<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
MARCH 31, 2000
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:
<TABLE>
<CAPTION>
Class Outstanding Shares
----- as of Midnight May 8, 2000
--------------------------
<S> <C>
Common Stock, par value $.01 per share 10,894,516
</TABLE>
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
1
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NETIVATION.COM, INC.
FORM 10-QSB
March 31, 2000
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
- Condensed Consolidated Balance Sheet at March 31, 2000, and
December 31, 1999
- Condensed Consolidated Statement of Operations for the Three Month
Period Ended March 31, 2000, and for the Comparable Period Ended
March 31, 1999
- Condensed Consolidated Statement of Cash Flows for the Three Month
Period Ended March 31, 2000, and for the Comparable Period Ended
March 31, 1999
ITEM 2. Plan of Operation
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
ITEM 5. Other Information
ITEM 6. Exhibits and Reports on form 8-K
SIGNATURE
EXHIBITS
2
<PAGE>
NETIVATION.COM, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEET March 31, 2000 December 31, 1999
DOLLARS IN THOUSANDS Unaudited
-----------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $9,043 $15,504
Accounts receivable, net of allowance of 714 295
$142 and $169, respectively
Prepaids and other 1,193 388
----------------------- --------------------
Total current assets 10,950 16,187
Equipment and furniture, net 1,313 815
Investments 796 918
Goodwill, net 6,459 5,116
Intangible assets, net 9,154 10,225
Other assets 197 182
----------------------- --------------------
Total assets $28,869 $33,443
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $869 $1,293
Accrued compensation --- 163
Other accrued expenses 1,390 738
Deferred revenue 1,234 619
----------------------- --------------------
Total current liabilities 3,493 2,813
Other long-term liabilities 219 75
----------------------- --------------------
Total liabilities 3,712 2,888
Stockholders' equity:
Common stock $0.01 par value,
30,000,000 shares authorized,
and 10,940,070 shares
issued and outstanding 41,856 41,187
Warrants 158 ---
Accumulated other comprehensive income 263 393
Retained deficit (17,120) (11,025)
----------------------- --------------------
Total stockholders' equity 25,157 30,555
Total liabilities and stockholders' equity $28,869 $33,443
======= =======
</TABLE>
The accompanying notes are an integral part of these Condensed Consolidated
Balance Sheets
3
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
Three Month Three Month
Period Ended Period Ended
March 31, 2000 March 31, 1999
Unaudited Unaudited
-------------------------------- ------------------------
<S> <C> <C>
Revenues:
Product Sales $607 ----
Website development, consulting, and
other services 637 82
Sales discounts, returns and allowances (25) ----
------------------- ------------------
$1,219 $ 82
Cost of revenues:
Product Sales 457 -----
Website development, consulting, and 281 -----
other services ------------------- ---------------
738 -----
Gross profit $ 481 $ 82
Operating expense:
Sales & marketing 2,046 423
General & administrative 2,726 1,278
Product development 545 323
Amortization of goodwill and intangibles 1,423 -----
------------------- ---------------
Total operating expenses 6,740 2,024
Loss from operations (6,259) (1,942)
Interest income (expense)-net 164 (14)
------------------- ---------------
Net loss (6,095) (1,956)
Preferred stock dividend earned --- (110)
------------------- ---------------
Net loss available to Common stock ($6,095) ($2,066)
======== ========
Historical weighted average shares outstanding used to
compute basic and diluted loss per share 10,909,149 3,517,159
========== =========
Basic and diluted loss per share ($0.56) ($0.59)
======= =======
</TABLE>
The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements
4
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 2000 March 31, 1999
Unaudited Unaudited
-------------------------- -------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($6,095) ($1,956)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation 120 8
Amortization of goodwill 1,423 ---
Stock based compensation --- 1,082
Amortization of debt discount --- 49
Changes in operating assets and liabilities excluding effect
of businesses acquired:
Accounts receivable (419) ---
Prepaid expenses and other (805) (664)
Other assets (15) ---
Accounts payable (424) 222
Accrued compensation (163) ---
Accrued expenses 652 (127)
Deferred revenue 615
Other long-term liabilities 144 ---
----------------------------------------------
Net cash used by operating activities (4,967) (1,386)
Cash flows from investing activities:
Purchase of equipment and furniture (618) (65)
Acquisition cost of business, net of cash acquired (611) ---
Investments (265) ---
--------------------- ---------------------
Net cash used by investing activities (1,494) (65)
Cash flows from financing activities:
Proceeds from sale of 8% preferred stock --- 1,582
Repayment of 8% convertible note payable --- (550)
Repayment of advances from shareholders --- (95)
Repayment of other long-term liabilities --- (8)
-------------------- ---------------------
Net cash provided by financing activities --- 929
Net decrease in cash and equivalents (6,461) (522)
Cash and cash equivalents at beginning of period 15,504 1,907
-------------------- ---------------------
Cash and cash equivalents at end of period $ 9,043 $ 1,385
======= =======
</TABLE>
The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
(Dollars in thousands, except per share data)
NOTE 1--ORGANIZATION AND DESCRIPTION OF BUSINESS
Netivation.com, Inc. ("Netivation" or the "Company"), a Delaware corporation,
formerly named Nelloro Corporation (Nelloro), was originally formed in 1993 for
the purpose of acquiring interests in mineral properties. The Company, which has
its headquarters in Post Falls, Idaho, commenced its current operations after
acquiring the technology developed by the existing management team in exchange
for 2,500,000 shares of Nelloro common stock on September 26, 1997. No value was
assigned to the technology as it had no net book value at the time of the
transaction and the common stock was deemed to have minimal value. The
transaction has been accounted for as a reverse acquisition with Netivation as
the acquiror. Netivation's existing business operations commenced upon the
acquisition of the technology.
The Company develops, designs and markets software and websites focused on the
political and medical communities. These communities, known as vertical portals,
are for individuals, groups and businesses sharing a common interest.
The Company emerged from the development stage during 1999. The Company is
subject to the risks and challenges associated with other companies at a similar
stage of development including dependence on key individuals, successful
development and marketing of its products and services, the acceptance of the
Internet as a medium for advertising, competition from substitute services and
larger companies with greater financial, technical, management and marketing
resources. Further, during the period required to develop commercially viable
products, services and sources of revenues, the Company may require additional
funds.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION.
The Company's condensed consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries. All significant intercompany
accounts have been eliminated in consolidation.
UNAUDITED INTERIM FINANCIAL DATA.
The interim condensed consolidated financial statements are unaudited and have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. 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. These condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
included in the Company's December 31, 1999 Form 10-K as filed with the
Securities and Exchange Commission on March 30, 2000. The financial information
included herein reflects all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the results for interim periods. The results of operations for
the three-month periods ended March 31, 2000 and 1999 are not necessarily
indicative of the results to be expected for the full year.
ESTIMATES AND ASSUMPTIONS.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
GOODWILL AND OTHER INTANGIBLE ASSETS.
Intangible assets consist primarily of acquired technology, assembled workforce,
customer base and goodwill related to acquisitions accounted for under the
purchase method of accounting. Amortization of these purchased intangibles is
provided on the straight-line basis over the respective useful lives of the
assets, primarily three years. The Company identifies and records impairment
losses on intangible and other assets when events and circumstances indicate
that such assets might be impaired. The Company considers factors such as
significant changes in the regulatory or business climate and projected future
cash flows from the respective asset. As of March 31, 2000, intangible assets
consisted of the following:
6
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<TABLE>
<S> <C>
Acquired technology $4,955
Assembled workforce 3,299
Customer base 2,853
Goodwill 6,998
--------
Less: Accumulated
Amortization (2,492)
--------
$15,613
========
</TABLE>
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation Number 44 (FIN 44), Accounting for Certain Transactions involving
Stock Compensation. FIN 44 clarifies the application of Accounting Principles
Board Opinion 25 for only certain issues. FIN 44 is effective July 1, 2000, but
certain conclusions in FIN 44 are applicable for transactions entered after
either December 15, 1998, or January 12, 2000.
The Company does not believe that the adoption of FIN 44 will have a material
effect on the Company's financial position or results of operations.
NOTE 3--ACQUISITIONS
In January 2000, the Company acquired U.S. Congress Handbook, Inc. (USCH). USCH
publishes congressional directories designed to give readers the fastest, most
complete, low-cost information about the U.S. Congress in both written and
electronic formats. Netivation paid consideration of $200, a $200 promissory
note and 75,000 unregistered shares of the Company's common stock for a total
purchase price of $827. The acquisition was accounted for using the purchase
method of accounting. Of the purchase price, approximately $414 was allocated to
customer base and $413 was allocated to goodwill, all of which is being
amortized over a three-year life.
In March 2000, the Company acquired most of the assets and business of
DisabilityMall.com (DisabilityMall.com). DisabilityMall.com provides information
on the products, resources, and services available to the disabled, the
handicapped, the physically challenged, the elderly, as well as to caregivers
and health care professionals. Netivation paid consideration of $250 and 20,000
in unregistered shares of the Company's common stock for a total purchase price
of $351. The acquisition was accounted for using the purchase method of
accounting. Of the purchase price, approximately $351 was allocated to goodwill,
all of which is being amortized over a three-year life.
NOTE 4--COMMITMENTS
INTERNET ACCESS.
During 1999, the Company entered into an agreement with a third party for the
provision of Internet access and services. This agreement expires annually.
Under the terms of this agreement, the Company is obligated to pay a total of
$3.3 per month.
7
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MARKETING AGREEMENTS.
During the first quarter of 2000, Netivation.com entered into multiple marketing
agreements whereby Netivation.com will work with Internet content providers to
provide political content and public affairs services. These contracts require
the payment of approximately $3,400 during the year 2000, plus warrants to
purchase shares of Netivation.com's stock.
NOTE 5--SEGMENT INFORMATION
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," during the second quarter of 1999. SFAS No. 131
established standards for reporting information about operating segments in
annual financial statements and requires selected information about operating
segments in interim financial reports issued to stockholders. It also
established standards for related disclosures about products and services and
geographic areas. Operating segments are defined as components of an enterprise
about which separate financial information is available and which are evaluated
regularly by the chief operating decision makers, or a decision making group, in
deciding how to allocate resources and in assessing performance. The Company's
chief operating decision making group is comprised of the Chief Executive
Officer and various executive vice presidents and general managers of the
Company. The Company has identified two distinct reportable segments: political
line of business and medical line of business. While the decision making group
evaluates results in a number of different ways, the line of business management
structure is the primary basis for which it assesses financial performance and
allocates resources. The accounting policies of the line of business operating
segments are the same as those described in the summary of significant
accounting policies.
The following table represents the Company's segment information for the
three-month period ended March 31, 2000:
<TABLE>
<CAPTION>
March 31, 2000
--------------
<S> <C>
Revenue from Divisions:
MEDMarket.com, Medical Division $485
Votenet.com, Public Policy and Politics Division 734
-----------------
1,219
Cost of Revenues:
MEDMarket.com, Medical Division $380
Votenet.com, Public Policy and Politics Division 358
-----------------
738
Gross Margin:
MEDMarket.com, Medical Division 105
Votenet.com, Public Policy and Politics Division 376
-----------------
$481
Profit Reconciliation:
Gross Profit for reportable segments 481
Operating Expenses (6,740)
Non Operating income, net 164
-----------------
Net Loss ($6,095)
</TABLE>
8
<PAGE>
The Company does not track assets by operating segments. Consequently, it is not
practicable to show assets by operating segments.
ITEM 2. MANAGEMENT'S PLAN OF OPERATION
GENERAL.
Netivation.com, Inc. is a business-to-business e-commerce company incorporated
in the State of Delaware ("Netivation.com"). Netivation.com's strategy is to
build significant revenues by developing leading Internet communities for large,
targeted markets. Netivation.com commenced current operations in September 1997
and began generating revenues from the sale of advertising and sponsorships in
January 1999.
Acquisitions play a major part in Netivation.com's growth strategy.
Netivation.com acquired seven (7) companies during 1999 and two (2) companies as
of the end of the first quarter of 2000. All acquisitions were accounted for by
the purchase method of accounting. Under the purchase method, assets acquired
are accounted for at their fair market values and results of operations are
included prospectively in the condensed consolidated financial statements from
their respective acquisition dates. The acquired companies represented a
substantial portion of Netivation.com's growth during the second half of 1999
and are expected to be an integral part of Netivation.com's growth in 2000.
In January, the Company acquired U.S. Congress Handbook, Inc. ("USCH"). USCH
publishes congressional directories designed to give readers complete, low-cost
information about the U.S. Congress in both written and electronic formats.
Netivation.com received all of the outstanding shares of USCH's capital stock in
exchange for 75,000 shares of Netivation.com common stock and payment of $0.2
million in cash and a $0.2 million promissory note. Upon completion of the
acquisition, USCH became a wholly-owned subsidiary of Netivation.com.
In March, the Company acquired most of the assets and business of
DisabilityMall.com. DisabilityMall.com provides information on the products,
resources, and services available to the disabled, the handicapped, the
physically challenged, the elderly, as well as to caregivers and health care
professionals. Netivation paid consideration of $0.25 million and 20,000 in
unregistered shares of Netivation.com common stock for this acquisition.
Revenues are generated from e-commerce merchandise sales, website development
and hosting, Internet access, software licenses, consulting, and advertising.
Sales of products directly to customers through e-commerce are recognized when
shipped. In these transactions, Netivation.com acts as merchant-of-record.
Accordingly, Netivation.com records, as revenue, the full sales price of the
product sold and records the full cost of the product to Netivation.com as the
cost of revenues when shipping the product.
Software licensing costs and website development revenues are generally
recognized when all elements essential to the functionality of the software or
the website have been delivered. In arrangements where Netivation.com has
significant continued involvement with the licensee, revenues are deferred and
recognized over the term of the agreement. Hosting contracts typically have a
term of one year, with fees charged on a monthly basis.
Advertising consists of the sale of impressions on one or more of
Netivation.com's network of websites for cash or barter. Advertising revenues
are recognized ratably over the term of the applicable agreement. Internet
access is billed on a monthly basis and is billed as earned.
Deferred revenue consists primarily of consulting and prepaid licensing and
hosting fees that are being amortized over their contract life.
9
<PAGE>
REVENUES.
During the first quarter of 2000, Netivation.com generated revenues of $1.2
million. This compares to revenues of $0.1 million during the first quarter of
1999. Fourth quarter 1999 revenues were $0.4 million. Revenues expanded
significantly during the first quarter of 2000 over the fourth quarter of 1999.
Most of the revenue growth was the result of companies acquired after
Netivation.com's initial public offering.
In addition, Netivation.com ended the first quarter of 2000 with $1.2 million in
deferred revenues. Netivation.com may experience seasonality in its advertising,
membership traffic, and some e-commerce revenues. Netivation.com also expects
that business usage of the Internet, and of its products and services may
typically decline during the summer, year-end, and holiday periods.
COST OF REVENUE.
Cost of product revenue primarily consists of the cost of books and medical
supplies sold over the Internet. Website development, consulting, and other
services' cost of revenue consist primarily of payroll costs for technology
employees and hosting/maintenance costs. During the first quarter of 2000, cost
of revenues represented sixty-one percent (61%) of revenues or $0.7 million.
GROSS MARGINS.
During the first quarter of 2000, the gross margins dollars were $0.5 million or
thirty-nine percent (39%) of revenues. Netivation.com offers discounts on
certain items as promotional opportunities. These promotions lower gross margin
percentages on the specific items offered but are intended to attract more
customers.
In the future, Netivation.com's gross margin will be affected by the mix of
products and services sold. Because of Netivation.com's lack of experience in
predicting revenues and product mix, Netivation.com is not able to predict the
gross margin it may generate in future periods. Periodically, Netivation.com may
sell its products and services at a loss and experience negative gross margins
as it attempts to develop market share and attract members to its communities.
Further, Netivation.com expects to experience significant fluctuations in its
operating results in the future as a result of its early stage of development.
OPERATING EXPENSES.
Operating expenses for the first quarter of 2000 totaled $6.7 million, compared
with $2.0 million for the same period in 1999. Operating expenses increased
mostly due to a growth in head count, as well as increasing expenditures for
advertising, marketing programs, and professional services fees. The increase in
operating expenses primarily reflects Netivation.com's transition from an early
stage to the stage of marketing and offering services. For example, the number
of employees increased from 131 as of fiscal year end 1999 to 180 as of March
31, 2000. Netivation.com believes that expansion of its operations is essential
to achieve a strong market position. Consequently, Netivation.com intends to
continue to increase its expenditures in all operating areas for the foreseeable
future.
Product development expenses grew from $0.3 million in the first quarter of 1999
to $0.5 million in the first quarter of 2000 due primarily to the development
and completion of management software in both divisions. Sales and marketing
expenditures increased during the first quarter of 2000 to $2.0 million compared
to $0.4 million for the same period in 1999. Of the $2.0 million sales and
marketing expenditures during the first quarter of 2000, $0.5 million was
related to multiple marketing agreements with Internet content providers.
General and administrative expenses grew from $1.3 million during the first
quarter of 1999 to $2.7 million for the first quarter of 2000. Amortization
expenses due to acquisitions were $1.4 million during the first quarter of 2000,
which compares to none during the first quarter of 1999.
10
<PAGE>
LOSS FROM OPERATIONS.
Netivation.com's loss from operations during the first quarter of 2000 was $6.1
million, compared to $2.0 million for the same quarter in 1999. Netivation.com
has incurred, and will continue to incur, substantial costs to create,
introduce, and enhance its products and services, to develop content, to build
brand awareness, and to grow its business.
TOTAL INTEREST AND OTHER INCOME.
Interest and other income net of expense for the first quarter of 2000 totaled
$0.2 million, compared with interest expense of $0.01 million during the same
period for 1999. The change was primarily due to interest earned on cash
deposits made subsequent to the public offering.
INCOME TAXES.
Netivation.com has not paid income taxes as it has lost money since its
inception and does not anticipate it will pay taxes in the foreseeable future.
NET LOSS AND LOSS PER SHARE.
Netivation.com's net loss applicable to common shareholders during the first
quarter of 2000 was $6.1 million, compared with $2.1 million for the same
quarter in 1999. The loss per basic and diluted share was $0.56 during the first
quarter of 2000 versus $0.59 in the first quarter of 1999. Netivation.com
expects continuing losses for the foreseeable future and there is no assurance
that profitability will be achieved.
YEAR 2000.
No material costs were incurred and operations were not materially impacted by
the Year 2000 issue.
LIQUIDITY AND CAPITAL RESOURCES.
On June 22, 1999, Netivation.com completed its initial public offering of
2,500,000 shares of common stock, resulting in net proceeds of $20.8 million. As
of March 31, 2000, Netivation.com had cash and cash equivalents totaling $9.0
million, compared to $15.5 million as of December 31, 1999.
Since its June 1999 IPO, through the first quarter of 2000, Netivation.com
acquired nine (9) companies that enhance and extend the range of
Netivation.com's products and services. Netivation.com paid total consideration
of 2,539,016 shares of Netivation.com common stock and $1.5 million cash and
$0.2 million in promissory notes to acquire the outstanding stock of these
companies.
During the first quarter of 2000, cash used in operating activities was $5.0
million. Cash used in operating activities consisted primarily of funding
Netivation.com's net operating losses.
Capital expenditures for the first quarter of 2000, consisting primarily of
additional computer equipment purchases, were $1.3 million.
Netivation.com estimates that its available cash balance 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.com'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 Netivation.com's products, the effects
of competition, and general economic conditions. At this time, Netivation.com
has no debt or established lines of credit.
11
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RECENT ACCOUNTING PRONOUNCEMENTS.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation Number 44 (FIN 44), Accounting for Certain Transactions involving
Stock Compensation. FIN 44 clarifies the application of Accounting Principles
Board Opinion 25 for only certain issues. FIN 44 is effective July 1, 2000, but
certain conclusions in FIN 44 are applicable for transactions entered after
either December 15, 1998, or January 12, 2000.
The Company does not believe that the adoption of FIN 44 will have a material
effect on the Company's financial position or results of operations.
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the first quarter of 2000, Netivation.com issued 95,000 shares of common
stock pursuant to exemptions from registration under the Securities Act.
Netivation.com sold the unregistered shares to each of the parties listed below
under the terms of separate agreements dated January 13, 2000 and March 27,
2000. Under the Agreement and Plan of Merger dated January 13, 2000,
Netivation.com acquired all of the issued and outstanding stock of U.S. Congress
Handbook, Inc. and U.S. Congress Handbook, Inc. became a wholly-owned subsidiary
of Netivation.com. Under the Asset Purchase Agreement dated March 27, 2000,
Netivation.com acquired a substantial portion of the assets of
DisabilityMall.com, a sole proprietorship owned by Curt and Bonnie Miller.
<TABLE>
<CAPTION>
NAME OF TYPE OF NUMBER OF EXEMPTION
COMPANY/PARTY SECURITIES SHARES GIVEN DATE RELIED ON
------------- ----------- ------------ ---------------- -------------
<S> <C> <C> <C> <C>
U.S. Congress Handbook, Inc. Common Stock 75,000 January 13, 2000 Section 4(2)
Section 4(6)
Rule 506
DisabilityMall.com/ Common Stock 20,000 March 27, 2000 Section 4(2)
Curt and Bonnie Miller
</TABLE>
Each stockholder was given the opportunity to review and discuss
Netivation.com's business with the directors, officers, and management of
Netivation.com. Each stockholder represented their intention to acquire the
securities for investment only and not for distribution. Appropriate legends are
affixed to the stock certificates issued in these transactions. No underwriters
were used in relation to these transactions.
On June 22, 1999, Netivation.com's Registration Statement on Form SB-2 covering
the offering of 2,500,000 shares of Netivation.com's Common Stock, Commission
file number 333-74569, was declared effective. The offering commenced on June
23, 1999, and terminated upon the sale of all 2,500,000 shares of Netivation.com
common stock. The offering was managed by EBI Securities Corporation and
Millennium Financial Group, Inc. (the "Underwriters"). The total price to the
public for the shares offered and sold by Netivation.com was $25 million. The
amount of expenses incurred by Netivation.com in connection with the offering is
as follows:
12
<PAGE>
<TABLE>
<S> <C>
Underwriting discounts and commissions $2,625,000
Finders fees 136,000
Expenses paid to or for the Underwriter 1,431,000
-------------
Total expenses $4,192,000
</TABLE>
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.com's common stock; or (iii) affiliates of
Netivation.com.
The net proceeds of the offering to Netivation.com (after deducting the
Underwriter's discounts and commissions and offering expenses) was $20,808,000.
From the offering date, the net proceeds have been used in the following manner,
in the following reasonably estimated amounts:
- Investments in debt instruments of the United States Government and its
agencies and investments in marketable equity securities: $9,043,000;
and investments in other securities: $500,000
- Acquisition of other businesses: $1,505,000
- Loan to Oron Strauss, Votenet General Manager: $133,000
- Working Capital: $9,627,000
ITEM 5. OTHER INFORMATION.
Netivation.com filed a Form S-8 Registration Statement with the Securities and
Exchange Commission on March 17, 2000. The S-8 Registration Statement was filed
pursuant to Rule 413 and was for the purpose of registering a total of 867,155
additional shares for issuance under the 1999 Equity Incentive Plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 2.1 Agreement and Plan of Merger dated January 13, 2000 among
Netivation.com, Inc., Netivation.com Merger Seven Corp., Pullen,
Inc., U.S. Congress Handbook, Inc., and the Stockholders of
Pullen, Inc. and U.S. Congress Handbook, Inc.
EXHIBITS:
Exhibit A - Stockholders
Exhibit B - Certain Definitions
Exhibit C - Director and Officer of Surviving Corporation
Exhibit D - Allocation of Merger Consideration
Exhibit E - Forms of Legal Opinion
Exhibit F - Forms of Consulting Agreements
Exhibit G - Form of Escrow Agreement
Exhibit H - Form of Prospective Offeree Questionnaire
SCHEDULES:
Schedule 2 - Pullen Schedule of Exceptions
Schedule 2.1 - Assets
Schedule 3 - Netivation Schedule of Exceptions
Exhibit 2.2 Asset Purchase Agreement dated March 27, 2000 by and between
Netivation.com, Inc. and Curt and Bonnie Miller.
EXHIBITS:
Exhibit A - List of Assets
Exhibit B - Agreements Assumed
Exhibit C - List of Cancelable Contracts
Exhibit D - Form of Escrow Agreement
Exhibit E - Bill of Sale
13
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Exhibit F - Assignment of Intellectual Property
Exhibit G - Form of Prospective Offeree Questionnaire
Exhibit 10.1 Anchor Distribution Agreement*
Exhibit 10.2 Content License Agreement*
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
Registrant's Form 8-K/A filed January 7, 2000 (File No. 000-26337):
Item 7 disclosure stating that the transactions described in
Registrant's Form 8-K previously filed November 10, 1999 (File No.
000-26337) do not meet the significance test set forth in Item 310(c)
and (d) of Regulation S-B and, therefore, no financial information will
be filed in relation to these transactions.
Registrant's Form 8-K/A filed February 28, 2000 (File No. 000-26337):
Item 7 disclosure of Net.Capitol, Inc. financial statements including:
Balance Sheets
As of December 31, 1997 and 1998 and September 31, 1999
(unaudited)
Statements of Operations
For the Years Ended December 31, 1997 and 1998 and the Nine
Months Ended September 30, 1999 (unaudited)
Statements of Changes in Shareholders' Equity For the Years
Ended December 31, 1997 and 1998 and the Nine Months Ended
September 30, 1999 (unaudited)
Statements of Cash Flows
For the Years Ended December 31, 1997 and 1998 and the Nine
Months Ended September 30, 1999 (unaudited)
Notes to Financial Statements
As of December 31, 1997 and 1998 and September 30, 1999
(unaudited)
Registrant's Form 8-K/A filed March 2, 2000 (File No. 000-26337):
Item 5 disclosure stating that none of the transactions described in
Registrant's Form 8-K previously filed November 10, 1999, as amended
January 7, 2000 (File No. 000-26337) meet the reporting requirements of
Item 2 Form 8-K.
Registrant's Form 8-K/A filed March 3, 2000, (File No. 000-26337):
Refiling of Registrant's Form 8-K/A filed March 2, 2000 (File No.
000-26337) to correct submission date.
* Confidential Treatment Requested
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In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Netivation.com, Inc. (Registrant)
Dated: May 12, 2000
/s/: ANTHONY J. PAQUIN
-----------------------
Anthony J. Paquin
President and Chief Executive Officer
15
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
among:
NETIVATION.COM, INC.,
a Delaware corporation;
NETIVATION.COM MERGER SEVEN CORP.,
a Delaware corporation;
PULLEN, INC.,
a Virginia corporation;
U.S. CONGRESS HANDBOOK, INC.,
a Virginia corporation;
and
THE STOCKHOLDERS OF PULLEN, INC. AND U.S. CONGRESS HANDBOOK, INC.
LISTED ON EXHIBIT A HERETO
Dated as of January ___, 2000
16
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1 - DESCRIPTION OF TRANSACTION...........................................................................20
1.1 Merger of USCH into Merger Sub.....................................................................20
1.2 Effect of the Merger...............................................................................20
1.3 Closing; Effective Time............................................................................20
1.4 Certificate of Incorporation, Bylaws and Directors and Officers....................................21
1.5 Conversion of USCH Stock...........................................................................21
1.6 Additional Consideration...........................................................................21
1.7 Closing of USCH Transfer Books.....................................................................21
1.8 Exchange of Certificates...........................................................................22
1.9 Dissenting Shares..................................................................................22
1.10 Tax Consequences...................................................................................23
1.11 Accounting Treatment...............................................................................23
1.12 Further Action.....................................................................................23
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF PULLEN, USCH, AND THE STOCKHOLDERS................................23
2.1 Organization, Good Standing and Qualification......................................................23
2.2 Subsidiaries.......................................................................................23
2.3 Capitalization; Voting Rights......................................................................24
2.4 Authorization; Binding Obligations.................................................................24
2.5 Financial Statements...............................................................................24
2.6 Liabilities........................................................................................24
2.7 Agreements; Action.................................................................................24
2.8 Obligations to Related Parties.....................................................................25
2.9 Absence of Changes.................................................................................25
2.10 Title to Properties and Assets; Liens, Etc.........................................................25
2.11 Patents and Trademarks.............................................................................26
2.12 Compliance with Other Instruments..................................................................26
2.13 Litigation.........................................................................................26
2.14 Tax Returns and Payments...........................................................................27
2.15 Employees..........................................................................................27
2.16 Registration Rights................................................................................27
2.17 Compliance with Legal Requirements; Consents.......................................................28
2.18 Stockholders.......................................................................................28
2.19 Full Disclosure....................................................................................28
2.20 Reliance on Representations and Warranties.........................................................28
2.21 Securities Laws Matters............................................................................29
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF NETIVATION.........................................................29
3.1 Organization, Good Standing and Qualification......................................................29
3.2 Subsidiaries.......................................................................................29
3.3 Capitalization; Voting Rights......................................................................30
3.4 Authorization; Binding Obligations.................................................................30
3.5 Full Disclosure....................................................................................30
3.6 Litigation.........................................................................................30
3.7 Compliance with other Instruments..................................................................30
3.8 Consents...........................................................................................31
3.9 Current Ownership of Netivation Stock by the Stockholders..........................................31
3.10 Reliance on Representations and Warranties.........................................................31
SECTION 4 - CERTAIN COVENANTS OF PULLEN, USCH AND THE STOCKHOLDERS..............................................31
4.1 Access and Investigation...........................................................................31
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4.2 Operation of Business..............................................................................32
4.3 USCH Stockholders' Meeting.........................................................................33
4.4 No Negotiation.....................................................................................33
SECTION 5 - ADDITIONAL COVENANTS OF THE PARTIES..................................................................33
5.1 Notification; Opportunity to Cure..................................................................33
5.2 Filings and Consents...............................................................................34
5.3 Public Announcements...............................................................................34
5.4 Best Efforts.......................................................................................34
5.5 Tax Matters........................................................................................35
5.6 Resale.............................................................................................35
5.7 Confidentiality....................................................................................35
SECTION 6 - CONDITIONS PRECEDENT TO OBLIGATIONS OF NETIVATION AND MERGER SUB....................................35
6.1 Accuracy of Representations........................................................................35
6.2 Performance of Covenants...........................................................................35
6.3 Stockholder Approval...............................................................................35
6.4 Consents...........................................................................................35
6.5 No Material Adverse Change.........................................................................35
6.6 Agreements and Documents...........................................................................36
6.7 No Restraints......................................................................................36
6.8 No Proceedings.....................................................................................36
6.9 Securities Law Compliance..........................................................................36
6.10 Dissenters Rights..................................................................................36
6.11 Unaccredited Investors.............................................................................36
6.12 Proceedings and Documents..........................................................................37
6.13 Corporate Approvals................................................................................37
SECTION 7 - CONDITIONS PRECEDENT TO OBLIGATIONS OF PULLEN, USCH AND THE STOCKHOLDERS............................37
7.1 Accuracy of Representations........................................................................37
7.2 Performance of Covenants...........................................................................37
7.3 Consents...........................................................................................37
7.4 Agreements and Documents...........................................................................37
7.5 No Restraints......................................................................................37
7.6 No Proceedings.....................................................................................38
7.7 Corporate Approvals................................................................................38
7.8 Stock Price........................................................................................38
SECTION 8 - TERMINATION..........................................................................................38
8.1 Termination Events.................................................................................38
8.2 Termination Procedures.............................................................................38
8.3 Effect of Termination..............................................................................38
SECTION 9 - INDEMNIFICATION, ETC.................................................................................39
9.1 Survival of Representations, Warranties and Covenants..............................................39
9.2 Indemnification by the Stockholders................................................................39
9.3 Indemnification by Netivation......................................................................40
9.4 Interest...........................................................................................40
9.5 Defense of Third Party Claims......................................................................40
9.6 Indemnity Reserve..................................................................................41
9.7 Exercise of Remedies by Netivation Indemnitees Other Than Netivation...............................41
SECTION 10 - MISCELLANEOUS PROVISIONS............................................................................41
10.1 Stockholders' Agent................................................................................41
10.2 Further Assurances.................................................................................42
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10.3 Fees and Expenses..................................................................................42
10.4 Attorneys' Fees....................................................................................42
10.5 Notices............................................................................................42
10.6 Headings...........................................................................................43
10.7 Counterparts.......................................................................................43
10.8 Governing Law......................................................................................43
10.9 Successors and Assigns.............................................................................43
10.10 Remedies Cumulative; Specific Performance..........................................................43
10.11 Waiver.............................................................................................43
10.12 Amendments.........................................................................................43
10.13 Time of the Essence................................................................................43
10.14 Severability.......................................................................................44
10.15 Parties in Interest................................................................................44
10.16 Mediation and Arbitration..........................................................................44
10.17 Entire Agreement...................................................................................44
10.18 Cross-Guarantee....................................................................................44
10.19 Construction.......................................................................................44
</TABLE>
EXHIBITS
Exhibit A - Stockholders
Exhibit B - Certain Definitions
Exhibit C - Director and Officer of Surviving Corporation
Exhibit D - Allocation of Merger Consideration
Exhibit E - Forms of Legal Opinions
Exhibit F - Forms of Consulting Agreements
Exhibit G - Form of Escrow Agreement
Exhibit H - Form of Prospective Offeree Questionnaire
19
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made and
entered into as of January 13, 2000, by and among: NETIVATION.COM, INC., a
Delaware corporation ("Netivation"), NETIVATION.COM MERGER SEVEN CORP., a
Delaware corporation and a wholly-owned subsidiary of Netivation ("Merger Sub"),
PULLEN, INC., a Virginia corporation ("Pullen"), U.S. CONGRESS HANDBOOK, INC., a
Virginia corporation and a sister corporation of Pullen, ("USCH"), and the
stockholders of Pullen and USCH set forth on EXHIBIT A hereto (the
"Stockholders"). Certain capitalized terms used in this Agreement are defined in
EXHIBIT B.
RECITALS
A. The parties intend to effect a merger of USCH into Merger
Sub in accordance with this Agreement and the Delaware General Corporation Law
("Delaware Law") and the Virginia Stock Corporation Act ("Virginia Law") (the
"Merger"). Upon consummation of the Merger, USCH will cease to exist, and Merger
Sub will remain a wholly-owned subsidiary of Netivation.
B. The Stockholders own an aggregate of 1000 shares of capital
stock of USCH (the "USCH Stock"), constituting 100% of the USCH capital stock on
a fully-diluted basis.
C. Pullen and USCH are sister corporations with the same
shareholders and a history of common transactional relationships.
D. Although Pullen is remaining independent and is not merging
with any other entity as contemplated in this Agreement or otherwise, Pullen has
nevertheless been made a party to this Agreement at the request of Netivation
for the purpose of providing Netivation a sufficient level of comfort in regards
to representations, warranties, indemnities and other assurances that Netivation
requires in light of the relationship between Pullen and USCH, and,
reciprocally, Netivation and Merger Sub are agreeing that the representations,
warranties, indemnities and other assurances provided to USCH are also provided
for the benefit of Pullen.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1 - DESCRIPTION OF TRANSACTION
1.1 MERGER OF USCH INTO MERGER SUB . Upon the terms and
subject to the conditions set forth in this Agreement, at the Effective Time (as
defined in Section 1.3), USCH shall be merged with and into Merger Sub, and the
separate existence of USCH shall cease. Merger Sub 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
Virginia 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 January 31, 2000,
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
Virginia Law, shall be filed with the Secretary of State of the State of
Delaware and the Clerk of the Virginia State Corporation Commission. 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 Clerk of the
Virginia State Corporation Commission (the "Effective Time").
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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 "U.S. Congress Handbook, 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.
(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 USCH 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, Pullen, USCH or the Stockholders, each share of
Common Stock of USCH issued and outstanding immediately prior to the Effective
Time shall be converted into the right to receive Seventy-Five (75) shares of
Common Stock of Netivation (the "Netivation Stock"). All outstanding shares of
USCH capital stock shall be exchanged for no more than Seventy-Five Thousand
(75,000) shares of Netivation Stock. The Netivation Stock, together with the
payments described in Section 1.6, shall be the consideration for this
Transaction (the "Merger Consideration"). The Merger Consideration to be
received by the Stockholders is set forth on EXHIBIT D.
If, between the date of this Agreement and the Closing Date, the shares
of capital stock of USCH 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 USCH
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 USCH,
then the shares of Netivation Stock issued in exchange for such shares of
capital stock of USCH 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 . At Closing, Netivation shall
pay Two Hundred Thousand Dollars ($200,000) cash to the Stockholders. At
Closing, Netivation shall also deliver to the Stockholders a promissory note for
an additional Two Hundred Thousand Dollars ($200,000) to be paid in $25,000
increments on a quarterly basis beginning February 1, 2000 and ending November
1, 2001. Said promissory note shall bear interest at the short term Applicable
Federal Rate compounded quarterly in existence at the time of Closing and shall
be secured by an interest in the assets transferred from USCH to Merger Sub
through this Merger. All cash payments to the Stockholders shall be made in
proportion to each Stockholder's interest in USCH immediately prior to Closing.
1.7 CLOSING OF USCH TRANSFER BOOKS . At the Effective Time,
holders of certificates representing USCH capital stock that were outstanding
immediately prior to the Effective Time shall cease to have any rights as
stockholders of USCH, and the stock transfer books of USCH 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 USCH 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 USCH (an "USCH Stock Certificate") is presented to the Surviving
Corporation or Netivation, such USCH Stock Certificate shall be canceled and
shall be exchanged as provided in Section 1.8.
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1.8 EXCHANGE OF CERTIFICATES .
(a) At or as soon as practicable after the Effective
Time, Netivation will send to each holder of an USCH 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 USCH Stock Certificate for payment therefor and conversion thereof. Upon
surrender of an USCH 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 USCH Stock Certificate
shall be entitled to receive in exchange therefor cash plus 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 USCH
Stock Certificate so surrendered shall be canceled. Until surrendered as
contemplated by this Section 1.8, each USCH Stock Certificate shall be deemed,
from and after the Effective Time, to represent only the right to receive upon
such surrender cash plus 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 USCH 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 USCH 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 USCH 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 USCH 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 USCH who would otherwise be entitled to receive a
fraction of a share of Netivation Stock shall, upon surrender of such holder's
USCH 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 ARE
RESTRICTED WITHIN THE MEANING OF RULE 144 OF 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 USCH 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. Netivation shall use its reasonable best efforts to (i) provide the
Stockholders with notice of any such amounts to be deducted or withheld; and
(ii) review the reasons for such deductions or withholdings with the
Stockholders.
1.9 DISSENTING SHARES . Notwithstanding anything in this
Agreement to the contrary, shares of capital stock of USCH 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 Virginia Law ("Dissenting Shares") shall not be canceled and
22
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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 Virginia Law. If such holder
shall have so failed to perfect, or shall have effectively withdrawn or lost
such right, such holder's capital stock of USCH 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. USCH shall give prompt notice
of any demands received by USCH 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, USCH 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 USCH
who has demanded appraisal rights as provided under Virginia Law shall be
entitled to vote such holder's shares of Netivation Stock or capital stock of
USCH 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 USCH 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(a) 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 Netivation's accounting
purposes, the Merger is intended to be treated as a "purchase," but it is also
intended to be treated as a tax-free reorganization under Section 368 of the
Code for federal income tax purposes. Pullen and Stockholders shall assume no
responsibility for Netivation's accounting or reporting of the Merger.
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 USCH, the officers and directors of the Surviving
Corporation and Netivation shall be fully authorized (in the name of USCH and
otherwise) to take such action.
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF
PULLEN, USCH, AND THE STOCKHOLDERS
Except as set forth in Schedule 2 (the "Pullen Schedule of
Exceptions"), Pullen, USCH, and each of the 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 . Pullen and
USCH are corporations duly organized, validly existing and in good standing
under the laws of the State of Virginia. Pullen and USCH have all requisite
corporate power and authority to own and operate their properties and assets, to
execute and deliver the Transactional Agreements, to carry out the provisions of
the Transactional Agreements and to carry on their business as presently
conducted and as presently proposed to be conducted. Pullen and USCH are duly
qualified and authorized to do business and are in good standing as foreign
entities in all jurisdictions in which the nature of their activities and of
their 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 Pullen, USCH or their respective businesses. Pullen
and USCH have made available to Netivation true, correct and complete copies of
Pullen's and USCH's articles of incorporation and bylaws, each as amended to
date.
2.2 SUBSIDIARIES . USCH owns no equity securities of any other
corporation, limited partnership or similar entity. Pullen and USCH are not
participants in any joint venture, partnership or similar arrangement.
23
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2.3 CAPITALIZATION; VOTING RIGHTS . The authorized capital
stock of Pullen consists of 1000 shares of Common Stock, of which 500 shares are
issued and outstanding. The authorized capital stock of USCH consists of 5000
shares of Common Stock, of which 1000 shares are issued and outstanding. EXHIBIT
A sets forth the names of the stockholders of Pullen and USCH and the number of
shares of capital stock owned of record by each such stockholder. The
Stockholders together own all of the outstanding shares of capital stock of
USCH. All issued and outstanding shares of USCH'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 USCH of any of its securities.
2.4 AUTHORIZATION; BINDING OBLIGATIONS . Pullen and USCH have
all requisite right, power and authority to enter into and to perform their
obligations under the Transactional Agreements to which Pullen and USCH are or
may become a party. This Agreement constitutes the legal, valid and binding
obligation of Pullen and USCH, enforceable against Pullen and USCH 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 Pullen and USCH, enforceable against Pullen and USCH 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 . Pullen and USCH have delivered to
Netivation their unaudited balance sheets as of _________, 1999 (the "Statement
Date") and their unaudited operating statements for the eleven months ended
November, 1999 (collectively, the "Pullen and USCH Financial Statements")
prepared in accordance with income tax accounting procedures. The Pullen and
USCH Financial Statements are complete and correct in all material respects, and
present fairly the financial condition and position of the respective entity for
the periods covered thereby.
2.6 LIABILITIES . Pullen and USCH have no material liabilities
and, to the Knowledge of Pullen and USCH, have no material contingent
liabilities not otherwise disclosed in the Pullen and USCH 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 Pullen and USCH
to affiliates, officers, members, directors and stockholders of Pullen and USCH
are disclosed on the Pullen and USCH Financial Statements.
2.7 AGREEMENTS; ACTION .
(a) There are no agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, writs or
decrees to which Pullen and USCH are a party or are bound which may involve (i)
obligations (contingent or otherwise) of, or payments to, Pullen or USCH in
excess of $10,000, or (ii) the license of any patent, copyright, trade secret or
other proprietary right to or from Pullen or USCH (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 Pullen's or USCH's products or services or (iv) indemnification by Pullen or
USCH with respect to infringements of proprietary rights.
(b) Pullen and USCH have 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
Pullen and USCH Financial Statements) individually in excess of $10,000 or, in
excess of $15,000 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 their assets or rights, other than the
sale of their 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 Pullen or USCH have reason to believe are
affiliated therewith) shall be aggregated for the purpose of meeting the
individual minimum dollar amounts of such subsections.
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2.8 OBLIGATIONS TO RELATED PARTIES . There are no obligations
of Pullen or USCH to officers, directors, stockholders, members or employees of
either other than (a) for payment of salary for services rendered, (b)
reimbursement for reasonable expenses incurred on behalf of Pullen or USCH and
(c) for other standard employee benefits made generally available to all
employees. No such officer, director or stockholder, or any member of their
immediate families is, directly or indirectly, interested in any material
contract with Pullen or USCH (other than such contracts as relate to any such
person's ownership of capital stock or other securities of Pullen or USCH).
Pullen and USCH are not guarantors or indemnitors of any indebtedness of any
other person, firm or corporation.
2.9 ABSENCE OF CHANGES . Since the Statement Date, there has
not been:
(a) Any change in the assets, liabilities, financial
condition or operations of Pullen or USCH from that reflected in the Pullen and
USCH 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 Pullen or USCH;
(b) Any resignation or termination of any key
officers of Pullen or USCH; and Pullen and USCH, to their Knowledge, do 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 Pullen or USCH 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 Pullen or USCH;
(e) Any waiver by Pullen or USCH of a valuable right
or of a material debt owed to them;
(f) Any direct or indirect loans made by Pullen or
USCH to any stockholder, employee, officer or director of Pullen or USCH,
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 Pullen or USCH;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred,
assumed or guaranteed by Pullen or USCH, 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
Pullen or USCH is a party or by which they are bound which materially and
adversely affects the business, assets, liabilities, financial condition,
operations or prospects of Pullen or USCH; 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 Pullen or USCH. 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. Schedule 2.10
is a complete and accurate list of all material assets (whether leased or
owned), including intellectual property, of USCH. Pullen and USCH
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have good and marketable title to all of their properties and assets,
including, for USCH, those listed on Schedule 2.10, and good title to their
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 USCH and (iii) those that have arisen
from purchase money security interests in an amount not to exceed $10,000.
None of the Stockholders has any right in or claim to any of the intellectual
property utilized by Pullen or USCH. All facilities, machinery, equipment,
fixtures, vehicles and other properties owned, leased or used by Pullen and
USCH are in good operating condition and repair and are reasonably fit and
usable for the purposes for which they are being used. Pullen and USCH are in
compliance with all material terms of each lease to which they are a party or
are otherwise bound.
2.11 PATENTS AND TRADEMARKS . USCH owns or possesses
sufficient legal rights to all trademarks, service marks, trade names,
copyrights, trade secrets and licenses, and, to the Knowledge of USCH, 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 Pullen or USCH 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. Pullen and USCH have not
received any communications alleging that they either have violated or, by
conducting their 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 Pullen's and USCH's
Knowledge, none of Pullen's or USCH'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 Pullen's and USCH's business
by the employees of Pullen or USCH. The conduct of Pullen's and USCH's business
as proposed, will not, to the Knowledge of Pullen and USCH, 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. Pullen and USCH do 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 Pullen or USCH, except for
inventions, trade secrets or proprietary information that have been assigned to
Pullen and USCH.
2.12 COMPLIANCE WITH OTHER INSTRUMENTS . Pullen and USCH are
not in violation or default of any term of their charter documents, or of any
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which either is party or by which either is bound or of any
judgment, decree, order, writ or, to Pullen's or USCH's Knowledge, any statute,
rule or regulation applicable to Pullen or USCH which would materially and
adversely affect the business, assets, liabilities, financial condition,
operations or prospects of Pullen or USCH. 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 Pullen or USCH or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to Pullen or USCH, or the business or
operations or any of their assets or properties.
2.13 LITIGATION . There is no action, suit, proceeding or
investigation pending, or to the Knowledge of Pullen or USCH, currently
threatened against Pullen or USCH that questions the validity of this Agreement
or Transactional Agreements or the right of Pullen or USCH 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 Pullen
or USCH, financially or otherwise, or any change in the current equity ownership
of Pullen or USCH, nor is Pullen or USCH aware that there is any basis for the
foregoing. The foregoing includes, without limitation, actions pending or
threatened (or any basis therefor known to Pullen or USCH) involving the prior
employment of any of Pullen's or USCH's employees, their use in connection with
Pullen's or USCH's business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers. Pullen and USCH are not parties 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 Pullen or USCH currently pending or which Pullen or USCH
intends to initiate.
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2.14 TAX RETURNS AND PAYMENTS .
(a) Each tax required to have been paid, or claimed
by any Governmental Body to be payable, by Pullen or USCH (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 Pullen or USCH, 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 Pullen or USCH with any Governmental Body have been timely filed,
taking into account valid extensions (collectively, the "Pullen and USCH
Returns"). All taxes required to be paid by Pullen for the fiscal year 1998 have
either been paid in full or shall not result in any liability to Pullen. All
Pullen and USCH Returns (i) have been filed when due and (ii) have been
accurately and completely prepared in full compliance with all applicable legal
requirements, in all material respects. Pullen has delivered to Netivation
accurate and complete copies of the 1998 Pullen and USCH Returns.
(c) There have been no examinations or audits of any
Pullen and USCH Returns, and, to the Knowledge of Pullen and USCH, no such
examination or audit has been proposed or scheduled by any Governmental Body.
Pullen and USCH have delivered to Netivation accurate and complete copies of all
audit reports and similar documents (to which Pullen has access) relating to the
Pullen and USCH Returns.
(d) No claim or proceeding is pending or, to the
Knowledge of Pullen or USCH, has been threatened against Pullen or USCH 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 Pullen or USCH. There are no liens for taxes upon any of the assets of Pullen
or USCH, except liens for current taxes not yet due and payable. Pullen and USCH
have not entered into or become bound by any agreement or consent pursuant to
Section 341(f) of the Code.
(e) To the Knowledge of Pullen and USCH, there is no
agreement, plan, arrangement or other contract covering any employee or
independent contractor or former employee or independent contractor of Pullen or
USCH that, individually or collectively, could give rise, directly or
indirectly, to the payment of any amount that would not be deductible by reason
of Section 280G or Section 162 of the Code. Pullen and USCH are not, and have
never been, a party to or bound by any tax indemnity agreement, tax sharing
agreement, tax allocation agreement or similar contract.
2.15 EMPLOYEES . Pullen and USCH are not parties 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
Pullen and USCH, no employee of Pullen or USCH, nor any consultant with whom
Pullen or USCH have 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, Pullen
or USCH because of the nature of the business to be conducted by Pullen or USCH;
and to the Knowledge of Pullen and USCH the continued employment by Pullen or
USCH of its present employees, and the performance of Pullen's and USCH's
contracts with its independent contractors, will not result in any such
violation. Pullen and USCH have not received any notice alleging that any such
violation has occurred. No employee of Pullen or USCH has been granted the right
to continued employment by Pullen or USCH or to any material compensation
following termination of employment with Pullen or USCH. To the Knowledge of
Pullen and USCH, no officer or key employee, or any group of key employees,
intends to terminate their employment with Pullen or USCH, nor does Pullen or
USCH have a present intention to terminate the employment of any officer, key
employee or group of key employees.
2.16 REGISTRATION RIGHTS . Pullen and USCH are not presently
under any obligation, and have not granted any rights, to register any of their
presently outstanding securities or any of its securities that may hereafter be
issued.
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2.17 COMPLIANCE WITH LEGAL REQUIREMENTS; CONSENTS .
(a) Pullen and USCH are, and have at all times since
inception been, in full compliance with each legal requirement that is or was
applicable to them or to the conduct of their business or the ownership or use
of any of their assets, except where the failure to comply with each such legal
requirement has not had and will not have a Material Adverse Effect on Pullen or
USCH.
(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 Pullen's or USCH's articles of
incorporation or bylaws, or (ii) any resolution adopted by Pullen's or USCH's
stockholders or Pullen's or USCH'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 Pullen or USCH, or any of the assets owned or used by Pullen or
USCH, is subject;
(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 Pullen or USCH is a party; or
(iv) give any Person the right to (A)
declare a default or exercise any remedy under any contract to which Pullen or
USCH is a party, (B) accelerate the maturity or performance of any contract to
which Pullen or USCH is a party or (C) cancel, terminate or modify any contract
to which Pullen or USCH is a party.
Neither Pullen, USCH nor any of the 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 other than Stockholders' spouses in connection with the
execution and delivery of any of the Transactional Agreements or the
consummation or performance of any of the Transactions.
2.18 STOCKHOLDERS . Each 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 Stockholder is or may become a party, (b) this
Agreement constitutes his, her or its legal, valid and binding obligation,
enforceable against such 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 Stockholder, enforceable against such 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.
2.19 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
Pullen, USCH and the 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. Pullen
and USCH have provided Netivation and Netivation's Representatives with full and
complete access to all of Pullen's and USCH's records and other documents and
data.
2.20 RELIANCE ON REPRESENTATIONS AND WARRANTIES . Pullen,
USCH, and the Stockholders acknowledge that they have not relied on any
representations or warranties from Netivation or Merger Sub that are not
contained within this Agreement.
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2.21 SECURITIES LAWS MATTERS . Each 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 a private placement exemption from registration under Section 4(2)
of the Securities Act, based in part upon the Stockholders' representations
contained in this Agreement. Each Stockholder hereby severally and not jointly
represents and warrants as follows:
(a) KNOWLEDGE AND EXPERIENCE. Each Stockholder is an
"accredited investor" within the meaning of Regulation D promulgated under the
Securities Act. Each Stockholder is knowledgeable and has substantial experience
in evaluating and investing in transactions in companies similar to Netivation
so that such Stockholder is capable of evaluating the merits and risks of his
investment in Netivation. Each Stockholder has by reason of such Stockholder's
business or financial knowledge and experience, the capacity to protect such
Stockholder's own interests in connection with the Transaction. Further, each
Stockholder is aware of no publication of any advertisement in connection with
the Transaction. Each Stockholder can bear the economic risk of the Transaction.
Each Stockholder has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act, including affiliate status, which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions. Each Stockholder acknowledges that he or she
will be required to hold Netivation stock for a period of one year prior to
resale in a public market transaction involving a broker or dealer, consistent
with Rule 144.
(b) NETIVATION INFORMATION. Each 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
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 Stockholder is
acquiring the Netivation Stock for such Stockholder's own account for investment
only, and not with a view towards distribution.
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF NETIVATION
Except as set forth in Schedule 3 (the "Netivation Schedule of
Exceptions"), Netivation and Merger Sub, as appropriate, jointly and severally
represent and warrant, to and for the benefit of Pullen, USCH, and the
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 Pullen 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.
3.2 SUBSIDIARIES . Except for Merger Sub, Netivation.com
Merger Corp., Netivation.com Merger Three Corp., InterLink Services, Inc., The
Online Medical Bookstore, Inc., MEDMarket, Inc., Raintree Communications
Corporation, Politicallyblack.com, Inc., and Public Disclosure, Inc. all of
which are wholly-owned
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subsidiaries of Netivation, and EBonlineinc.com, 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
January 9, 2000, consists of (a) 30,000,000 shares of Common Stock, of which
10,743,483 shares are issued and outstanding, and (b) 2,000,000 shares of
Preferred Stock, of which no 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 (1,000) shares of Common Stock, one hundred (100)
shares 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, (iii) were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities, and (iv) are owned directly by Netivation.
3.4 AUTHORIZATION; BINDING OBLIGATIONS . Each of Netivation
and Merger Sub has all requisite 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 Pullen 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"), and its 10Qs filed on August 16, 1999
and November 15, 1999 (the "10Qs"). The Registration Statement and the 10Qs (i)
comply in all material respects with the applicable requirements of the
Securities Act and (ii) do not contain any untrue statements 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. Netivation shall promptly provide the
Stockholders with copies of all public releases made by Netivation from the time
of the execution of this Agreement to the Closing. Netivation acknowledges that
the disclosures, and any updates, referenced in this Section 3.5 shall be relied
on by the Stockholders. Netivation has also filed with the SEC a Form 8-K on
November 10, 1999, regarding the acquisitions of Politicallyblack.com,
MEDMarket, Public Disclosure, and Raintree Communications. The Form 8-K would
not have been timely filed if the acquisitions are determined to be material.
3.6 LITIGATION . There is no material action, suit, proceeding
or investigation pending, or to the Knowledge of Netivation, currently
threatened against Netivation that questions the validity of this Agreement or
Transactional Agreements or the right of Netivation to enter into any of such
agreements, or to consummate the transactions contemplated hereby or thereby.
3.7 COMPLIANCE WITH OTHER INSTRUMENTS . Neither the execution
and delivery of any of the Transactional Agreements, nor the consummation or
performance of any of the Transactions, will materially, directly or indirectly,
(with or without notice or lapse of time):
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(i) contravene, conflict with or result in a
violation of (A) any of the provisions of Netivation's certificate of
incorporation or bylaws, or (B) any resolution adopted by Netivation's
stockholders or Netivation'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 Netivation, or any of the assets owned or used by Netivation, is
subject;
(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 Netivation is a party; or
(iv) give any Person the right to (A)
declare a default or exercise any remedy under any contract to which Netivation
is a party, (B) accelerate the maturity or performance of any contract to which
Netivation is a party or (C) cancel, terminate or modify any contract to which
Netivation is a party.
3.8 CONSENTS . Other than filings to be made in accordance
with the Delaware Law, neither Netivation nor Merger Sub 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.
3.9 CURRENT OWNERSHIP OF NETIVATION STOCK BY THE STOCKHOLDERS.
Netivation acknowledges that the Stockholders currently own 1,000 shares of
Netivation common stock purchased on the independent decision of the
Stockholders in the open securities market. Netivation acknowledges that the
Stockholders have no management control, voting control, or other advantage on
account of such stock ownership.
3.10 RELIANCE ON REPRESENTATIONS AND WARRANTIES . Netivation
acknowledges that it has not relied on any representations or warranties from
Pullen, USCH, or the Stockholders that are not contained within this Agreement.
SECTION 4 - CERTAIN COVENANTS OF PULLEN, USCH
AND THE STOCKHOLDERS
4.1 ACCESS AND INVESTIGATION . Pullen, USCH and the
Stockholders shall ensure that, at all times during the Pre-Closing Period:
(a) Pullen, USCH and their Representatives provide
Netivation and its Representatives with access, during normal business hours
upon reasonable notice, to Pullen's and USCH's Representatives, personnel and
assets and to all existing books, records, tax returns, work papers and other
documents and information relating to Pullen and USCH;
(b) Pullen, USCH and their Representatives provide
Netivation and its Representatives with such copies of existing books, records,
tax returns, work papers and other documents and information relating to Pullen
or USCH as Netivation may request in good faith; and
(c) Pullen, USCH and their Representatives compile
and provide Netivation and its Representatives with such additional financial,
operating and other data and information regarding Pullen and USCH as Netivation
may request in good faith. Without limiting the generality of the foregoing,
during the Pre-Closing Period, Pullen and USCH shall promptly provide Netivation
with copies of:
(i) all material operating and financial
reports prepared by Pullen and USCH for its senior management, including copies
of the unaudited monthly balance sheets of Pullen and USCH 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 Pullen or USCH to its stockholders generally;
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(iii) any material notice, document or other
communication sent by or on behalf of Pullen or USCH to any party to any Pullen
or USCH contract or sent to Pullen or USCH by any party to any Pullen or USCH
contract (other than any communication that relates solely to commercial
transactions 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 Pullen from any Governmental Body.
4.2 OPERATION OF BUSINESS . Pullen, USCH and the Stockholders
shall ensure that, during the Pre-Closing Period:
(a) Pullen and USCH conducts their 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) Pullen and USCH use their commercially reasonable
efforts to preserve intact their current business organization, keep available
the services of their current officers and employees and maintain their
relations and good will with suppliers, customers, landlords, creditors,
licensors, licensees, employees and other Persons having business relationships
with Pullen or USCH;
(c) Pullen and USCH keep in full force all existing
insurance policies;
(d) Pullen's and USCH's officers confer regularly,
upon request, with Netivation concerning operational matters and otherwise
report regularly, upon request, to Netivation concerning the status of Pullen's
and USCH's business, condition, assets, liabilities, operations, financial
performance and prospects;
(e) Pullen and USCH immediately notify Netivation of
any inquiry, proposal or offer from any Person relating to any Acquisition
Transaction;
(f) Pullen or USCH do not declare, accrue, set aside
or pay any dividend or make any other distribution in respect of any shares of
capital stock or other securities, and do not repurchase, redeem or otherwise
reacquire any shares of capital stock or other securities;
(g) Pullen or USCH do not sell or otherwise issue any
shares of capital stock or any other securities;
(h) Pullen or USCH do not amend their articles of
incorporation or bylaws, and do not effect or become a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(i) Pullen or USCH do not form any subsidiary or
acquire any equity interest or other interest in any other entity;
(j) Pullen or USCH do 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) Pullen or USCH do 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) Pullen or USCH do not establish or adopt any
employee benefit plan, nor pay or agree to pay any bonus nor make any
profit-sharing or similar payment to, nor increase the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of their directors, officers or employees (except for regularly
scheduled salary increases in the Ordinary Course of Business);
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(m) Pullen or USCH do not change any of their methods
of accounting or accounting practices in any respect;
(n) Pullen or USCH do not commence any Proceeding,
except in the Ordinary Course of Business;
(o) Pullen or USCH do not enter into any transaction
or take any other action of the type referred to in Section 2.9;
(p) Pullen or USCH do not enter into any transaction
or take any other action outside the Ordinary Course of Business;
(q) Pullen or USCH do 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 Pullen, USCH or the
Stockholders; and
(r) Pullen or USCH do not agree, commit or offer (in
writing or otherwise), or attempt, to take any of the actions described in
clauses "(f)" through "(q)" of this Section 4.2.
4.3 USCH STOCKHOLDERS' MEETING . USCH shall, in accordance
with its articles of incorporation and bylaws and the applicable requirements of
Virginia 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. USCH 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 Prospective Offeree Questionnaire 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.
4.4 NO NEGOTIATION . Pullen and USCH shall ensure that, during
the Pre-Closing Period, neither Pullen, USCH nor any of their 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 NOTIFICATION; OPPORTUNITY TO CURE .
(a) During the Pre-Closing Period, each party shall
promptly notify the other party in writing of:
(i) the discovery by that party of any
event, condition, fact or circumstance that occurred or existed on or prior to
the date of this Agreement that caused or constitutes a Breach of any
representation or warranty made by that party 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 that party 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;
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(iii) any Breach of any covenant or
obligation of that party; 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.
(b) Upon receipt of any notification pursuant to
Section 5.1(a), the party receiving notification shall send written notice to
the other party of its/their decision to seek termination of this Agreement or
pursue any other available remedy. The party seeking termination shall provide
the other party a reasonable opportunity to cure, but in no event less than ten
(10) days.
(c) During the Pre-Closing Period, each party shall
promptly notify the other party, as appropriate, in writing of the awareness by
that party or its representatives of any event, condition, fact or circumstance
that occurred or existed on or prior to the date of this Agreement or thereafter
that caused or constitutes or will cause or constitute a Breach of any
representation or warranty made by the other party in this Agreement.
(d) Upon receipt of any notification pursuant to
Section 5.1(c), the party receiving notification shall send written notice to
the other party of its/their intent to cure the defect. The parties shall
provide a reasonable opportunity to cure the defect, but in no event less than
ten (10) days. Neither party shall have the right to sue for indemnity for any
defect that the party seeking indemnification was aware of prior to or during
the Pre-Closing Period for which no notification pursuant to Section 5.1(c) was
given to the other party, as appropriate.
(e) If any event, condition, fact or circumstance
that is required to be disclosed by the parties pursuant to Section 5.1(a)
requires any change in their respective Schedule of Exceptions, or if any such
event, condition, fact or circumstance would require such a change assuming
their respective Schedule of Exceptions were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then the disclosing parties shall promptly deliver to the
non-disclosing parties an update to their respective Schedule of Exceptions
specifying such change. No such update shall be deemed to supplement or amend
their respective Schedule of Exceptions for the purpose of (i) determining the
accuracy of any of the representations and warranties made by the disclosing
party in this Agreement for purposes of Section 6.1 or Section 7.1, but shall be
deemed to supplement or amend their respective Schedule of Exceptions for
purposes of Section 9 or (ii) determining whether any of the other conditions
set forth in Section 6 or Section 7 have been satisfied.
5.2 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 Pullen,
USCH, Merger Sub, or Netivation, as the case may be, during the Pre-Closing
Period
5.3 PUBLIC ANNOUNCEMENTS . During the Pre-Closing Period, (i)
neither Pullen, USCH, the Stockholders, Merger Sub, nor Netivation shall (and
neither Pullen, USCH, the Stockholders, Merger Sub, nor Netivation shall permit
any of their respective Representatives to) issue any press release or make any
public statement regarding this Agreement or the Transactions, without the other
parties' prior written consent, and (ii) each party will use reasonable efforts
to consult with the other parties prior to issuing any press release or making
any public statement regarding the Merger; PROVIDED THAT Netivation shall be
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.
5.4 BEST EFFORTS . During the Pre-Closing Period, (i)
Pullen and USCH 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
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this Agreement. Pullen will take all actions necessary to cause USCH to
perform its obligations under this Agreement and to consummate the Merger on
the terms and conditions set forth in this Agreement.
5.5 TAX MATTERS . At or prior to the Closing, (a) Stockholders
and USCH 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 Stockholders a tax
representation letter, in a form reasonably acceptable to such parties. All
parties hereto 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 at any
time that could reasonably be expected to cause loss of such qualification. All
parties hereto agree to comply with applicable reporting requirements of the
Code and U.S. Treasury Regulations for such a reorganization. Netivation and
Merger Sub have not made any representations, warranties, or covenants with
regards to tax matters in relation to the activities of Pullen, USCH, or the
Stockholders made in connection or anticipation of the Transactions. Pullen,
USCH, and the Stockholders have not made any representations, warranties, or
covenants with regards to tax matters in relation to the activities of
Netivation or Merger Sub made in connection or anticipation of the Transactions.
5.6 RESALE . Each Stockholder shall not sell or otherwise
transfer any Netivation Stock until the requirements of Rule 144 are satisfied
for such sale or transfer unless the stock is earlier registered. Netivation
shall endeavor to timely cooperate with the Stockholders regarding the resale of
Netivation Stock once the requirements in the preceding sentence have been
satisfied.
5.7 CONFIDENTIALITY . Netivation shall maintain in strict
confidence all due diligence information obtained from Pullen or USCH pursuant
to Section 4.1 and shall disclose such information to its employees, agents and
representatives on a "need-to-know" basis. Netivation shall use all such
information so obtained from Pullen and USCH only for the purposes of evaluating
and completing the Transactions. If the Merger is not completed, Netivation
shall return all such information to USCH. Upon written request, Netivation and
its agents and representatives shall sign reasonable confidentiality agreements
confirming the foregoing as reasonably required by Pullen.
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 Pullen, USCH and the 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 Pullen, USCH or any of the 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 Pullen and USCH in
accordance with the provisions of Virginia Law and applicable agreements.
6.4 CONSENTS . All consents required to be obtained by Pullen
and USCH in connection with the Transactions 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 Pullen's or USCH's business, condition, assets, liabilities,
operations, financial performance or prospects since the date of this Agreement.
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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) a legal opinion from counsel for Pullen, USCH and
the Stockholders, substantially in the form of EXHIBIT E1;
(b) Consulting Agreements, substantially in the forms
of EXHIBIT F1 and F2, executed by Dale Pullen and Barbara Pullen;
(c) the Escrow Agreement, substantially in the form
of EXHIBIT G;
(d) a Tax Representation Letter executed by Pullen
and USCH;
(e) a Prospective Offeree Questionnaire substantially
in the form of EXHIBIT H executed by each Stockholder;
(f) written resignations of all officers and
directors of USCH, effective as of the Closing Date;
(g) a certificate executed by each of the
Stockholders containing the representation and warranty of each such Stockholder
that (i) each of the representations and warranties made by Pullen, USCH and the
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 "Stockholders' Closing
Certificate");
(h) a certificate executed by Pullen and USCH
containing the representation and warranty of Pullen and USCH that (i) each of
the representations and warranties made by Pullen and USCH in this Agreement are
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; and
(i) such other documents, to the extent such
documents are reasonably available or should be reasonably available, as
Netivation may reasonably request in good faith for the purpose of (i)
evidencing the accuracy of any representation or warranty made by Pullen, USCH
or the Stockholders, (ii) evidencing the compliance by Pullen, USCH or the
Stockholders with, or the performance by Pullen, USCH or the 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 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.
6.8 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.
6.9 SECURITIES LAW COMPLIANCE . All applicable requirements of
the Securities Act and any applicable state securities laws shall have been
satisfied.
6.10 DISSENTERS RIGHTS . No stockholder of USCH shall have
exercised dissenters rights with respect to approval of the Transactions.
6.11 UNACCREDITED INVESTORS . The Prospective Offeree
Questionnaires delivered pursuant to Section 6.6 shall indicate that no more
than 35 of the stockholders of USCH are "unaccredited investors," as defined by
Rule 501 under the Securities Act.
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6.12 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 the parties to this Agreement.
6.13 CORPORATE APPROVALS . This Agreement and the consummation
of the Transactions shall have been approved by all necessary corporate action
on the part of Pullen, USCH, Netivation, Merger Sub and the Stockholders.
SECTION 7 - CONDITIONS PRECEDENT TO OBLIGATIONS
OF PULLEN, USCH AND THE STOCKHOLDERS
The obligations of Pullen, USCH and the 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 may be waived solely by Agent
(described in 10.1 below), 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 and Merger Sub 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 . Stockholders 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) Consulting Agreements, substantially in the forms
of EXHIBIT F1 and F2, executed by Dale Pullen and Barbara Pullen;
(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;
(e) a legal opinion from counsel for Netivation,
substantially in the form of EXHIBIT E2; and
(f) such other documents as Agent 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.
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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.
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 Netivation and Merger Sub.
7.8 STOCK PRICE. The market price of Netivation common stock,
as quoted on the Nasdaq National Market, shall not have closed below $5.35 per
share as of the Effective Time. If said stock price does close before $5.35 per
share at the Effective Time, then (i) Pullen, USCH, and the Stockholders may
proceed with the Closing at their option; or (ii) notwithstanding the
termination provisions of Section 8, the parties shall wait for a period of up
to eight calendar weeks for the price of Netivation common stock to close at or
above $5.35 per share before proceeding with the Closing.
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 Pullen, USCH or any of the 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 Pullen, USCH or any of the Stockholders to comply with or
perform any covenant or obligation of Pullen, USCH or the 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 January 31, 2000 (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 January 31, 2000 (other than as a result of the failure on the part
of Pullen, USCH or any of the Stockholders to comply with or perform any
covenant or obligation of Pullen, USCH or the Stockholders set forth in this
Agreement); or
(g) by the mutual consent of Netivation, Pullen 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)
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neither Pullen, USCH nor the 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) Pullen, USCH and Netivation shall, in all events, remain bound by and
continue to be subject to Section 5.3.
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 Pullen, USCH or any of the
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 Pullen, USCH and the 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 (other than the items shown on the Pullen
Schedule of Exceptions), 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 STOCKHOLDERS .
(a) Subject to the provisions of this Section 9, the
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 Pullen, USCH or any of the
Stockholders contained in Section 2 hereof or in any instrument delivered
pursuant to this Agreement (each as modified by the Pullen Schedule of
Exceptions delivered by Pullen, USCH and the Stockholders on the date of this
Agreement and not as modified by any revisions to such Pullen Schedule of
Exceptions after such date), (ii) any Breach of any covenant or obligation
contained herein , (iii) any final determination of Pullen's or USCH'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 Stockholders' Closing
Certificate.
(b) The Stockholders acknowledge and agree that, if
there is any Breach of any representation or warranty or other provision
relating to Pullen or USCH or Pullen's or USCH'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 USCH, to have incurred Damages as result of
such Breach or Liability.
(c) Each Stockholder waives and acknowledges and
agrees that such 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
Stockholder may become subject under the Transactional Agreements or otherwise
in connection with any of the Transactions.
(d) Claims for Damages made by the Netivation
Indemnitees pursuant to the provisions of Sections 9.2(a) or 9.5 shall be
limited to an amount equal to (i) the fair market value on the date such claim
is fully and finally resolved of the Netivation Stock, which was received by the
Stockholders on the Closing
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Date and still held by the Stockholders on the date such claim is fully and
finally resolved; plus (ii) the amount realized from the sale of Netivation
Stock, which was received on the Closing Date but sold by the Stockholders
prior to the full and final resolution of such claim; plus (iii) $400,000 and
any interest earned thereon by the Stockholders. The provisions of this
Section 9.2 shall not apply to claims for willful misconduct, fraud, bad
faith or recklessness on the part of Pullen, USCH or any Stockholder.
9.3 INDEMNIFICATION BY NETIVATION.
(a) Subject to the provisions of this Section 9,
Netivation and Merger Sub shall indemnify and hold harmless each of the
Stockholders from and against the amount of any Damages incurred by any of the
Stockholders directly or indirectly as a result of (i) any Breach of a
representation or warranty of Netivation contained in Section 9.3 hereof or in
any instrument delivered pursuant to this Agreement or (ii) any Breach of any
covenant or obligation contained herein
(b) Netivation acknowledges and agrees that, if and
to the extent that there are any Damages as a result of any Breach of any
representation or warranty, then the Stockholders shall be deemed, by virtue of
such Stockholders ownership of the Netivation Stock, to have incurred Damages as
result of such Breach or Liability.
(c) Netivation waives and acknowledges and agrees
that Netivation 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 Netivation may become
subject under the Transactional Agreements or otherwise in connection with any
of the Transactions.
(d) Claims for Damages made by the Stockholders
pursuant to the provisions of Sections 9.3(a) shall be limited to an amount
equal to $450,000 minus the total of (i) the product of the number of shares of
Netivation Stock held by the Stockholders, at the time of the claim, multiplied
by the fair market value of said shares on the date such claim is fully and
finally resolved; plus (ii) the total sales price of the shares of Netivation
Stock sold prior to the full resolution of such claim by the Stockholders. The
provisions of this Section 9.3 shall not apply to claims for willful misconduct,
fraud, bad faith or recklessness on the part of Netivation.
9.4 INTEREST . Any party that is required to indemnify any
other party pursuant to this Section 9 with respect to any Damages shall also be
required to pay such other party interest on the amount of such Damages (for the
period commencing as of the date on which such other party 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 9.4, a party 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 party shall be deemed to have first become subject to such Damages
at the time such party pays such judgment or makes such settlement payment.)
9.5 DEFENSE OF THIRD PARTY CLAIMS . In the event of the
assertion or commencement by any Person not a party to this Agreement (a "Third
Party")of any claim or Proceeding (whether against Pullen or USCH, against any
other Netivation Indemnitee or any other Person) with respect to which any of
the parties to this Agreement (the "Indemnifying Party") may become obligated to
indemnify, hold harmless, compensate or reimburse any other party to this
Agreement (the "Indemnitee") pursuant to this Section 9, the Indemnifying Party
shall have the right, at its election, to proceed with the defense of such claim
or Proceeding, provided however, that the Indemnifying Party must conduct the
defense of the Third Party's claim actively and diligently thereafter in order
to preserve its rights in this regard; and provided further that the Indemnitee
may retain separate co-counsel at its sole cost and expense. If the Indemnifying
Party 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 the Indemnitee) shall be borne
and paid exclusively by the Indemnifying Party;
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(b) the Indemnifying Party shall make available to
the Indemnitee any documents and materials in the possession or control of any
Indemnifying Party that may be necessary to the defense of such claim or
Proceeding; and
(c) The Indemnifying Party shall keep the Indemnitee
informed of all material developments and events relating to such claim or
Proceeding.
9.6 INDEMNITY RESERVE . In order to secure Netivation's and
each Netivation Indemnitee's rights of indemnity, the Stockholders shall place
50,000 shares of Netivation Stock in escrow in accordance with the terms of the
Escrow Agreement, substantially in the form attached hereto as EXHIBIT G.
9.7 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 STOCKHOLDERS' AGENT .
(a) The Stockholders hereby irrevocably nominate,
constitute and appoint Dale Pullen as the agent and true and lawful
attorney-in-fact of the Stockholders (the "Agent"), with full power of
substitution, to act in the name, place and stead of the Stockholders for
purposes of executing any documents and taking any actions that the Agent may,
in his/her 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 Stockholders. Dale Pullen hereby accepts his
appointment as Agent.
(b) The Stockholders hereby grant to the Agent full
authority to execute, deliver, acknowledge, certify and file on behalf of the
Stockholders (in the name of any or all of the 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 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 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 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
Stockholder by the Agent, and on any other action taken or purported to be taken
on behalf of any Stockholder by the Agent, as fully binding upon such
Stockholder.
(c) The 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 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 Stockholder or to have been signed and
presented by a Stockholder.
(e) If the Agent shall die, become disabled or
otherwise be unable to fulfill his responsibilities hereunder, then the
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
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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 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
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 Pullen's and USCH'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 Netivation Schedule of Exceptions and the Pullen 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. Notwithstanding the provisions of the
Section 10.3, Netivation shall pay up to $500 of Pullen's and USCH's fees
incurred in association with filings required to be made in connection with the
Transaction, provided that such fees do not include expenses related to
professional services.
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).
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 N
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 P.O. Box 566
or any of the 6878 Fleetwood Road
Stockholders: McLean, VA 22101
Attention: Dale Pullen
Facsimile: (703) 760-0942
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with a copy to: Morris A. Nunes, Atty., P.C.
7247 Lee Hwy
Falls Church, VA 22046
Facsimile: (703) 241-4935
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 and transmitted by facsimile, 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: Pullen and its successors and assigns (if any); USCH and its successors
and assigns (if any); the 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: Pullen; USCH; the 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 affiliate 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 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.
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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 MEDIATION AND ARBITRATION. Any disputes or claims
arising hereunder shall be mediated by a mediation service in Washington, D.C.,
having no fewer than three (3) years of operating experience in Washington,
D.C.. If after good faith by the parties to this Agreement mediation is
unsuccessful in any particular, then as to any remaining controversy or claim
arising out of or relating to this Agreement or the breach thereof, same shall
be settled by arbitration in Washington, D.C., in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. If the amount of the controversy or claim is less than
$200,000 following mediation efforts, the arbitration shall be conducted by a
single arbitrator, but if the amount exceeds $200,000, then the arbitration
shall be conducted by a panel of three arbitrator who are experienced in
corporate matters and contract disputes. The prevailing party in any arbitration
hereunder shall be entitled to the recovery from the other party of its
reasonable attorneys' fees and costs of the proceeding.
10.17 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.
10.18 CROSS-GUARANTEE . Each of Netivation and Merger Sub
cross-guarantee the performance of the obligations of each other created by the
terms of this Agreement. Each of Pullen, USCH and the Stockholders
cross-guarantee the performance of the obligations of each other created by the
terms of this Agreement.
10.19 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."
(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.
[Remainder of Page Intentionally Left Blank]
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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 SEVEN CORP.,
a Delaware corporation
By
-----------------------------------------
Anthony J. Paquin
President and Chief Executive Officer
PULLEN:
PULLEN, INC.,
a Virginia corporation
By
-----------------------------------------
Dale Pullen
President
USCH:
U.S. CONGRESS HANDBOOK, INC.,
a Virginia corporation
By
-----------------------------------------
Dale Pullen
President
STOCKHOLDERS:
--------------------------------------------
Dale Pullen
--------------------------------------------
Barbara Pullen
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AGENT:
--------------------------------------------
Dale Pullen
SECRETARY'S CERTIFICATE
I, Gary S. Paquin, Secretary of Netivation.com Merger Seven Corp.,
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
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Exhibit 2.2
ASSET PURCHASE AGREEMENT DATED MARCH 27, 2000, BY AND BETWEEN
NETIVATION.COM, INC. AND CURT AND BONNIE MILLER
This Asset Purchase Agreement is entered into this ______ day
of March, 2000, by and between NETIVATION.COM, INC., a Delaware corporation
("Purchaser") and CURT AND BONNIE MILLER, husband and wife ("Seller").
R E C I T A L S :
A. Seller operates a business primarily engaged in development
and maintenance of an Internet website featuring information on products,
resources and services available for the disabled, the handicapped, the
physically challenged, the elderly, caregivers and health care professionals and
providers (the "Business"). Seller's principal place of business is 954 Murphy
Court, New Windsor, MD 21776. Seller owns equipment, intellectual property,
contract rights and miscellaneous assets used in connection with the operation
of the Business.
B. Purchaser desires to acquire substantially all the assets
used or useful, or intended to be used, in the operation of the Business, and
Seller desires to sell such assets to Purchaser.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
A G R E E M E N T :
SECTION 1 - DESCRIPTION OF TRANSACTION
1.1 ASSETS PURCHASED. Seller shall sell to Purchaser and
Purchaser agrees to purchase from Seller, on the terms and conditions set forth
in this Agreement, the assets set forth on Exhibit A hereto (the "Assets").
1.2 LIABILITIES ASSUMED. Purchaser shall assume no liabilities
except the obligation to perform all of Seller's future obligations under the
agreements listed on Exhibit B hereto.
1.3 EXCLUDED ASSETS. Excluded from this sale and purchase are
any other assets of the Business not specified in Section 1.1.
1.4 PURCHASE PRICE FOR ASSETS. The purchase price for the
Assets shall be Two Hundred Fifty Thousand Dollars ($250,000) cash and Twenty
Thousand (20,000) shares of Netivation.com, Inc. common stock (the "Netivation
Stock") valued as of the Closing Date.
1.5 PAYMENT OF PURCHASE PRICE. The cash portion of the
purchase price for the Assets shall be paid at Closing, by wire transfer to the
Seller. The shares of Netivation Stock shall be transferred to Seller as soon as
practicable after the Closing.
1.6 CLOSING. This Agreement shall be closed at the offices of
Moffatt, Thomas, Barrett, Rock & Fields, Chtd, 101 S. Capitol Blvd, 10th Floor,
Boise, Idaho 83702 on or before March 31, 2000, or at such other time as the
parties may agree in writing (the "Closing" or the "Closing Date"). If Closing
has not occurred on or prior to March 31, 2000, then either party may elect to
terminate this Agreement. If, however, the Closing has not occurred because of a
breach of contract by one or more parties, the breaching party or parties shall
remain liable for breach of contract.
1.7 ADJUSTMENTS. The operation of the Business and related
income and expenses up to the close of business on the day before the Closing
Date shall be for the account of Seller and
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thereafter for the account of Purchaser. Expenses, including but not limited
to utilities, taxes and rents shall be prorated between Seller and Purchaser
as of the close of business on the Closing Date, the proration to be made and
paid, insofar as reasonably possible, on the Closing Date, with settlement of
any remaining items to be made within 30 days following the Closing Date.
1.8 SHARES ISSUED. Each certificate representing any of the
shares of Netivation Stock to be issued pursuant to this Agreement 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 ARE
RESTRICTED WITHIN THE MEANING OF RULE 144 OF 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."
1.9 TAX TREATMENT . Purchaser and Seller intend that the
transaction contemplated by this Agreement be treated as a purchase and sale of
assets that would be reportable to the Internal Revenue Service as a taxable
transaction.
1.10 FURTHER ACTION . If, at any time after the Closing Date,
any further action is determined by Purchaser to be necessary or desirable to
carry out the purposes of this Agreement or to vest Purchaser with full right,
title and possession of and to all rights and property of the Business, the
officers and directors of Purchaser shall be fully authorized (in the name of
Seller and otherwise) to take such action.
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in Schedule 2 (Seller's Schedule of
Exceptions), Seller represents and warrants, to and for the benefit of
Purchaser, as follows:
2.1 COMPANY EXISTENCE. Seller has all requisite power and
authority to own, operate and/or lease the Assets, as the case may be, and to
carry on the Business as now being conducted.
2.2 AUTHORIZATION. The execution, delivery, and performance of
this Agreement have been duly authorized and approved by the Seller, and this
Agreement constitutes a valid and binding Agreement of Seller in accordance with
its terms.
2.3 BROKERS AND FINDERS. Seller has not employed any broker or
finder in connection with the transactions contemplated by this Agreement, or
taken action that would give rise to a valid claim against any party for a
brokerage commission, finder's fee, or other like payment.
2.4 TRANSFER NOT SUBJECT TO ENCUMBRANCES OR THIRD-PARTY
APPROVAL. The execution and delivery of this Agreement by Seller, and the
consummation of the contemplated transactions, will not result in the creation
or imposition of any valid lien, charge, or encumbrance on any of the Assets,
and will not require the authorization, consent, or approval of any third party,
including any governmental subdivision or regulatory agency.
2.5 EMPLOYMENT MATTERS. Seller 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, and Seller has no employees.
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2.6 NONCANCELLABLE CONTRACTS. At the time of Closing, there
will be no material leases, employment contracts, contracts for services or
maintenance, or other similar contracts existing or relating to or connected
with the operation of the Business not cancellable within 30 days, except those
Agreements listed on Exhibit C.
2.7 TAX MATTERS AND LICENSES. Seller understands that it is
solely responsible for any and all liabilities for taxes (including liabilities
for interest, additions to tax, and penalties thereon and related expenses) with
respect to the operations, sale, or other activities of the Business. Seller
also understands that it was solely responsible for all material licenses,
permits, and authorizations, and any and all liabilities related thereto,
necessary to own and otherwise conduct its operation of the Business.
2.8 FINANCIAL INFORMATION. The financial information furnished
by Seller to Purchaser involving the Business was generated in the ordinary
course of operation of the Business, and to the best of Seller's knowledge, is
accurate utilizing generally accepted accounting principles.
2.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. Exhibit A is a
complete and accurate list of all material assets (whether leased or owned),
including intellectual property, of Seller which are used in the Business and
are to be purchased by Purchaser. Seller has good and marketable title to all of
its properties and assets, including those listed on Exhibit A, 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 the Business
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 Seller in conjunction
with the Business are in good operating condition and repair and are reasonably
fit and usable for the purposes for which they are being used. Seller is in
compliance with all material terms of each lease to which it is a party or is
otherwise bound.
2.10 PATENTS AND TRADEMARKS . Seller owns or possesses
sufficient legal rights to all trademarks, service marks, trade names,
copyrights, trade secrets and licenses, and 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 Seller 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. Seller has not received any communications
alleging that it either has violated or, by conducting the Business, 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. None
of Seller'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 the Seller's business by the employees of Seller.
The conduct of the Business as proposed, will not, 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.
Seller 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 Seller, except for inventions, trade secrets or proprietary
information that have been assigned to Seller.
2.11 LITIGATION. Seller has no knowledge of any claim,
litigation, proceeding, or investigation pending or threatened against Seller
that might result in any material adverse change in the Business or condition of
Assets being conveyed under this Agreement.
2.12 SECURITIES LAWS MATTERS. Seller 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 a
private placement exemption from registration under Section 4(2) of the
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Securities Act, based in part upon the Seller's representations contained in
this Agreement. Seller hereby represents and warrants as follows:
(a) KNOWLEDGE AND EXPERIENCE. Seller is an
"accredited investor" within the meaning of Regulation D promulgated under the
Securities Act and/or Seller is knowledgeable and has substantial experience in
evaluating and investing in transactions in companies similar to Purchaser so
that Seller is capable of evaluating the merits and risks of its investment in
Purchaser. Seller has by reason of the Business or financial knowledge and
experience, the capacity to protect Seller's own interests in connection with
the transactions contemplated by this Agreement. Further, Seller is aware of no
publication of any advertisement in connection with the transactions
contemplated by this Agreement. Seller can bear the economic risk of the
transactions contemplated by this Agreement. Seller has been advised or is aware
of the provisions of Rule 144 promulgated under the Securities Act, including
affiliate status, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions. Seller acknowledges
that he or she will be required to hold the Netivation Stock for a period of one
year prior to resale in a public market transaction involving a broker or
dealer, consistent with Rule 144.
(b) PURCHASER INFORMATION. Seller has had an
opportunity to discuss Purchaser's business, management and financial affairs,
both as currently conducted and as proposed to be conducted following the
transactions contemplated by this Agreement, with directors, officers and
management of Purchaser and has had the opportunity to review Purchaser's
operations and facilities. Seller has also had the opportunity to ask questions
of, and receive answers from, Purchaser and its management regarding the terms
and conditions of the transactions contemplated by this Agreement and the
receipt of Netivation Stock.
(c) ACQUISITION FOR OWN ACCOUNT. Seller is acquiring
the Netivation Stock for Seller's own account for investment only, and not with
a view towards distribution.
2.13 ACCURACY OF REPRESENTATIONS AND WARRANTIES. None of the
representations or warranties of Seller contain or will contain any untrue
statement of a material fact or omit or will omit or misstate a material fact
necessary in order to make statements in this Agreement not misleading. Seller
knows of no fact that has resulted, or that will result in a material change in
the Business, operations, or assets of Seller that has not been set forth in
this Agreement or otherwise disclosed to Purchaser.
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as set forth in Schedule 3 (Purchaser's Schedule of
Exceptions), Purchaser represents and warrants, to and for the benefit of
Seller, as follows:
3.1 COMPANY EXISTENCE. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the state of
Delaware. Purchaser has all requisite corporate power and authority to enter
into this Agreement and perform its obligations hereunder.
3.2 VALIDITY. This Agreement constitutes a valid and binding
Agreement of Purchaser in accordance with its terms.
3.3 BROKERS AND FINDERS. Purchaser has not employed any broker
or finder in connection with the transaction contemplated by this Agreement and
has taken no action that would give rise to a valid claim against any party for
a brokerage commission, finder's fee, or other like payment.
3.4 ACCURACY OF REPRESENTATIONS AND WARRANTIES. None of the
representations or warranties of Purchaser contain or will contain any untrue
statement of a material fact or omit or will omit or misstate a material fact
necessary in order to make the statements contained herein not misleading.
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SECTION 4 - CERTAIN COVENANTS OF SELLER
4.1 SELLER'S OPERATION OF BUSINESS PRIOR TO CLOSING. Seller
agrees that between the date of this Agreement and the Closing Date, Seller
will:
(a) Continue to operate the Business in the usual and
ordinary course and in substantial conformity with all applicable laws,
ordinances, regulations, rules, or orders, and will use its best efforts to
preserve its business organization and preserve the continued operation of the
Business with its customers, suppliers, and others having business relations
with Seller.
(b) Not assign, sell, lease, or otherwise transfer or
dispose of any of the assets used in the performance of the Business, whether
now owned or hereafter acquired, except in the normal and ordinary course of
business and in connection with its normal operation.
(c) Maintain all of its assets other than inventories
in their present condition, reasonable wear and tear and ordinary usage
excepted, and maintain the inventories at levels normally maintained.
4.2 ACCESS AND INVESTIGATION. Seller shall ensure that, at all
times during the Pre-Closing period:
(a) Seller and its representatives provide Purchaser
and its representatives with access, during normal business hours upon
reasonable notice, to Seller's representatives, personnel and assets and to all
existing books, records, tax returns, work papers and other documents and
information relating to Seller;
(b) Seller and its representatives provide Purchaser
and its representatives with such copies of existing books, records, tax
returns, work papers and other documents and information relating to Seller as
Purchaser may request in good faith; and
(c) Seller and its representatives compile and
provide Purchaser and its representatives with such additional financial,
operating and other data and information regarding Seller as Purchaser may
request in good faith. Without limiting the generality of the foregoing, during
the Pre-Closing Period, Seller shall promptly provide Purchaser with copies of:
(i) all material operating and financial
reports prepared by Seller for its senior management, including copies of the
unaudited monthly balance sheets of Seller and the related unaudited monthly
statements of operations and statements of cash flows;
(ii) any material notice, document or other
communication sent by or on behalf of Seller to any party to any Seller contract
or sent to Seller by any party to any Seller contract (other than any
communication that relates solely to commercial transactions of the type sent in
the ordinary course of business);
(iii) any written notice, report or other
document filed with or sent to any governmental body in connection with the
transactions contemplated by this Agreement; and
(iv) any material written notice, report or
other document received by Seller from any governmental body.
4.3 CHANGE OF NAME. On or prior to the Closing Date, Seller
will take all action necessary or appropriate to permit Purchaser to legally
commence use of Seller's name on the Closing Date. Seller shall not use the name
"DISABILITYMALL" or "DISABILITYMALL.COM" in any business whatsoever after the
Closing Date.
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4.4 NO NEGOTIATION. Seller shall ensure that, during the
Pre-Closing period, neither Seller nor any of its representatives directly or
indirectly:
(a) solicits or encourages the initiation of any
inquiry, proposal or offer from any person (other than Purchaser) relating to
any transaction contemplated by this Agreement;
(b) participates in any discussions or negotiations
with, or provides any non-public information to, any person (other than
Purchaser) relating to any transaction contemplated by this Agreement; or
(c) considers the merits of any unsolicited inquiry,
proposal or offer from any person (other than Purchaser) relating to any
transaction contemplated by this Agreement.
SECTION 5 - ADDITIONAL COVENANTS OF THE PARTIES
5.1 CONDITIONS AND BEST EFFORTS. Purchaser and Seller will use
their best efforts to effectuate the transactions contemplated by this Agreement
and to fulfill all the conditions of Purchaser's and Seller's obligations under
this Agreement, and shall do all acts and things as may be required to carry out
Purchaser's and Seller's obligations and to consummate this Agreement.
5.2 CONFIDENTIAL INFORMATION. If for any reason the sale of
Assets is not closed, Purchaser will not disclose to third parties any
confidential information received from Seller in the course of investigating,
negotiating, and performing the transactions contemplated by this Agreement.
5.3 RESALE. Seller shall not sell or otherwise transfer any
Netivation Stock until the requirements of Rule 144 are satisfied for such sale
or transfer unless the stock is earlier registered. Purchaser shall endeavor to
timely cooperate with Seller regarding the resale of Netivation Stock once the
requirements in the preceding sentence have been satisfied.
SECTION 6 - CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to effect the transaction
contemplated by this Agreement are subject to the satisfaction, at or prior to
Closing, of each of the following conditions (any of which may be waived by
Purchaser, in whole or in part):
6.1 REPRESENTATIONS, WARRANTIES, AND COVENANTS OF SELLER. All
representations and warranties made in this Agreement by Seller shall be true as
of the Closing Date as fully as though such representations and warranties had
been made on and as of the Closing Date, and, as of the Closing Date, Seller
shall not have violated nor shall have failed to perform in accordance with any
covenant contained in this Agreement.
6.2 CONDITIONS OF THE BUSINESS. There shall have been no
material adverse change in the manner of operation of the Business prior to the
Closing Date.
6.3 NO SUITS OR ACTIONS. At the Closing Date no suit, action,
or other proceeding shall have been threatened or instituted to restrain,
enjoin, or otherwise prevent the consummation of this Agreement or the
contemplated transactions.
6.4 SECURITIES LAW COMPLIANCE. All applicable requirements of
the Securities Act of 1933 and any applicable state securities laws shall have
been satisfied.
6.5 APPROVALS. This Agreement and the consummation of the
transactions contemplated by this Agreement shall have been approved by all
necessary corporate action on the part of Purchaser.
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6.6 AGREEMENTS AND DOCUMENTS. Purchaser 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 D;
(b) a Bill of Sale and Assignment, substantially in
the form of Exhibit E;
(c) an Assignment of Intellectual Property,
substantially in the form of Exhibit F;
(d) a Prospective Offeree Questionnaire,
substantially in the form of Exhibit G executed by each of Curt Miller and
Bonnie Miller;
(e) a certificate executed by Seller containing the
representation and warranty that (i) each of the representations and warranties
made by Seller 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; and
(f) such other documents, to the extent such
documents are reasonably available or should be reasonably available, as
Purchaser may reasonably request in good faith for the purpose of (i) evidencing
the accuracy of any representation or warranty made by Seller, (ii) evidencing
the compliance by Seller with, or the performance by Seller 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 contemplated by this
Agreement.
SECTION 7 - CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller to effect the transactions
contemplated by this Agreement are subject to the fulfillment, at or prior to
Closing, of each of the following conditions (any of which may be waived by
Seller, in whole or in part):
7.1 REPRESENTATIONS, WARRANTIES, AND COVENANTS OF PURCHASER.
All representations and warranties made in this Agreement by Purchaser shall be
true as of the Closing Date as fully as though such representations and
warranties had been made on and as of the Closing Date, and Purchaser shall not
have violated or shall not have failed to perform in accordance with any
covenant contained in this Agreement.
7.2 AGREEMENTS AND DOCUMENTS. Seller 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 D;
(b) a certificate executed by Purchaser containing
the representation and warranty that (i) each of the representations and
warranties made by Purchaser 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
(c) such other documents, to the extent such
documents are reasonably available or should be reasonably available, as Seller
may reasonably request in good faith for the purpose of (i) evidencing the
accuracy of any representation or warranty made by Purchaser, (ii) evidencing
the compliance by Purchaser with, or the performance by Purchaser 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
contemplated by this Agreement.
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SECTION 8 - TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior
to the Closing:
(a) by Purchaser if (i) there is a material breach of
any covenant or obligation of Seller or (ii) Purchaser 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 Purchaser to
comply with or perform any covenant or obligation of Purchaser set forth in this
Agreement);
(b) by Seller if (i) there is a material breach of
any covenant or obligation of Purchaser or (ii) Seller 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 Seller to
comply with or perform any covenant or obligation of Seller set forth in this
Agreement);
(c) by Purchaser at or after the Closing Date if any
condition set forth in Section 6 has not been satisfied by the Closing Date;
(d) by Seller at or after the Closing Date if any
condition set forth in Section 7 has not been satisfied by the Closing Date;
(e) by Purchaser if the Closing has not taken place
on or before March 31, 2000 (other than as a result of any failure on the part
of Purchaser to comply with or perform any covenant or obligation of Purchaser
set forth in this Agreement);
(f) by Seller if the Closing has not taken place on
or before March 31, 2000 (other than as a result of the failure on the part of
Seller to comply with or perform any covenant or obligation of Seller set forth
in this Agreement); or
(g) by the mutual consent of Purchaser and Seller.
8.2 TERMINATION PROCEDURES. If Purchaser wishes to terminate
this Agreement pursuant to Section 8.1, Purchaser shall deliver to Seller a
written notice stating that Purchaser is terminating this Agreement and setting
forth a brief description of the basis on which Purchaser is terminating this
Agreement. If Seller wishes to terminate this Agreement pursuant to Section 8.1,
Seller shall deliver to Purchaser 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
Purchaser nor Seller shall be relieved of any obligation or liability arising
from any prior breach by such party of any provision of this Agreement; and (b)
the parties shall, in all events, remain bound by and continue to be subject to
the provisions set forth in Section 9.
SECTION 9 - INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Agreement shall survive the Closing
of this Agreement, except that any party to whom a representation or warranty
has been made in this Agreement shall be deemed to have waived any
misrepresentation or breach of representation or warranty of which such party
had knowledge prior to Closing. Any party learning of a misrepresentation or
breach of representation or warranty under this Agreement shall immediately give
written notice thereof to all other parties to this Agreement. The
representations and warranties in this Agreement shall terminate one year from
the Closing Date, and such representations or warranties shall thereafter be
without force or effect, except (i) any claim with respect to which notice has
been given to the party to be charged prior to such expiration date and (ii)
fraud claims and claims under Section 2.7, which shall survive for the statute
of limitations applicable to claims based on such matters.
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9.2 SELLER'S INDEMNIFICATION. Seller hereby agrees to
indemnify and hold Purchaser, its successors, and assigns harmless from and
against:
(a) Any and all claims, liabilities, and obligations
of every kind and description, contingent or otherwise, arising out of or
related to the operation of the Business prior to the close of business on the
day before the Closing Date, except for claims, liabilities, and obligations of
Seller expressly assumed by Purchaser under this Agreement or paid by insurance
maintained by Seller or Purchaser.
(b) Any and all damage or deficiency resulting from
any material misrepresentation, breach of warranty or covenant, or
nonfulfillment of any agreement on the part of Seller under this Agreement.
(c) Seller's indemnity obligations under Section 9.2
shall be subject to the following: if any claim is asserted against Purchaser
that would give rise to a claim by Purchaser against Seller for indemnification
under the provisions of this section, then Purchaser shall promptly give written
notice to Seller concerning such claim and Seller shall, at no expense to
Purchaser, defend the claim.
9.3 PURCHASER'S INDEMNIFICATION. Purchaser agrees to defend,
indemnify, and hold harmless Seller from and against:
(a) Any and all claims, liabilities, and obligations
of every kind and description arising out of or related to the operation of the
Business following Closing or arising out of Purchaser's failure to perform
obligations of Seller assumed by Purchaser pursuant to this Agreement.
(b) Any and all damage or deficiency resulting from
any material misrepresentation, breach of warranty or covenant, or
nonfulfillment of any agreement on the part of Purchaser under this Agreement.
9.4 INDEMNITY RESERVE. In order to secure Purchaser's right of
indemnity, Seller shall place 15,000 shares of Netivation Stock in escrow in
accordance with the terms of the Escrow Agreement, substantially in the form
attached hereto as Exhibit D.
SECTION 10 - MISCELLANEOUS PROVISIONS
10.1 PURCHASER'S ACCEPTANCE. Purchaser represents and
acknowledges that it has entered into this Agreement on the basis of its own
examination, personal knowledge, and opinion of the value of the Business.
Purchaser has not relied on any representations made by Seller other than those
specified in this Agreement. Purchaser further acknowledges that Seller has not
made any agreement or promise to repair or improve any of the equipment, or
other personal property being sold to Purchaser under this Agreement, and that
Purchaser takes all such property in the condition existing on the date of this
Agreement, except as otherwise provided in this Agreement.
10.2 RISK OF LOSS. The risk of loss, damage, or destruction to
any of the equipment, inventory, or other assets to be conveyed to Purchaser
under this Agreement shall be borne by Seller to the time of Closing. In the
event of such loss, damage, or destruction, Seller, to the extent reasonable,
shall replace the lost property or repair or cause to repair the damaged
property to its condition prior to the damage. If replacement, repairs, or
restorations are not completed prior to Closing, then the purchase price shall
be adjusted by an amount agreed upon by Purchaser and Seller that will be
required to complete the replacement, repair, or restoration following Closing.
If Purchaser and Seller are unable to agree, then Purchaser, at its sole option
and notwithstanding any other provision of this Agreement, upon notice to
Seller, may rescind this Agreement and declare it to be of no further force and
effect, in which event there shall be no Closing of this Agreement and all the
terms and provisions of this Agreement shall be deemed null and void.
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10.3 AGREEMENT NOT TO COMPETE. Seller, for a period of twelve
(12) months immediately following Closing, will not, directly or indirectly, at
any place in the world, engage or become interested (as owner, stockholder,
partner, director, officer, member, creditor, consultant, or employee) in any
business in competition with any portion of the Business as conducted by
Purchaser. Seller acknowledges that Purchaser is doing business throughout the
world and that the worldwide geographic scope of this covenant is reasonably
necessary to protect Purchaser's legitimate business interests.
10.4 AMENDMENT AND MODIFICATION. Subject to applicable law,
this Agreement may be amended, modified, or supplemented only by a written
agreement signed by all of the parties hereto.
10.5 NOTICES. All notices, requests, demands, and other
communications required or permitted hereunder will be in writing and will be
deemed to have been duly given when delivered by hand or two days after being
mailed by certified or registered mail, return receipt requested, with postage
prepaid:
If to Purchaser, to:
Netivation.com, Inc.
806 Clearwater Loop, Suite N
Post Falls, ID 83854
with copy to:
Mark Ellison
Moffatt, Thomas, Barrett, Rock & Fields, Chtd.
101 S. Capitol Blvd., 10th Floor
Post Office Box 829
Boise, ID 83701-0829
or to such other person or address as Purchaser furnishes to Seller pursuant to
the above.
If to Seller to:
Curt and Bonnie Miller
954 Murphy Court
New Windsor, MD 21776
with copy to:
-------------------------
-------------------------
-------------------------
or to such other address as Seller furnishes to Purchaser pursuant to the above.
10.6 ATTORNEY FEES. In the event an arbitration, suit or
action is brought by any party under this Agreement to enforce any of its terms,
or in any appeal therefrom, it is agreed that the prevailing party shall be
entitled to reasonable attorneys fees to be fixed by the arbitrator, trial
court, and/or appellate court.
10.7 DISPUTE RESOLUTION. Any disputes or claims arising
hereunder shall be mediated by a mediator or mediation service in Boise, Idaho,
having no fewer than three (3) years of operating experience in Boise, Idaho. If
after good faith by the parties to this Agreement mediation is unsuccessful in
any particular, then as to any remaining controversy or claim arising out of or
relating to this Agreement or the breach thereof, same shall be settled by
arbitration in Boise, Idaho, in accordance
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with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
10.8 PRESUMPTION. This Agreement or any section thereof shall
not be construed against any party due to the fact that said Agreement or any
section thereof was drafted by said party. Seller acknowledges that it has had
sufficient opportunity to obtain advice from its own counsel in regards to the
drafting and creation of this Agreement.
10.9 GOVERNING LAW, TIME, TITLES, PRONOUNS. This Agreement
shall be governed by and construed in accordance with the laws of the state of
Idaho. In computing any period of time pursuant to this Agreement, the day of
the act, event, or default from which the designated period of time begins to
run shall be included, unless it is a Saturday, Sunday, or a legal holiday, in
which event the period shall begin to run on the next day which is not a
Saturday, Sunday, or legal holiday. All section titles or captions contained in
this Agreement are for convenience only and shall not be deemed part of the
context nor affect the interpretation of this Agreement. All pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural as the identity of the person or persons may require. This
Agreement contains the entire understanding between and among the parties and
supersedes any prior understandings and agreements among them respecting the
subject matter of this Agreement. Any amendments to this Agreement must be in
writing and signed by the party against whom enforcement of that amendment is
sought. This Agreement shall be binding upon the heirs, executors,
administrators, successors, and assigns of the parties hereto.
10.10 FURTHER ACTION, COUNTERPARTS, SAVINGS CLAUSE. The
parties hereto shall execute and deliver all documents, provide all information,
and take or forbear from all such action as may be necessary or appropriate to
achieve the purpose of the Agreement. This Agreement may be executed in several
counterparts and transmitted by facsimile and all so executed shall constitute
one Agreement, binding on all the parties hereto even though all the parties are
not signatories to the original or the same counterpart. Nothing herein shall be
construed to be to the benefit of any third party, nor is it intended that any
provision shall be for the benefit of any third party. If any provision of this
Agreement, or the application of such provision to any person or circumstance,
shall be held invalid, the remainder of this Agreement, or the application of
such provision to persons or circumstances other than those as to which it is
held invalid, shall not be affected thereby.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement the date and year set forth above.
PURCHASER:
NETIVATION.COM, INC., a Delaware
corporation
By
---------------------------------------
Anthony J. Paquin, President and
Chief Executive Officer
SELLER:
CURT AND BONNIE MILLER, husband and wife
-------------------------------------------
Curt Miller
-------------------------------------------
Bonnie Miller
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Exhibit 10.1
ANCHOR DISTRIBUTION AGREEMENT
This agreement (the "Agreement") is made and entered into as of _______________,
2000, between Microsoft Corporation ("Microsoft"), with offices at One Microsoft
Way, Redmond, WA 98052-6399 and Netivation.com (the "Company"), with offices at
806 West Clearwater Loop, Suite N, Post Falls, ID 83854. Microsoft and Company
agree as follows:
SECTION 1. DEFINITIONS
"COMPANY LOGO" means the Company logo(s) and trademark(s) provided to
Microsoft for use in connection with the Service.
"CONTENT" means material provided by Company to Microsoft, including,
but not limited to, advertisements, promotional banners and the Newsletter.
"COPY" means a single email delivered to a specific Subscriber
consisting of a reproduction (in whole or in part) of a specific version of the
Newsletter and/or hypertext link to the Newsletter.
"IPRS" means trade secrets, patents, copyrights, trademarks, service
marks, trade names, know-how, moral rights, rights of publicity and privacy, and
similar rights of any type under the laws of any governmental authority,
domestic or foreign, including all applications and registrations relating to
any of the foregoing.
"NEWSLETTER" means the publications to be provided by Company to
Microsoft, Copies of which will be distributed to Subscribers via the Service.
"REGISTRATION PAGES" means those web pages that are displayed to users
of the U.S. English language Hotmail service in a manner to permit such users to
register to receive the Copies and other third party content via the Service.
"SERVICE" means the WebCourier Service whereby a person registering or
registered for a U.S. English language Hotmail email account may also register
to receive third party content via the Hotmail service.
"SUBSCRIBER" means a Hotmail account that has consented to receiving
the Newsletter.
SECTION 2. MICROSOFT OBLIGATIONS
2.1 SERVICE. Microsoft will provide Company with placement on the
Registration Page consisting of Newsletter name, for which the Newsletter name
will link to a hide-and-seek functionality which displays the Company Logo and a
text description of the Newsletter. Company will be listed as an "Anchor
Provider" in the Politics category ("Category"). Microsoft may modify the
Registration Pages (including, without limitation, Category names) from time to
time, provided that Company receives reasonably comparable placement on such
revised pages as specified herein.
2.2 PROVIDERS. The Newsletters of not more than one (1) "Premier
Provider" and [confidential information filed separately with the SEC] "Anchor
Providers" may be referenced in the Category. The "Premier Provider" will
receive the most prominent placement in the Category, and each "Anchor Provider"
will receive placement in descending order [confidential information filed
separately with the SEC] by such "Anchor Provider" to Microsoft to appear in
such category.
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2.3 DISTRIBUTION. Subject to paragraph 3.1, Microsoft will deliver
Copies to Subscribers according to such schedules as mutually agreed upon by
Company and Microsoft. Company may change the schedule pursuant to which the
Copies are distributed to Subscribers by giving Microsoft written notice of the
requested change at least fifteen (15) business days prior to the scheduled
change. Company may not schedule Copies of more than one Newsletter to be
distributed in any twenty-four (24) hour period.
2.4 POLITICS ADVERTISEMENT. Microsoft will provide Company with a
permanent advertisement approximately one-third (1/3) of the page beginning
below the header in the right column on the MSN Politics home page and
appropriate story level pages designated by Microsoft (collectively, "Politics
Ad"). Company may alternate the elements and text within the Politics Ad,
however, such Content shall be subject to prior approval by Microsoft. The
Politics Ad (including the site to which the ad links) must identify Company as
the purchaser of the advertisement. Specifications for the material elements
that Company must include in the Politics Ad and any link are attached hereto as
Exhibit A, and Company agrees that all submissions will comply with all such
applicable elements.
2.5 ADVERTISING IMPRESSIONS. Microsoft will provide Company with the
following advertising impressions ("Impressions"):
(a) [Confidential information filed separately with the SEC]
Impressions which shall be distributed between various Microsoft properties, at
Microsoft's sole discretion; and
(b) [Confidential information filed separately with the SEC]
Impressions which shall appear on MSNBC.
Impressions consist of a combination of banners (in rotation with other
companies), e-mail advertisements (within the text of the e-mail), advertorials
and any other advertising inventory elements greed upon by the parties. Such
Impressions may not be redeemed for cash and will expire at the end of the Term.
Microsoft guarantees a minimum of [confidential information filed separately
with the SEC] Impressions of the Political Ad. If Microsoft fails to deliver the
agreed upon number of Impressions during the Term, Company's sole remedy for
such failure will be the extension of the Term until the agreed upon number of
Impressions (or other Impressions as the parties may agree) are provided.
Company may purchase additional advertising impressions during the Term at
Microsoft's then-current rate card. Company will create and deliver to Microsoft
all promotional banners for review at least ten (10) days prior to the first run
date for such banner as designated by Company. All promotional banners shall
meet all specifications and submissions requirements provided by Microsoft.
SECTION 3. COMPANY OBLIGATIONS
3.1 DELIVERY AND SPECIFICATIONS. Company will deliver the Newsletter to
Microsoft at a specified URL, and on a delivery schedule agreed upon by the
parties in writing. The Company Logo, Newsletter text description and the
Newsletters are all subject to specifications and submissions guidelines (as
applicable) established by Microsoft and set forth in Exhibit B, as the same may
be modified from time to time by Microsoft upon notice. Company will deliver the
Company Logo and Newsletter text description to Microsoft in the manner directed
by Microsoft. Company acknowledges that time is of the essence in providing the
foregoing to Microsoft, and the Company's failure to meet the foregoing timing
requirements or any applicable specifications may delay or prevent delivery of
Copies hereunder.
3.2 LICENSE. Company hereby grants Microsoft a world-wide,
non-exclusive, royalty-free license to:
(a) reproduce, promote, market, distribute, display, transmit,
download, upload, edit, modify and otherwise use the Newsletter to fulfill
Microsoft's obligations under this Agreement; and
(b) reproduce, display, transmit and otherwise use the Company
Logo and Newsletter text description in connection with (i) providing the
Service and Newsletter to Subscribers, and (ii) marketing and promoting the
Service and Newsletter.
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3.3 LIMITATIONS. The Content may not contain, promote, market,
advertise, distribute, offer to distribute, link (either directly or, if with
the knowledge of Company, indirectly) to or otherwise related to content that:
(a) is inappropriate, obscene, defamatory, profane, indecent
or unlawful;
(b) infringes or misappropriates third party IPRs;
(c) constitutes "hate speech," whether directed at an
individual or a group, and whether based upon the race, sex, creed, national
origin, religious affiliation, sexual orientation or language of such individual
or group;
(d) promotes or contains viruses, worms, corrupted files,
cracks or other materials that are intended to or may damage or render
inoperable software, hardware or security measures of Microsoft, Subscribers or
any third party;
(e) facilitates gambling, or the sale or use of liquor,
tobacco products or illicit drugs;
(f) facilitates, promotes or forwards pyramid schemes, chain
letters or illegal contests; or
(g) otherwise restricts or inhibits any person's use or
enjoyment of Hotmail or the Service.
The Newsletter may not contain, promote, market, advertise, distribute, or offer
to distribute competing e-mail or newsletter products whether offered by Company
or a third party (E.G., Lycos, Excite and other services designated by
Microsoft). Microsoft may, but is under no obligation to, review the Content,
and may refuse to host or make the Content available to MSN users in whole or in
part if Microsoft determines that the Content violates the foregoing
limitations, is not deemed appropriate for MSN users, or violates such other
reasonable limitations as Microsoft may adopt from time to time. Failure by
Microsoft to publish any Content does not constitute a breach of contract or
otherwise entitle Company to any legal remedy. Microsoft reserves the right to
refuse advertisements from third parties that require ads to be served from that
third party's servers.
3.4 SUBSCRIBER INFORMATION. All information regarding Subscribers
collected through the Service constitutes Confidential Information (as that term
is used in Section 9) of Microsoft, and is subject to the confidentiality
requirements of Section 9. Notwithstanding the foregoing, information obtained
by Company directly from Subscribers will not constitute Confidential
Information of Microsoft and may be used by Company from time to time; provided,
Company does not collect, use or disclose such information in any manner that
identifies the subject as a Subscriber or Hotmail customer.
3.5 CHANGES TO NEWSLETTER. Company will provide Microsoft with
[confidential information filed separately with the SEC] prior written notice of
any material change to the nature or intended audience of any Newsletter.
[Confidential information filed separately with the SEC.]
SECTION 4. CONSIDERATION
4.1 ADVANCE. Company will prepay Microsoft an advance of the fees set
forth in paragraph 4.2 in an amount equal to one million five hundred thousand
dollars (U.S.$1,500,000) (the "Advance"). The Advance is a non-refundable,
guaranteed payment to Microsoft. The Advance will be rendered to Microsoft in
four (4) equal installments on a quarterly basis (i.e., every three (3) months
during the Term). The first payment hereunder is due when this Agreement is
signed and returned to Microsoft. Microsoft will invoice Company for the three
(3) remaining payments approximately thirty (30) days prior to the beginning of
each subsequent quarter, and Company will pay such invoiced amounts on or before
the
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first day of each such subsequent quarter. Notwithstanding the foregoing,
upon termination or expiration of this Agreement, other than by Company
pursuant to paragraph 5.2(b) or Microsoft pursuant to paragraph 5.3, Company
will immediately pay Microsoft any amounts of the Advance not yet paid.
4.2 FEE. Company will pay Microsoft the following fees as consideration
for Microsoft distributing the Newsletter to Subscribers:
(a) for Newsletters scheduled to be distributed [confidential
information filed separately with the SEC], one cent (U.S.$0.01) per Copy
distributed to a Subscriber; and
(b) for Newsletters scheduled to be distributed [confidential
information filed separately with the SEC], one and one-half cent (U.S.$0.015)
per Copy distributed to a Subscriber.
4.3 DISTRIBUTION AGREEMENT. On a quarterly basis (including, at the end
of the Term), Microsoft will compare the fees accumulated for the Copies
actually distributed hereunder against the Advance paid for such quarter (or the
Term). If the fees incurred pursuant to paragraph 4.2 for the number of Copies
actually distributed during such quarter (or the Term) are greater than the
portion of the Advance paid for such quarter (or the Term), Microsoft will
invoice Company for the difference at the applicable rates noted in paragraph
4.2. If at the end of the Term the fees (including the Advance) received by
Microsoft hereunder exceed the amount of the fees incurred by Company for
distribution of Copies hereunder, Microsoft will refund the difference to
Company; except that in no event will Microsoft be required to refund or
otherwise return to Company any portion of the Advance.
4.4 INVOICE AND PAYMENT. Within thirty (30) days after the date of an
invoice, Company will pay Microsoft all amounts owing pursuant to such invoice
in readily available funds. Amounts not paid when due under this Agreement will
accrue interest at a rate of one and one-half percent (1.5%), compounded on a
monthly basis. Microsoft reserves the right to immediately suspend distribution
of the Newsletter if Company fails to make timely payment of any amounts owing
hereunder. All payments of amounts owing to Microsoft will be made at the
following location or such other location designated by Microsoft in writing:
Microsoft Corporation
PO Box 7247 - 7123
Philadelphia PA 19170-7123
4.5 REPORTS. Microsoft will provide Company with monthly reports
setting forth the number of Subscribers receiving Copies and the total number of
Copies delivered per month.
4.6 TAXES. The fees, advances and other amounts owing to Microsoft
pursuant to this Agreement do not include taxes or other governmental fees.
Company will pay all taxes and other governmental fees arising out of or related
to all transactions undertaken pursuant to this Agreement, other than taxes on
Microsoft income and revenue, and will provide Microsoft with appropriate
evidence of such payment upon request.
4.7 AUDITS. Microsoft will maintain during the Term and for at least
six (6) months thereafter all of its regular books of account relating to Copies
distributed via the Service and amounts owing to Microsoft hereunder. If Company
believes in good faith that Microsoft invoiced Company in excess of amounts
actually owing pursuant to paragraph 4.2, Company will have the right at
Company's sole expense to audit such books of account, subject to the following:
(a) Company will provide Microsoft with at least thirty (30) days' prior written
notice of such audits; (b) audits may occur only during Microsoft's regular
business hours, and at the location where such books of account are maintained
by Microsoft or such other location reasonably specified by Microsoft; (c)
Company will cooperate with Microsoft in good faith to avoid and limit any
disruption of such audits to Microsoft's business and operations; (d) such audit
will be conducted by an independent accounting firm, acceptable to Microsoft and
compensated by Company in a manner that is not affected by the outcome of the
audit (e.g., no contingency fees); (e) the auditors provide Microsoft with all
results and other communications to Company related to the audit at the same
time such
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auditors provide such communications to Company; (f) audits may not occur
more than once, may not exceed three (3) consecutive days and must be
completed within six (6) months after the end of the Term; (g) the auditors
provide their final conclusions of the audit to Company and Microsoft
simultaneously and within thirty (3) days after the last day of the audit.
Any information disclosed to or otherwise learned by Company or its auditors
in connection with an audit conducted pursuant to this paragraph constitutes
Confidential Information (as the term is used in Section 9) of Microsoft and
subject to the limitations on use set forth in paragraph 9.1.
SECTION 5. TERM AND TERMINATION
5.1 TERM. This Agreement is binding upon signature and the "Term" will
be in effect for a period of twelve (12) months commencing upon January 14,
2000.
5.2 TERMINATION. Either party may immediately terminate this Agreement:
(a) [confidential information filed separately with the SEC]; or (b) upon
written notice if the other party breaches the Agreement in any material
respect, and the breach remains uncured for a period of ten (10) days following
the breaching party's receipt of written notice of the breach from the
nonbreaching party.
5.3 MICROSOFT TERMINATION. Notwithstanding paragraph 5.1, Microsoft may
terminate this Agreement upon thirty (30) days' prior written notice if
Microsoft ceases to offer the Service. In such a case, Microsoft will return to
Company a pro rata portion of the Advance actually paid to Microsoft (less any
additional fees incurred by Company hereunder). If fees incurred by Company
hereunder exceed the amount of the pro rated Advance actually paid to Microsoft
as of the date of termination, Microsoft will invoice, and Company will promptly
pay, any additional amounts owing hereunder.
5.4 SURVIVAL. This paragraph and Sections 3.4 (Subscriber Information),
4 (Consideration), 6 (Representations and Warranties), 7 (Indemnification), 8
(Limitation of Liability), 9 (Confidentiality), and 10 (General) shall survive
any termination of this Agreement, together with all obligations, rights and
causes of action that may have accrued prior to termination, along with any
other provisions that might reasonably be deemed to survive such termination.
SECTION 6. REPRESENTATIONS AND WARRANTIES
6.1 COMPANY. Company represents and warrants that:
(a) Company has the full corporate rights, power and authority
to enter into this Agreement and to perform the acts required of it hereunder;
(b) Company's execution and performance of this Agreement do
not and will not violate any agreement to which Company is a party or by which
Company is otherwise bound, or any applicable law, rule or regulation;
(c) the Content and Company Logo do not and will not violate
any third party IPRs or give rise to any obligation for the payment of any sums
to any third party by Microsoft or Microsoft's successors in interest;
(d) the Content (in whole or in part) and Company Logo do not
and will not violate the limitations set forth in paragraph 3.3;
(e) it will not harvest or otherwise collect through the
Service information about Subscribers, including e-mail addresses, without
Subscribers' express consent.
(f) it will not link the Service or Hotmail to any unsolicited
communication sent to any third party, or otherwise use or mention the Service
or Hotmail in connection with any such unsolicited communication; and
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(g) it has in effect a privacy policy that is available online
to Subscribers and that meets or exceeds the applicable standards of an industry
recognized online privacy organization (e.g., the TRUST E Program, BBB ONLINE),
and it will adhere to the information gathering, dissemination, privacy
protection and other practices specified in such privacy policy.
6.2 MICROSOFT: Microsoft represents and warrants to Company that it has
the full corporate rights, power and authority to enter into this Agreement and
to perform the acts required of it hereunder.
6.3 WARRANTY DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE
SERVICE, NEWSLETTER, HOTMAIL, AND ANY MATERIALS OR OTHER SERVICES PROVIDED BY OR
ON BEHALF OF MICROSOFT PURSUANT TO THIS AGREEMENT ARE PROVIDED "AS IS" AND WITH
ALL DEFECTS. MICROSOFT HEREBY DISCLAIMS ALL REPRESENTATIONS, WARRANTIES AND
CONDITIONS, EXPRESS OR IMPLIED, OF FITNESS FOR A PARTICULAR PURPOSE, WORKMANLIKE
EFFORT, MERCHANTABILITY, TITLE, NONINFRINGEMENT, COMPATIBILITY, SECURITY, AND
CONDITION OR OPERATION OF THE FOREGOING, MICROSOFT DOES NOT WARRANT THE
CONTINUED OR UNINTERRUPTED OPERATION OF THE INTERNET, SERVICE, OR HOTMAIL.
SECTION 7. INDEMNIFICATION
7.1 COMPANY. The Company will indemnify and hold harmless Microsoft
against, and will defend or settle at the Company's expense, any and all
actions, claims, liabilities, losses, damages, costs, expenses, judgments and
penalties, including but not limited to reasonable attorneys' fees, or other
proceeding brought by third parties against Microsoft to the extent based on a
claim that, if true would (a) result from any misrepresentation or breach of
representation or warranty of the Company contained herein, or (b) result from
any breach of any covenant or agreement to be performed by Company hereunder.
7.2 MICROSOFT. Microsoft will indemnify and hold harmless the Company
against, and will defend or settle at Microsoft's expense, any action actions,
claims, liabilities, losses, damages, costs, expenses, judgments and penalties,
including but not limited to reasonable attorneys' fees, or other proceeding
brought by third parties against Company to the extent based on a claim that, if
true would (a) result from any misrepresentation, or breach of representation or
warranty of Microsoft contained herein, or (b) result from any breach of any
covenant or agreement to be performed by Microsoft hereunder.
7.3 PROCEDURE. The party to be indemnified, defended and held harmless
pursuant to paragraph 7.1 or 7.2 will: (a) provide the indemnifying party with
prompt written notice of any such claim, (b) permit the indemnifying party to
assume and control the defense of such action, and (c) not enter into any
settlement or compromise of any such claim without the indemnifying party's
prior written consent (not to be unreasonably withheld). The indemnifying party
will pay any and all costs, damages, and expenses (including but not limited to
reasonable attorneys' fees and costs) awarded or incurred by the indemnified
party in any such action or proceeding attributable to any such claim. The
indemnified party may also retain counsel at its own expense in connection with
the defense or settlement of any such claim.
SECTION 8. LIMITATION OF LIABILITY
8.1 LIMITATION OF REMEDIES. EXCEPT TO THE EXTENT ARISING PURSUANT TO
SECTION 7 OR A BREACH OF SECTION 9, UNDER NO CIRCUMSTANCE SHALL EITHER PARTY BE
LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR
EXEMPLARY DAMAGES (EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES), ARISING FROM OR OTHERWISE RELATED TO THIS AGREEMENT, SUCH AS, BUT
NOT LIMITED TO, LOSS OF REVENUE, PROFITS, ACCOUNTS OR LOST BUSINESS, AND WHETHER
ARISING IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.
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8.2 LIMITATION OF DAMAGES. EXCEPT TO THE EXTENT ARISING PURSUANT TO
SECTION 7 OR A BREACH OF SECTION 9, UNDER NO CIRCUMSTANCE SHALL EITHER PARTY BE
LIABLE TO THE OTHER PARTY FOR DAMAGES IN EXCESS OF AMOUNTS ACTUALLY PAID AND
OWING TO MICROSOFT HEREUNDER.
SECTION 9. CONFIDENTIALITY
The parties acknowledge and agree that the Microsoft Non-Disclosure Agreement
dated as of November 4, 1999 ("NDA") entered into by and between the parties
applies to this Agreement as if fully set forth herein and that all of the terms
of this Agreement (including but not limited to its existence) and all
discussions and negotiations related thereto are considered Confidential
Information (as that term is defined in the NDA) of Microsoft under the NDA.
SECTION 10. GENERAL
10.1 NOTICES. All notices and requests in connection with this
Agreement will be deemed given (a) when personally delivered, (b) when delivered
by facsimile (followed by delivery of the original in the United States mail,
postage prepaid, certified or registered, return receipt request) or telex, (c)
the next business day following delivery to a nationally recognized courier
service guarantying next-day delivery, or (d) five (5) business days after being
placed in the United States mail, postage prepaid, certified or registered,
return receipt requested, as follows:
Notice to Company: Notices to Microsoft:
- ------------------ ---------------------
Netivation.com, Inc. Microsoft Corporation
806 West Clearwater Loop, Suite N One Microsoft Way
Post Falls, ID 83854 Redmond, WA 98052-6399
Attn: Tony Paquin Attn: Cyrus Krohn
Telephone:___________________ Telephone: (425) 705-2179
Fax:________________________ Fax: (425) 936-7329
Copy to: Copy to:
Netivation.com, Inc. Microsoft Law & Corporate Affairs
806 West Clearwater Loop, Suite N One Microsoft Way
Post Falls, ID 83854 Redmond, WA 98052
Fax:_________________________ Fax: (425) 936-7329
Attn: Legal Department Attn: Gregory Ritts
or to such other address as the party to receive the notice or request so
designates by at least ten (10) days' prior written notice to the other party.
10.2 INDEPENDENT CONTRACTOR. Company is an independent contractor, and
nothing in this Agreement will be construed as creating an employer-employee
relationship, partnership, or joint venture between the parties.
10.3 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Washington. Company hereby irrevocably consents to the personal
jurisdiction of, and exclusive venue for any legal proceeding commenced by or on
behalf of Company in, the state and federal courts sitting in King County,
Washington, USA. In any suit or action to enforce any right or remedy under this
Agreement or to interpret any provision of this Agreement, the prevailing party
will be entitled to recover its costs, including reasonable attorneys' fees.
10.4 ASSIGNMENT. Company may not assign, sub-license, transfer,
encumber or otherwise dispose of this Agreement without Microsoft's prior
written approval. Any attempted assignment, sub-
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license, transfer, encumbrance or other disposal of this Agreement by Company
without Microsoft's prior written approval will be void and will constitute a
material default and breach of this Agreement. Except as otherwise provided,
this Agreement will be binding upon and inure to the benefit of the parties'
successors and lawful assigns.
10.5 PUBLICITY. No press releases, public statements, promotions or
advertising concerning the existence of this Agreement, shall be made or
released in any medium except with the prior written approval of both parties
except as follows:
(a) Either party may, at any time, make announcements which
are required by applicable law, regulatory bodies, stock exchange or stock
association rules, so long as the announcing party notifies the non-announcing
party of such requirement and discusses in good faith the exact wording of any
such announcement;
(b) Microsoft will have the right to distribute a general
press release regarding the Service and Company's participation therein without
Company's approval;
10.6 EXCLUSIVITY. This Agreement is non-exclusive and the parties shall
be free to enter into agreements with other parties comprising technologies and
products within the scope of this Agreement.
10.7 HEADINGS. The section headings used in this Agreement are intended
for convenience only and will not be deemed to affect in any manner the meaning
or intent of this Agreement or any provision hereof.
10.8 MODIFICATION. This Agreement may not be modified except by a
written agreement dated subsequent to the date of this Agreement and signed on
behalf of Company and Microsoft by their respective duly authorized
representatives.
10.9 WAIVER. No waiver of any breach of this Agreement will constitute
a waiver of any prior, concurrent or subsequent breach of the same or any other
provisions hereof, and no waiver will be effective unless made in writing and
signed by the waiving party.
10.10 SEVERABILITY. To the extent that any provision of this Agreement
conflicts with governing law or any provision is held to be null, void or
otherwise ineffective or invalid by a court of competent jurisdiction, (a) such
provision will be deemed to be restated to reflect as nearly as possible the
original intentions of the parties in accordance with applicable law, and (b)
the remaining terms, provisions, covenants and restrictions of this Agreement
will remain in full force and effect.
10.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together will constitute one agreement.
10.12 ENTIRE AGREEMENT. Subject to Section 9, this Agreement
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements or
communications between the parties.
The parties have caused this Agreement to be executed by their duly authorized
representatives as of the date written above.
Microsoft Company
MICROSOFT CORPORATION NETIVATION.COM, INC.
One Microsoft Way 806 West Clearwater Loop, Suite N
Redmond, WA 98052-6399 Post Falls, ID 83854
By By
----------------------------------- -------------------------------------
(Sign) (Sign)
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- ------------------------------------- ---------------------------------------
Name (Print) Name (Print)
- ------------------------------------- ---------------------------------------
Title Title
- ------------------------------------- ---------------------------------------
Date Date
---------------------------------------
Company's Federal Employer ID Number
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Exhibit 10.2
CONTENT LICENSE AGREEMENT
THIS CONTENT LICENSE AGREEMENT (the "AGREEMENT") is made as of this
19th day of February, 2000 (the "EFFECTIVE DATE") between YAHOO! INC., a
Delaware corporation, with offices at 3420 Central Expressway, Santa Clara, CA
95051 ("YAHOO"), and VoteNet.com and its parent company Netivation.com, Inc.
("VN") ("LICENSOR"), a Delaware corporation, with offices at 806 West Clearwater
Loop, Suite N, Post Falls, Idaho 83854.
In consideration of the mutual promises contained herein, the parties agree as
follows:
SECTION 1: DEFINITIONS.
Unless otherwise specified, capitalized terms used in this Agreement shall have
the meanings attributed to them in EXHIBIT A hereto.
SECTION 2: GRANT OF LICENSES.
2.1 GRANT OF LICENSES. Subject to the terms and conditions of this Agreement,
Licensor hereby grants to Yahoo, under Licensor's Intellectual Property Rights:
(a) A non-exclusive, worldwide license to use, modify, reproduce,
distribute, display and transmit the Licensor Content in electronic
form via the Internet and third party networks (including, without
limitation, telephone and wireless networks) in connection with Yahoo
Properties, and to permit users of the Yahoo Properties to download and
print the Licensor Content. Yahoo's license to modify the Licensor
content shall be limited to modifying the Licensor Content to fit the
format and look and feel of the Yahoo Property.
(a) A non-exclusive, worldwide, fully paid license to use, reproduce and
display the Licensor's Brand Features: (i) in connection with the
presentation of the Licensor Content on the Content Pages in the Yahoo
Properties; and (ii) in connection with the marketing and promotion of
the Yahoo Properties.
(b) Yahoo shall be entitled to sublicense the rights set forth in this
Section 2.1 (1) to its Affiliates only for inclusion in Yahoo
Properties, and (2) in connection with any mirror site, derivative
site, or distribution arrangement concerning a Yahoo Property.
2.2 Subject to the terms and conditions of this Agreement, Yahoo hereby grants
to Licensor, under Yahoo's Intellectual Property Rights, a non-exclusive
worldwide, fully paid license to use, reproduce and display the Yahoo Brand
Features only as explicitly set forth in EXHIBIT D.
SECTION 3: DELIVERY OF LICENSOR CONTENT; ADVERTISING REVENUE.
3.1 YAHOO'S RESPONSIBILITIES. In addition to any responsibilities that may be
set forth in EXHIBIT C, Yahoo will be responsible for the design, layout,
posting, and maintenance of the Content Pages. In no event is Yahoo under any
obligation, express or implied, to post or otherwise include any of the Licensor
Content in any Yahoo Property, including without limitation, in any Content
Pages.
3.2 LICENSOR ASSISTANCE. In addition to any responsibilities that may be set
forth in EXHIBIT C, Licensor will provide on-going assistance to Yahoo with
regard to technical, administrative and service-oriented issues relating to the
utilization, transmission and maintenance of the Licensor Content, as Yahoo may
reasonably request. Licensor will use its reasonable commercial efforts to
ensure that the Licensor Content is accurate, comprehensive and updated
regularly as set forth in EXHIBIT C.
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3.3 ADVERTISING RIGHTS. Yahoo shall have the sole right to sell and retain all
Advertising Rights with respect to Content Pages.
3.4 NOTICES. Yahoo will not alter or impair any acknowledgment of copyright or
other Intellectual Property Rights of Licensor that may appear in the Licensor
Content and the Licensor Brand Features, including all copyright, trademark and
similar notices that Licensor may reasonably request.
3.5 LINKS. The parties will maintain the hypertext links specified in EXHIBIT D.
SECTION 4: DELIVERY OF LICENSOR CONTENT.
During the term of this Agreement, Licensor shall deliver updates of the
Licensor Content to Yahoo in accordance with the Delivery Specifications set
forth in EXHIBIT C. Licensor also shall provide Yahoo with [confidential
information filed separately with the SEC] prior notice of any significant
Enhancements that generally affect the appearance, updating, delivery or other
elements of the Licensor Content, and shall make such Enhancements available to
Yahoo upon commercially reasonable terms.
SECTION 5: INDEMNIFICATION.
Licensor, at its own expense, will indemnify, defend and hold harmless Yahoo,
its Affiliates and their employees, representatives, agents and affiliates,
against any claim, suit, action, or other proceeding brought against Yahoo or an
Affiliate based on or arising from a claim that the Licensor Content as
delivered to Yahoo or any Licensor Brand Feature infringes in any manner any
Intellectual Property Right of any third party or contains any material or
information that is obscene, defamatory, libelous, slanderous, that violates any
person's right of publicity, privacy or personality, or has otherwise resulted
in any tort, injury, damage or harm to any person; PROVIDED, HOWEVER, that in
any such case: (x) Yahoo provides Licensor with prompt notice of any such claim;
(y) Yahoo permits Licensor to assume and control the defense of such action,
with counsel chosen by Licensor (who shall be reasonably acceptable to Yahoo);
and (z) Licensor does not enter into any settlement or compromise of any such
claim without Yahoo's prior written consent, which consent shall not be
unreasonably withheld. Licensor will pay any and all costs, damages, and
expenses, including, but not limited to, reasonable attorneys' fees and costs
awarded against or otherwise incurred by Yahoo or an Affiliate in connection
with or arising from any such claim, suit, action or proceeding. It is
understood and agreed that Yahoo does not intend and will not be required to
edit or review for accuracy or appropriateness any Licensor Content.
SECTION 6: LIMITATION OF LIABILITY.
EXCEPT AS PROVIDED IN SECTION 5, UNDER NO CIRCUMSTANCES SHALL LICENSOR, YAHOO,
OR ANY AFFILIATE BE LIABLE TO ANOTHER PARTY FOR INDIRECT, INCIDENTAL,
CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES ARISING FROM THIS AGREEMENT, EVEN IF
THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, SUCH AS, BUT NOT
LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS.
SECTION 7: TERM AND TERMINATION.
7.1 INITIAL TERM AND RENEWALS. This Agreement will become effective as of the
Effective Date and shall, unless sooner terminated as provided below or as
otherwise agreed, remain effective for an initial term of [confidential
information filed separately with the SEC] following the first date of public
availability of the Licensor Content on a Content Page within a Yahoo Property
(the "Initial Term"). As used herein, the "Term" means the Initial Term and any
Extension Term(s).
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7.2 TERMINATION FOR CAUSE. Notwithstanding the foregoing, this Agreement may be
terminated by either party immediately upon notice if the other party: (w)
becomes insolvent; (x) files a petition in bankruptcy; (y) makes an assignment
for the benefit of its creditors; or (z) breach any of its obligations under
this Agreement in any material respect, which breach is not remedied within
[confidential information filed separately with the SEC] days following written
notice to such party. In addition, this Agreement may be terminated immediately
by Yahoo in the event that: (i) the Warrant Agreement is not executed within ten
(10) business days of the Effective Date, or (ii) Licensor breaches any
obligation in the Insertion Order which are not cured within ten (10) business
days following written notice from Yahoo to Licensor specifying such breach and
the notice being provided hereunder.
7.3 EFFECT OF TERMINATION. Any termination pursuant to this Section 7 shall be
without any liability or obligation of the terminating party, other than with
respect to any breach of this Agreement prior to termination. The provisions of
Sections 5, 6, 7, 8, 9, 10, shall survive any termination or expiration of this
Agreement.
SECTION 8: OWNERSHIP.
8.1 BY LICENSOR. Yahoo acknowledges and agrees that: (i) as between Licensor on
the one hand, and Yahoo and its Affiliates on the other, Licensor owns all
right, title and interest in the Licensor Content and the Licensor Brand
Features; (ii) nothing in this Agreement shall confer in Yahoo or an Affiliate
(other than that contained herein), right of ownership in the Licensor Content
or the Licensor Brand Features; and (iii) neither Yahoo or its Affiliates shall
now or in the future contest the validity of the Licensor Brand Features. No
licenses are granted by either party except for those expressly set forth in
this Agreement.
8.2 BY YAHOO. Licensor acknowledges and agrees that: (i) as between Licensor on
the one hand, and Yahoo and its Affiliates on the other, Yahoo or the Affiliates
own all right, title and interest in any Yahoo Property and the Yahoo Brand
Features; (ii) nothing in this Agreement shall confer in Licensor any license or
right of ownership in the Yahoo Brand Features; and (iii) Licensor shall not now
or in the future contest the validity of the Yahoo Brand Features. No licenses
are hereby granted by Yahoo other than those expressly set forth herein. Yahoo
or its Affiliates shall own all derivative works created by Yahoo from the
Licensor Content, including the Content Pages, pursuant to this Agreement, to
the extent such is separable from the Licensor Content.
SECTION 9: PUBLIC ANNOUNCEMENTS.
Neither party shall make any public announcement regarding the existence or
content of this Agreement or the relationship between the parties without the
other party's prior written approval and consent unless required by law, rule or
regulation.
SECTION 10: WARRANTS AND ADVERTISING COMMITMENT.
10.1 WARRANTS. Within ten (10) days of the execution of the Agreement, Yahoo and
Netivation.com will execute a separate Warrant Agreement (the "Warrant
Agreement") whereby Yahoo shall be issued a Warrant to purchase the number of
shares of Netivation.com's Common Stock equal to 50,000 shares of capital stock
(on a fully-diluted basis (on the date hereof), assuming conversion of
outstanding options, warrants, and other instruments convertible into
Netivation.com Common Stock). The exercise price of the Warrant will be
equivalent to the closing price of Netivation.com Common Stock [confidential
information filed separately with the SEC] Warrant Agreement. The Warrant
Agreement shall be in the form attached to the Insertion Order as EXHIBIT D.
10.2 ADVERTISING COMMITMENT. Netivation.com agrees to purchase from Yahoo no
less than [confidential information filed separately with the SEC] of
advertising on the Yahoo Properties annually during the Term at Yahoo's then
current advertising rate card. Simultaneously upon execution of this Agreement,
Netivation.com and Yahoo will execute an insertion order that will contain
Yahoo's standard advertising terms and describe the breakdown of
Netivation.com's initial advertising commitment (the "Insertion Order").
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SECTION 11: NOTICE; MISCELLANEOUS PROVISIONS.
11.1 NOTICES. All notices, requests and other communications called for by this
agreement shall be deemed to have been given immediately if made by telecopy or
electronic mail (confirmed by concurrent written notice sent first class U.S.
mail, postage prepaid), if to Yahoo at 3420 Central Expressway, Santa Clara, CA
95051, Fax: (408) 731-3301 Attention: Senior Director, Business Development
(e-mail: [confidential information filed separately with the SEC]), with a copy
to its General Counsel (e-mail: [confidential information filed separately with
the SEC]), and if to Licensor at the physical and electronic mail addresses set
forth on the signature page of this, or to such other addresses as either party
shall specify to the other. Notice by any other means shall be deemed made when
actually received by the party to which notice is provided.
11.2 MISCELLANEOUS PROVISIONS. This Agreement will bind and inure to the benefit
of each party's permitted successors and assigns. Neither party may assign this
Agreement, in whole or in part, without the other party's written consent;
provided, however, that: (i) either party may assign this Agreement without such
consent in connection with any merger, consolidation, any sale of all or
substantially all of such party's assets or any other transaction in which more
than fifty percent (50%) of such party's voting securities are transferred. Any
attempt to assign this Agreement other than in accordance with this provision
shall be null and void. This Agreement will be governed by and construed in
accordance with the laws of the State of California, without reference to
conflicts of laws rules, and without regard to its location of execution or
performance. If any provision of this Agreement is found invalid or
unenforceable, that provision will be enforced to the maximum extent
permissible, and the other provisions of this Agreement will remain in force.
Neither this Agreement, nor any terms and conditions contained herein may be
construed as creating or constituting a partnership, joint venture or agency
relationship between the parties. No failure of either party to exercise or
enforce any of its rights under this Agreement will act as a waiver of such
rights. This Agreement and its exhibits are the complete and exclusive agreement
between the parties with respect to the subject matter hereof, superseding and
replacing any and all prior agreements, communications, and understandings, both
written and oral, regarding such subject matter. This Agreement may only be
modified, or any rights under it waived, by a written document executed by both
parties. This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute a single instrument. Execution and
delivery of this Agreement may be evidenced by facsimile transmission.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the date first written above.
<TABLE>
<S> <C>
YAHOO! INC. LICENSOR
By: By
-------------------------------------------------- --------------------------------------------------
Matt Rightmire Tony Paquin
Title: VP/GM Media Title: President & CEO
----------------------------------------------- -----------------------------------------------
Address: 3420 Central Expressway Address: 806 W. Clearwater Loop, Suite N
--------------------------------------------- --------------------------------------------
Santa Clara, CA 95051 Post Falls, ID 83854
-------------------------------------------- --------------------------------------------
Telecopy: (408) 616-3712 Telecopy: (208) 777-6013
-------------------------------------------- --------------------------------------------
E-mail: [confidential information filed separately with the SEC] e-mail: [email protected]
-------------------------------------------------------- -------------------------------------
</TABLE>
71
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000, AND CONDENSED CONSOLIDATED
STATEMENT OF OPERATION FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2000, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 9,043
<SECURITIES> 0
<RECEIVABLES> 856
<ALLOWANCES> 142
<INVENTORY> 0
<CURRENT-ASSETS> 10,950
<PP&E> 1,433
<DEPRECIATION> 120
<TOTAL-ASSETS> 28,869
<CURRENT-LIABILITIES> 3,493
<BONDS> 0
0
0
<COMMON> 41,856
<OTHER-SE> (16,699)
<TOTAL-LIABILITY-AND-EQUITY> 28,869
<SALES> 1,219
<TOTAL-REVENUES> 1,219
<CGS> 738
<TOTAL-COSTS> 6,740
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 164
<INCOME-PRETAX> 6,095
<INCOME-TAX> 6,095
<INCOME-CONTINUING> 6,095
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,095
<EPS-BASIC> 0.56
<EPS-DILUTED> 0.56
</TABLE>
