netivation believes that the results of
operations for the three months ended September 30, 1999, are not necessarily
indicative of the results to be expected for any future period.
Computation of Historical Earnings Per Share
Basic loss per share is computed using the weighted average number of common
shares outstanding during the period. Diluted earnings per share are computed
using the weighted average number of common and diluted common equivalent shares
outstanding during the same period. For the three-month period and nine month
periods ended September 30, 1999, basic and diluted shares outstanding are the
same, as common equivalent shares are anti-dilutive.
The following table sets forth the computation of loss per share:
<TABLE>
<CAPTION>
Dollars in thousands, except per share data Three Months Ended Year To Date
September 30, 1999 September 30, 1999
-------------------- --------------------
<S> <C> <C>
Basic and diluted net loss per share:
Numerator: Net loss available to common stock ($1,845) ($5,339)
Denominator:
Weighted average shares outstanding basic and diluted 8,615,055 5,377,642
Basic net loss per share ($0.21) ($0.99)
</TABLE>
6
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Note 2. Investments
Netivation principally invests its excess cash in debt instruments of the United
States Government and its agencies. All highly liquid instruments with an
original maturity of three months or less are considered cash equivalents and
those instruments with original maturities greater than three months and current
maturities less than twelve months from the balance sheet date are considered
short-term investments.
During the third quarter, Netivation invested $525,000 for 175,000 shares of
EBonlineinc.com. Although EBonlineinc.com is a traded security (OTC: EBOL),
these shares are part of a private placement and are under trading restrictions
offered by the private placement exemption. Consequently, we have accounted for
this as a long-term investment. Netivation believes this investment will provide
a relationship with a financial site providing key services to businesses and
may enhance our internal merger and acquisition strategy.
EBonlineinc.com provides an electronic forum whereby companies in various stages
of capital requirements can come to obtain their needed resources. They offer
members a place to buy and sell businesses as well as request and offer capital
for business growth and expansion. EBonlineinc.com attracts investors,
professionals and entrepreneurs looking to assist companies with their financial
needs, including Debt Financing, Merger & Acquisitions services, Going Public,
Bridge Loans, Private Placements, Mergers into Public Shells and Maintenance
Services.
Note 3. Subsequent Events
During the third quarter, Netivation signed six letters of intent with the
companies discussed below and subsequently acquired four of those six companies
to be wholly-owned subsidiaries of Netivation.
We acquired MEDMarket, Inc., politicallyblack.com, Inc., Raintree Communications
Corporation, and Public Disclosure, Inc.
MEDMarket, Inc., is a Colorado corporation, which develops Internet e-commerce
Web sites for medical manufacturer and supplier companies. MEDMarket was
acquired for 100,000 shares of Netivation stock and $100,000. Netivation
anticipates this acquisition will enhance its business-to-business e-commerce
strategy in the healthcare marketplace.
Public Disclosure, Inc., Raintree Communications Corporation, and
politicallyblack.com, Inc. are Internet political companies. Public Disclosure,
Inc., provides FECInfo, a comprehensive web site of Federal Election Commission
information on federal candidates and interest groups. Public Disclosure was
acquired for 300,000 shares of Netivation stock and $190,000; Raintree
Communications Corporation, provides automated voice and data services for
grassroots lobbying. Raintree was acquired for 150,000 shares of Netivation
stock and $100,000; and politicallyblack.com, is a leading political information
center and news web site for the African American political community.
Politicallyblack was acquired for 30,000 share of Netivation stock and $55,000.
The completion of these acquisitions helps to strengthen Netivation's
Votenet.com division and assists Netivation in its quest to become a leader in
online politics.
Upon the completion of the four acquisitions, seven employees of the acquired
companies were brought onto the Netivation payroll.
The acquisitions will be accounted for through the purchase method of
accounting. The company anticipates recognizing additional goodwill of
approximately $4.4 million for these acquisitions, which will be amortized over
three years.
The companies to yet be acquired are Healthspan, Inc., the parent company of the
Ultrafit Northwest corporate wellness program and Net.Capitol, Inc., a developer
of Internet-based products and services for public affairs and political
organizations. Netivation and these companies are currently continuing to
perform due diligence and discussing the terms of these acquisitions. There can
be no assurance that these acquisitions will be completed.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Except for the historical financial information, this report contains forward
looking statements that involve risks and uncertainties regarding our
positioning for the future. We advise investors that forward-looking statements
are subject to risks known and unknown, and factors outside our control which
may differ materially from actual future events or results.
7
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There are a number of important factors that could cause actual results to
differ materially from those anticipated by any forward looking information. A
description of risks and uncertainties relating to Netivation and its industry
along with other factors which could affect our financial results are included
in Netivation's SB-2 filing. (Filing No. 333-74569)
OVERVIEW
We have yet to achieve significant revenue and our ability to generate
significant revenue is uncertain but is improving. In view of the rapidly
evolving nature of our business and our very limited operating history, we have
little experience forecasting our revenues. We believe that period to period
comparisons of our financial results are not necessarily meaningful and you
should not rely on these comparisons as an indication of our future performance.
To date, we have incurred substantial costs to create, introduce and enhance our
products and services, to develop content, to build brand awareness and to grow
our business. As a result, we have incurred operating losses in each fiscal
quarter since inception. We expect operating losses and negative cash flows to
continue for the foreseeable future as we intend to increase our operating
expenses to grow our business. Having closed four acquisitions since the end of
the third quarter and based on our plan to continue an acquisition strategy,
additional costs associated with mergers and acquisitions will occur. We expect
to also incur additional costs and expenses related to content creation,
marketing, and technology development to respond to future changes in our
industry. These costs could have an adverse effect on our future financial
condition or operating results.
Our revenues and expenses continue to increase. Revenues in the third quarter
grew mainly as a result of our second quarter acquisitions. Expenses increased
in the third quarter mainly due to an increase in goodwill amortization as a
result of having a full quarter of amortization for prior acquisitions. Goodwill
is amortized over a three-year life and management expects goodwill will grow in
future periods as Netivation continues its acquisition activities. Subsequent to
the third quarter, we acquired four companies as wholly owned subsidiaries,
these acquisitions are expected to increase both Netivation's revenues and
expenses in future quarters.
RESULTS OF OPERATIONS
NET REVENUES
We began selling advertising and sponsorships in January 1999. We did not
recognize any revenues from Netivation's inception through December 31, 1998 and
we generated minimal revenues through the second quarter of 1999. However,
revenues grew significantly in the third quarter of 1999 to $434,000 as compared
to $48,000 for the second quarter. The increase in revenue was mainly
attributable to our second quarter acquisitions and specifically to e-commerce.
Year to date revenue in 1999 totals $563,000. Barter transactions, in which
Netivation received advertising in exchange for services, account for
approximately $8,000 of total revenues for the three months ended September 30,
1999, and $105,000 for nine months ended September 30, 1999. As discussed above,
this compares to zero revenue for the same period of 1998.
With the second quarter acquisitions of Interlink Services, Inc. and The Online
Medical Bookstore, Inc. in place, and with the addition of the four newly
acquired companies, as well as our continued advertising, web development, and
web hosting, we expect revenue to continue to increase. In addition, as of
September 30, 1999, we had deferred revenues of $61,000, which compares to
$39,000 in the prior quarter, or a 56% increase.
E-commerce, advertising, sponsorship, and web services will continue to account
for a substantial portion of revenues in the foreseeable future. To increase
revenues in 1999 and beyond, management will continue to broaden the penetration
of the market of Netivation's business opportunities through acquisitions,
partnerships and the development of additional products.
COST OF REVENUES
The cost of revenues of $349,000 for the three month period ended September 30,
1999, is primarily the result of the cost of books and medical supplies sold
over the Internet, costs associated with web development, cost of maintenance
and technical support of our network. As new software systems are introduced and
services and products are expanded, we estimate we will need to add additional
support staff that will increase our cost of revenues.
8
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GROSS MARGIN
In the future, gross margins will be affected by the mix of products and
services we sell. Periodically, we may sell our products and services at cost or
even at a loss and experience zero or negative gross margins as we attempt to
develop market share and attract members to our portals.
OPERATING EXPENSES
In the third quarter of 1999 operating expenses, excluding goodwill, increased
by 307% to $1.8 million compared to $437,000 in the same period for 1998. For
the nine-month period ended September 30, 1999, total operating expenses,
excluding goodwill, increased by 416% to $5.2 million compared to $1.0 million
in the same period of 1998.
Product development expenses increased 84% to $231,000 for the quarter ended
September 30, 1999, compared to $125,000 reported for the same quarter in 1998.
The product development expenses for the quarter ended September 30, 1999,
represented approximately 13% of Netivation's total operating expenses. For the
nine month period ended September 30, 1999, Netivation's total research and
development expenses increased approximately 385% to $922,000 from $190,000
reported for the same period in 1998 and represented 18% of Netivation's total
operating expenses. The increase in research and product development expenses is
attributable to Netivation's continued testing and refinement of its physicians
office management software system. We intend to increase the dollar level of
future product development expenditures to further enhance Netivation's product
lines and meet market demands.
Increases in Netivation's sales and marketing expenses are primarily a result of
increased headcount in our sales force and additional advertising expenses.
Sales and marketing costs were $706,000 for the three months ended September 30,
1999, and $125,000 for the three months ended September 30, 1998. This is an
increase of $581,000 or 464%. As a percentage of total operating expenses, sales
and marketing expenses were 40% for the three-month period ended September 30,
1999 and 29% for the three-month period ended September 30, 1998. We anticipate
that sales and marketing expenses will increase as we continue to pursue an
aggressive brand building strategy through advertising and expanding our sales
organization.
General and administrative expenses primarily consist of compensation for
administrative and finance personnel, professional fees, and occupancy costs.
General and administrative costs were $843,000 for the three months ended
September 30, 1999, and $187,000 for the three months ended September 30, 1998,
an increase of $656,000. As a percentage of total operating expenses general and
administrative costs were 47% for the three month period ended September 30,
1999, and 43% for the three-month period ended September 30, 1998. General and
administrative expenses increased due to increased head count, increased
occupancy needs, legal, and consulting expenses. These costs included travel
expenses, directors and officers liability insurance and professional fees. We
believe that the level of general and administrative expense will increase in
future periods as a result of an increase in personnel to support our growth.
Stock compensation relates to non-cash charges incurred in connection with
certain stock option grants with exercise prices below the fair market value of
the common stock. During 1999, we recognized significant non-cash charges
related to stock option grants to Netivation employees, consultants and
directors. For the quarter ended September 30, 1999, we did not have non-cash
charges, but for the nine-month period ended September 30, 1999, we recorded
$1.3 million in non-cash charges.
HEADCOUNT
As of September 30, 1999 Netivation had 71 employees. Including the four
subsequent acquisitions the number of employees is 78. This compares to 45
employees at the end of the second quarter of 1999 or an increase of 58%. We
also hired additional personnel, including but not limited to a new Chief
Financial Officer, a Vice President for Mergers and Acquisitions, a Vice
President of Technology, and various business development personnel.
INTEREST INCOME (EXPENSE)
Net interest income of $154,000 for the three months ended September 30, 1999,
resulted from interest income on proceeds from our initial public offering.
9
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LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, Netivation's primary source of liquidity consisted of
cash and cash equivalents that are highly liquid so such funds are readily
available for operating purposes. As of September 30, 1999, Netivation had cash
and cash equivalents totaling $19.6 million compared to $179,000 as of September
30, 1998.
We have several capital leases for computers and communications equipment, which
expire in 2000. We make total monthly payments on these capital leases of
approximately $14,000. We also have an insurance premium financing agreement for
liability insurance for our directors and officers. Under the terms of this
agreement the interest rate is 7% and we make total monthly payments of
approximately $45,000.
For the nine-month period ended September 30, 1999, cash used for operations was
$3.8 million. Cash used in operating activities consisted mostly of net
operating losses, offset by non-cash expenses.
Net cash used in investing activities was $1.3 million for the nine-month period
ended September 30, 1999. Our investing activities included $431,000 for the
purchase of additional servers, furniture and computer equipment for the
additional personnel, $300,000 for our second quarter acquisitions, and a
$525,000 investment in EBonlineinc.com. We have generally invested in United
States government debt instruments, although we may make strategic investments
in and acquisitions of private and public companies.
For the nine-month period ended September 30, 1999, cash provided by financing
activities of $22.8 million was primarily due to our IPO, which raised net
proceeds of $20.8 million.
Netivation estimates that its current cash balance and the cash to be generated
from its revenues will be sufficient to fund its operations working capital,
capital expenditures and business growth through the year 2000. At its current
stage of business development, Netivation's quarterly revenues and results of
operations may be materially affected by, among other factors, development and
introduction of products, time to market, market acceptance, demand for
products, the affects of competition, and general economic conditions. As a
result, there can be no assurance that Netivation will be sufficiently funded
beyond 2000 or that we will be able to obtain additional funding or borrowing on
favorable terms to us, or at all.
YEAR 2000
Netivation is aware of the Year 2000 issue. During 1999, Netivation performed an
internal analysis of its primary software product and assessed the readiness of
its other products, its internal computer systems, as well as third party
equipment and software for handling Year 2000 issues. Netivation believes that
its current products are currently Year 2000 compliant. Netivation expects to be
able to successfully address and implement any necessary changes to ensure Year
2000 compliance. Netivation's management team believes that the impact of the
Year 2000 on its computer systems will not result in material costs to
Netivation.
The main risk to Netivation with respect to the Year 2000 issue is the failure
of major vendors and infrastructure providers to be Year 2000 compliant. Year
2000 failures by third parties could result in delays or the inability to
communicate with customers or suppliers and an overall inability to conduct
business. Netivation cannot estimate the financial impact of any failure to be
Year 2000 compliant by such third party vendors and service providers.
In an effort to determine third parties' Year 2000 readiness, management has
sent correspondence to its outside vendors and third party suppliers to inquire
about their Year 2000 readiness of their respective products or services.
Netivation has received returned correspondence from the outside vendors and
third party suppliers, and to the extent that such vendors and suppliers can
ensure Year 2000 compliance, Netivation anticipates the continued use and
dependence on such suppliers. However, there can be no assurance that these
suppliers will be able to become Year 2000 compliant. The lack of Year 2000
readiness by outside vendors and third party suppliers could have an adverse
effect on Netivation.
Netivation does not have a contingency plan for Year 2000 compliance because it
does not anticipate that it will fail to be Year 2000 compliant, particularly in
relation to those systems, software programs, and hardware that are under its
control. However, there can be no assurances that all measures being taken to
avoid Year 2000 problems will be effective and as such, unforeseen issues could
arise that would have a material adverse effect upon Netivation's business,
operating results and financial condition.
10
<PAGE>
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On October 25, 1999 a legal proceeding was filed against Netivation by Lawrence
L. and Nancy D. Burch, husband and wife. Lawrence L. Burch ("Burch") was
Netivation's former Chief Financial Officer and Treasurer. The complaint was
filed with the First Judicial District of the State of Idaho in and for the
County of Kootenai.
Effective February 25, 1999, Netivation and Burch entered into an employment
agreement by which Burch accepted employment as Netivation's Chief Financial
Officer. On October 6, 1999, Netivation terminated Burch's employment for what
we believe to have been a good cause. The Burches then filed the lawsuit against
Netivation, alleging breach of contract, among other things, and seeking
monetary damages in an unspecified amount in excess of the district court's
$10,000 jurisdictional minimum, as well as their court costs and attorney's
fees.
Item 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
On June 22, 1999, the Company's Registration Statement on Form SB-2 covering the
offering of 2,500,000 shares of the Company's Common Stock, Commission file
number 333-74569 was declared effective. The offering commenced on June 23,
1999, managed by EBI Securities Corporation and Millennium Financial Group, Inc.
The total price to the public for the shares offered and sold by Netivation was
$25,000,000.
The amount of expenses incurred by Netivation in connection with the offering
are as follows:
Underwriting discounts and commissions $2,625,000
Finders fees
Expenses paid to or for the Underwriter 136,000
Other expenses 1,431,000
--------------
Total expenses $4,192,000
All of the foregoing expenses were direct or indirect payments to persons other
than (i) directors, officers or their associates; (ii) persons owning ten
percent (10%) or more of Netivation's common stock; or (iii) affiliates of
Netivation.
The net proceeds of the offering to the Company (after deducting the
Underwriter's discounts and commissions and offering expenses) was $20,808,000.
From the settlement date, the net proceeds have been used in the following
manner:
Investments in debt instruments of the United States Government and its
agencies: $20,283,000.
Investments in EBonlineinc.com: $525,000 cash
11
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 10, 1999 Netivation.com, Inc.
(Registrant)
/s/ Anthony J. Paquin
-------------------------------------
Anthony J. Paquin
President and Chief Executive Officer
12
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Exhibit 2 Agreement and Plan of Merger and Reorganization dated September
17, 1999 among Netivation.com, Inc., Netivation.com Merger Two
Corp., MEDMarket, Inc. an Selling Shareholders of MEDMarket, Inc.
================================================================================
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
NETIVATION.COM, INC.
a Delaware corporation;
NETIVATION.COM MERGER TWO CORP.,
a Delaware corporation;
MEDMarket, INC.,
a Colorado corporation;
and
the Selling Stockholders of MEDMarket, Inc.
listed on Exhibit A hereto
------------------------------
Dated as of September 17, 1999
------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
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SECTION 1 - DESCRIPTION OF TRANSACTION 17
1.1 Merger of Merger Sub into MEDMarket 17
1.2 Effect of the Merger 17
1.3 Closing; Effective Time 17
1.4 Certificate of Incorporation, Bylaws and Directors and Officers 17
1.5 Conversion of MEDMarket Stock 18
1.6 Additional Consideration 18
1.7 Closing of MEDMarket's Transfer Books 18
1.8 Exchange of Certificates 19
1.9 Dissenting Shares 19
1.10 Tax Consequences 20
1.11 Accounting Treatment 20
1.12 Further Action 20
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF MEDMarket AND THE SELLING
STOCKHOLDERS 20
2.1 Organization, Good Standing and Qualification 20
2.2 Subsidiaries 20
2.3 Capitalization; Voting Rights 20
2.4 Authorization; Binding Obligations 21
2.5 Financial Statements 21
2.6 Liabilities 21
2.7 Agreements; Action 21
2.8 Obligations to Related Parties 21
2.9 Absence of Changes 22
2.10 Title to Properties and Assets; Liens, Etc. 22
2.11 Patents and Trademarks 23
2.12 Compliance with Other Instruments 23
2.13 Litigation 23
2.14 Tax Returns and Payments 24
2.15 Employees 24
2.16 [INTENTIONALLY OMITTED] 24
2.17 Registration Rights 24
2.18 Compliance with Legal Requirements; Consents 25
2.19 Selling Stockholders 25
2.20 Full Disclosure 25
2.21 Year 2000 Compliance 25
2.22 [INTENTIONALLY OMITTED] 26
2.23 Securities Laws Matters 26
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF NETIVATION 26
3.1 Organization, Good Standing and Qualification 26
3.2 Subsidiaries 27
3.3 Capitalization; Voting Rights 27
3.4 Authorization; Binding Obligations 27
3.5 Full Disclosure 27
SECTION 4 - CERTAIN COVENANTS OF MEDMarket AND THE SELLING STOCKHOLDERS 27
4.1 Access and Investigation 27
4.2 Operation of Business 28
4.3 Notification; Updates to Schedule of Exceptions 29
4.4 No Negotiation 30
SECTION 5 - ADDITIONAL COVENANTS OF THE PARTIES 30
5.1 Filings and Consents 30
5.2 Disclosure Document 30
5.3 MEDMarket Stockholders'Meeting 30
5.4 Public Announcements 30
<PAGE>
5.5 Best Efforts 31
5.6 Tax Matters 31
5.7 Capital Infusion 31
SECTION 6 - CONDITIONS PRECEDENT TO OBLIGATIONS OF NETIVATION AND MERGER
SUB 31
6.1 Accuracy of Representations 31
6.2 Performance of Covenants 31
6.3 Stockholder Approval 31
6.4 Consents 31
6.5 No Material Adverse Change 31
6.6 Agreements and Documents 31
6.7 [INTENTIONALLY OMITTED] 32
6.8 Lock-Up Agreements 32
6.9 No Restraints 32
6.10 No Proceedings 32
6.11 Securities Law Compliance 32
6.12 Dissenters Rights 32
6.13 Unaccredited Investors 32
6.14 Proceedings and Documents 32
6.15 Corporate Approvals 33
SECTION 7 - CONDITIONS PRECEDENT TO OBLIGATIONS OF MEDMarket AND THE
SELLING STOCKHOLDERS 33
7.1 Accuracy of Representations 33
7.2 Performance of Covenants 33
7.3 Consents 33
7.4 Agreements and Documents 33
7.5 No Restraints 33
7.6 No Proceedings 33
7.7 Corporate Approvals 34
SECTION 8 - TERMINATION 34
8.1 Termination Events 34
8.2 Termination Procedures 34
8.3 Effect of Termination 34
SECTION 9 - INDEMNIFICATION, ETC. 35
9.1 Survival of Representations, Warranties and Covenants 35
9.2 Indemnification by the Selling Stockholders 35
9.3 Contribution 35
9.4 Ceiling; Limitation on Additional Damages 35
9.5 Interest 36
9.6 Defense of Third Party Claims 36
9.7 Setoff 36
9.8 Indemnity Reserve 36
9.9 Exercise of Remedies by Netivation Indemnitees Other Than
Netivation 36
SECTION 10 - MISCELLANEOUS PROVISIONS 36
10.1 Selling Stockholders'Agent 36
10.2 Further Assurances 37
10.3 Fees and Expenses 37
10.4 Attorneys'Fees 37
10.5 Notices 38
10.6 Headings 38
10.7 Counterparts 38
10.8 Governing Law 38
10.9 Successors and Assigns 38
10.10 Remedies Cumulative; Specific Performance 38
10.11 Waiver 38
10.12 Amendments 39
10.13 Time of the Essence 39
10.14 Severability 39
<PAGE>
10.15 Parties in Interest 39
10.16 Entire Agreement 39
10.17 Construction 39
EXHIBITS
Exhibit A Selling Stockholders
Exhibit B - Certain Definitions
Exhibit C - Director and Officer of Surviving Corporation
Exhibit D Allocation of Merger Consideration
Exhibit E - Form of Legal Opinion
Exhibit F - Form of Employment and Noncompetition Agreement
Exhibit G Form of Escrow Agreement
<PAGE>
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of September 17, 1999, by and among: NETIVATION.COM,
INC., a Delaware corporation ("Netivation"), NETIVATION.COM MERGER TWO CORP., a
Delaware corporation and a wholly-owned subsidiary of Netivation ("Merger Sub"),
MEDMarket, INC., a Colorado corporation ("MEDMarket"), and the stockholders of
MEDMarket set forth on Exhibit A hereto (the "Selling Stockholders"). Certain
capitalized terms used in this Agreement are defined in Exhibit B.
RECITALS
A. The parties intend to effect a merger of Merger Sub into MEDMarket
in accordance with this Agreement and the Delaware General Corporation Law
("Delaware Law") and the Colorado General Corporation Law ("Colorado Law") (the
"Merger"). Upon consummation of the Merger, Merger Sub will cease to exist, and
MEDMarket will become a wholly-owned subsidiary of Netivation.
B. The Selling Stockholders own an aggregate of 100,000 shares of
capital stock of MEDMarket (the "MEDMarket Stock"), constituting 100% of the
MEDMarket capital stock on a fully-diluted basis.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1 - DESCRIPTION OF TRANSACTION
1.1 Merger of Merger Sub into MEDMarket . Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into MEDMarket, and the
separate existence of Merger Sub shall cease. MEDMarket will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 Effect of the Merger . The Merger shall have the effects set forth
in this Agreement and in the applicable provisions of Delaware Law and Colorado
Law.
1.3 Closing; Effective Time . The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Moffatt, Thomas, Barrett, Rock & Fields, Chartered, 101 S. Capitol Boulevard,
10th Floor, Boise, Idaho 83702 on or before September 24, 1999 or at such other
time as the parties may agree (the "Scheduled Closing Time"). (The date on which
the Closing actually takes place is referred to in this Agreement as the
"Closing Date.") Contemporaneously with or as promptly as practicable after the
Closing, a properly executed certificate of merger (the "Certificate of
Merger"), conforming to the requirements of Delaware Law and Colorado Law, shall
be filed with the Secretary of State of the State of Delaware and the State of
Colorado. The Merger shall become effective at the time such Certificate of
Merger is filed with and accepted by the Secretary of State of the State of
Delaware and the State of Colorado (the "Effective Time").
1.4 Certificate of Incorporation, Bylaws and Directors and Officers .
(a) The certificate of incorporation of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the
certificate of incorporation of the Surviving Corporation until
thereafter amended as provided by law; provided, however, that Article
I of the Certificate of Incorporation shall be amended to read as
follows: "The name of this corporation is MEDMarket, Inc."
(b) The bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the bylaws of the Surviving Corporation
until thereafter amended.
<PAGE>
(c) The directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals
identified on Exhibit C.
1.5 Conversion of MEDMarket Stock .
(a) Subject to Sections 1.8(c) and 1.9, at the Effective Time,
by virtue of the Merger and without any further action on the part of
Netivation, Merger Sub, MEDMarket or any stockholder of MEDMarket: (i)
each share of Common Stock of MEDMarket issued and outstanding
immediately prior to the Effective Time shall be converted into the
right to receive one (1) share of Common Stock of Netivation (the
"Netivation Stock"). All outstanding shares of MEDMarket capital stock
shall be exchanged for no more than One Hundred Thousand (100,000)
shares of Netivation Stock. Each share of common stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into one (1) share of common stock of the Surviving
Corporation. The Merger Consideration to be received by the Selling
Stockholders is set forth on Exhibit D. If, between the date of this
Agreement and the Closing Date, the shares of capital stock of
MEDMarket or the Netivation Stock are changed into a different number
or class of shares by reason of any stock dividend, subdivision,
reclassification, recapitalization, split-up, combination or similar
transaction, the Merger Consideration shall be appropriately adjusted.
(b) If any shares of capital stock of MEDMarket outstanding
immediately prior to the Effective Time are unvested or are subject to
a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with
MEDMarket, then the shares of Netivation Stock issued in exchange for
such shares of capital stock of MEDMarket will also be unvested and
subject to the same repurchase option, risk of forfeiture or other
condition, and the certificates representing such shares of Netivation
Stock may be accordingly marked with appropriate legends.
1.6 Additional Consideration .
(a) At Closing, Netivation shall pay to the Selling Stockholders the
sum of One Hundred Thousand Dollars ($100,000) to be allocated among them as
provided in Exhibit D.
(b) At Closing, Netivation shall repay the corporate debt and payables
in the aggregate principal amount of not more than Seventy-Five Thousand Dollars
($75,000) owed by MEDMarket to the Region 9 Economic Development District, Burns
National Bank, Kerry Yndestad, Gemini Investments, and others.
1.7 Closing of MEDMarket's Transfer Books . At the Effective Time,
holders of certificates representing MEDMarket Stock that were outstanding
immediately prior to the Effective Time shall cease to have any rights as
stockholders of MEDMarket, and the stock transfer books of MEDMarket shall be
closed with respect to all shares of such capital stock outstanding immediately
prior to the Effective Time. No further transfer of any such capital stock of
MEDMarket shall be made on such stock transfer books after the Effective Time.
If, after the Effective Time, a valid certificate previously representing any of
such capital stock of MEDMarket (a "MEDMarket Stock Certificate") is presented
to the Surviving Corporation or Netivation, such MEDMarket Stock Certificate
shall be canceled and shall be exchanged as provided in Section 1.8.
<PAGE>
1.8 Exchange of Certificates .
(a) At or as soon as practicable after the Effective Time,
Netivation will send to each holder of a MEDMarket Stock Certificate a
letter of transmittal and instructions for use in customary form and
containing such provisions as may reasonably be required for use in
effecting the surrender of such MEDMarket Stock Certificate for payment
therefor and conversion thereof. Upon surrender of a MEDMarket Stock
Certificate to Netivation for exchange, together with a duly executed
letter of transmittal and such other documents as may be reasonably
required by Netivation, the holder of such MEDMarket Stock Certificate
shall be entitled to receive in exchange therefor certificates
representing the number of whole shares of Netivation Stock that such
holder has the right to receive pursuant to the provisions of this
Section 1 and the MEDMarket Stock Certificate so surrendered shall be
canceled. Until surrendered as contemplated by this Section 1.8, each
MEDMarket Stock Certificate shall be deemed, from and after the
Effective Time, to represent only the right to receive upon such
surrender a certificate representing shares of Netivation Stock (and
cash in lieu of any fractional share of Netivation Stock) as
contemplated by this Section 1. If any MEDMarket Stock Certificate
shall have been lost, stolen or destroyed, Netivation may, in its
discretion and as a condition precedent to the issuance of any
certificates representing Netivation Stock, require the owner of such
lost, stolen or destroyed MEDMarket Stock Certificate to provide an
appropriate affidavit and to deliver a bond (in such sum as Netivation
may reasonably direct) as indemnity.
(b) No dividends or other distributions declared or made with
respect to Netivation Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered MEDMarket Stock
Certificate with respect to the shares of Netivation Stock represented
thereby, and no cash payment in lieu of any fractional share shall be
paid to any such holder, until such holder surrenders such MEDMarket
Stock Certificate in accordance with this Section 1.8 (at which time
such holder shall be entitled to receive all such dividends and
distributions and such cash payment).
(c) No fractional shares of Netivation Stock shall be issued
in connection with the Merger. In lieu of such fractional shares, any
holder of capital stock of MEDMarket who would otherwise be entitled to
receive a fraction of a share of Netivation Stock shall, upon surrender
of such holder's MEDMarket Stock Certificate(s), be paid in cash the
dollar amount (rounded to the nearest whole cent), without interest,
determined by multiplying such fraction by the closing price of one
share of Netivation Stock as reported by the NASDAQ consolidated
reporting system on the Closing Date.
(d) Each certificate representing any of the shares of
Netivation Stock to be issued in the Merger shall bear a legend
identical or similar in effect to the following legend (together with
any other legend or legends required by applicable state securities
laws or otherwise):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS REGISTERED UNDER THE
ACT OR UNLESS AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE ACT IS AVAILABLE."
(e) Netivation and the Surviving Corporation shall be entitled
to deduct and withhold from any consideration payable or otherwise
deliverable to any holder or former holder of capital stock of
MEDMarket pursuant to this Agreement such amounts as Netivation or the
Surviving Corporation may be required to deduct or withhold therefrom
under the Code or under any provision of state, local or foreign tax
law. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise
have been paid.
1.9 Dissenting Shares . Notwithstanding anything in this Agreement to
the contrary, shares of capital stock of MEDMarket that are issued and
outstanding immediately prior to the Effective Time and that are held by
stockholders who have not voted such shares in favor of the Merger and who have
delivered a written demand for appraisal of such shares in the manner provided
under Colorado Law ("Dissenting Shares") shall not be canceled and converted in
accordance with Section 1.5 unless and until such holder shall have failed to
perfect, or shall have effectively withdrawn or lost, such holder's right to
appraisal and payment under Colorado Law. If such holder shall have so failed to
perfect, or shall have effectively withdrawn or lost such right, such holder's
capital
<PAGE>
stock of MEDMarket shall thereupon be deemed to have been canceled and converted
as described in Section 1.5 at the Effective Time, and each such share shall
represent solely the right to receive the Merger Consideration described in
Section 1.5. MEDMarket shall give prompt notice of any demands received by
MEDMarket for appraisal of its shares, and, prior to the Effective Time,
Netivation shall have the right to participate in all negotiations and
proceedings with respect to such demands. Prior to the Effective Time, MEDMarket
shall not, except with the prior written consent of Netivation, make any payment
with respect to, or settle or offer to settle, any such demands. From and after
the Effective Time, no stockholder of MEDMarket who has demanded appraisal
rights as provided under Colorado Law shall be entitled to vote such holder's
shares of Netivation Stock or capital stock of MEDMarket for any purpose or to
receive payment of dividends or other distributions with respect to such
holder's shares (except dividends and other distributions payable to
stockholders of record of MEDMarket at a date which is prior to the Effective
Time).
1.10 Tax Consequences . For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.11 Accounting Treatment . For accounting purposes, the Merger is
intended to be treated as a "purchase."
1.12 Further Action . If, at any time after the Effective Time, any
further action is determined by Netivation to be necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation or
Netivation with full right, title and possession of and to all rights and
property of MEDMarket, the officers and directors of the Surviving Corporation
and Netivation shall be fully authorized (in the name of MEDMarket and
otherwise) to take such action.
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF MEDMarket AND
THE SELLING STOCKHOLDERS
MEDMarket and each of the Selling Stockholders jointly and severally
represent and warrant, to and for the benefit of the Netivation Indemnitees, as
follows:
2.1 Organization, Good Standing and Qualification . MEDMarket is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado. MEDMarket has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
the Transactional Agreements, to carry out the provisions of the Transactional
Agreements and to carry on its business as presently conducted and as presently
proposed to be conducted. MEDMarket is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in all jurisdictions
(other than Illinois) in which the nature of its activities and of its
properties (both owned and leased) make such qualifications necessary, except
for those jurisdictions in which failure to do so would not have a Material
Adverse Effect on MEDMarket or its business. MEDMarket has made available to
Netivation true, correct and complete copies of MEDMarket's certificate of
incorporation and bylaws, each as amended to date.
2.2 Subsidiaries . MEDMarket owns no equity securities of any other
corporation, limited partnership or similar entity. MEDMarket is not a
participant in any joint venture, partnership or similar arrangement.
2.3 Capitalization; Voting Rights . The authorized capital stock of
MEDMarket consists of 100,000 shares of Common Stock, of which 100,000 shares
are issued and outstanding. Exhibit A sets forth the names of the stockholders
of MEDMarket and the number of shares of capital stock owned of record by each
such stockholder. The Selling Stockholders together own all of the outstanding
shares of capitol stock of MEDMarket. All issued and outstanding shares of
MEDMarket's Common Stock (i) have been duly authorized and validly issued, (ii)
are fully paid and nonassessable and (iii) were issued in compliance with all
applicable state and federal laws concerning the issuance of securities. There
are no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or stockholder agreements, or
agreements of any kind for the purchase or acquisition from MEDMarket of any of
its securities.
<PAGE>
2.4 Authorization; Binding Obligations . MEDMarket has the absolute and
unrestricted right, power and authority to enter into and to perform its
obligations under the Transactional Agreements to which MEDMarket is or may
become a party. This Agreement constitutes the legal, valid and binding
obligation of MEDMarket, enforceable against MEDMarket in accordance with its
terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies. Upon the execution
of each of the other Transactional Agreements at the Closing, each of such other
Transactional Agreements will constitute the legal, valid and binding obligation
of MEDMarket, enforceable against MEDMarket in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
2.5 Financial Statements . MEDMarket has delivered to Netivation (i)
its unaudited balance sheet and profit and loss statement as of December 31,
1996, 1997, and 1998 and (ii) its unaudited balance sheet and profit and loss
statement as of September 14, 1999 (the "Statement Date") (collectively, the
"MEDMarket Financial Statements"). The MEDMarket Financial Statements are
complete and correct in all material respects, and present fairly the financial
condition and position of MEDMarket for the periods covered thereby.
2.6 Liabilities . Except as set forth in Schedule 2.6, MEDMarket has no
material liabilities and, to the knowledge of MEDMarket, has no material
contingent liabilities not otherwise disclosed in the MEDMarket Financial
Statements, except current liabilities incurred in the Ordinary Course of
Business subsequent to the Statement Date which have not been, either in any
individual case or in the aggregate, materially adverse. All obligations of
MEDMarket to affiliates, officers, directors and stockholders of MEDMarket are
disclosed on the MEDMarket Financial Statements.
2.7 Agreements; Action .
(a) Except as set forth in Schedule 2.7, there are no
agreements, understandings, instruments, contracts, proposed
transactions, judgments, orders, writs or decrees to which MEDMarket is
a party or to its knowledge by which it is bound which may involve (i)
obligations (contingent or otherwise) of, or payments to, MEDMarket in
excess of $10,000, or (ii) the license of any patent, copyright, trade
secret or other proprietary right to or from MEDMarket (other than
licenses arising from the purchase of "off the shelf" or other standard
products), or (iii) provisions restricting or affecting the
development, manufacture or distribution of MEDMarket's products or
services or (iv) indemnification by MEDMarket with respect to
infringements of proprietary rights.
(b) MEDMarket has not (i) incurred any indebtedness for money
borrowed or any other liabilities (other than with respect to dividend
obligations, distributions, indebtedness and other obligations incurred
in the Ordinary Course of Business or as disclosed in the MEDMarket
Financial Statements) individually in excess of $10,000 or, in excess
of $10,000 in the aggregate, (ii) made any loans or advances to any
person, other than ordinary advances for travel expenses or (iii) sold,
exchanged or otherwise disposed of any of its assets or rights, other
than the sale of its inventory in the Ordinary Course of Business.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities MEDMarket has reason to believe are
affiliated therewith) shall be aggregated for the purpose of meeting
the individual minimum dollar amounts of such subsections.
2.8 Obligations to Related Parties . Except as set forth in Schedule
2.8, there are no obligations of MEDMarket to officers, directors, stockholders,
or employees of MEDMarket other than (a) for payment of salary for services
rendered, (b) reimbursement for reasonable expenses incurred on behalf of
MEDMarket and (c) for other standard employee benefits made generally available
to all employees. Except as set forth in Schedule 2.8, no such officer, director
or stockholder, or any member of their immediate families is, directly or
indirectly, interested in any material contract with MEDMarket (other than such
contracts as relate to any such person's ownership of capital stock or other
securities of MEDMarket). MEDMarket is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
<PAGE>
2.9 Absence of Changes . Except as set forth in Schedule 2.9, since the
Statement Date, there has not been:
(a) Any change in the assets, liabilities, financial condition
or operations of MEDMarket from that reflected in the MEDMarket
Financial Statements, other than changes in the Ordinary Course of
Business, none of which individually or in the aggregate has had or is
expected to have a Material Adverse Effect on such assets, liabilities,
financial condition or operations of MEDMarket;
(b) Any resignation or termination of any key officers of
MEDMarket; and MEDMarket, to its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) Any material change, except in the Ordinary Course of
Business, in the contingent obligations of MEDMarket by way of
guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business
or prospects or financial condition of MEDMarket;
(e) Any waiver by MEDMarket of a valuable right or of a
material debt owed to it;
(f) Any direct or indirect loans made by MEDMarket to any
stockholder, employee, officer or director of MEDMarket, other than
advances made in the Ordinary Course of Business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(h) Any declaration or payment of any dividend or other
distribution of the assets of MEDMarket;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by MEDMarket, except those for immaterial amounts and for
current liabilities incurred in the Ordinary Course of Business;
(k) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which MEDMarket is
a party or by which it is bound which materially and adversely affects
the business, assets, liabilities, financial condition, operations or
prospects of MEDMarket; or
(m) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or
prospects of MEDMarket. For purposes of this subsection (m), a material
and adverse effect shall only be deemed to occur if its monetary impact
exceeds, or with the passage of time, will exceed $10,000.
2.10 Title to Properties and Assets; Liens, Etc. MEDMarket has good and
marketable title to its properties and assets (including, but not limited to the
web sites located at impg.medmarket.com; rainfo.medmarket.com;
alt.medmarket.com; and dr.medmarket.com), and good title to its leasehold
estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than (i) those resulting from taxes which have not yet become
due and payable, (ii) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of MEDMarket and (iii) those that have arisen from purchase money
security interests in an amount not to exceed $10,000. All facilities,
machinery, equipment, fixtures, vehicles and other properties owned, leased or
used by MEDMarket are in good operating condition and repair and are reasonably
fit and usable for the purposes for which they are being used.
<PAGE>
Except as set forth in Schedule 2.10 MEDMarket is in compliance with all
material terms of each lease to which it is a party or is otherwise bound.
2.11 Patents and Trademarks . MEDMarket owns or possesses sufficient
legal rights to all trademarks (including, but not limited to the marks
MEDMARKET and MEDMARKET.COM), service marks, trade names, copyrights, trade
secrets and licenses, and, to the knowledge of MEDMarket, to all patents,
information and other proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted, without any known
infringement of the rights of others. There are no outstanding options, licenses
or agreements of any kind relating to the foregoing, nor is MEDMarket bound by
or a party to any options, licenses or agreements of any kind with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes of any other
person or entity other than such licenses or agreements arising from the
purchase of "off the shelf" or standard products. MEDMarket has not received any
communications alleging that MEDMarket has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity. To MEDMarket's knowledge, none of MEDMarket's
employees is obligated under any contract (including licenses, covenants or
commitments or any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
their duties to MEDMarket's business by the employees of MEDMarket. The conduct
of MEDMarket's business as proposed, will not, to the knowledge of MEDMarket,
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any employee is now obligated. MEDMarket does not believe it is or will be
necessary to utilize any inventions, trade secrets or proprietary information of
any of its employees made prior to their employment by MEDMarket, except for
inventions, trade secrets or proprietary information that have been assigned to
MEDMarket.
2.12 Compliance with Other Instruments . MEDMarket is not in violation
or default of any term of its certificate of incorporation or bylaws, or of any
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which it is party or by which it is bound or of any judgment,
decree, order, writ or, to its knowledge, any statute, rule or regulation
applicable to MEDMarket which would materially and adversely affect the
business, assets, liabilities, financial condition, operations or prospects of
MEDMarket. The execution, delivery, and performance of and compliance with the
Transactional Agreements will not, with or without the passage of time or giving
of notice, result in any such material violation, or be in conflict with or
constitute a default under any such term, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of MEDMarket or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, authorization or approval applicable to
MEDMarket, its business or operations or any of its assets or properties.
2.13 Litigation . There is no action, suit, proceeding or investigation
pending, or to the knowledge of MEDMarket, currently threatened against
MEDMarket that questions the validity of this Agreement or Transactional
Agreements or the right of MEDMarket to enter into any of such agreements, or to
consummate the transactions contemplated hereby or thereby, or which might
result, either individually or in the aggregate, in any material adverse change
in the assets, condition, affairs or prospects of MEDMarket, financially or
otherwise, or any change in the current equity ownership of MEDMarket, nor is
MEDMarket aware that there is any basis for the foregoing. The foregoing
includes, without limitation, actions pending or threatened (or any basis
therefor known to MEDMarket) involving the prior employment of any of
MEDMarket's employees, their use in connection with MEDMarket's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers.
MEDMarket is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by
MEDMarket currently pending or which MEDMarket intends to initiate.
<PAGE>
2.14 Tax Returns and Payments .
(a) Each tax required to have been paid, or claimed by any
Governmental Body to be payable, by MEDMarket (whether pursuant to any
tax return or otherwise) has been duly paid in full and on a timely
basis. Any tax required to have been withheld or collected by
MEDMarket, including with respect to employees, has been duly withheld
and collected; and (to the extent required) each such tax has been paid
to the appropriate Governmental Body.
(b) All tax returns required to be filed by or on behalf of
MEDMarket with any Governmental Body have been timely filed, with the
exception of the Colorado Unemployment Tax due for the forth quarter of
1998 ("MEDMarket Returns"). All taxes required to be paid by MEDMarket
for the fiscal year 1998 have either been paid in full or shall not
result in any liability to MEDMarket. All MEDMarket Returns (i) have
been filed when due and (ii) have been accurately and completely
prepared in full compliance with all applicable legal requirements.
MEDMarket has delivered to Netivation accurate and complete copies of
the last three years MEDMarket Returns.
(c) Other than a Colorado State Unemployment Tax Insurance
Audit performed in January 28, 1998, there have been no examinations or
audits of any MEDMarket Return, and, to the knowledge of MEDMarket, no
such examination or audit has been proposed or scheduled by any
Governmental Body. MEDMarket has delivered to Netivation accurate and
complete copies of all audit reports and similar documents (to which
MEDMarket has access) relating to the MEDMarket Returns.
(d) No claim or Proceeding is pending or, to the knowledge of
MEDMarket, has been threatened against MEDMarket in respect of any tax.
There are no unsatisfied Liabilities for taxes (including Liabilities
for interest, additions to tax and penalties thereon and related
expenses) with respect to any notice of deficiency or similar document
received by MEDMarket. There are no liens for taxes upon any of the
assets of MEDMarket, except liens for current taxes not yet due and
payable. MEDMarket has not entered into or become bound by any
agreement or consent pursuant to Section 341(f) of the Code.
(e) To the knowledge of MEDMarket, there is no agreement,
plan, arrangement or other contract covering any employee or
independent contractor or former employee or independent contractor of
MEDMarket that, individually or collectively, could give rise, directly
or indirectly, to the payment of any amount that would not be
deductible pursuant to Section 280G or Section 162 of the Code.
MEDMarket is not, and has never been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or
similar contract.
2.15 Employees . Except as set forth in Schedule 2.15, MEDMarket is not
a party to or bound by any currently effective employment contract, deferred
compensation arrangement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee compensation plan or agreement. To the
knowledge of MEDMarket, no employee of MEDMarket, nor any consultant with whom
MEDMarket has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with,
MEDMarket because of the nature of the business to be conducted by MEDMarket;
and to the knowledge of MEDMarket the continued employment by MEDMarket of its
present employees, and the performance of MEDMarket's contracts with its
independent contractors, will not result in any such violation. MEDMarket has
not received any notice alleging that any such violation has occurred. No
employee of MEDMarket has been granted the right to continued employment by
MEDMarket or to any material compensation following termination of employment
with MEDMarket. To the knowledge of MEDMarket, no officer or key employee, or
any group of key employees, intends to terminate their employment with
MEDMarket, nor does MEDMarket have a present intention to terminate the
employment of any officer, key employee or group of key employees.
2.16 [INTENTIONALLY OMITTED]
2.17 Registration Rights . MEDMarket is presently not under any
obligation, and has not granted any rights, to register any of MEDMarket's
presently outstanding securities or any of its securities that may hereafter be
issued.
<PAGE>
2.18 Compliance with Legal Requirements; Consents .
(a) MEDMarket is, and has at all times since inception been,
in full compliance with each legal requirement that is or was
applicable to it or to the conduct of its business or the ownership or
use of any of its assets, except where the failure to comply with each
such legal requirement has not had and will not have a Material Adverse
Effect on MEDMarket.
(b) Neither the execution and delivery of any of the
Transactional Agreements, nor the consummation or performance of any of
the Transactions, will directly or indirectly (with or without notice
or lapse of time):
(i) contravene, conflict with or result in a
violation of (i) any of the provisions of the MEDMarket's
certificate of incorporation or bylaws or (ii) any resolution
adopted by MEDMarket's stockholders or MEDMarket's board of
directors;
(ii) contravene, conflict with or result in a
violation of, or give any Governmental Body or other Person
the right to exercise any remedy or obtain any relief under,
any legal requirement or any order to which MEDMarket, or any
of the assets owned or used by MEDMarket, is subject (the
parties intend to payoff the Region 9 loans at Closing);
(iii) contravene, conflict with or result in a
violation or Breach of, or result in a default under, any
provision of any contract to which MEDMarket is a party; or
(iv) give any Person the right to (A) declare a
default or exercise any remedy under any contract to which
MEDMarket is a party, (B) accelerate the maturity or
performance of any contract to which MEDMarket is a party or
(C) cancel, terminate or modify any contract to which
MEDMarket is a party.
Neither MEDMarket nor any of the Selling Stockholders was, is or will
be required to make any filing with or give any notice to, or to obtain any
consent from, any Person in connection with the execution and delivery of any of
the Transactional Agreements or the consummation or performance of any of the
Transactions.
2.19 Selling Stockholders . Each Selling Stockholder represents that
(i) he, she or it has the absolute and unrestricted right, power and authority
to enter into and to perform his, her or its obligations under each of the
Transactional Agreements to which such Selling Stockholder is or may become a
party, (b) this Agreement constitutes his, her or its legal, valid and binding
obligation, enforceable against such Selling Stockholder in accordance with its
terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies and (c) upon the
execution of each of the other Transactional Agreements at the Closing, each of
such other Transactional Agreements will constitute the legal, valid and binding
obligation of such Selling Stockholder, enforceable against such Selling
Stockholder in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
2.20 Full Disclosure . This Agreement does not (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact or (ii) omit to state any material fact necessary in order
to make the representations, warranties and information of or with respect to
MEDMarket and the Selling Stockholders contained and to be contained herein (in
light of the circumstances under which such representations, warranties and
information were or will be made or provided) not false or misleading. MEDMarket
has provided Netivation and Netivation's Representatives with full and complete
access to all of MEDMarket's records and other documents and data.
2.21 Year 2000 Compliance . MEDMarket has developed a detailed plan to
ensure that it, its affiliates, and all customers, suppliers and vendors that
are material to its business, become Year 2000 Compliant on or before October
15, 1999. The plan (a) effectively prioritizes mission-critical systems, (b) has
the involvement
<PAGE>
of executive management, (c) includes assessment of key customer, supplier, and
vendor Year 2000 compliance, (d) includes contingency planning to mitigate risk
from Year 2000 business interruptions affecting key vendors, suppliers, or
customers, and (e) has been allocated adequate resources within MEDMarket's
abilities.
2.22 [INTENTIONALLY OMITTED]
2.23 Securities Laws Matters . Each Selling Stockholder understands
that the Netivation Stock has not been registered under the Securities Act and
that the Netivation Stock being issued in the Transaction is being issued
pursuant to an exemption from registration contained in the Securities Act,
based in part upon the Selling Stockholders' representations contained in this
Agreement. Each Selling Stockholder hereby severally and not jointly represents
and warrants as follows:
(a) Knowledge and Experience. Each Selling Stockholder is
knowledgeable and has substantial experience in evaluating and
investing in transactions in companies similar to Netivation so that he
is capable of evaluating the merits and risks of his investment in
Netivation. Each Selling Stockholder has by reason of his business or
financial knowledge and experience, the capacity to protect his own
interests in connection with the Transaction. Further, each Selling
Stockholder is aware of no publication of any advertisement in
connection with the Transaction. Each Selling Stockholder can bear the
economic risk of the Transaction. Each Selling Stockholder has been
advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions.
(b) Netivation Information. Each Selling Stockholder has had
an opportunity to discuss Netivation's business, management and
financial affairs, both as currently conducted and as proposed to be
conducted following the Merger, with directors, officers and management
of Netivation and has had the opportunity to review Netivation's
operations and facilities. Each Selling Stockholder has also had the
opportunity to ask questions of, and receive answers from, Netivation
and its management regarding the terms and conditions of the
Transaction and the receipt of Netivation Stock.
(c) Acquisition for Own Account. Each Selling Stockholder is
acquiring the Netivation Stock for his own account for investment only,
and not with a view towards distribution.
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF NETIVATION
Netivation represents and warrants to MEDMarket and the Selling
Stockholders as follows:
3.1 Organization, Good Standing and Qualification .
(a) Netivation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Netivation has all requisite corporate power and authority to own and
operate its properties and assets, to execute and deliver this
Agreement and the Transactional Agreements, to issue and sell the
Netivation Stock, to carry out the provisions of this Agreement and the
Transactional Agreements and to carry on its business as presently
conducted and as presently proposed to be conducted. Netivation is duly
qualified and is authorized to do business and is in good standing as a
foreign corporation in all jurisdictions in which the nature of its
activities and of its properties (both owned and leased) make such
qualifications necessary, except for those jurisdictions in which
failure to do so would not have a Material Adverse Effect on Netivation
or its business. Netivation has made available to MEDMarket true,
correct and complete copies of the Netivation's certificate of
incorporation and bylaws, each as amended to date.
(b) Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Merger Sub has all requisite corporate power and authority to own and
operate its properties and assets, to execute and deliver the
Transactional Agreements, to carry out the provisions of the
Transactional Agreements and to carry on its business as presently
conducted and as presently proposed to be conducted.
<PAGE>
3.2 Subsidiaries . Except for Merger Sub, Netivation Acquisition
Company, InterLink Internet Services, Inc., and The Online Medical Bookstore,
Inc., all of which are wholly-owned subsidiaries of Netivation, Netivation owns
no equity securities of any other corporation, limited partnership or similar
entity. Netivation is not a participant in any joint venture, partnership or
similar arrangement.
3.3 Capitalization; Voting Rights .
(a) The authorized capital stock of Netivation, as of
September 14, 1999, consists of (a) 30,000,000 shares of Common Stock,
of which 8,660,055 shares are issued and outstanding, and (b) 2,000,000
shares of Preferred Stock, of which 0 shares are issued and
outstanding. All issued and outstanding shares of Netivation's Common
Stock and Preferred Stock (i) have been duly authorized and validly
issued, (ii) are fully paid and nonassessable and (iii) were issued in
compliance with all applicable state and federal laws concerning the
issuance of securities. The Netivation Stock has been duly authorized
and, when issued in compliance with the provisions of this Agreement
and its certificate of incorporation, will be validly issued, fully
paid and nonassessable, with no personal liability attaching to the
ownership thereof, other than liabilities imposed upon stockholders
generally by the provisions of Delaware Law, and will not be subject to
any other restrictions, except as set forth in or provided by this
Agreement and as may be imposed by applicable law.
(b) The authorized capital stock of Merger Sub consists of one
thousand (1000) shares of Common Stock, all of which have been issued
to Netivation. All of the issued and outstanding shares of Common Stock
of Merger Sub (i) have been duly authorized and validly issued, (ii)
are fully paid and nonassessable and (iii) were issued in compliance
with all applicable state and federal laws concerning the issuance of
securities.
3.4 Authorization; Binding Obligations . Each of Netivation and Merger
Sub has the absolute and unrestricted right, power and authority to enter into
and to perform its obligations under the Transactional Agreements to which
Netivation and Merger Sub, as the case may be, is or may become a party. This
Agreement constitutes the legal, valid and binding obligation of each of
Netivation and Merger Sub, enforceable against them in accordance with its
terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies. Upon the execution
of each of the other Transactional Agreements at the Closing, each of such other
Transactional Agreements will constitute the legal, valid and binding obligation
of Netivation, enforceable against Netivation in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
3.5 Full Disclosure . Netivation has delivered to MEDMarket an accurate
and complete copy of its Registration Statement on Form SB-2 No. 333-74569 filed
with the Securities and Exchange Commission (the "SEC") on June 22, 1999 (the
"Registration Statement"), which is the most recent document filed with the SEC
as of the date hereof. The Registration Statement (i) complies in all material
respects with the applicable requirements of the Securities Act and (ii) does
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
SECTION 4 - CERTAIN COVENANTS OF MEDMarket AND THE SELLING STOCKHOLDERS
4.1 Access and Investigation . MEDMarket and the Selling Stockholders
shall ensure that, at all times during the Pre-Closing Period:
(a) MEDMarket and its Representatives provide Netivation and
its Representatives with access, during normal business hours upon
reasonable notice, to MEDMarket's Representatives, personnel and assets
and to all existing books, records, tax returns, work papers and other
documents and information relating to MEDMarket;
(b) MEDMarket and its Representatives provide Netivation and
its Representatives with such copies of existing books, records, tax
returns, work papers and other documents and information relating to
MEDMarket as Netivation may request in good faith; and
<PAGE>
(c) MEDMarket and its Representatives compile and provide
Netivation and its Representatives with such additional financial,
operating and other data and information regarding MEDMarket as
Netivation may request in good faith. Without limiting the generality
of the foregoing, during the Pre-Closing Period, MEDMarket shall
promptly provide Netivation with copies of:
(i) all material operating and financial reports
prepared by MEDMarket for its senior management, including
copies of the unaudited monthly balance sheets of MEDMarket
and the related unaudited monthly statements of operations,
statements of stockholders' equity and statements of cash
flows;
(ii) any written materials or communications sent by
or on behalf of MEDMarket to its stockholders generally;
(iii) any material notice, document or other
communication sent by or on behalf of MEDMarket to any party
to any MEDMarket contract or sent to MEDMarket by any party to
any MEDMarket contract (other than any communication that
relates solely to commercial transactions between MEDMarket
and the other party to any such MEDMarket contract and that is
of the type sent in the Ordinary Course of Business);
(iv) any written notice, report or other document
filed with or sent to any Governmental Body in connection with
the Merger or any of the other Transactions; and
(v) any material written notice, report or other
document received by MEDMarket from any Governmental Body.
4.2 Operation of Business . MEDMarket and the Selling Stockholders
shall ensure that, during the Pre-Closing Period:
(a) MEDMarket conducts its operations exclusively in the
Ordinary Course of Business and in the same manner as such operations
have been conducted prior to the date of this Agreement;
(b) MEDMarket uses its commercially reasonable efforts to
preserve intact its current business organization, keep available the
services of its current officers and employees and maintain its
relations and good will with suppliers, customers, landlords,
creditors, licensors, licensees, employees and other Persons having
business relationships with MEDMarket;
(c) MEDMarket keeps in full force all existing insurance
policies;
(d) MEDMarket's officers confer regularly, upon request, with
Netivation concerning operational matters and otherwise report
regularly, upon request, to Netivation concerning the status of
MEDMarket's business, condition, assets, liabilities, operations,
financial performance and prospects;
(e) MEDMarket immediately notifies Netivation of any inquiry,
proposal or offer from any Person relating to any Acquisition
Transaction;
(f) MEDMarket not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of
capital stock, and does not repurchase, redeem or otherwise reacquire
any shares of capital stock or other securities;
(g) MEDMarket does not sell or otherwise issue any shares of
capital stock or any other securities;
(h) MEDMarket does not amend its certificate of incorporation
or bylaws, and does not effect or become a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split,
reverse stock split or similar transaction;
<PAGE>
(i) MEDMarket does not form any subsidiary or acquire any
equity interest or other interest in any other entity;
(j) MEDMarket does not make any capital expenditure, except
for capital expenditures that are made in the Ordinary Course of
Business and that do not exceed $10,000;
(k) MEDMarket does not (i) lend money to any Person or (ii)
incur, assume or otherwise become subject to any Liability, except for
current liabilities incurred in the Ordinary Course of Business;
(l) MEDMarket does not establish or adopt any employee benefit
plan, and does not pay or agree to pay any bonus or make any
profit-sharing or similar payment to, or increase the amount of the
wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees
(except for regularly scheduled salary increases in the Ordinary Course
of Business);
(m) MEDMarket does not change any of its methods of accounting
or accounting practices in any respect;
(n) MEDMarket does not commence any Proceeding, except in the
Ordinary Course of Business;
(o) MEDMarket does not enter into any transaction or take any
other action of the type referred to in Section 2.9;
(p) MEDMarket does not enter into any transaction or take any
other action outside the Ordinary Course of Business;
(q) MEDMarket does not enter into any transaction or take any
other action that is reasonably likely to cause or constitute a Breach
of any representation or warranty made by MEDMarket or the Selling
Stockholders; and
(r) MEDMarket does not agree, commit or offer (in writing or
otherwise), and does not attempt, to take any of the actions described
in clauses "(f)" through "(q)" of this Section 4.2.
4.3 Notification; Updates to Schedule of Exceptions .
(a) During the Pre-Closing Period, MEDMarket and/or the
Selling Stockholders shall promptly notify Netivation in writing of:
(i) the discovery by MEDMarket or any of the Selling
Stockholders of any event, condition, fact or circumstance
that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a Breach of any
representation or warranty made by MEDMarket or the Selling
Stockholders in this Agreement;
(ii) any event, condition, fact or circumstance that
occurs, arises or exists after the date of this Agreement and
that would cause or constitute a Breach of any representation
or warranty made by MEDMarket or the Selling Stockholders in
this Agreement if (A) such representation or warranty had been
made as of the time of the occurrence, existence or discovery
of such event, condition, fact or circumstance or (B) such
event, condition, fact or circumstance had occurred, arisen or
existed on or prior to the date of this Agreement;
(iii) any Breach of any covenant or obligation of
MEDMarket or the Selling Stockholders; and
(iv) any event, condition, fact or circumstance that
may make the timely satisfaction of any of the conditions set
forth in Section 6 or Section 7 impossible or unlikely.
<PAGE>
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 4.3(a) requires any change
in the Schedule of Exceptions, or if any such event, condition, fact or
circumstance would require such a change assuming the Schedule of
Exceptions were dated as of the date of the occurrence, existence or
discovery of such event, condition, fact or circumstance, then
MEDMarket shall promptly deliver to Netivation an update to the
Schedule of Exceptions specifying such change. No such update shall be
deemed to supplement or amend the Schedule of Exceptions for the
purpose of (i) determining the accuracy of any of the representations
and warranties made by MEDMarket in this Agreement for purposes of
Section 6.1, but shall be deemed to supplement or amend the Schedule of
Exceptions for purposes of Section 9 or (ii) determining whether any of
the other conditions set forth in Section 6 have been satisfied.
4.4 No Negotiation . MEDMarket shall ensure that, during the
Pre-Closing Period, neither MEDMarket nor any of MEDMarket's Representatives
directly or indirectly:
(a) solicits or encourages the initiation of any inquiry,
proposal or offer from any Person (other than Netivation) relating to
any Acquisition Transaction;
(b) participates in any discussions or negotiations with, or
provides any non-public information to, any Person (other than
Netivation) relating to any Acquisition Transaction; or
(c) considers the merits of any unsolicited inquiry, proposal
or offer from any Person (other than Netivation) relating to any
Acquisition Transaction.
SECTION 5 - ADDITIONAL COVENANTS OF THE PARTIES
5.1 Filings and Consents . As promptly as practicable after the
execution of this Agreement, each party to this Agreement (i) shall make all
filings (if any) and give all notices (if any) required to be made and given by
such party in connection with the Transactions and (ii) shall use all
commercially reasonable efforts to obtain all consents (if any) required to be
obtained (pursuant to any applicable legal requirement or contract, or
otherwise) by such party in connection with the Transactions. Each of the
parties shall (upon request) promptly deliver to the other a copy of each such
filing made, each such notice given and each such consent obtained by MEDMarket
or Netivation, as the case may be, during the Pre-Closing Period.
5.2 Disclosure Document . As soon as practicable following the date
hereof, Netivation and MEDMarket shall prepare and provide to the stockholders
of MEDMarket a disclosure document regarding the issuance of Netivation Stock
(the "Disclosure Document"). Each party shall provide to the other such
information as may reasonably be requested in connection with the preparation of
the Disclosure Document. Each party shall promptly supplement, update and
correct any information provided by it for use in the Disclosure Document if and
to the extent that it is or shall have become incomplete, false or misleading.
In any such event, Netivation and MEDMarket shall take all steps necessary to
cause the Disclosure Document as so supplemented, updated or corrected to be
disseminated to the stockholders of MEDMarket as and to the extent required by
applicable United States federal securities laws.
5.3 MEDMarket Stockholders' Meeting . MEDMarket shall, in accordance
with its certificate of incorporation and bylaws and the applicable requirements
of Colorado Law, call and hold a special meeting of its stockholders, or solicit
written consents from its stockholders, as promptly as practicable for the
purpose of permitting them to consider and to vote upon and approve the Merger
and this Agreement. MEDMarket shall use its best efforts (i) to solicit from
each of such stockholders a proxy or consent in favor of the approval of the
Merger and this Agreement and (ii) to cause each of such stockholders to execute
and deliver to Netivation a Subscription Agreement in a form acceptable to
Netivation certifying, among other items, as to whether each of such
stockholders is an "accredited investor" as such term is defined in Rule 501
under the Securities Act.
5.4 Public Announcements . During the Pre-Closing Period, (i) neither
MEDMarket nor Netivation shall (and neither MEDMarket nor Netivation shall
permit any of its respective Representatives to) issue any press release or make
any public statement regarding this Agreement or the Transactions, without the
other party's prior written consent, and (ii) each party will use reasonable
efforts to consult with the other party prior to issuing any press release or
making any public statement regarding the Merger; provided that Netivation shall
be
<PAGE>
free to make any disclosure regarding the Merger that it deems necessary in
connection with filings with the SEC made in connection with the Registration
Statement.
5.5 Best Efforts . During the Pre-Closing Period, (i) MEDMarket shall
use commercially reasonable efforts to cause the conditions set forth in Section
6 to be satisfied on a timely basis and (ii) Netivation and Merger Sub shall use
their commercially reasonable efforts to cause the conditions set forth in
Section 7 to be satisfied on a timely basis and Netivation will take all actions
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement.
5.6 Tax Matters . At or prior to the Closing, (a) MEDMarket shall
execute and deliver to Moffatt, Thomas, Barrett, Rock & Fields, Chtd. and to
Netivation a tax representation letter, in a form reasonably acceptable to such
parties, and (b) Netivation shall execute and deliver to Moffatt, Thomas,
Barrett, Rock & Fields, Chtd. and to MEDMarket a tax representation letter, in a
form reasonably acceptable to such parties. MEDMarket and the Selling
Stockholders will use all of their respective reasonable efforts to cause the
transactions contemplated hereby to qualify as a reorganization under the
provisions of Section 368(a) of the Code and will not take any action after the
Acquisition is effected that could reasonably be expected to cause the
Acquisition to lose its tax-free status. All parties hereto agree to file this
Agreement with their respective federal income tax returns for the year in which
the Acquisition closes and to comply with the reporting requirements of United
States Treasury Regulations Section 1.368-2(g), if applicable.
5.7 Capital Infusion . MEDMarket acknowledges that Netivation has
provide it with Twenty Thousand Dollars ($20,000) for working capital purposes.
SECTION 6 - CONDITIONS PRECEDENT TO OBLIGATIONS OF NETIVATION AND MERGER SUB
The obligations of Netivation and Merger Sub to effect the Transactions
are subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Netivation, in whole or in
part, in accordance with Section 10.11):
6.1 Accuracy of Representations . Each of the representations and
warranties made by MEDMarket and the Selling Stockholders in this Agreement
shall have been accurate in all material respects as of the date of this
Agreement and shall be accurate in all material respects as of the Scheduled
Closing Time as if made at the Scheduled Closing Time.
6.2 Performance of Covenants . Each covenant and obligation that
MEDMarket or any of the Selling Stockholders is required to comply with or to
perform pursuant to this Agreement at or prior to the Closing shall have been
duly complied with and performed in all material respects.
6.3 Stockholder Approval . The principal terms of the Merger shall have
been duly approved by the stockholders of MEDMarket in accordance with the
provisions of Colorado Law and applicable agreements.
6.4 Consents . All consents required to be obtained by MEDMarket in
connection with the Transactions (including the consents identified in Schedule
2.18) shall have been obtained and shall be in full force and effect.
6.5 No Material Adverse Change . Except for adverse changes that result
from general economic conditions, there shall have been no material adverse
change in MEDMarket's business, condition, assets, liabilities, operations,
financial performance or prospects since the date of this Agreement.
6.6 Agreements and Documents . Netivation shall have received the
following agreements and documents, each of which shall be in full force and
effect:
(a) the Escrow Agreement, substantially in the form of Exhibit
G;
<PAGE>
(b) an Employment and Noncompetition Agreement, substantially
in the form of Exhibit F, executed by each of Thomas A. Slater and Paul
J. Barloon;
(c) a Tax Representation Letter executed by MEDMarket;
(d) written resignations of all officers and directors of
MEDMarket, effective as of the Closing Date;
(e) a certificate executed by each of the Selling Stockholders
containing the representation and warranty of each such Selling
Stockholder that (i) each of the representations and warranties made by
MEDMarket and the Selling Stockholders in this Agreement is accurate in
all material respects as of the Closing Date as if made on the Closing
Date and (ii) the conditions set forth in this Section 6 have been duly
satisfied (the "Selling Stockholders' Closing Certificate");
(f) a legal opinion from counsel for MEDMarket and the Selling
Stockholders, substantially in the form of Exhibit E.
(g) such other documents as Netivation may reasonably request
in good faith for the purpose of (i) evidencing the accuracy of any
representation or warranty made by MEDMarket or the Selling
Stockholders, (ii) evidencing the compliance by MEDMarket or the
Selling Stockholders with, or the performance by MEDMarket or the
Selling Stockholders of, any covenant or obligation set forth in this
Agreement, (iii) evidencing the compliance with any applicable federal
or state securities law, (iv) evidencing the satisfaction of any
condition set forth in this Section 6 or (v) otherwise facilitating the
consummation or performance of any of the Transactions.
6.7 [INTENTIONALLY OMITTED]
6.8 Lock-Up Agreements . Each of the Selling Stockholders shall have
delivered to Netivation a lock-up agreement, in a form acceptable to
Netivation's underwriters , providing for a maximum of a one (1) year lock-up
period from the Effective Time.
6.9 No Restraints . No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any legal requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.10 No Proceedings . No Person shall have commenced or threatened to
commence any Proceeding challenging or seeking the recovery of a material amount
of damages in connection with the Merger or seeking to prohibit or limit the
exercise by Netivation of any material right pertaining to its ownership of
stock of the Surviving Corporation.
6.11 Securities Law Compliance . All applicable requirements of the
Securities Act and any applicable state securities laws shall have been
satisfied.
6.12 Dissenters Rights . No stockholder of MEDMarket shall have
exercised dissenters rights with respect to approval of the Transactions.
6.13 Unaccredited Investors . The Subscription Agreements delivered
pursuant to Sections 5.3 and 6.6 shall indicate that no more than 35 of the
stockholders of MEDMarket are "unaccredited investors," as defined by Rule 501
under the Securities Act.
6.14 Proceedings and Documents . All corporate and other proceedings in
connection with the Transactions and all documents and instruments incident to
such Transactions shall be reasonably satisfactory in substance and form to
Netivation.
<PAGE>
6.15 Corporate Approvals . This Agreement and the consummation
of the Transactions shall have been approved by all necessary corporate action
on the part of MEDMarket, Netivation, Merger Sub and the Selling Stockholders.
SECTION 7 - CONDITIONS PRECEDENT TO OBLIGATIONS OF MEDMarket AND THE
SELLING STOCKHOLDERS
The obligations of MEDMarket and the Selling Stockholders to effect the
Transactions are subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which, notwithstanding the provisions
of Sections 10.11 and 10.12, may be waived solely by MEDMarket, in whole or in
part, in accordance with Section 10.11):
7.1 Accuracy of Representations . Each of the representations and
warranties made by Netivation in this Agreement shall have been accurate in all
material respects as of the date of this Agreement and shall be accurate in all
material respects as of the Scheduled Closing Time as if made at the Scheduled
Closing Time.
7.2 Performance of Covenants . Each covenant and obligation that
Netivation and Merger Sub are required to comply with or to perform pursuant to
this Agreement at or prior to the Closing shall have been duly complied with and
performed in all material respects.
7.3 Consents . All consents required to be obtained by Netivation in
connection with the Transactions shall have been obtained and shall be in full
force and effect.
7.4 Agreements and Documents . MEDMarket shall have received the
following agreements and documents, each of which shall be in full force and
effect:
(a) the Escrow Agreement, substantially in the form of Exhibit
G;
(b) an Employment and Noncompetition Agreement, substantially
in the form of Exhibit F, executed by each of Thomas A. Slater and Paul
J. Barloon;
(c) a Tax Representation Letter executed by Netivation;
(d) a certificate executed by Netivation containing the
representation and warranty of Netivation that (i) each of the
representations and warranties made by Netivation in this Agreement is
accurate in all material respects as of the Closing Date as if made on
the Closing Date and (ii) the conditions set forth in this Section 7
have been duly satisfied; and
(e) such other documents as MEDMarket may reasonably request
in good faith for the purpose of (i) evidencing the accuracy of any
representation or warranty made by Netivation, (ii) evidencing the
compliance by Netivation with, or the performance by Netivation of, any
covenant or obligation set forth in this Agreement, (iii) evidencing
the compliance with any applicable federal or state securities law,
(iv) evidencing the satisfaction of any condition set forth in this
Section 7 or (v) otherwise facilitating the consummation or performance
of any of the Transactions.
7.5 No Restraints . No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any legal requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
7.6 No Proceedings . No Person shall have commenced or threatened to
commence any Proceeding challenging or seeking the recovery of a material amount
of damages in connection with the Merger or seeking to prohibit or limit the
exercise by Netivation of any material right pertaining to its ownership of
stock of the Surviving Corporation.
<PAGE>
7.7 Corporate Approvals . This Agreement and the consummation of the
Transactions shall have been approved by all necessary corporate action on the
part of the MEDMarket, Netivation, Merger Sub and the Selling Stockholders.
SECTION 8 - TERMINATION
8.1 Termination Events . This Agreement may be terminated prior to the
Closing:
(a) by Netivation if (i) there is a material Breach of any
covenant or obligation of MEDMarket or any of the Selling Stockholders
or (ii) Netivation reasonably determines that the timely satisfaction
of any condition set forth in Section 6 has become impossible (other
than as a result of any failure on the part of Netivation or Merger Sub
to comply with or perform any covenant or obligation of Netivation or
Merger Sub set forth in this Agreement);
(b) by the Agent (as defined in Section 10.1) if (i) there is
a material Breach of any covenant or obligation of Netivation or (ii)
the Agent reasonably determines that the timely satisfaction of any
condition set forth in Section 7 has become impossible (other than as a
result of any failure on the part of MEDMarket or any of the Selling
Stockholders to comply with or perform any covenant or obligation of
MEDMarket or the Selling Stockholders set forth in this Agreement);
(c) by Netivation at or after the Scheduled Closing Time if
any condition set forth in Section 6 has not been satisfied by the
Scheduled Closing Time;
(d) by the Agent at or after the Scheduled Closing Time if any
condition set forth in Section 7 has not been satisfied by the
Scheduled Closing Time;
(e) by Netivation if the Closing has not taken place on or
before September 30, 1999 (other than as a result of any failure on the
part of Netivation or Merger Sub to comply with or perform any covenant
or obligation of Netivation or Merger Sub set forth in this Agreement);
(f) by the Agent if the Closing has not taken place on or
before September 30, 1999 (other than as a result of the failure on the
part of MEDMarket or any of the Selling Stockholders to comply with or
perform any covenant or obligation of MEDMarket or the Selling
Stockholders set forth in this Agreement); or
(g) by the mutual consent of Netivation, MEDMarket and the
Agent.
8.2 Termination Procedures . If Netivation wishes to terminate this
Agreement pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e),
Netivation shall deliver to the Agent a written notice stating that Netivation
is terminating this Agreement and setting forth a brief description of the basis
on which Netivation is terminating this Agreement. If the Agent wishes to
terminate this Agreement pursuant to Section 8.1(b), Section 8.1(d) or Section
8.1(f), the Agent shall deliver to Netivation a written notice terminating this
Agreement and setting forth a brief description of the basis on which this
Agreement is terminated.
8.3 Effect of Termination . If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
automatically terminate; provided, however, that: (a) neither MEDMarket nor the
Selling Stockholders nor Netivation shall be relieved of any obligation or
liability arising from any prior Breach by such party of any provision of this
Agreement; (b) the parties shall, in all events, remain bound by and continue to
be subject to the provisions set forth in Section 9; and (c) MEDMarket and
Netivation shall, in all events, remain bound by and continue to be subject to
Section 5.4.
<PAGE>
SECTION 9 - INDEMNIFICATION, ETC.
9.1 Survival of Representations, Warranties and Covenants .
(a) The representations, warranties and covenants of each
party pursuant to this Agreement shall survive the Closing and shall
expire on the first anniversary of the Closing Date; provided, however,
(i) that fraud claims and claims under Section 2.14 shall survive for
the statute of limitations applicable to claims based on such matters
and (ii) that if, at any time prior to the first anniversary of the
Closing Date, any Netivation Indemnitee seeking indemnification under
this Section 9 (acting in good faith) delivers to the Agent a written
notice alleging the existence of a Breach of any of the representations
and warranties made by MEDMarket or any of the Selling Stockholders or
a Breach of any covenant contained herein (and setting forth in
reasonable detail the basis for such Netivation Indemnitee's belief
that such a Breach may exist) and asserting a claim for recovery under
Section 9.2 based on such alleged Breach, then the claim asserted in
such notice shall survive the first anniversary of the Closing Date
until such time as such claim is fully and finally resolved.
(b) The representations, warranties, covenants and obligations
of MEDMarket and the Selling Stockholders, and the rights and remedies
that may be exercised by the Netivation Indemnitees, shall not be
limited or otherwise affected by or as a result of any information
furnished to, or any investigation made by or knowledge of, any of the
Netivation Indemnitees or their Representatives.
(c) For purposes of this Agreement, each statement or other
item of information set forth in the Schedule of Exceptions or in any
update to the Schedule of Exceptions shall be deemed to be a
representation and warranty made in this Agreement.
9.2 Indemnification by the Selling Stockholders .
(a) Subject to the provisions of this Section 9, the Selling
Stockholders, jointly and severally, shall indemnify and hold harmless
each of the Netivation Indemnitees from and against the amount of any
Damages incurred by any of the Netivation Indemnitees directly or
indirectly as a result of (i) any Breach of a representation or
warranty of MEDMarket or any of the Selling Stockholders contained in
Section 2 hereof or in any instrument delivered pursuant to this
Agreement (each as modified by the Schedule of Exceptions delivered by
MEDMarket and the Selling Stockholders on the date of this Agreement
and not as modified by any revisions to such Schedule of Exceptions
after such date), (ii) any Breach of any covenant or obligation
contained herein , (iii) any final determination of MEDMarket's net tax
liability for the fiscal year immediately prior to the Closing or (iv)
any Breach of any representation or warranty made in the Selling
Stockholders' Closing Certificate.
(b) The Selling Stockholders acknowledge and agree that, if
there is any Breach of any representation or warranty or other
provision relating to MEDMarket or MEDMarket's business, condition,
assets, Liabilities, operations, financial performance or net income
(or any aspect or portion thereof), then Netivation itself shall be
deemed, by virtue of its ownership of the capital stock of MEDMarket,
to have incurred Damages as result of such Breach or Liability.
9.3 Contribution . Each Selling Stockholder waives and acknowledges and
agrees that such Selling Stockholder shall not have and shall not exercise or
assert (or attempt to exercise or assert), any right of contribution, right of
indemnity or other similar right or remedy against the Surviving Corporation in
connection with any indemnification obligation or any other Liability to which
such Selling Stockholder may become subject under the Transactional Agreements
or otherwise in connection with any of the Transactions.
9.4 Ceiling; Limitation on Additional Damages . Claims for Damages made
by the Netivation Indemnitees pursuant to the provisions of Sections 9.2(a) or
9.6 shall be limited to an amount equal to the closing price (as reported by the
NASDAQ consolidated reporting system) of the Netivation Stock on the Closing
Date, multiplied by 100,000. The provisions of this Section 9.4 shall not apply
to claims for willful misconduct, fraud, bad faith or recklessness on the part
of MEDMarket or any Selling Stockholder; provided that each Selling Stockholder
shall be liable only up to the pro rata portion of such amount pertaining to
that Selling Stockholder.
<PAGE>
9.5 Interest . Any party that is required to indemnify any Netivation
Indemnitee pursuant to this Section 9 with respect to any Damages shall also be
required to pay such Netivation Indemnitee interest on the amount of such
Damages (for the period commencing as of the date on which such Netivation
Indemnitee first incurred or otherwise became subject to such Damages and ending
on the date on which the applicable indemnification payment is made by such
party) at a floating rate equal to three (3) percentage points above the rate of
interest publicly announced by Bank of America, N.T. & S.A. from time to time as
its prime, base or reference rate. (For purposes of this Section 9.5, a
Netivation Indemnitee that suffers Damages by virtue of being required to pay
any judgment or to make any settlement payment to any third party with respect
to any third party claim against such Netivation Indemnitee shall be deemed to
have first become subject to such Damages at the time such Netivation Indemnitee
pays such judgment or makes such settlement payment.)
9.6 Defense of Third Party Claims . In the event of the assertion or
commencement by any Person of any claim or Proceeding (whether against
MEDMarket, against any other Netivation Indemnitee or any other Person) with
respect to which any of the Selling Stockholders may become obligated to
indemnify, hold harmless, compensate or reimburse any Netivation Indemnitee
pursuant to this Section 9, Netivation shall have the right, at its election, to
proceed with the defense of such claim or Proceeding on its own. If Netivation
so proceeds with the defense of any such claim or Proceeding:
(a) all expenses relating to the defense of such claim or
Proceeding (whether or not incurred by Netivation) shall be borne and
paid exclusively by the Selling Stockholders;
(b) the Selling Stockholders shall make available to
Netivation any documents and materials in the possession or control of
any of the Selling Stockholders that may be necessary to the defense of
such claim or Proceeding; and
(c) Netivation shall keep the Agent informed of all material
developments and events relating to such claim or Proceeding.
9.7 Setoff . In addition to any rights of setoff or other rights that
any of the Netivation Indemnitees may have at common law or otherwise,
Netivation shall have the right to set off any amount that may be owed to any
Netivation Indemnitee under this Section 9 against any amount otherwise payable
by any Indemnitee to the Agent or any of the Selling Stockholders.
9.8 Indemnity Reserve . In order to secure Netivation's and each
Netivation Indemnitee's rights of indemnity, the Selling Stockholders shall
place 25,000 shares of Netivation Stock in escrow in accordance with the terms
of the Escrow Agreement, substantially in the form attached hereto as Exhibit G.
9.9 Exercise of Remedies by Netivation Indemnitees Other Than
Netivation . No Netivation Indemnitee (other than Netivation or any successor
thereto or assignee thereof) shall be permitted to assert any indemnification
claim or exercise any other remedy under this Agreement unless Netivation (or
any successor thereto or assignee thereof) shall have consented to the assertion
of such indemnification claim or the exercise of such other remedy.
SECTION 10 - MISCELLANEOUS PROVISIONS
10.1 Selling Stockholders' Agent .
(a) The Selling Stockholders hereby irrevocably nominate,
constitute and appoint Andrew D. Craig as the agent and true and lawful
attorney-in-fact of the Selling Stockholders (the "Agent"), with full
power of substitution, to act in the name, place and stead of the
Selling Stockholders for purposes of executing any documents and taking
any actions that the Agent may, in his sole discretion, determine to be
necessary, desirable or appropriate in connection with any of the
Transactional Agreements or any of the Transactions on behalf of the
Selling Stockholders. Andrew D. Craig hereby accepts his appointment as
Agent.
(b) The Selling Stockholders hereby grant to the Agent full
authority to execute, deliver, acknowledge, certify and file on behalf
of the Selling Stockholders (in the name of any or all of the Selling
<PAGE>
Stockholders or otherwise) any and all documents that the Agent may, in
his sole discretion, determine to be necessary, desirable or
appropriate, in such forms and containing such provisions as the Agent
may, in his sole discretion, determine to be appropriate (including the
Selling Stockholders' Closing Certificate and any amendment to or
waiver of rights under any of the Transactional Agreements).
Notwithstanding anything to the contrary contained in the Transactional
Agreements:
(i) Netivation shall be entitled to deal exclusively
with the Agent, acting on behalf of the Selling Stockholders,
on all matters relating to the Transactional Agreements and
the respective Transactions (including all matters relating to
any notice to, or any consent to be given or action to be
taken by, any Selling Stockholder, including any matters set
forth in Section 9); and
(ii) each Netivation Indemnitee shall be entitled to
rely conclusively (without further evidence of any kind
whatsoever) on any document executed or purported to be
executed on behalf of any Selling Stockholder by the Agent,
and on any other action taken or purported to be taken on
behalf of any Selling Stockholder by the Agent, as fully
binding upon such Selling Stockholder.
(c) The Selling Stockholders recognize and intend that the
power of attorney granted herein (i) is coupled with an interest and is
irrevocable, (ii) may be delegated by the Agent and (iii) shall survive
the death or incapacity of each of the Selling Stockholders.
(d) The Agent shall be entitled to treat as genuine, and as
the document it purports to be, any letter, facsimile, telex or other
document that is believed by him to be genuine and to have been
telexed, telegraphed, faxed or cabled by any Selling Stockholder or to
have been signed and presented by an Selling Stockholder.
(e) If the Agent shall die, become disabled or otherwise be
unable to fulfill his responsibilities hereunder, then the Selling
Stockholders shall, within ten (10) days after such death or
disability, appoint a successor agent and, immediately thereafter,
shall notify Netivation of the identity of such successor. Any such
successor shall succeed the Agent as Agent hereunder. If for any reason
there is no Agent at any time, all references herein to the Agent shall
be deemed to refer to the Selling Stockholders.
(f) All expenses incurred by the Agent in connection with the
performance of his duties as Agent shall be borne and paid by the
Selling Stockholders.
10.2 Further Assurances . Each party hereto shall execute and cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the Transactions.
10.3 Fees and Expenses . Subject to Section 9, each party to this
Agreement shall bear and pay all fees, costs and expenses (including legal fees
and accounting fees) that have been incurred or that are incurred in the future
by such party in connection with the Transactions, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Netivation and its Representatives with
respect to MEDMarket's business (and the furnishing of information to Netivation
and its Representatives in connection with such investigation and review), (ii)
the negotiation, preparation and review of this Agreement (including the
Schedule of Exceptions) and all agreements, certificates, opinions and other
instruments and documents delivered or to be delivered in connection with the
Transactions, (iii) the preparation and submission of any filing or notice
required to be made or given in connection with any of the Transactions and the
obtaining of any consent required to be obtained in connection with any of such
Transactions and (iv) the consummation of the Merger.
10.4 Attorneys' Fees . If any action or Proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
<PAGE>
10.5 Notices . Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or overnight delivery service or by facsimile) to
the address or facsimile telephone number set forth beneath the name of such
party below (or to such other address or facsimile telephone number as such
party shall have specified in a written notice given to the other parties
hereto):
if to Netivation: Netivation.com, Inc.
806 Clearwater Loop, Suite M
Post Falls, ID 83854
Attention: Anthony J. Paquin, President and
Chief Executive Officer
Facsimile: (208) 777-8904
with a copy to: Moffatt Thomas Barrett Rock & Fields, Chtd.
101 S. Capitol Blvd., 10th Floor
Boise, ID 83702
Attention: Mark A. Ellison
Facsimile: (208) 385-5384
if to the Agent Andrew D. Craig, Esq.
or any of the 1570 East 2nd Ave.
Selling Stockholders: Durango, CO 81301
Facsimile:(970) 385-4012
with a copy to: Thomas A. Slater
439 S. Main St.
Bourbonnais, IL 60914
Facsimile: (815) 936-9419
Any of the above addresses may be changed at any time by notice given
as provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, telecopied or by overnight courier, and three (3) business
days after the date of mailing, if mailed by certified mail, return receipt
requested.
10.6 Headings . The boldface headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.7 Counterparts . This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
10.8 Governing Law . This Agreement shall be construed in accordance
with, and governed in all respects by, the internal laws of the State of Idaho
(without giving effect to principles of conflicts of laws).
10.9 Successors and Assigns . This Agreement shall be binding upon:
MEDMarket and its successors and assigns (if any); the Selling Stockholders and
their respective personal representatives, executors, administrators, estates,
heirs, successors and assigns (if any); Netivation and its successors and
assigns (if any); and Merger Sub and its successors and assigns (if any). This
Agreement shall inure to the benefit of: MEDMarket; the Selling Stockholders;
Netivation; Merger Sub; the Netivation Indemnitees; and the respective
successors and assigns (if any) of the foregoing. Each party may freely assign
any or all of its rights (but not its obligations) under this Agreement
(including its indemnification rights under Section 9), in whole or in part, to
any other Person without obtaining the consent or approval of any other party
hereto or of any other Person.
10.10 Remedies Cumulative; Specific Performance . The rights and
remedies of the parties hereto shall be cumulative (and not alternative). The
parties to this Agreement agree that, in the event of any
<PAGE>
Breach or threatened Breach by any party to this Agreement of any covenant,
obligation or other provision set forth in this Agreement for the benefit of any
other party to this Agreement, such other party shall be entitled (in addition
to any other remedy that may be available to it) to (i) a decree or order of
specific performance or mandamus to enforce the observance and performance of
such covenant, obligation or other provision, and (ii) an injunction restraining
such Breach or threatened Breach.
10.11 Waiver .
(a) No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on
the part of any Person in exercising any power, right, privilege or
remedy under this Agreement, shall operate as a waiver of such power,
right, privilege or remedy; and no single or partial exercise of any
such power, right, privilege or remedy shall preclude any other or
further exercise thereof or of any other power, right, privilege or
remedy.
(b) No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a written instrument duly
executed and delivered on behalf of such Person; and any such waiver
shall not be applicable or have any effect except in the specific
instance in which it is given.
10.12 Amendments . This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.13 Time of the Essence . Time is of the essence of this Agreement.
10.14 Severability . In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.15 Parties in Interest . Except for the provisions of Section 9,
none of the provisions of this Agreement is intended to provide any rights or
remedies to any Person other than the parties hereto and their respective
successors and assigns (if any).
10.16 Entire Agreement . This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties hereto
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof.
10.17 Construction .
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa;
the masculine gender shall include the feminine and neuter genders; the
feminine gender shall include the masculine and neuter genders; and the
neuter gender shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting
party shall not be applied in the construction or interpretation of
this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words
"without limitation."
<PAGE>
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to
Sections of this Agreement and Exhibits to this Agreement.
The parties hereto have caused this Agreement to be executed and
delivered as of the date first set forth above.
NETIVATION:
NETIVATION.COM, INC.,
a Delaware corporation
By
---------------------------------------
Anthony J. Paquin
President and Chief Executive Officer
MERGER SUB:
NETIVATION.COM MERGER TWO CORP.,
a Delaware corporation
By
---------------------------------------
Anthony J. Paquin
President and Chief Executive Officer
MEDMarket:
MEDMarket, INC.,
a Colorado corporation
By
---------------------------------------
Thomas A. Slater
President
SELLING STOCKHOLDERS:
-----------------------------------------
Thomas A. Slater
-----------------------------------------
Paul J. Barloon
-----------------------------------------
Tim Corbett
-----------------------------------------
C. Donald Kafader
-----------------------------------------
Scott Oblander
AGENT:
<PAGE>
-----------------------------------------
Andrew D. Craig
SECRETARY'S CERTIFICATE
I, Gary S. Paquin, Secretary of Netivation.com Merger Two Inc., hereby
certify that this Agreement has been adopted pursuant to the first sentence of
Title 8, Section 251(f) of the Delaware Corporations Laws, and that the
conditions specified in that sentence have been satisfied.
- -----------------------------------------
Gary S. Paquin, Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND CONDENSED STATEMENT OF OPERATION FOR
THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1999, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 19,634,000
<SECURITIES> 525,000
<RECEIVABLES> 113,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,251,000
<PP&E> 545,000
<DEPRECIATION> 72,000
<TOTAL-ASSETS> 24,581,000
<CURRENT-LIABILITIES> 1,186,000
<BONDS> 0
0
0
<COMMON> 31,136,000
<OTHER-SE> (7,748,000)
<TOTAL-LIABILITY-AND-EQUITY> 24,581,000
<SALES> 0
<TOTAL-REVENUES> 434,000
<CGS> 0
<TOTAL-COSTS> 349,000
<OTHER-EXPENSES> 2,084,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (154,000)
<INCOME-PRETAX> (1,845,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,845,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,845,000)
<EPS-BASIC> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
