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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: May 5, 1999
(Date of earliest event reported: May 3, 1999)
XOOM.COM, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 000-25139 88-0361536
(State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)
</TABLE>
<TABLE>
<S> <C>
300 Montgomery Street, Suite 300, San Francisco, California 94104
(Address of Principal Executive Offices) (Zip Code)
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(415) 288-2500
(Registrant's telephone number, including area code)
Not applicable.
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On May 3, 1999, the Registrant completed the acquisition of MightyMail
Networks, Inc., a California corporation ("MightyMail"). The acquisition of
MightyMail was consummated pursuant to an Agreement and Plan of Merger, dated as
of May 3, 1999 (the "Merger Agreement"), providing for a merger of a wholly-
owned subsidiary of the Registrant with and into MightyMail (the "Merger"), with
MightyMail surviving as a wholly-owned subsidiary of the Registrant. Upon
consummation of the Merger, approximately 335,955 shares of the Registrant's
common stock became issuable and approximately 21,188 additional shares of the
Registrant's common sock have been reserved for issuance upon the exercise of
outstanding MightyMail options that the Registrant is assuming pursuant to the
terms of the Merger Agreement, reflecting a common stock exchange ratio of
0.067141758 shares of the Registrant's common stock for each outstanding share
of MightyMail's common stock (including shares of MightyMail's common stock
issuable upon exercise of outstanding MightyMail options). The Merger was
approved by 100% of the voting shares of the former shareholders of MightyMail,
acting by written consent. The Merger is expected to be accounted for under the
purchase method of accounting, and was structured to qualify as a tax-free
reorganization under the Internal Revenue Code of 1986, as amended.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of MightyMail Networks, Inc.
The financial statements required by this item are not included in this
report. Such financial statements will be filed by amendment to this Form 8-K
within 60 days of the date hereof.
(b) Pro Forma Financial Information.
The financial information required by this item is not included in this
report. Such financial statements will be filed by amendment to this Form 8-K
within 60 days of the date hereof.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated as of May 3, 1999, by and among
the Registrant, XOOM Acquisition Sub, Inc. and MightyMail Networks, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
XOOM.COM, INC.
By: /s/ Rajesh A. Aji
-------------------
Rajesh A. Aji
Vice President, Corporate and Legal Affairs,
General Counsel and Assistant Secretary
Date: May 5, 1999
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================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
XOOM.com, Inc.
a Delaware corporation
MightyMail Networks, Inc.
a California corporation
and
XOOM Acquisition Sub, Inc.
a Delaware corporation
Dated as of May 3, 1999
================================================================================
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TABLE OF CONTENTS
Page
----
1. The Merger; Effective Time...................................... 1
1.1 The Merger................................................. 1
1.2 Effective Time of the Merger............................... 2
1.3 The Merger Consideration................................... 2
1.4 Escrow..................................................... 2
2. Purchaser and the Surviving Corporation......................... 2
2.1 Articles of Incorporation of the Surviving Corporation..... 2
2.2 Bylaws of the Surviving Corporation........................ 2
2.3 Directors and Officers of the Surviving Corporation........ 2
3. Treatment of Shares............................................. 3
3.1 Exchange of Shares......................................... 3
3.2 Mechanics of Exchange...................................... 4
3.3 No Further Rights in Stock................................. 5
3.4 Closing.................................................... 5
3.5 Supplementary Action....................................... 6
3.6 Dissenting Shares.......................................... 6
4. Closing Conditions.............................................. 7
4.1 Conditions Precedent to Obligations of the Purchaser
and Merger Sub.............................................. 7
4.2 Conditions Precedent to Obligations of the Company and
the Selling Shareholders................................... 9
5. Representations and Warranties of the Company and the Selling
Shareholders.................................................... 10
5.1 Organization, Good Standing, Qualification................ 10
5.2 Articles of Incorporation and Bylaws; Records............. 10
5.3 Capitalization............................................ 11
5.4 Authority; Binding Nature of Agreements................... 12
5.5 Non-Contravention; Consents............................... 12
5.6 Intellectual Property..................................... 13
5.7 Proceedings; Orders....................................... 14
5.8 Financial Statements...................................... 15
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Page
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5.9 Title to Assets.............................................. 15
5.10 Contracts................................................... 16
5.11 Employees................................................... 17
5.12 Compliance with Legal Requirements.......................... 17
5.13 Governmental Authorizations................................. 18
5.14 Tax Matters................................................. 18
5.15 Securities Laws Compliance; Registration Rights............. 20
5.16 Finders and Brokers; Fees................................... 20
5.17 Environmental Compliance.................................... 20
5.18 Insurance................................................... 20
5.19 Related Party Transactions.................................. 21
5.20 Absence of Changes.......................................... 21
5.21 The Selling Shareholders; Investment Intent and
Restrictions................................................ 23
5.22 Powers of Attorney.......................................... 26
5.23 Benefit Plans; ERISA........................................ 26
5.24 Full Disclosure............................................. 28
5.25 Due Diligence Information................................... 29
6. Representations and Warranties of the Purchaser and Merger Sub.... 29
6.1 Organization, Good Standing, Authority; Binding Nature
of Agreement................................................ 29
6.2 Investment Representations.................................. 29
6.3 Purchaser Stock............................................. 30
6.4 Authority; Binding Nature of Agreements..................... 30
6.5 Non-Contravention; Consents................................. 30
6.6 Finders and Brokers......................................... 31
6.7 Reports and Financial Statements; Absence of Certain
Changes..................................................... 31
6.8 Compliance with Applicable Law.............................. 32
6.9 Complete Copies of Requested Reports........................ 32
6.10 Full Disclosure............................................. 33
6.11 Contracts................................................... 33
7. Pre-Closing Covenants of the Company and the Selling
Shareholders...................................................... 33
7.1 Corporate Proceedings; Shareholder Approval.................. 33
ii
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Page
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7.2 Access and Investigation...................................... 34
7.3 Operation of Business......................................... 34
7.4 Filings and Consents.......................................... 36
7.5 Notification; Updates to Disclosure Schedule.................. 37
7.6 No Negotiation................................................ 37
7.7 Best Efforts.................................................. 38
8. Pre-Closing Covenants of the Purchaser............................. 38
8.1 Corporate Proceedings......................................... 38
8.2 Access and Investigation...................................... 38
8.3 Filings and Consents.......................................... 39
8.4 Notification.................................................. 39
8.5 Best Efforts.................................................. 40
9. Other Agreements................................................. 40
9.1 Registration of Company Options............................. 40
9.2 Confidentiality............................................. 40
9.3 Public Disclosure........................................... 40
9.4 No Inconsistent Action...................................... 40
9.5 Restrictive Legend.......................................... 40
9.6 Market Stand-Off............................................ 41
9.7 Certain Tax Matters......................................... 41
10. Termination...................................................... 43
10.1 Termination Events......................................... 43
10.2 Termination Procedures..................................... 44
10.3 Effect of Termination...................................... 44
10.4 Exclusivity of Termination Rights.......................... 44
11. Indemnification, etc............................................. 44
11.1 Survival of Representations and Covenants.................. 44
11.2 Indemnification by the Selling Shareholders................ 45
11.3 No Contribution............................................ 46
11.4 Setoff..................................................... 46
11.5 Defense of Third Party Claims.............................. 46
iii
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11.6 Sole Remedy............................................................................ 47
11.7 Exercise of Remedies by Indemnitees Other than Purchaser and by Selling Shareholders... 47
12. Miscellaneous................................................................................ 48
12.1 Further Assurances..................................................................... 48
12.2 Fees and Expenses...................................................................... 48
12.3 Attorneys' Fees........................................................................ 48
12.4 Taxes.................................................................................. 48
12.5 Governing Law; Arbitration............................................................. 48
12.6 Successors and Assigns................................................................. 49
12.7 Entire Agreement....................................................................... 49
12.8 Separability........................................................................... 49
12.9 Amendments............................................................................. 49
12.10 Notices................................................................................ 50
12.11 Publicity and Use of Confidential Information.......................................... 51
12.12 Counterparts........................................................................... 51
12.13 Delays or Omissions; Waivers........................................................... 51
12.14 Remedies Cumulative; Specific Performance.............................................. 52
12.15 Headings............................................................................... 52
12.16 Construction........................................................................... 52
</TABLE>
iv
<PAGE>
Agreement and Plan of Merger
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into as of
---------
May 3, 1999, by and among XOOM.com, Inc., a Delaware corporation (the
"Purchaser"), MightyMail Networks, Inc., a California corporation (the
---------
"Company"), XOOM Acquisition Sub, Inc., a Delaware corporation and a wholly-
-------
owned subsidiary of Purchaser (the "Merger Sub"), the Company and Merger Sub
----------
sometimes being hereinafter collectively referred to as the "Constituent
-----------
Corporations," and the undersigned individuals and Entities (collectively, the
- ------------
"Selling Shareholders"). Certain capitalized terms in this Agreement are
- ---------------------
defined in Exhibit A.
Recitals
A. The Board of Directors of Purchaser, Merger Sub and the Company each have
determined that it is in the best interests of their respective
stockholders and shareholders, as the case may be, for Purchaser to acquire
the Company by the merger of the Merger Sub with and into the Company upon
the terms, and subject to the conditions, set forth herein (the "Merger").
------
B. For federal income tax purposes, it is intended that the Merger constitute
a reorganization under the provisions of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code") and that this Agreement shall
----
constitute a plan of reorganization for purposes of Section 368 of the
Code.
Agreement
The Purchaser, the Company and Merger Sub, intending to be legally bound,
agree as follows:
1. The Merger; Effective Time.
1.1 The Merger.
Subject to the terms and conditions of this Agreement, at the Effective
Time (as defined in Section 1.2 hereof), Merger Sub shall be merged with and
into the Company, the Company shall be the surviving corporation in such Merger
(the "Surviving Corporation"), and the separate existence of Merger Sub shall
---------------------
thereupon cease. The Merger shall have the effects set forth in Sections 1107
and 1108 of the General Corporation Law of the State of California. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all property, rights, powers, privileges and franchises of Merger Sub shall
vest in the Company as the Surviving Corporation, and all debts, liabilities and
duties of Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation. Immediately following the Effective Time, the Surviving
Corporation shall be a wholly-owned subsidiary of Purchaser.
1
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1.2 Effective Time of the Merger.
The Merger shall become effective upon the completion of the filing of
properly executed Certificate of Merger with the Secretary of State of the State
of Delaware, which filing shall be made as soon as practicable after the closing
of the Transactions upon satisfaction or waiver of the conditions set forth in
Section 4. When used in this Agreement, the term "Effective Time" with respect
--------------
to the Merger shall mean the date and time at which such Certificate of Merger
has been accepted for filing by the Secretary of State of California.
1.3 The Merger Consideration.
Purchaser shall acquire all of the outstanding shares of Common Stock, and
assume all of the Company Options, for an aggregate consideration of Twenty Five
Million Dollars ($25,000,000), payable in shares of Purchaser Stock (the "Merger
------
Consideration"). Each Selling Shareholder shall be allocated the portion of the
- -------------
Merger Consideration set forth on Schedule I attached hereto in exchange for the
shares of Common Stock held by such Selling Shareholder.
1.4 Escrow.
As the source for the payment of the Selling Shareholders' indemnification
obligations set forth herein and in the Escrow Agreement, and as security for
the completion of certain software development and integration tasks that are
essential to the value of the assets of the Company, Purchaser will deliver to
Escrow Agent under an Escrow Agreement (the "Escrow Agreement") in substantially
----------------
the form attached as Exhibit B, an amount equal to twenty percent (20%) of the
Merger Consideration (the "Holdback Amount").
---------------
2. Purchaser and the Surviving Corporation.
2.1 Articles of Incorporation of the Surviving Corporation.
The Articles of Incorporation of the Company as in effect at the Effective
Time shall be the Articles of Incorporation of the Surviving Corporation until
duly amended in accordance with applicable law.
2.2 Bylaws of the Surviving Corporation.
The Bylaws of the Company as in effect at the Effective Time shall be the
Bylaws of the Surviving Corporation until thereafter amended in accordance with
applicable law.
2.3 Directors and Officers of the Surviving Corporation.
(a) The directors of Merger Sub at the Effective Time shall be the
initial directors of the Surviving Corporation and shall hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided in the Articles of Incorporation and Bylaws
of the Surviving Corporation, or as otherwise provided by law.
2
<PAGE>
(b) The officers of the Company at the Effective Time shall be the
initial officers of the Surviving Corporation and shall hold office from the
Effective Time until removed or until their respective successors are duly
elected or appointed and qualified in the manner provided in the Articles of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by law.
3. Treatment of Shares.
3.1 Exchange of Shares.
At the Effective Time, by virtue of the Merger and without any further
action on the part of the holders thereof:
(a) The shares of Merger Sub common stock, $.0001 par value, which
shall be outstanding immediately prior to the Effective Time of the Merger,
shall be converted into the number of shares of common stock of the Surviving
Corporation equal to the number of shares of common stock of Merger Sub then
outstanding.
(b) Each share of common stock of the Company (the "Common Stock"),
------------
outstanding immediately prior to the Effective Time (such outstanding shares
hereinafter referred to as the "Stock") shall at the Effective Time, by virtue
-----
of the Merger and without any action on the part of the holder thereof, be
converted into the right to receive a portion of the Merger Consideration equal
to the number of shares of Purchaser Stock derived by obtaining the product of
(i) a fraction, the numerator of which is the Merger Consideration and the
denominator of which is the Average Purchaser Stock Price prior to the Closing
Date times (ii) a fraction, the numerator of which is one and the denominator of
which is the sum of (x) the number of shares of Stock plus (y) the number of
shares of Common Stock reserved in the Option Pool but not yet issued and
outstanding (such product, the "Exchange Ratio").
--------------
(c) At the Effective Time, all Company Options shall be assumed by
Purchaser in accordance with provisions described below.
(i) At the Effective Time, each Company Option, whether vested
or unvested, shall be, in connection with the Merger, assumed by the Purchaser.
Each Company Option so assumed by the Purchaser under this Agreement shall
continue to have, and be subject to, the same terms and conditions set forth in
the Company's 1999 Stock Option Plan (the "Option Plan") and/or as provided in
-----------
the respective option agreements governing such Company Option immediately prior
to the Effective Time, except that (A) such Company Option shall be exercisable
for that number of whole shares of the Common Stock of the Purchaser equal to
the product of the number of shares of Common Stock that were issuable upon
exercise of such Company Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounded down (in the case of Company Options
granted under the Option Plan) to the nearest whole number of shares of the
common stock of the Purchaser and (B) the per share exercise price for the
shares of the common stock of the Purchaser issuable upon exercise of such
assumed Company Option shall be equal to the quotient determined by dividing the
exercise price per share of Common Stock at which such Company Option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent.
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(ii) It is the intention of the parties that the Company Options
assumed by the Purchaser qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Code to the extent the Company Options
qualified as incentive stock options immediately prior to the Effective Time.
(iii) Promptly following the Effective Time, the Purchaser will
issue to each holder of an outstanding Company Option a document evidencing the
foregoing assumption of such Company Option by the Purchaser.
(d) The Holdback Amount shall be held by the Escrow Agent as provided
for in Section 1.4 hereof and in the Escrow Agreement, and each Selling
Shareholder shall be paid such Selling Shareholder's allocable portion of the
Merger Consideration set forth in Schedule I attached hereto less such Selling
Shareholder's pro rata portion of the Holdback Amount, without interest thereon,
upon the surrender of the certificates formerly representing the Stock in
accordance with Section 3.2 of this Agreement.
(e) No fraction of a share of Purchaser Stock shall be issued in the
Merger. In lieu of fractional shares, the Selling Shareholders upon surrender of
their Certificates as set forth in Section 3.2 shall be paid an amount in cash,
without interest, rounded to the nearest cent, determined by multiplying the
fractional interest to which such Shareholder would otherwise be entitled by the
Average Purchaser Stock Price prior to the Closing Date.
(f) The shares of Purchaser Stock issued in connection with the
Transactions will not be registered under the Securities Act. Such shares may
not be transferred or resold thereafter, except in compliance with the terms of
this Agreement and the other Transactional Agreements and following registration
under the Securities Act or in reliance on an exemption from registration under
the Securities Act.
3.2 Mechanics of Exchange.
(a) At the Effective Time, each Selling Shareholder shall be entitled
to surrender the certificate or certificates that immediately prior to the
Effective Time represented the Stock (the "Certificates"), and which were
------------
converted into the right to receive a portion of the Merger Consideration, to
Purchaser for cancellation in exchange for such Selling Shareholder's allocable
portion of the Merger Consideration as set forth on Schedule I attached hereto,
less such Selling Shareholder's pro rata portion of the Holdback Amount. It
shall be a condition of payment that the Certificates so surrendered shall be
properly endorsed or otherwise in proper form for transfer to the Purchaser.
(b) From and after the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates formerly representing the Stock set forth on Schedule I attached
hereto are presented to the Surviving Corporation for payment, they shall be
cancelled and exchanged for the applicable portion of the Merger Consideration
in accordance with the procedures set forth in this Section.
4
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(c) At or prior to the Effective Time of the Merger, Purchaser shall
deliver irrevocably to the Escrow Agent shares of Purchaser Stock in an
aggregate amount equal to the Holdback Amount.
(d) In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Selling
Shareholder claiming such Certificate to be lost, stolen or destroyed, Purchaser
will issue or cause to be issued in exchange for such lost, stolen or destroyed
Certificate the portion of the Merger Consideration for which the shares of
Stock represented by the Certificate are exchanged in accordance with this
Section 3. When authorizing such issuance in exchange therefor, Purchaser may,
in its discretion and as a condition precedent to the issuance thereof, require
such Selling Shareholder to give Purchaser a bond in such sum as it may direct
as indemnity, or such other form of indemnity, as it shall direct, against any
claim that may be made against Purchaser with respect to the Certificate alleged
to have been lost, stolen or destroyed.
(e) Purchaser may, at its option, meet its obligations under this
Section 3.2 through a bank or trust company selected by Purchaser to act as
exchange agent in connection with the Transactions.
(f) If any certificate for Purchaser Stock is to be issued in a name
other than that in which the Certificate surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the person requesting
such exchange shall (i) pay to Purchaser any transfer or other taxes required by
reason of the issuance of certificates for such securities in a name other than
that of the registered holder of the Certificate surrendered, or (ii) establish
to the satisfaction of Purchaser that such tax has been paid or is not
applicable.
(g) Notwithstanding anything in this Agreement to the contrary,
neither Purchaser nor any other party hereto shall be liable to a holder of
shares of Stock for any portion of the Merger Consideration, or dividend on
shares of Purchaser Stock issued as part of the Merger Consideration, or in
accordance with Section 3.1 the cash payment for any fractional interests,
delivered to a public official pursuant to applicable escheat laws following the
passage of time specified therein.
3.3 No Further Rights in Stock.
All cash, cash equivalents or securities received by each Selling
Shareholder pursuant to this Agreement shall be deemed to have been delivered
and received in full satisfaction of all rights pertaining to such Selling
Shareholder's shares of Stock. At the Effective Time of the Merger, the Selling
Shareholders shall cease to have any rights with respect to shares of Stock, and
their sole right shall be to receive the Merger Consideration.
3.4 Closing.
The closing of the Transactions (the "Closing") shall take place at the
-------
offices of Morrison & Foerster llp, 425 Market Street, San Francisco, California
94105-2482 at 9:00 a.m., local time, on the later of (x) May 3, 1999 or (y) the
second business day after the day on which all of the conditions set forth in
Sections 4.1 and 4.2 hereof are satisfied or waived, or at such
5
<PAGE>
other date, time and place as the parties shall otherwise agree (the date of
such Closing, the "Closing Date").
-------------
3.5 Supplementary Action.
If at any time after the Effective Time, any further assignments or
assurances in law or any other things are necessary or desirable to vest or to
perfect or confirm of record in the Surviving Corporation the title to any
property or rights of either Constituent Corporation, or otherwise to carry out
the provisions of this Agreement, the officers and directors of the Surviving
Corporation are hereby authorized and empowered on behalf of the Constituent
Corporations, in the name of and on behalf of either Constituent Corporation as
appropriate, to execute and deliver any and all things necessary or proper to
vest or to perfect or confirm title to such property or rights in the Surviving
Corporation, and otherwise to carry out the purposes and provisions of this
Agreement.
3.6 Dissenting Shares
(a) If holders of Stock are entitled to dissent from the Merger and
demand appraisal of the Stock under applicable law (each person electing to
exercise such rights, a "Dissenting Holder"), any shares of Stock held by a
-----------------
Dissenting Holder as to which appraisal has been so demanded in accordance with
applicable law ("Dissenting Shares") shall not be exchanged as described in
-----------------
Section 3.1, but shall from and after the Effective Time represent only the
right to receive such consideration as may be determined to be due such
Dissenting Holder pursuant to applicable law; provided, that each share of Stock
held by a Dissenting Holder who shall, after the Effective Time, withdraw its
demand for appraisal or lose its rights of appraisal with respect to such shares
of Stock, in either case pursuant to applicable law, shall not be deemed a
Dissenting Share, but shall be deemed to be converted, as of the Effective Time,
into the applicable portion of the Merger Consideration.
(b) The Company shall give Purchaser prompt notice of any written
demands for appraisal of any shares of Stock, withdrawals of such demands or
failures to perfect appraisal rights resulting in a loss of such rights, and any
other instruments received by the Company which relate to any such demand for
appraisal. The Company shall not voluntarily make any payment with respect to
any demands or potential demands for appraisal of Stock or offer to settle or
settle any such demands or potential demands. Purchaser shall be responsible for
any settlement of claims with respect to any Dissenting Shares, which
settlements may be paid in cash, Purchaser Stock or such other consideration as
Purchaser may determine, except as otherwise required under applicable law.
6
<PAGE>
4. Closing Conditions.
4.1 Conditions Precedent to Obligations of the Purchaser and Merger Sub.
The Purchaser's and Merger Sub's obligations to consummate the Merger and
to take the other actions required to be taken by the Purchaser and Merger Sub
at the Closing are subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which may be waived by the Purchaser,
in whole or in part, in accordance with Section 12.13):
(a) the representations and warranties made by the Selling
Shareholders and the Company in Section 5 hereof or in any other Transactional
Agreement shall have been true and accurate in all material respects as of the
date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date, without giving effect to any Disclosure Schedule update;
(b) all covenants, agreements and conditions contained in this
Agreement or in any other Transactional Agreement to be observed by the Selling
Shareholders and/or the Company on or prior to the Closing shall have been
performed or complied with in all material respects;
(c) the Selling Shareholders or the Company, as the case may be,
shall have delivered the following documents to the Purchaser:
(i) the Escrow Agreement, duly executed by the Selling
Shareholders;
(ii) a Registration Rights Agreement in the form of Exhibit C
(the "Rights Agreement"), duly executed by the Selling Shareholders;
----------------
(iii) the Employment and Non-Competition Agreement substantially
in the form of Exhibit D, duly executed by each of the Key Employees;
(iv) the legal opinion of Howard, Rice, Nemerovski, Canady,
Falk & Rabkin, counsel to the Selling Shareholders and the Company, dated the
Closing Date, in substantially the form of Exhibit E;
(v) a certificate (the "Selling Shareholders Closing
----------------------------
Certificate" and the "Company Closing Certificate," respectively) executed by
- ---------- ---------------------------
the Selling Shareholders and a senior executive officer of the Company,
respectively, dated as of the Closing, and certifying to the satisfaction of the
conditions specified in Sections 4.1(a) and (b);
(vi) the written resignations of the members of the Company
Board;
(vii) written evidence reasonably satisfactory to Purchaser and
its counsel of the grant of Company Options to the employees of the Company as
set forth on Schedule II attached hereto;
(viii) written evidence reasonably satisfactory to Purchaser and
its counsel of the conversion of all of the Company Preferred Stock into Common
Stock;
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(ix) such other documents reasonably satisfactory to Purchaser
as the Purchaser may request in good faith for the purpose of (A) evidencing
the accuracy of any representation or warranty made by the Company or the
Selling Shareholders, (B) evidencing the compliance by the Company or the
Selling Shareholders with, or the performance by the Company or the Selling
Shareholders of, any covenant or obligation set forth in this Agreement or any
other Transactional Agreement, (C) evidencing the satisfaction of the
conditions set forth in this Section 4.1, or (D) otherwise facilitating the
consummation or performance of any of the Transactions;
(d) each of the Key Employees shall have accepted employment with
Purchaser (or one of Purchaser's subsidiaries);
(e) to the satisfaction of Purchaser and its counsel, the offer and
sale of the Purchaser Stock pursuant to the terms of this Agreement shall comply
with an exemption from registration under the Securities Act and/or any
applicable federal or state securities laws and regulations;
(f) all corporate and other proceedings required to be taken on the
part of the Company and the Selling Shareholders in connection with this
Agreement, the Transactional Agreements and the Transactions, and all documents
incident thereto, shall be reasonably satisfactory in form and in substance to
the Purchaser and its counsel;
(g) there shall not be Dissenting Shares constituting more than one
percent (1%) of the capital stock of the Company calculated on a fully-diluted
basis;
(h) the Purchaser's Board of Directors shall have ratified or
approved the execution of this Agreement and the other Transactional Agreements
by Purchaser and shall have approved the consummation of the Transactions;
(i) each of the Consents identified or required to be identified in
Part 5.5 of the Disclosure Schedule shall have been obtained and shall be in
full force and effect ;
(j) there shall have been no material adverse change in the Company's
business, condition, assets, liabilities, operations, financial performance or
prospects since the date of this Agreement;
(k) there shall not have been commenced or expressly threatened
against the Purchaser or any of its affiliates any Proceeding (i) involving any
challenge to, or seeking damages or other relief in connection with, any of the
Transactions, or (ii) that is likely to have the effect of preventing, delaying,
making illegal or otherwise interfering with any of the Transactions or have a
material adverse effect on the Company;
(l) no Person shall have made or expressly threatened any claim
asserting that such Person (i) may be the holder or the beneficial owner or, or
may have the right to acquire or to obtain beneficial ownership of, any capital
stock or other securities of the Company, or (ii) may be entitled to all or any
portion of the Merger Consideration; and
8
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(m) neither the consummation nor the performance of any the
Transactions will, directly or indirectly (with or without notice or lapse of
time), contravene or conflict with or result in a violation of, or cause the
Purchaser or the Company, or any Person affiliated with the Purchaser or the
Company, to suffer any material adverse consequence under, (a) any applicable
legal requirement or Order, or (b) any legal requirement or Order that has been
proposed by or before any Governmental Body.
4.2 Conditions Precedent to Obligations of the Company and the Selling
Shareholders.
The Company's obligation to take the actions required to be taken by the
Company at the Closing, is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by the
Company, in whole or in part, in accordance with Section 12.13):
(a) the representations and warranties made by the Purchaser and
Merger Sub in Section 6 and in any other Transactional Agreement shall have been
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date as though made on and as of the Closing Date;
(b) all covenants, agreements and conditions contained in this
Agreement or in any other Transactional Agreement to be observed by the
Purchaser and Merger Sub on or prior to the Closing shall have been performed or
complied with in all material respects;
(c) the Purchaser shall have delivered the following documents to the
Selling Shareholders and/or the Company, as the case may be, duly executed by
the Purchaser:
(i) the Escrow Agreement;
(ii) the Rights Agreement;
(iii) the Employment and Non-Competition Agreements;
(iv) the legal opinion of Morrison & Foerster LLP, counsel to
Purchaser, dated the Closing Date, in substantially the form of Exhibit F; and
(v) a certificate (the "Purchaser Closing Certificate") executed
-----------------------------
by a senior executive officer of the Purchaser, dated the Closing Date and
certifying to the satisfaction of the conditions specified in Sections 4.2(a)
and (b);
(d) all corporate and other proceedings required to be taken on the
part of the Purchaser and Merger Sub in connection with the Transactions, and
all documents incident thereto, shall be reasonably satisfactory in form and in
substance to the Company and its counsel;
(e) neither the consummation nor the performance of any the
Transactions will, directly or indirectly (with or without notice or lapse of
time), contravene or conflict with or result in a violation of, or cause the
Selling Shareholders to suffer any adverse consequence
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under, (i) any applicable legal requirement or Order, or (ii) any legal
requirement or Order that has been proposed by or before any Governmental Body;
and
(f) there shall have been no material adverse change in the
Purchaser's business, condition assets, liabilities, operations, financial
performance or prospects since the date of this Agreement.
5. Representations and Warranties of the Company and the Selling Shareholders.
Except as specifically set forth in the disclosure schedule provided by the
Company and attached hereto (the "Disclosure Schedule"), the parts of which are
-------------------
numbered to correspond to the Section numbers of this Agreement, the Selling
Shareholders (solely for the purposes of Section 5.21) and the Company hereby
represent and warrant to each Indemnitee as follows:
5.1 Organization, Good Standing, Qualification.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California, is qualified to
conduct business and is in both corporate and tax good standing under the laws
of each jurisdiction in which the nature of its business or the ownership or
leasing of its properties requires such qualification. The Company has the
requisite corporate power and authority to own and operate its properties and
assets, and to carry out the provisions hereof and thereof, and to carry on its
business as currently conducted.
(b) The Company has never approved, or commenced any proceeding, or
made any election contemplating, the dissolution or liquidation of the Company
or the winding up or cessation of the Company's business or affairs.
(c) The Company has no subsidiaries and does not own, beneficially or
otherwise, any shares or other securities of, or any other direct or any other
indirect interest of any nature in, any Entity.
(d) The Company was never operated as a sole proprietorship, or any
other business entity, prior to its incorporation.
5.2 Articles of Incorporation and Bylaws; Records.
(a) The Company has delivered to the Purchaser accurate and complete
copies of:
(i) the Company's Articles of Incorporation and bylaws,
including all amendments thereto, as presently in effect;
(ii) the stock records of the Company; and
(iii) the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise without
a meeting) of
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the shareholders of the Company, the Company Board and all committees of the
Company Board.
There have been no meetings or other proceedings of the shareholders of the
Company, the Company Board or any committee of the Company Board that are not
memorialized in such minutes or other records.
(b) The Company has never conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious name, assumed name,
trade name or other name, other than the names listed on Part 5.2 of the
Disclosure Schedule.
(c) There has not been any material violation of the Company's
Articles of Incorporation or bylaws or of any resolution adopted by the
Company's shareholders, the Company Board or any committee of the Company Board.
5.3 Capitalization.
(a) As of May 3, 1999, the authorized capital stock of the Company
consists of thirty million (30,000,000) shares of capital stock, comprised of
twenty million (20,000,000) shares of Common Stock, of which three million four
hundred sixty five thousand eight hundred fifty eight (3,465,858) shares are
issued and outstanding, and ten million (10,000,000) shares of Preferred Stock,
one million six hundred twenty thousand (1,620,000) shares of which are
designated Series A Preferred Stock, of which one million two hundred seventy
thousand (1,270,000) shares are issued and outstanding (the "Company Preferred
-----------------
Stock"), all of which Company Preferred Stock shall be converted into Common
- -----
Stock conditioned upon the Closing and immediately prior to the Effective Time.
No other shares of capital stock are issued or outstanding. All issued and
outstanding shares of the Company's capital stock have been duly authorized and
validly issued, are fully paid and nonassessable, and have been issued in full
compliance with all applicable securities laws and other applicable legal
requirements. Schedule II accurately sets forth (i) the names of the
employees/consultants who have been granted Company Options; (ii) the number of
Company Options held by such employees as of the date of this Agreement; and/or
(iii) the number of Company Options to be granted to such employees/consultants
prior to the Closing.
(b) Except as set forth on Schedule II or Part 5.3 of the Disclosure
Schedule, there is no:
(i) outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of the Company;
(ii) outstanding security, instrument or obligation that is or
may become convertible into or exchangeable for any shares of the capital stock
or other securities of the Company; or
(iii) to the knowledge of the Company, condition or circumstance
that may directly or indirectly give rise to or provide a basis for a claim by
any Person to the effect
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that such Person is entitled to acquire or receive any shares of capital stock
or other securities of the Company.
(c) The Company has never repurchased, redeemed or otherwise
reacquired (or agreed, committed or offered (in writing or otherwise) to
repurchase, redeem or otherwise reacquire) any shares of capital stock or other
securities, except from employees of the Company pursuant to the terms of the
Option Plan.
5.4 Authority; Binding Nature of Agreements.
The Company has the corporate power and authority to enter into and to
perform its obligations under this Agreement and the other Transactional
Agreements to which it is or is contemplated to be a party, and the execution,
delivery and performance by the Company of this Agreement and such Transactional
Agreements have been duly authorized by all necessary action on the part of the
Company Board and its shareholders. This Agreement and the other Transactional
Agreements constitute, or upon execution and delivery will constitute, the
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditor's
rights generally and by general principles of equity regardless of whether such
enforceability is considered in a proceeding in law or equity.
5.5 Non-Contravention; Consents.
The execution and delivery of this Agreement and the other Transactional
Agreements, and the consummation of the Transactions, by the Company will not,
directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a material violation of
(i) the Company's Articles of Incorporation or bylaws, or (ii) any resolution
adopted by the Company Board or any committee thereof or the shareholders of the
Company;
(b) to the knowledge of the Company, contravene, conflict with or
result in a material violation of, or give any Governmental Body or other Person
the right to challenge any of the Transactions or to exercise any remedy or
obtain any relief (other than statutory dissenters' rights) under, any legal
requirement or any Order to which the Company or any material assets owned or
used by it are subject;
(c) to the knowledge of the Company, cause any material assets owned
or used by the Company to be reassessed or revalued by any taxing authority or
other Governmental Body;
(d) to the knowledge of the Company, contravene, conflict with or
result in a material violation of any of the terms or requirements of, or give
any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate
or modify, any Governmental Authorization that is held by the Company or any of
its employees or that otherwise relates to the Company's business or to any of
the material assets owned or used by the Company;
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(e) contravene, conflict with or result in a material violation or
material breach of, or material default under, any Company Contract;
(f) give any Person the right to any payment by the Company or give
rise to any acceleration or change in the award, grant, vesting or determination
of options, warrants, rights, severance payments or other contingent obligations
of any nature whatsoever of the Company in favor of any Person, in any such case
as a result of the change in control of the Company or otherwise resulting from
the Transactions; or
(g) result in the imposition or creation of any encumbrance upon or
with respect to any material asset owned or used by the Company.
Except as set forth in Part 5.5 of the Disclosure Schedule and as contemplated
in this Agreement and the other Transactional Agreements, the Company will not
be required to make any filing with or give any notice to, or obtain any Consent
from, any Person in connection with the execution and delivery of this Agreement
and the other Transactional Agreements or the consummation or performance of any
of the Transactions.
5.6 Intellectual Property.
(a) Part 5.6 of the Disclosure Schedule sets forth a complete list,
in all material respects, of all patents, trademarks, copyrights, registered
maskworks, trade names and service marks, and any applications therefor in
respect of any of the foregoing, included in the Company's Proprietary Assets,
and specifies, where applicable, the jurisdictions in which each such
Proprietary Assets has been issued or registered or in which an application for
such issuance and registration has been filed, including the respective
registration or application numbers and the names of all registered owners. Part
5.6 also sets forth a complete list of all material licenses, sublicenses and
other agreements as to which the Company is a party and pursuant to which the
Company or any other Person is currently authorized to use any of the Company's
Proprietary Assets (excluding object code and end-user licenses granted to end-
users in the ordinary course of business that permit use of software products
without a right to modify, distribute or sublicense the same ("End-User
--------
Licenses")) or other trade secret material to the Company, and includes the
- --------
identity of all parties thereto, a description of the nature and subject matter
thereof, the applicable royalty and the term thereof. The Company is not in
material violation of any license, sublicense or agreement described on such
list except such violations as do not materially impair the Company's rights
under such license, sublicense or agreement. Except as set forth in Part 5.6 and
except for any consents to transfer required under any Company Contract, the
execution and delivery of this Agreement by the Company, and the consummation of
the transactions contemplated hereby, (i) will not cause the Company to be in
material violation or default under any such license, sublicense or agreement,
(ii) will not entitle any other party to any such license, sublicense or
agreement to terminate or modify such license, sublicense or agreement or (iii)
will not require the Company to repay any funds already received by it from a
third party.
(b) Except as set forth in Part 5.6, the Company has all right, title
and interest in and to and is the sole and exclusive owner or licensee of (free
and clear of any liens or encumbrances), the Company's Proprietary Assets, and
has sole and exclusive rights (and is not
13
<PAGE>
contractually obligated to pay any compensation to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which the Company's Proprietary Assets
are being used.
(c) Except as set forth in Part 5.6, no claims with respect to the
Company's Proprietary Assets have been asserted or, to the knowledge of the
Company, are threatened by any person nor are there any valid grounds, to the
knowledge of the Company, for any bona fide claims: (i) to the effect that the
manufacture, sale, licensing or use of any of the products of the Company as now
manufactured, sold, licensed or used or proposed for manufacture, sale,
licensing or use by the Company infringes on any third party's Proprietary
Assets; (ii) against the use by the Company used in the Company's business as
currently conducted; or (iii) challenging the ownership by the Company, validity
or effectiveness of any of the Company's Proprietary Assets. To the Company's
knowledge, all registered patents, trademarks, service marks and copyrights held
by the Company, if any, are valid and subsisting.
(d) To the knowledge of the Company, there is no material
unauthorized use, infringement or misappropriation of any of the Company's
Proprietary Assets by any third party, including any employee or former employee
of the Company.
(e) None of the Company's Proprietary Assets or product of the
Company is subject to any outstanding decree, order, judgment, or stipulation
restricting in any manner the licensing thereof by the Company.
(f) The Company has not entered into any agreement under which the
Company is restricted from selling, licensing or otherwise distributing any of
its current or anticipated products to any class of customers, in any geographic
area, during any period of time or in any segment of the market.
(g) Each employee and consultant identified on the Disclosure
Schedule has executed the Company's form of proprietary information and
invention agreement in substantially the form provided to Purchaser and its
counsel.
5.7 Proceedings; Orders.
(a) There is no pending Proceeding, and, to the Company's knowledge,
no Person has threatened to commence any Proceeding:
(i) that (x) involves the Company or (y) otherwise relates to or
might affect the Company's business or any of the material assets owned or used
by the Company (whether or not the Company is named as a party thereto), other
than Proceedings to which the Company is not a party that would affect
businesses generally; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of the Transactions
or the Company's ability to comply with or perform its obligations and covenants
under the Transactional Agreements, and, to the knowledge of the Company, no
event has occurred, and no claim, dispute or other condition or circumstance
exists, that might directly or indirectly give rise to or serve as a basis for
the commencement of any such Proceeding.
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<PAGE>
(b) The Company has delivered to the Purchaser accurate and complete
copies of all pleadings, correspondence and other written materials to which the
Company has access that relate to the Proceedings identified in Part 5.7 of the
Disclosure Schedule, if any.
(c) There is no Order to which the Company, or any of the assets
owned or used by the Company, is subject.
(d) To the Company's knowledge, no officer or employee of the Company
is subject to any Order that prohibits such officer or employee from engaging in
or continuing any conduct, activity or practice relating to the Company's
business.
5.8 Financial Statements.
(a) The Company has delivered to the Purchaser the following
financial statements and notes (collectively, the "Financial Statements"), which
--------------------
are attached as Exhibit G:
(i) the unaudited balance sheet of the Company as of December
31, 1998, and the related unaudited statement of operations of the Company for
the period ended December 31, 1998; and
(ii) the unaudited balance sheet of the Company as of March 31,
1999 (the "Unaudited Interim Balance Sheet"), and the related unaudited
-------------------------------
statement of operations of the Company for the three (3) months then ended.
(b) All the Financial Statements are accurate and complete in all
material respects, and the dollar amount of each line item included in the
Financial Statements is accurate in all material respects. The Financial
Statements are in accordance with the books and records of the Company and
present fairly the financial position of the Company as of the respective dates
thereof and the results of operations of the Company for the periods covered
thereby. The Financial Statements have been prepared using the income tax method
of accounting (cash basis) used by the Company to prepare the Company Returns,
applied on a consistent basis throughout the periods covered.
(c) As of the date of this Agreement, the Company has no Liabilities
in excess of Ten Thousand Dollars ($10,000), individually or in the aggregate,
except for Liabilities identified as such in the "liabilities" column of the
Unaudited Interim Balance Sheet and Liabilities arising out of the Transactional
Agreements and the Company Contracts.
5.9 Title to Assets.
(a) The Company owns, and has good, valid and marketable title to,
all assets purported to be owned by it, free and clear of any material
encumbrances, except liens for current taxes and assessments not delinquent.
(b) Part 5.9(b) of the Disclosure Schedule identifies all equipment,
furniture, fixtures, improvements and other tangible assets owned by the Company
with a value over Ten Thousand Dollars ($10,000), and sets forth the original
cost and book value of each of said assets.
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(c) Each asset identified in Part 5.9(b) of the Disclosure Schedule:
(i) is free of material defects and deficiencies and in good
condition and repair, consistent with its age and intended use (ordinary wear
and tear excepted); and
(ii) is adequate for the uses to which it is being put.
(d) The Company does not own any real property or any interest in
real property, except for the leaseholds created under the real property leases
identified in Part 5.9(d) of the Disclosure Schedule (the "Leased Premises").
---------------
Part 5.9(d) of the Disclosure Schedule lists the premises covered by said
leases. The Company enjoys peaceful and undisturbed possession of such premises.
(e) Part 5.9(e) of the Disclosure Schedule identifies all tangible
assets that are leased to the Company that have a value in excess of Ten
Thousand Dollars ($10,000). All leases pursuant to which the Company leases real
or personal property are in good standing and are valid and effective in
accordance with their respective terms and, to the knowledge of the Company,
there exists no default thereunder.
5.10 Contracts.
(a) Part 5.10 of the Disclosure Schedule identifies and describes
each material Company Contract. The Company has delivered to the Purchaser
accurate and complete copies of all Company Contracts identified in Part 5.10 of
the Disclosure Schedule, including all amendments thereto.
(b) Each Company Contract is currently valid and in full force and
effect, and is enforceable by the Company in accordance with its terms, except
to the extent that enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting the enforcement
of creditor's rights generally and by general principles of equity regardless of
whether such enforceability is considered in a proceeding in law or equity.
(c) The Company is not in material default under any Company
Contract, and, to the knowledge of the Company, (i) no Person has violated or
breached, or declared or committed any material default under, any Company
Contract; and (ii) the Company has not waived any of its rights under any
Company Contract.
(d) (i) The Company has never guaranteed or otherwise agreed to
cause, insure or become liable for, and has never pledged any of its assets to
secure, the performance or payment of any obligation or other Liability of any
other Person; and (ii) the Company has never been a party to or bound by any
material joint venture agreement, partnership agreement, profit-sharing
agreement, cost-sharing agreement, loss-sharing agreement or similar Contract.
(e) No Person is renegotiating any amount paid or payable to the
Company under any Company Contract or any other material term or provision of
any Company Contract.
(f) Part 5.10(f) of the Disclosure Schedule identifies and provides
an accurate and complete description of each proposed Company Contract (other
than this Agreement and
16
<PAGE>
the Transactional Agreements) as to which any bid, offer, written proposal, term
sheet or similar document has been submitted to or received by the Company and
is outstanding and which would be material to the business or prospects of the
Company.
(g) No party to any Company Contract has notified the Company to the
effect that the Company has failed to perform a material obligation thereunder.
5.11 Employees.
(a) Part 5.11(a) of the Disclosure Schedule contains a list of all
employees of the Company as of the date of the Agreement and their respective
titles and annualized compensation.
(b) Part 5.11(b) of the Disclosure Schedule contains a list of
Persons who are currently performing services for the Company business and are
classified as "consultants" or "independent contractors," and the respective
compensation of each such "consultant" or "independent contractor."
(c) The Company has no collective bargaining agreements, union
contracts with any of its employees. To the knowledge of the Company, there is
no labor union organizing activity pending or threatened with respect to the
Company. The employment of each of the Company's employees is terminable by the
Company at will; and, except as set forth in Part 5.11(c) of the Disclosure
Schedule, no employee has any agreement or contract, written or verbal,
regarding his or her employment.
(d) To the Company's knowledge, (i) no employee of the Company, nor
any consultant with whom the Company has contracted, is in violation of any term
of any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be conducted
by the Company, and (ii) the continued employment by the Company of its present
employees, and the performance of the Company's contracts with its independent
contractors, will not result in any such violation. The Company has not received
any notice (written or otherwise) alleging that any such violation has occurred.
No employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. To the knowledge of the Company, no officer or key employee,
or any group of employees, has given notice of his, her or their intent to
terminate his, her or their employment with the Company, and no employee of the
Company has received an offer to join a business that is or likely would be
competitive with the Company's business.
5.12 Compliance with Legal Requirements.
(a) The Company is in full compliance with each legal requirement
that is applicable to it or to the conduct of its business or the ownership or
use of any of its assets.
(b) The Company has not received, at any time, any notice from any
Governmental Body or any other Person regarding (i) any actual, alleged,
possible or potential violation of, or failure to comply with, any legal
requirement by the Company, or (ii) any actual,
17
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alleged, possible or potential obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any cleanup or any
remedial, corrective or response action of any nature relating to Hazardous
Materials, except to the extent noncompliance would not materially adversely
effect the Company's business prospects or financial condition.
5.13 Governmental Authorizations.
(a) Part 5.13 of the Disclosure Schedule identifies each Governmental
Authorization held by the Company. The Company has delivered to the Purchaser
accurate and complete copies of all such Governmental Authorizations, including
all renewals thereof and all amendments thereto. Each Governmental Authorization
identified or required to be identified in Part 5.13 of the Disclosure Schedule
is valid and in full force and effect.
(b) The Governmental Authorizations identified in Part 5.13 of the
Disclosure Schedule constitute all the Governmental Authorizations necessary (i)
to enable the Company to conduct its business in the manner in which its
business is currently being conducted, and (ii) to permit the Company to own and
use its assets in the manner in which they are currently owned and used.
5.14 Tax Matters.
(a) Except to the extent set forth in Part 5.14 of the Disclosure
Schedule, each Tax required to have been paid, or claimed by any Governmental
Body to be payable, by the Company (whether pursuant to any Tax Return or
otherwise) has been duly paid in full on a timely basis. Any Tax required to
have been withheld or collected by the Company has been duly withheld and
collected, and (to the extent required) each such Tax has been paid to the
appropriate Governmental Body. The Company has complied with all information
reporting and backup withholding requirements, including maintenance of required
records with respect thereto, in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third party.
(b) Part 5.14 of the Disclosure Schedule accurately identifies all
Tax Returns required to be filed by or on behalf of the Company with any
Governmental Body with respect to any taxable period ending on or before the
Closing Date ("Company Returns"). All Company Returns (i) have been, or will be,
---------------
filed when due, and (ii) have been, or will be when filed, accurately and
completely prepared pursuant to applicable law. All amounts shown on the Company
Returns to be due on or before the Closing Date, and all amounts otherwise
payable in connection with the Company Returns on or before the Closing Date,
have been paid on or before the Closing Date. The Company has delivered to the
Purchaser copies of all Company Returns filed by or on behalf of the Company or
any other entity acquired by or merged into the Company prior to the Closing
Date.
(c) The Company's liability for unpaid Taxes for all periods ending
on or before the date of the Financial Statements does not, in the aggregate,
exceed the amount of the current liability accruals for Taxes (excluding
reserves for deferred taxes) reported in the Financial Statements. The Company
has established, in the Ordinary Course of Business, reserves adequate for the
payment of all Taxes for the period from December 31, 1998 through
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the Closing Date, and the Company has disclosed the dollar amount of such
reserves to the Purchaser on or prior to the Closing Date.
(d) Part 5.14 of the Disclosure Schedule identifies each examination
or audit of any Company Return that has been conducted by any Governmental Body.
The Company has delivered to the Purchaser copies of all audit reports and
similar documents (to which the Company has access) relating to Company Returns.
No extension or waiver of the limitation period applicable to any of the Company
Returns has been granted (by the Company or any other Person), and no such
extension or waiver has been requested from the Company.
(e) No claim or other Proceeding is pending or has been threatened in
writing or orally (formally or informally) against or with respect to the
Company in respect of any Tax. The Company has not entered into or become bound
by any agreement or consent pursuant to Section 341(f) of the Code. The Company
has not been, and will not be, required to include any adjustment in taxable
income for any tax period (or portion thereof) pursuant to Section 481 or 263A
of the Code or any comparable provision under state or foreign Tax laws as a
result of transactions or events occurring, or accounting methods employed,
prior to the Closing. The Company has never been in a "consolidated group"
within the meaning of Treasury Regulations Section 1.1502-1(h), and is not
liable for Taxes incurred by any individual, trust, corporation, partnership or
any other Entity either as a transferee, pursuant to Treasury Regulations
Section 1.1502-6, or pursuant to any other provision of federal, territorial,
state, local or foreign law or regulations. Except as set forth in Part 5.14 of
the Disclosure Schedule, the Company is not a party to any joint venture,
partnership or other arrangement or contract which could be treated as a
partnership for United States federal income tax purposes. None of the assets of
the Company (i) directly or indirectly secures any debt the interest on which is
tax exempt under Section 103(a) of the Code or (ii) is "tax exempt use property"
within the meaning of Section 168(h) of the Code. The Company has not
participated in an international boycott as defined in Code Section 999. The
Company does not have a "permanent establishment," as defined in any applicable
Tax treaty or convention of the United States of America, or fixed place of
business in any foreign country.
(f) The Company is not party to any agreement, plan, arrangement or
other Contract covering any employee or independent contractor or former
employee or independent contractor of the Company that, individually or
collectively, could give rise directly or indirectly to the payment of any
amount that would not be deductible pursuant to Section 280G or Section 162(m)
of the Code. Except as set forth in Part 5.14 of the Disclosure Schedule, the
Company is not, and has never been, a party to or bound by any tax indemnity
agreement, tax-sharing agreement, tax allocation agreement or similar Contract,
and has not otherwise assumed the tax liability of any other Person under
contract.
(g) The Company is not a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code and has not been
a United States real property holding corporation within the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
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(h) The Company has no net operating losses or other tax attributes
presently subject to limitation under Code Section 382, 383 or 384, or the
federal consolidated return regulations.
(i) The Company's final 1999 U.S. income tax return to be prepared
pursuant to Section 12.4(b) will contain, in all material respects, an accurate
and complete description of the Company's tax basis in its assets, its current
and accumulated earnings and profits, its tax carryovers, and any tax elections.
5.15 Securities Laws Compliance; Registration Rights.
The Company has complied with all federal and state securities laws in
connection with all offers and sales of securities issued by the Company prior
to the date of this Agreement. The Company has not heretofore granted any other
purchaser of its securities the right to require the Company to register any
securities under the Securities Act or to qualify for any exemption thereunder.
5.16 Finders and Brokers; Fees.
(a) Neither the Company nor any person acting on behalf of the
Company has engaged any finder, broker, intermediary or any similar person in
connection with the Transactions.
(b) The Company has not entered into a contract or other agreement
that provides that a fee shall be paid to any Person or Entity if the
Transactions are consummated.
5.17 Environmental Compliance.
To the knowledge of the Company, the Company is and has been at all times
in compliance in all material respects with all Environmental Laws.
5.18 Insurance.
(a) Part 5.18 of the Disclosure Schedule sets forth each insurance
policy maintained by or at the expense of, or for the direct or indirect benefit
of, the Company:
(b) The Company has delivered to the Purchaser copies of all of the
insurance policies identified in Part 5.18 of the Disclosure Schedule (including
all renewals thereof and endorsements thereto) and binders relating thereto.
(c) Each of the policies identified in Part 5.18 of the Disclosure
Schedule is in full force and effect. All of the information contained in the
applications submitted in connection with said policies was (at the times said
applications were submitted) accurate and complete, and all premiums and other
amounts owing with respect to said policies have been paid in full on a timely
basis. Each of the policies identified in Part 5.18 of the Disclosure Schedule
will continue in full force and effect following the Closing, and the Company
has paid all premiums due, and has otherwise performed all of its obligations,
under each policy to which
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it is a party or that provides coverage to it or any of its directors or
officers in connection with their performance of services to the Company.
(d) There is no pending claim under or based upon any of the policies
identified in Part 5.18 of the Disclosure Schedule, and, to the Company's
knowledge, no event has occurred, and no condition or circumstance exists, that
might (with or without notice or lapse of time) directly or indirectly give rise
to or serve as a basis for any such claim.
(e) The Company has not received:
(i) any notice or other communication (in writing or otherwise)
regarding the actual or possible cancellation or invalidation of any of the
policies identified in Part 5.18 of the Disclosure Schedule or regarding any
actual or possible adjustment in the amount of the premiums payable with respect
to any of said policies; or
(ii) any notice or other communication (in writing or otherwise)
regarding any actual or possible refusal of coverage under, or any actual or
possible rejection of any claim under, any of the policies identified in Part
5.18 of the Disclosure Schedule.
5.19 Related Party Transactions.
(a) No Related Party has, and no Related Party has at any time since
December 31, 1998, had, any direct or indirect material interest of any nature
in any material asset of the Company or any Company Contract.
(b) No Related Party is, or has at any time since December 31, 1998,
been, indebted to the Company for an amount, individually or in the aggregate,
in excess of Ten Thousand Dollars ($10,000).
(c) Since December 31, 1998, no Related Party has entered into, or
has had any direct or indirect material financial interest in, any Company
Contract, transaction or business dealing of any nature involving the Company.
(d) No Related Party is competing, or has at any time since December
31, 1998, competed, directly or indirectly, with the Company in any market
served by the Company.
5.20 Absence of Changes.
Since March 31, 1999:
(a) there has not been any material adverse change in the Company's
business, assets, liabilities, operations or prospects (or in any aspect or
portion thereof), and, to the knowledge of the Company, no event has occurred
that is likely to have a material adverse effect on the Company's business,
assets, liabilities, operations or prospects (or on any aspect or portion
thereof);
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(b) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock;
(c) the Company has not amended its Articles of Incorporation or
Bylaws and has not effected or been a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(d) the Company has not made any individual capital expenditure in
excess of Twenty Five Thousand Dollars ($25,000);
(e) the Company has not pledged or hypothecated any of its material
assets or otherwise permitted any of its material assets to become subject to
any encumbrance;
(f) the Company has not made any loan or advance in excess of Ten
Thousand Dollars ($10,000) to any Person;
(g) the Company has not paid any bonus or made any profit-sharing or
similar payment to, or increased the amount of the wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of its
directors, officers or employees;
(h) there has been no resignation or termination of employment of any
officer or key employee of the Company;
(i) there has been no borrowing or agreement to borrow by the Company
or material change in the contingent obligations of the Company by way of
guaranty, endorsement, indemnity, warranty or otherwise or grant of a mortgage
or security interest in any property of the Company;
(j) the Company has not discharged any encumbrance or discharged,
paid or forgiven any indebtedness or other Liability in excess of Ten Thousand
Dollars ($10,000), individually or in the aggregate, except for accounts payable
that (i) are reflected as current liabilities in the "liabilities" column of the
Unaudited Interim Balance Sheet or have been incurred by the Company since the
date of the Unaudited Interim Balance Sheet in the Ordinary Course of Business
and (ii) have been discharged or paid in the Ordinary Course of Business;
(k) the Company has released or waived any material right or claim;
(l) the Company has not changed any of its methods of accounting or
accounting practices in any material respect;
(m) the Company has not received notice that there has been a loss
of, or cancellation of a material order by, any customer of the Company; and
(n) the Company has not agreed, committed or offered (in writing or
otherwise), and has not attempted, to take any of the actions referred to in
clauses (c) through (m) above.
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5.21 The Selling Shareholders; Investment Intent and Restrictions.
Each Selling Shareholder, severally and not jointly, represents and
warrants as follows:
(a) As of the Effective Time, the Selling Shareholder will own,
beneficially and of record, that number of shares of Common Stock specified
opposite the Selling Shareholder's name on Schedule I attached hereto, free and
clear of any encumbrances. The Selling Shareholder has delivered to the
Purchaser copies of the stock certificate(s) evidencing the Stock.
(b) The Selling Shareholder has the absolute and unrestricted right,
power and authority to enter into and to perform his respective obligations
under this Agreement and the other Transactional Agreements to which he is
contemplated to be a party. This Agreement and the other Transactional
Agreements constitute, or upon execution and delivery will constitute, the
legal, valid and binding obligations of the Selling Shareholder, enforceable
against him in accordance with their respective terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditor's
rights generally and by general principles of equity regardless of whether such
enforceability is considered in a proceeding in law or equity.
(c) To the knowledge of the Selling Shareholder, the execution and
delivery of this Agreement and the other Transactional Agreements, and the
consummation of the Transactions, by the Selling Shareholder will not, directly
or indirectly (with or without notice or lapse of time), contravene, conflict
with or result in a violation of, or give any Governmental Body or other Person
the right to challenge any of the Transactions or to exercise any remedy or
obtain any relief under, any legal requirement or any Order to which the Selling
Shareholder is subject.
(d) There is no pending Proceeding, and, to the knowledge of the
Selling Shareholder, no Person has threatened to commence any Proceeding, that
challenges, or that may have the effect of preventing, delaying or making
illegal, any of the Transactions or the Selling Shareholder's ability to comply
with or perform his obligations and covenants under the Transactional
Agreements; and, to the knowledge of the Selling Shareholder, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
might directly or indirectly give rise to or serve as a basis for the
commencement of any such Proceeding.
(e) The Selling Shareholder is not subject to any Order that relates
to the Company's business or to any of the assets owned or used by the Company.
(f) To the knowledge of the Selling Shareholder, there is no proposed
Order that, if issued or otherwise put into effect, may have a material adverse
effect on the ability of the Selling Shareholder to comply with or perform any
covenant or obligation under this Agreement and the other Transactional
Agreements .
(g) To the knowledge of the Selling Shareholder, no Governmental Body
has proposed any legal requirement (other than any legal requirement that would
be applicable generally to the Internet communications industry) that, if
adopted or otherwise put into effect,
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may adversely affect his ability to comply with or perform any of his covenants
or obligations under this Agreement and the other Transactional Agreements.
(h) Neither the Selling Shareholder nor any person acting on his
behalf has negotiated with any finder, broker, intermediary or any similar
person in connection with the transactions contemplated herein.
(i) All information regarding the Selling Shareholder that such
Selling Shareholder has furnished to the Purchaser or any of its representatives
is accurate and complete in all material respects.
(j) The Selling Shareholder has the capacity and financial capability
to comply with and perform all his covenants and obligations under this
Agreement and each of the other Transactional Agreements.
With respect to the Purchaser Stock, each Selling Shareholder further
represents and warrants as follows:
(k) The Selling Shareholder is an "accredited investor" as that term
is defined in Rule 501(a) of Regulation D of the Securities Act.
(l) The Selling Shareholder, by reason of its business and financial
experience has such knowledge, sophistication and experience in financial and
business matters and in making investment decisions of this type that it is
capable of (i) evaluating the merits and risks of an investment in the Purchaser
Stock and making an informed investment decision, (ii) protecting its own
interest and (iii) bearing the economic risk of such investment. If the Selling
Shareholder retained a purchaser's representative with respect to the investment
in Purchaser Stock that may be made hereby then the Selling Shareholder shall,
prior to or at the Closing, (i) acknowledge in writing such representation and
(ii) cause such representative to deliver a certificate to Purchaser containing
such representations as are reasonably requested by Purchaser.
(m) The Selling Shareholder is acquiring the Purchaser Stock for
investment for the Selling Shareholder's own account, not as a nominee or agent
and not with the view to, or any intention of, a resale or distribution thereof,
in whole or in part, or the grant of any participation therein. The Selling
Shareholder understands that the Purchaser Stock has not been registered under
the Securities Act or state securities laws by reason of a specific exemption
from the registration provisions of the Securities Act and applicable state
securities laws that depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Selling Shareholder's
representations as expressed in this Agreement. The Selling Shareholder has not
been formed for the specific purpose of acquiring the Purchaser Stock. The
Selling Shareholder further understands that Purchaser shall have no obligation
to register the Purchaser Stock under the Securities Act or any state securities
laws or to take any action that would make available any exemption from the
registration requirements of such laws, except pursuant to the Rights Agreement.
The Selling Shareholder hereby acknowledges that because of the restrictions on
transfer or assignment of the Purchaser Stock to be issued in connection with
the Merger hereunder the Selling Shareholder may have to bear the economic risk
of the investment commitment in Purchaser Stock for an indefinite period of
time.
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(n) The Selling Shareholder will observe and comply with the
Securities Act and the rules and regulations promulgated thereunder, as now in
effect and as from time to time amended, in connection with any offer, sale,
pledge, transfer or other disposition of Purchaser Stock. In furtherance of the
foregoing, and in addition to any restrictions contained in this Agreement or
the other Transactional Agreements, the Selling Shareholder will not offer to
sell, exchange, transfer, pledge, or otherwise dispose of any of the Purchaser
Stock unless at such time at least one of the following is satisfied:
(i) a registration statement under the Securities Act covering
the Purchaser Stock proposed to be sold, transferred or otherwise disposed of,
describing the manner and terms of the proposed sale, transfer or other
disposition, and containing a current prospectus, shall have been filed with the
SEC and made effective under the Securities Act;
(ii) such transaction shall be permitted pursuant to the
provisions of Rule 144;
(iii) counsel representing the Selling Shareholder, satisfactory
to Purchaser, shall have advised Purchaser in a written opinion letter
reasonably satisfactory to Purchaser and its counsel, and upon which Purchaser
and its counsel may rely, that no registration under the Securities Act would be
required in connection with the proposed sale, transfer or other disposition; or
(iv) an authorized representative of the SEC shall have rendered
written advice to the Selling Shareholder (sought by the Selling Shareholder or
counsel to the Selling Shareholder, with a copy thereof and of all other related
communications delivered to Purchaser) to the effect that the SEC would take no
action, or that the staff of the SEC would not recommend that the SEC take
action, with respect to the proposed sale, transfer or other disposition if
consummated.
(o) The Selling Shareholder has received and carefully reviewed a
copy of the Information Statement.
(p) The Selling Shareholder understands that an investment in the
Purchaser Stock involves substantial risks. Selling Shareholder has been given
the opportunity to make a thorough investigation of the proposed activities of
Purchaser and, upon request to Purchaser, has been furnished with materials
relating to Purchaser and its proposed activities, including, without
limitation, a copy of Purchaser's Registration Statement on Form S-1 dated April
9, 1999 (the "Registration Statement") and the Purchaser SEC Reports. The
----------------------
Selling Shareholder has been afforded the opportunity to obtain any additional
information deemed necessary by the Selling Shareholder to verify the accuracy
of any representations made or information conveyed to the Selling Shareholder.
The Selling Shareholder confirms that all documents, records and books
pertaining to its investment in Purchaser Stock and requested by the Selling
Shareholder have been made available or delivered to the Selling Shareholder.
The Selling Shareholder has had an opportunity to ask questions of and receive
answers from Purchaser, or from a person or persons acting on Purchaser's
behalf, concerning the terms and conditions of this investment. The Selling
Shareholder acknowledges that it has been informed by Purchaser prior to making
its investment decision that (i) Purchaser has been approached from time to time
to consider and
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evaluate potential business combinations, some of which could have resulted in a
change in control of Purchaser, (ii) Purchaser is currently engaged in
discussions relating to a business combination that could result in a change in
control of Purchaser, (iii) it is uncertain whether Purchaser will enter into
any such transaction and (iv) if Purchaser should enter into any such
transaction, it is uncertain what the final terms of such transaction would be.
The Selling Shareholder has relied upon, and is making its investment decision
upon, the Registration Statement, the Information Statement and other
information publicly available about Purchaser.
(q) The Selling Shareholder has no knowledge of any causes of action
or other claims that could have been or in the future might be asserted by the
Selling Shareholder against the Company or any of its predecessors, successors,
assigns, directors, employees, agents or representatives arising out of facts or
circumstances occurring at any time on or prior to the date hereof and in any
way relating to any duty or obligation of the Company or any of such other
parties to the Selling Shareholder.
5.22 Powers of Attorney.
The Company has not given a power of attorney to any Person.
5.23 Benefit Plans; ERISA.
(a) Part 5.23 of the Disclosure Schedule lists (i) all "employee
benefit plans" within the meaning of Section 3(3) of ERISA, (ii) all employment
agreements, including, but not limited to, any individual benefit arrangement,
policy or practice with respect to any current or former employee or director of
the Company or Member of the Controlled Group, and (iii) all other employee
benefit, bonus or other incentive compensation, stock option, stock purchase,
stock appreciation, severance pay, lay-off or reduction in force, change in
control, sick pay, vacation pay, salary continuation, retainer, leave of
absence, educational assistance, service award, employee discount, fringe
benefit plans, arrangements, policies or practices, whether legally binding or
not, which the Company or any Member of the Controlled Group maintains,
contributes to or has any obligation to or liability for (collectively, the
"Plans").
-----
(b) None of the Plans is a Defined Benefit Plan, and neither the
Company nor any Member of the Controlled Group has ever sponsored, maintained or
contributed to, or ever been obligated to contribute to, a Defined Benefit Plan
that could reasonably be expected to result in a material amount of liability
under Title IV of ERISA.
(c) None of the Plans is a Multiemployer Plan, and neither the
Company nor any Member of the Controlled Group has ever contributed to, or ever
been obligated to contribute to, a Multiemployer Plan that could reasonably be
expected to result in a material amount of liability under Title IV of ERISA.
(d) The Company does not maintain or contribute to any welfare
benefit plan which provides health benefits to an employee after the employee's
termination of employment or retirement except as required under Section 4980B
of the Code and Sections 601 through 608 of ERISA.
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(e) Each Plan that is an "employee benefit plan," as defined in
Section 3(3) of ERISA, complies in all material respects by its terms and in
operation with the requirements provided by any and all statutes, orders or
governmental rules or regulations currently in effect and applicable to the
Plan, including but not limited to ERISA and the Code.
(f) All reports, forms and other documents required to be filed with
any government entity with respect to any Plan (including, without limitation,
summary plan descriptions, Forms 5500 and summary annual reports) have been
timely filed and are accurate.
(g) Each Plan intended to qualify under Section 401(a) of the Code is
the subject of a favorable determination letter issued by the Internal Revenue
Service. To the Company's knowledge, nothing has occurred since the date of the
Internal Revenue Service's favorable determination letter that could adversely
affect the qualification of the Plan and its related trust. The Company and each
Member of the Controlled Group have timely and properly applied for a written
determination by the Internal Revenue Service on the qualification of each such
Plan and its related trust under Section 401(a) of the Code, as amended by the
Tax Reform Act of 1986 and subsequent legislation enacted through the date
hereof, and Section 501 of the Code.
(h) All contributions owed for all periods ending prior to the
Closing Date (including periods from the first day of the current plan year to
the Closing Date) under any Plan have been or will be made prior to the Closing
Date by the Company in accordance with past practice and the recommended
contribution in any applicable actuarial report.
(i) All insurance premiums have been paid in full, subject only to
normal retrospective adjustments in the ordinary course, with regard to the
Plans for plan years ending on or before the Closing Date.
(j) With respect to each Plan:
(i) no prohibited transactions (as defined in Section 406 or
407 of ERISA or Section 4975 of the Code) have occurred for which an exemption
is not available that could reasonably be expected to result in a material
amount of liability to the Company;
(ii) no actions or claims (other than routine claims for benefits
made in the ordinary course of Plan administration for which Plan administrative
review procedures have not been exhausted) are pending, threatened or imminent
against or with respect to the Plan, any employer who is participating (or who
has participated) in the Plan or any fiduciary (as defined in Section 3(21) of
ERISA) of the Plan that could reasonably be expected to result in a material
amount of liability to the Company;
(iii) no facts exist which could give rise to any such action or
claim; and
(iv) the Plan provides that it may be amended or terminated at
any time and, except for benefits protected under Section 411(d) of the Code,
all benefits payable to current, terminated employees or any beneficiary may be
amended or terminated by the Company at any time without a material amount of
liability.
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(k) Neither the Company nor any Member of the Controlled Group
has any Plan-related liability or is threatened with any liability (whether
joint or several) (i) for any excise tax imposed by Section 4971, 4975, 4976,
4977 or 4979 of the Code, or (ii) for a fine under Section 502 of ERISA that
could reasonably be expected to result in a material amount of liability to the
Company.
(l) All the "group health plans" (as defined in Section 607(1) or
733(a)(1) of ERISA or Section 4980B(g)(2) of the Code) that are part of the
Plans listed in the Disclosure Schedule are in material compliance with the
continuation of group health coverage provisions contained in Section 4980B of
the Code and Sections 601 through 608 of ERISA.
(m) Copies of all documents creating or evidencing any Plan listed in
the Disclosure Schedule, and all reports, forms and other documents required to
be filed with any governmental entity (including, without limitation, summary
plan descriptions, Forms 5500 and summary annual reports for all plans subject
to ERISA), have been delivered or made available to Purchaser. There are no
negotiations, demands or proposals which are pending or have been made which
concern matters now covered, or that would be covered, by any Plan listed in the
Disclosure Schedule.
(n) All expenses and liabilities relating to contributions required
by law and the terms of the Plans described in the Disclosure Schedule have
been, and on the Closing Date will be, fully and properly accrued on the
Company's books and records and disclosed in accordance with GAAP and in Plan
financial statements.
5.24 Full Disclosure.
(a) Neither this Agreement (including all Schedules and Exhibits
hereto), nor any of the Transactional Agreements, contains any untrue statement
of material fact; and none of such documents omits to state any material fact
necessary to make any of the representations, warranties or other statements or
information contained therein when read collectively not misleading .
(b) There is no fact within the knowledge of the Company (other than
publicly known facts relating exclusively to political or economic matters of
general applicability that will adversely affect all comparable Entities) that
may have a material adverse effect on (i) the Company's business, financial
condition, assets, liabilities, operations, financial performance, net income or
prospects (or on any aspect or portion thereof) or (ii) the ability of the
Selling Shareholders or the Company to comply with or perform any covenant or
obligation under this Agreement or any of the other Transactional Agreements to
which it is contemplated to be a party.
(c) All the information set forth in the Disclosure Schedule, and all
other information (including copies of documents) regarding or relating to the
Company and its business, condition, assets, liabilities, operations, financial
performance, net income and prospects that has been furnished to the Purchaser
or any of its representatives by or on behalf of the Company or any of its
representatives, is accurate and complete in all material respects.
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5.25 Due Diligence Information.
The Company has provided the Purchaser and the Purchaser's representatives
with full and complete access to all of the Company's records and other
documents and data, and has produced all documents and related materials in
response to the reasonable requests of Purchaser.
6. Representations and Warranties of the Purchaser and Merger Sub.
The Purchaser and Merger Sub, jointly and severally, hereby represent and
warrant to the Selling Shareholders as follows:
6.1 Organization, Good Standing, Authority; Binding Nature of Agreement.
(a) Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, is qualified to
conduct business and is in both corporate and tax good standing under the laws
of each jurisdiction in which the nature of its business or the ownership or
leasing of its properties requires such qualification. Purchaser has the
requisite corporate power and authority to own and operate its properties and
assets and to carry on its business as currently conducted.
(b) Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, is qualified to
conduct business and is in both corporate and tax good standing under the laws
of each jurisdiction in which the nature of its business or the ownership or
leasing of its properties requires such qualification. Merger Sub has the
requisite corporate power and authority to own and operate its properties and
assets and to carry on its business as currently conducted
6.2 Investment Representations.
(a) The Purchaser understands that the Stock has not been registered
under the Securities Act. The Purchaser also understands that the Stock is being
offered and sold pursuant to an exemption from registration contained in the
Securities Act based in part upon the Purchaser's representations contained in
this Section 6.2.
(b) The Purchaser is acquiring the Stock for the Purchaser's own
account for investment only, and not with the current intention of making a
public distribution thereof.
(c) The Purchaser represents that by reason of its, or of its
management's business or financial experience, the Purchaser has the capacity to
protect its own interests in connection with the Transactions contemplated in
this Agreement and the other Transactional Agreements. The Purchaser is able to
bear the loss of its entire investment in the Company. The Purchaser is not a
corporation, partnership or other entity specifically formed for the purpose of
consummating this transaction.
(d) The Purchaser is an accredited investor as that term is defined
in Rule 501(a) of Regulation D, promulgated pursuant to the Securities Act.
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6.3 Purchaser Stock.
The Purchaser Stock to be issued to the Selling Shareholders and upon
exercise of the Company Options assumed by Purchaser, when issued in connection
with this Agreement and the other Transactional Agreements, will be duly
authorized, validly issued and nonassessable.
6.4 Authority; Binding Nature of Agreements.
(a) The execution, delivery and performance of this Agreement, the
Transactional Agreements, and all other agreements and instruments contemplated
to be executed and delivered by the Purchaser or Merger Sub, as the case may be,
in connection herewith have been duly authorized by all necessary action on the
part of the Purchaser and Merger Sub and their respective board of directors.
(b) This Agreement, the Transactional Agreements, and all other
agreements and instruments contemplated to be executed and delivered by the
Purchaser and Merger Sub each constitute the legal, valid and binding obligation
of the Purchaser and Merger Sub, enforceable against the Purchaser and Merger
Sub in accordance with their terms, except to the extent that enforceability may
be limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting the enforcement of creditors' rights generally and by
general principles of equity regardless of whether such enforceability is
considered in a proceeding in law or equity.
(c) There is no pending Proceeding, and, to Purchaser's knowledge, no
Person has threatened to commence any Proceeding that challenges, or that may
have the effect of preventing, delaying, making illegal or otherwise interfering
with, any of the Transactions or Purchaser's ability to comply with or perform
its obligations and covenants under the Transactional Agreements, and, to the
knowledge of Purchaser, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that might directly or indirectly give rise to
or serve as a basis for the commencement of any such Proceeding.
6.5 Non-Contravention; Consents.
The execution and delivery of this Agreement and the other Transactional
Agreements, and the consummation of the Transactions, by the Purchaser and
Merger Sub will not, directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a material violation of
(i) the Purchaser and Merger Sub's Certificate of Incorporation or bylaws, or
(ii) any resolution adopted by the Purchaser and Merger Sub Board or any
committee thereof or the stockholders of the Purchaser and Merger Sub;
(b) to the knowledge of the Purchaser and Merger Sub, contravene,
conflict with or result in a material violation of, or give any Governmental
Body the right to challenge any of the Transactions or to exercise any remedy or
obtain any relief under, any legal requirement or any Order to which the
Purchaser and Merger Sub or any material assets owned or used by it are subject;
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(c) to the knowledge of the Purchaser and Merger Sub, cause any
material assets owned or used by the Purchaser and Merger Sub to be reassessed
or revalued by any taxing authority or other Governmental Body;
(d) to the knowledge of the Purchaser and Merger Sub, contravene,
conflict with or result in a material violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify, any Governmental Authorization that is
held by the Purchaser or Merger Sub or any of their respective employees or that
otherwise relates to the Purchaser and Merger Sub's business or to any of the
material assets owned or used by the Purchaser and Merger Sub;
(e) contravene, conflict with or result in a material violation or
material breach of, or material default under, any Purchaser Contract;
(f) give any Person the right to any payment by the Purchaser or
Merger Sub or give rise to any acceleration or change in the award, grant,
vesting or determination of options, warrants, rights, severance payments or
other contingent obligations of any nature whatsoever of the Purchaser or Merger
Sub in favor of any Person, in any such case as a result of the change in
control of Merger Sub or otherwise resulting from the Transactions; or
(g) result in the imposition or creation of any material encumbrance
upon or with respect to any material asset owned or used by the Purchaser and
Merger Sub.
Except as set forth in Part 6.5 of the Disclosure Schedule and as contemplated
in this Agreement and the other Transactional Agreements, the Purchaser and
Merger Sub will not be required to make any filing with or give any notice to,
or obtain any Consent from, any Person in connection with the execution and
delivery of this Agreement and the other Transactional Agreements or the
consummation or performance of any of the Transactions.
6.6 Finders and Brokers.
The Purchaser and Merger Sub will indemnify the Selling Shareholders and
the Company and hold them harmless from any liability or expense arising from
any claim for brokerage commissions, finder's fees or other similar compensation
based upon any agreement, arrangement or understanding made by or on behalf of
the Purchaser or Merger Sub.
6.7 Reports and Financial Statements; Absence of Certain Changes.
(a) The Purchaser has filed all reports required to be filed with the
SEC pursuant to the Exchange Act, if any, since its initial public offering on
December 9, 1998 (all such reports, including those to be filed prior to the
Closing Date, collectively, the "Purchaser SEC Reports"), and has previously
---------------------
furnished or made available to the Company true and complete copies of all the
Purchaser SEC Reports filed, if any, with respect to periods ending after
December 9, 1998 (including any exhibits thereto) and will promptly deliver to
the Company any Purchaser SEC Reports filed between the date hereof and the
Effective Time. All of such Purchaser SEC Reports complied at the time they were
filed in all material respects with applicable requirements of the Securities
Act and the Exchange Act and the rules and regulations thereunder. None of such
Purchaser SEC Reports, as of their respective dates (as amended
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through the date hereof), contained or, with respect to Purchaser SEC Reports
filed after the date hereof, will contain any untrue statement of a material
fact or omitted or, with respect to Purchaser SEC Reports filed after the date
hereof, will omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited financial statements of the
Purchaser included in the Purchaser SEC Reports comply in all material respects
with the published rules and regulations of the SEC with respect thereto, and
such audited financial statements (i) were prepared from the books and records
of the Purchaser, (ii) were prepared in accordance with GAAP applied on a
consistent basis (except as may be indicated therein or in the notes or
schedules thereto) and (iii) present fairly the financial position of the
Purchaser as of the dates thereof and the results of operations and cash flows
for the periods then ended. The unaudited financial statements included in the
Purchaser SEC Reports comply in all material respects with the published rules
and regulations of the SEC with respect thereto; and such unaudited financial
statements (i) were prepared from the books and records of the Purchaser, (ii)
were prepared in accordance with GAAP, except as otherwise permitted under the
Exchange Act and the rules and regulations thereunder, on a consistent basis
(except as may be indicated therein or in the notes or schedules thereto) and
(iii) present fairly the financial position of the Purchaser as of the dates
thereof and the results of operations and cash flows (or changes in financial
condition) for the periods then ended, subject to normal year-end adjustments
and any other adjustments described therein or in the notes or schedules
thereto. The foregoing representations and warranties shall also be deemed to be
made with respect to all filings made with the SEC on or before the Effective
Time.
(b) Except as specifically contemplated by this Agreement or
reflected in the Purchaser SEC Reports, since December 31, 1998 there has not
been (i) any change or event having a material adverse effect on the Purchaser,
(ii) any declaration setting aside or payment of any dividend or distribution
with respect to the common stock of Purchaser other than consistent with past
practices, or (iii) any material change in the Purchaser's accounting
principles, procedures or methods.
6.8 Compliance with Applicable Law.
Except as disclosed in the Purchaser SEC Reports filed prior to the date of
this Agreement, the Purchaser holds all licenses, franchises, permits,
variances, exemptions, orders, approvals and authorizations necessary for the
lawful conduct of its business under and pursuant to, and the business of the
Purchaser is not being conducted in violation of, any provision of any federal,
state, local or foreign statute, law, ordinance, rule, regulation, judgment,
decree, order, concession, grant, franchise, permit or license or other
governmental authorization or approval applicable to the Purchaser, except to
the extent that the failure or violation would not in the aggregate have a
material adverse effect.
6.9 Complete Copies of Requested Reports.
The Purchaser has delivered or made available (through public sources or
directly) true and complete copies of each document that has been reasonably
requested by the Company or its counsel in connection with their legal and
accounting review of the Purchaser.
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6.10 Full Disclosure.
(a) Neither this Agreement (including all Schedules and Exhibits
hereto) nor any of the Transactional Agreements contemplated to be executed and
delivered by the Purchaser or Merger Sub in connection with this Agreement
contains any untrue statement of material fact; and none of such documents omits
to state any material fact necessary to make any of the representations,
warranties or other statements or information contained therein not misleading.
(b) All of the information set forth in the Information Statement and
all other information regarding the Purchaser or Merger Sub and the business,
condition, assets, liabilities, operations, financial performance, net income
and prospects of either that has been furnished to the Company or any of its
representatives by or on behalf of the Purchaser, Merger Sub or any of the
Purchaser's representatives, is accurate and complete in all material respects.
6.11 Contracts.
(a) Except as set forth in Part 6.11 of the Disclosure Schedule, no
Purchaser Contracts have come into existence since March 31, 1999 that will be
required to be filed as exhibits to the Purchaser's Quarterly Report on Form 10-
Q for the quarter ended June 30, 1999.
(b) The Purchaser has previously made available for inspection and
copying to the Company complete and correct copies (or, in the case of oral
contracts, a complete and correct description) of each Purchaser Contract (and
any amendments or supplements thereto) listed on Part 6.11 of the Disclosure
Schedule. Except as set forth on Part 6.11 of the Disclosure Schedule, (i) each
Purchaser Contract (including any Purchaser Contract filed with the Purchaser
SEC Reports) listed is in full force and effect; (ii) neither the Purchaser nor,
to its knowledge, any other party is in material default under any such
Purchaser Contract, and no event has occurred which constitutes, or with the
lapse of time or the giving of notice or both would constitute, a material
default, (iii) to the knowledge of the Purchaser, there are no material disputes
or disagreements between the Purchaser and any other party with respect to any
such Purchaser Contract, and (iv) each other party to each such Purchaser
Contract has consented or been given notice (or prior to the Closing Date shall
have consented or been given notice), where such consent or the giving of such
notice is necessary, sufficient that such Purchaser Contract shall remain in
full force and effect following the consummation of the Transactions, without
material modification in the rights or obligations of the Purchaser thereunder.
7. Pre-Closing Covenants of the Company and the Selling Shareholders.
7.1 Corporate Proceedings; Shareholder Approval.
The Selling Shareholders and the Company shall ensure that (i) resolutions
(in form satisfactory to the Purchaser) of the Company Board approving or
adopting, as applicable, all necessary further action of the Company Board, this
Agreement, the other Transactional Agreements and the Transactions and
recommending approval by the Company's shareholders of the Agreement, the other
Transactional Agreements and the Transactions, are passed as necessary pursuant
to applicable law, and (ii) the shareholders of the Company take all necessary
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action to approve or adopt, as applicable, the Merger. In furtherance, and not
in limitation of the foregoing:
(a) the Company, acting through the Company Board, shall, in
accordance with all applicable legal requirements and its Articles of
Incorporation and Bylaws (i) promptly and duly call, give notice of, convene and
hold as soon as practicable a meeting (or solicit an action by written consent
in lieu thereof) of its shareholders for the purpose of voting to approve and
adopt the Merger and this Agreement and the other Transactional Agreements to
which the Company is a party, and (ii) recommend approval and adoption of the
Merger and this Agreement and the other Transactional Agreements to which the
Company is a party by the Company's shareholders and allow the Purchaser to
include in the Information Statement such recommendation, and take all lawful
action to solicit such approval. The Company shall consult with the Purchaser as
to the timing and procedures of such meeting (or consent solicitation); and
(b) the Company will cooperate fully with respect to all requests by
the Purchaser to facilitate the preparation and mailing of the Information
Statement. The Company shall furnish the Purchaser with all information
concerning the Company, its capital stock, the Selling Shareholders, the holders
of the Company Options and other matters, and shall take all other actions, as
the Purchaser may reasonably request in connection with the Information
Statement. Such information provided by the Company shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
Whenever the Company obtains any knowledge of any event which should be set
forth in an amendment or a supplement to the Information Statement, the Company
will promptly inform the Purchaser and will cooperate in mailing to the Selling
Shareholders such amendment or supplement.
7.2 Access and Investigation.
The Company and the Selling Shareholders shall ensure that, at all times
during the Pre-Closing Period:
(a) The Company and its representatives provide the Purchaser and its
representatives with such copies of existing books, records, Tax Returns, work
papers and other documents and information relating to the Company as the
Purchaser may reasonably request in good faith; and
(b) The Company and its representatives compile and provide the
Purchaser and its representatives with such additional financial, operating and
other data and information regarding the Company as the Purchaser may reasonably
request in good faith.
7.3 Operation of Business.
The Company and the Selling Shareholders shall ensure that, during the Pre-
Closing Period:
(a) the Selling Shareholders do not directly or indirectly sell or
otherwise transfer, or offer, agree or commit (in writing or otherwise) to sell
or otherwise transfer, any of their Stock or any interest in or right relating
to any of their Stock;
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(b) the Selling Shareholders do not permit, or offer, agree or commit
(in writing or otherwise) to permit, any of the Stock to become subject,
directly or indirectly, to any encumbrance;
(c) the Company conducts its operations exclusively in the Ordinary
Course of Business and in the same manner as such operations have been conducted
prior to the date of this Agreement;
(d) the Company preserves intact its current business organization,
keeps available the services of its current officers and employees and maintains
its relations and goodwill with all suppliers, customers, landlords, creditors,
licensors, licensees, employees and other Persons having business relationships
with the Company;
(e) the Company keeps in full force all insurance policies identified
in Part 5.20 of the Disclosure Schedule;
(f) the Company's officers confer regularly with the Purchaser
concerning operational matters and otherwise report regularly to the Purchaser
concerning the status of the Company's business, condition, assets, liabilities,
operations, financial performance and prospects;
(g) the Company immediately notifies the Purchaser of any inquiry,
proposal or offer from any Person relating to any Acquisition Transaction;
(h) the Company does not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and does not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities, except for shares for which the Company has a
repurchase right under the Option Plan;
(i) the Company does not sell or otherwise issue (or grant any
warrants, options or other rights to purchase) any shares of capital stock or
any other securities, other than options to purchase up to the number of shares
of Common Stock pursuant to the Option Plan set forth on Schedule II attached
hereto, up to three hundred thousand (300,000) shares of Company Preferred Stock
issuable upon exercise of warrants outstanding as of the date hereof and shares
of Common Stock issuable upon conversion of outstanding Company Preferred Stock
(including Company Preferred Stock issued upon exercise of warrants) or unless
approved in advance in writing by Purchaser;
(j) the Company does not amend its Articles of Incorporation or
Bylaws, and does not effect or become a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction, or enter into any transaction or take any other action
of the type referred to in Section 5.22(c) through (n);
(k) the Company does not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(l) the Company does not make any capital expenditure, except for
capital expenditures made in the Ordinary Course of Business that, when added to
all other capital
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expenditures made on behalf of the Company during the Pre-Closing Period, do not
exceed Ten Thousand Dollars ($10,000), unless approved in advance in writing by
the Purchaser;
(m) the Company does not enter into, or permit any of the material
assets owned or used by the Company to become bound by, any Contract;
(n) the Company does not incur, assume or otherwise become subject to
any Liability, except for current liabilities incurred in the Ordinary Course of
Business, unless approved in advance in writing by the Purchaser;
(o) the Company does not establish or adopt any Employee Benefit
Plan, and does not pay any bonus or make any profit-sharing or similar payment
to, or materially increase the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors,
officers or employees, other than annual adjustments made on January 1, 1999 in
the Ordinary Course of Business;
(p) the Company does not change any of its methods of accounting or
accounting practices in any respect;
(q) the Company does not make any Tax election;
(r) the Company does not commence any Proceeding; and
(s) neither the Selling Shareholders nor the Company agrees, commits
or offers (in writing or otherwise) or attempts to take any of the actions
described in the preceding clauses of this Section 7.3.
7.4 Filings and Consents.
The Company and the Selling Shareholders shall ensure that:
(a) each filing or notice required to be made or given (pursuant to
any applicable legal requirement, Order or Contract, or otherwise) by the
Company or the Selling Shareholders in connection with the execution and
delivery of any of the Transactional Agreements or in connection with the
consummation or performance of any of the Transactions (including each of the
filings and notices identified in Part 5.5 of the Disclosure Schedule) is made
or given as soon as possible after the date of this Agreement;
(b) each Consent required to be obtained (pursuant to any applicable
legal requirement, Order or Contract, or otherwise) by the Company or the
Selling Shareholders in connection with the execution and delivery of any of the
Transactional Agreements or in connection with the consummation or performance
of any of the Transactions (including each of the Consents identified in Part
5.5 of the Disclosure Schedule) is obtained as soon as possible after the date
of this Agreement and remains in full force and effect through the Closing Date;
(c) the Company promptly delivers to the Purchaser a copy of each
filing made, each notice given and each Consent obtained by the Company or the
Selling Shareholders during the Pre-Closing Period; and
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(d) during the Pre-Closing Period, the Company and its
representatives cooperate with the Purchaser and with the Purchaser's
representatives, and prepare and make available such documents and take such
other actions as the Purchaser may request in good faith, in connection with any
filing, notice or Consent that Purchaser or Merger Sub is required or elects to
make, give or obtain.
7.5 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, the Company and the Selling
Shareholders shall promptly notify the Purchaser in writing of:
(i) the discovery by the Company or the Selling Shareholders
of any event, condition, fact or circumstance that constitutes a material breach
of any representation or warranty made by the Company or the Selling
Shareholders in this Agreement or in any of the other Transactional Agreements;
and
(ii) any event, condition, fact or circumstance that may make
the timely satisfaction of any of the conditions set forth in Section 4.1,
impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 7.5(a) requires any change in the Disclosure
Schedule or Information Statement, or if any such event, condition, fact or
circumstance would require such a change assuming the Disclosure Schedule were
dated as of the date of the occurrence, existence or discovery of such event,
condition, fact or circumstance, then the Company and the Selling Shareholders
shall promptly deliver to the Purchaser an update to the Disclosure Schedule or
Information Statement (a "Disclosure Schedule Update") specifying such change.
--------------------------
Such Disclosure Schedule Update shall be deemed to supplement or amend the
Disclosure Schedule or Information Statement for the purpose of (i) determining
the accuracy of any of the representations and warranties made by the Company or
the Selling Shareholders in this Agreement as of the Closing, or (ii)
determining whether the conditions set forth in Section 4.1 have been satisfied,
unless objected to in writing by Purchaser.
7.6 No Negotiation.
Neither the Company nor the Selling Shareholders nor any of their
respective representatives, nor any of their employees, directors,
representatives, affiliates or advisors (including, without limitation, legal,
accounting, financial and investment banking advisors) will directly or
indirectly on behalf of the Company or the Selling Shareholders:
(a) enter into any agreement (or grant any option or right) to sell,
transfer or otherwise dispose of the shares of capital stock or the assets of
the Company or issue any controlling interest in shares of capital stock of the
Company, directly or indirectly, to any person other than Company Options and
shares issuable upon exercise of the Company Options in the ordinary course;
(b) hold any discussion with, or provide any information to, any
person concerning the Company in connection therewith or provide any information
to, any person concerning the Company in connection therewith; or
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<PAGE>
(c) respond to any inquiry made by any person concerning a proposed
acquisition of any assets or capital stock of the Company, except to advise such
person that the Company has entered into this Agreement. The Company and the
Selling Shareholders further agree to advise the Purchaser immediately upon
receiving any inquiry from any such person. If the Company receives a bona fide
offer concerning a proposed acquisition of any assets or capital stock of the
Company, the Company shall, in addition to notifying the Purchaser of the
receipt of such offer, identify the identity of the proposed buyer.
7.7 Best Efforts.
During the Pre-Closing Period, the Company and the Selling Shareholders
shall use their Best Efforts to cause the conditions set forth in Section 4.1 to
be satisfied on a timely basis, and shall not take any action or omit to take
any action, the taking or omission of which would or could reasonably be
expected to result in any of the representations and warranties set forth in
Section 5 of this Agreement becoming untrue, in any of the conditions of Closing
set forth in Section 4.1 not being satisfied or in the business of the Company
becoming materially less valuable.
8. Pre-Closing Covenants of the Purchaser.
8.1 Corporate Proceedings.
(a) The Purchaser shall ensure that resolutions (in form satisfactory
to the Purchaser) of the Purchaser Board approving or adopting, as applicable,
all necessary further action of the Purchaser Board, this Agreement, the other
Transactional Agreements and the Transactions and recommending approval by the
Purchaser's stockholders of the Agreement, the other Transactional Agreements
and the Transactions, are passed as necessary pursuant to applicable law.
(b) Prior to or after the signing of this Agreement, the Purchaser
will prepare an Information Statement (the "Information Statement"), subject to
---------------------
Section 7.1(b), and use its Best Efforts to cause the Information Statement and
any other disclosure documents deemed appropriate by the Purchaser to be mailed
to Selling Shareholders in connection with obtaining the approval of such
Selling Shareholders of the Merger and this Agreement and the other
Transactional Agreements to which the Purchaser is a party.
8.2 Access and Investigation.
The Purchaser shall ensure that, at all times during the Pre-Closing
Period:
(a) the Purchaser and its representatives provide the Company and its
representatives and the Selling Shareholders with free and complete access at
reasonable times to the Purchaser's premises and assets and to all existing
books, records, Tax Returns, work papers and other documents and information
relating to the Purchaser;
(b) the Purchaser and its representatives provide the Company and its
representatives with such copies of existing books, records, Tax Returns, work
papers and other
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documents and information relating to the Purchaser as the Company may request
in good faith; and
(c) the Purchaser and its representatives compile and provide the
Company and its representatives with such additional financial, operating and
other data and information regarding the Purchaser as the Company may request in
good faith .
8.3 Filings and Consents.
Purchaser shall ensure that:
(a) each filing or notice required to be made or given (pursuant to
any applicable legal requirement, Order or Contract, or otherwise) by Purchaser
or Merger Sub in connection with the execution and delivery of any of the
Transactional Agreements or in connection with the consummation or performance
of any of the Transactions is made or given as soon as possible after the date
of this Agreement;
(b) each Consent required to be obtained (pursuant to any applicable
legal requirement, Order or Contract, or otherwise) by Purchaser or Merger Sub
in connection with the execution and delivery of any of the Transactional
Agreements or in connection with the consummation or performance of any of the
Transactions is obtained as soon as possible after the date of this Agreement
and remains in full force and effect through the Closing Date;
(c) Purchaser promptly delivers to the Company a copy of each filing
made, each material notice given and each material Consent obtained by Purchaser
or Merger Sub during the Pre-Closing Period; and
(d) during the Pre-Closing Period, Purchaser or Merger Sub and the
representatives of either cooperate with the Company and its representatives,
and prepare and make available such documents and take such other actions as the
Company may request in good faith, in connection with any filing, notice or
Consent that the Company is required or elects to make, give or obtain.
8.4 Notification.
During the Pre-Closing Period, Purchaser or Merger Sub shall promptly
notify the Company in writing of:
(a) the discovery by Purchaser of any event, condition, fact or
circumstance that constitutes a breach of any representation or warranty made by
Purchaser or Merger Sub in this Agreement or in any of the other Transactional
Agreements;
(b) any breach of any covenant or obligation of Purchaser or Merger
Sub; and
(c) any event, condition, fact or circumstance that may make the
timely satisfaction of any of the conditions set forth in Section 4.2,
impossible or unlikely.
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8.5 Best Efforts.
During the Pre-Closing Period, each of Purchaser or Merger Sub shall use
its Best Efforts to cause the conditions set forth in Section 4.2 to be
satisfied on a timely basis, and shall not take any action or omit to take any
action, the taking or omission of which would or could reasonably be expected to
result in any of the representations and warranties set forth in Section 6 of
this Agreement becoming untrue or in any of the conditions of Closing set forth
in Section 4.2 not being satisfied or in the business of Purchaser becoming
materially less valuable.
9. Other Agreements.
9.1 Registration of Company Options.
Purchaser agrees that as soon as reasonably practicable after the Closing
Date, but in no event later than fifteen (15) days following the Closing Date,
it will cause to be filed one or more registration statements on Form S-8 under
the Securities Act, or amendments to its existing registration statements on
Form S-8, in order to register the shares of Common Stock of Purchaser issuable
upon exercise of the aforesaid converted Company Options.
9.2 Confidentiality.
Each of the parties hereto hereby agrees to and reaffirms the terms and
provisions of the Mutual Nondisclosure Agreement by and between the Purchaser
and the Company, dated as of April 14, 1999.
9.3 Public Disclosure.
Unless otherwise required by law (including, without limitation, securities
laws) or, as to the Purchaser, by the rules and regulations of the National
Association of Securities Dealers, Inc., prior to the Effective Time, no
disclosure (whether or not in response to an inquiry) of the subject matter of
this Agreement or any Transactional Agreement shall be made by any party hereto
unless approved by the Purchaser and the Company prior to release; provided,
that such approval shall not be unreasonably withheld, provided, further, that
the parties agree and understand that certain disclosures regarding the
Transactions may be made to (i) employees of Purchaser and the Company, (ii)
third parties whose consent or approval may be required in connection with the
Transactions, and (iii) the professional advisors of Purchaser, the Company and
the Selling Shareholders, in each case without any prior written consent.
9.4 No Inconsistent Action.
None of Purchaser, the Company or the Selling Shareholders shall take any
action inconsistent with the treatment of the Merger as a reorganization under
Section 368(a) of the Code.
9.5 Restrictive Legend.
All certificates representing the Purchaser Stock deliverable to the
Selling Shareholders pursuant to this Agreement and any certificates
subsequently issued with respect thereto or in
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substitution therefor, unless a sale, transfer or other disposition is executed
pursuant to one or more of the alternative conditions set forth in Section
5.21(n) shall have occurred, or unless the conditions of paragraph (k) of Rule
144 promulgated under the Securities Act shall have been satisfied, shall bear a
legend substantially as follows, in addition to any legend Purchaser determines
is required pursuant to any applicable legal requirement:
"The shares represented by this certificate may not be offered, sold,
pledged, transferred or otherwise disposed of except in accordance with the
requirements of the Securities Act of 1933, as amended, and the other
conditions specified in that certain Agreement and Plan of Merger dated as
of May 3, 1999, a copy of which Agreement and Plan of Merger XOOM.com, Inc.
will furnish, without charge, to the holder of this certificate upon
written request therefor."
Purchaser, at its discretion, may cause a stop transfer order to be placed
with its transfer agent(s) with respect to the certificates for the Purchaser
Stock but not as to the certificates for any part of the Purchaser Stock as to
which said legend is no longer appropriate when one or more of the alternatives
set forth in Section 5.21(n) shall have been satisfied or the conditions of
paragraph (k) of Rule 144 promulgated under the Securities Act shall have been
satisfied.
9.6 Market Stand-Off.
Notwithstanding anything in this Agreement to the contrary, in connection
with any public offering of the capital stock of Purchaser (a "Follow-On
---------
Offering"), each Selling Shareholder agrees that, if requested by the managing
- --------
underwriter of the Follow-On Offering, such Selling Shareholder shall not,
directly or indirectly, sell, offer, contract to sell, grant any option to
purchase, transfer the economic risk of ownership in, make any short sale,
pledge or otherwise dispose of, any Purchaser Stock, without the prior written
consent of Purchaser and the managing underwriters of the Follow-On Offering for
a period of ninety (90) days from the effective date of the registration
statement under the Securities Act relating to such Follow-On Offering and to
the extent otherwise permissible under the requirements for a tax-free Merger;
provided, however, that (a) all officers and directors of Purchaser enter into
- -------- -------
similar agreements and (b) shares of the Purchaser Stock shall be released from
this restriction to the extent such shares are registered pursuant to the Rights
Agreement. This restriction shall be binding upon any transferee of the
Purchaser Stock and the certificates for the Purchaser Stock shall bear a legend
to such effect. In order to enforce the foregoing covenant, Purchaser may
impose stop-transfer instructions with respect to the Purchaser Stock until the
end of such period.
9.7 Certain Tax Matters.
(a) Notwithstanding anything in the contrary in Section 11.5, the
Selling Shareholders shall have the right (but not the obligation), at their own
expense, to control, defend, settle, compromise or prosecute in any manner any
audit, examination, investigation, hearing or other proceeding with respect to
any Company Return involving only periods ending on or before the Closing Date;
provided, however, that the Selling Shareholders shall not settle, or compromise
- -------- -------
any such audit, etc. without Purchaser's timely and reasonable prior written
consent. Nothing in this Section 9.7(a) shall be construed to increase the
Selling Shareholders' maximum indemnification limitation as set forth in
Sections 11.2(a) and 11.5.
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(b) Except as expressly provided in Section 9.7(a), Section 11.5
shall determine the procedures for defending any other tax audit, examination,
investigation, hearing or other proceeding with respect to any Company Return.
(c) Purchaser further represents, warrants and covenants as follows:
(i) Purchaser agrees to report the Merger as a reorganization
within the meaning of Section 368(a) of the Code, unless otherwise required by
law or unless advised in writing by counsel to the Company that the Merger will
not qualify as such a reorganization.
(ii) Prior to the Merger, Purchaser will be in "control" of
Merger Sub within the meaning of Section 368(c) of the Code.
(iii) Purchaser has no plan or intention to cause the
Surviving Corporation to additional shares of stock after the Merger, or take
any other action, that would result in Purchaser losing control of the Surviving
Corporation.
(iv) Purchaser has no plan or intention to liquidate the
Surviving Corporation; to merge the Surviving Corporation with Purchaser or into
any other corporation; to sell, distribute or otherwise dispose of the capital
stock of the Surviving Corporation; or to cause the Surviving Corporation to
sell or otherwise dispose of any of its assets (or of any of the assets acquired
from Merger Sub) except for dispositions made in the Ordinary Course of Business
or transfers permitted under Section 368(a)(2)(C) of the Code or prescribed by
Section 1.368-1(d) that will not affect the Company's satisfaction of the
"continuity of business enterprise" requirement under Section 368 of the Code.
(v) In the Merger, the Surviving Corporation will receive all
of the assets of Merger Sub. Following the Merger, the historic business of the
Surviving Corporation will be continued or a significant portion of the
Surviving Corporation's historic business assets will be used in a business.
(vi) Following the Merger, Purchaser and the Surviving
Corporation will comply with the record-keeping and information filing
requirements of Section 1.368-3 of the Treasury Regulations.
(d) The Selling Shareholders further represent, warrant and covenant
as follows:
(i) The Selling Shareholders agree to report the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code, unless
otherwise required by law or unless advised in writing by counsel to the Selling
Shareholders that the Merger does not constitute such a reorganization.
(ii) After the Merger, the Company will hold at least ninety
percent (90%) of the fair market value of its net assets and at least seventy
percent (70%) of the fair market value of its gross assets held immediately
prior to the Merger. For purposes of this Section 9.7, assets of the Company
held immediately prior to the Merger include amounts paid or incurred by the
Company in connection with the Merger, including amounts used to pay
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reorganization expenses and all payments, redemptions and distributions (except
for regular, normal dividends) made by the Company contemporaneously with, in
contemplation of or as part of the Merger.
(iii) The liabilities of the Company, if any, and the
liabilities to which the asof the Company are subject, if any, were or will be
incurred by the Company in the Ordinary Course of Business.
(iv) Except as otherwise provided in Section 12.2, the Company
and each of the Selling Shareholders will pay any of its own expenses incurred
in connection with the Merger.
(v) The Company is not under the jurisdiction of a court in a
"title 11 or similar case," within the meaning of Section 368(a)(3)(A) of the
Code.
(vi) The Company is not an investment company for purposes of
Section 368(a)(2)(F) of the Code.
(vii) None of the employee compensation received by any
Selling Shareholder-employees the Company is or will be separate consideration
for, or allocable to, any of their shares of Company Stock to be surrendered in
the Merger. None of the Purchaser Stock received by any Selling Shareholder-
employee of the Company in the Merger will be separate consideration for, or
allocable to, any employment, consulting or similar arrangement. Any
compensation paid or to be paid to any Selling Shareholder who will be an
employee or who will provide advisory services for the Company, Merger Sub,
Purchaser or any affiliate thereof after the Merger will be determined by
bargaining at arm's length.
(viii) The Company's business conducted immediately before the
Effective Time be its "historic business" and its assets held immediately before
the Effective Time will be its "historic business assets" for purposes of
Section 368 of the Code.
10. Termination.
10.1 Termination Events.
This Agreement may be terminated prior to Closing:
(a) by Purchaser if there is a material breach of any covenant or
obligation of the Company or the Selling Shareholders and such breach has not
been cured within ten (10) business days of after written notice of such breach
is given to the Company;
(b) by the Company if there is a material breach of any covenant or
obligation of the Purchaser and such breach has not been cured within ten (10)
business days of after written notice of such breach is given to the Purchaser;
(c) by either the Purchaser or the Company if the Closing has not
taken place on or before June 1, 1999; or
43
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(d) by the mutual consent of the Purchaser and the Company.
10.2 Termination Procedures.
If the Purchaser wishes to terminate this Agreement pursuant to Section
10.1(a) or Section 10.1(c), the Purchaser shall deliver to the Selling
Shareholders a written notice stating that the Purchaser is terminating this
Agreement and setting forth a brief description of the basis on which the
Purchaser is terminating this Agreement. If the Company wishes to terminate
this Agreement pursuant to Section 10.1(b) or Section 10.1(c), the Company shall
deliver to the Purchaser a written notice stating that the Company is
terminating this Agreement and setting forth a brief description of the basis on
which the Company is terminating this Agreement.
10.3 Effect of Termination.
If this Agreement is terminated pursuant to Section 10.1, all further
obligations of the parties under this Agreement shall terminate; provided, that
each party shall remain liable for any breaches of this Agreement prior to its
termination and provided, further, that Sections 9.2, 9.3, 10, 12.2, 12.3 and
12.11 shall survive the termination of this Agreement.
10.4 Exclusivity of Termination Rights.
Except to the extent termination occurs due to the bad faith of the other
party, the termination rights and obligations provided in this Section 10 shall
be deemed to be exclusive. Subject to the provisions of Section 10.3, the
parties shall not have any other or further Liabilities to or with respect to
one another by reason of this Agreement or its termination.
11. Indemnification, etc.
11.1 Survival of Representations and Covenants.
(a) The representations, warranties, covenants and obligations of
each party set forth in this Agreement or any other Transactional Agreement
shall survive the Closing Date, and any subsequent Acquisition Transaction
effected by or otherwise involving the Purchaser or the Company, to the extent
provided in this Section 11.1(a). All representations and warranties (as well as
covenants and obligations to be performed prior to the Closing Date) of the
parties in this Agreement or any other Transactional Agreement shall terminate
on the Indemnification Termination Date, unless earlier terminated pursuant to
Section 10.1.
(b) The representations, warranties, covenants and obligations of the
respective parties, and the rights and remedies that may be exercised by any of
them, shall not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by, or the knowledge of, any
of the parties or any of their respective representatives.
(c) For purposes of this Agreement, although each statement or other
item of information set forth in the Disclosure Schedule qualifies the specific
representation and warranty to which such information refers, all such
statements and other items of information set
44
<PAGE>
forth in the Disclosure Schedule shall be deemed to be a representation and
warranty made by the Company and the Selling Shareholders in this Agreement.
(d) The representations, warranties, covenants and obligations of the
Company or the Selling Shareholders are made to the Purchaser and for the
benefit of each Indemnitee (as defined in Section 11.2(a) below).
11.2 Indemnification by the Selling Shareholders.
(a) Subject to the remainder of this Section 11.2 and Section 11.6,
and to the extent of each Selling Shareholder's pro rata share of the
Indemnification Portion only, the Selling Shareholders, covenant and agree to
indemnify Purchaser, each of its officers and directors, and each of its agents
and representatives engaged to perform services with respect to the transactions
contemplated by the Transactional Agreements (collectively, the "Indemnitees"
-----------
and individually each an "Indemnitee") from and against any Damages which are
----------
suffered or incurred by any of the Indemnitees (regardless of whether or not
such Damages relate to any third party claim) directly or indirectly arising or
resulting from or connected with any breach of any representation or warranty
made by the Company or the Selling Shareholders in this Agreement or any other
Transactional Agreement. Notwithstanding the foregoing, the liability of each
Selling Shareholder pursuant to the terms of this Agreement shall not be limited
to each Selling Shareholder's pro rata share of the Indemnification Portion for
Damages resulting from any fraud or intentional misrepresentation on the part of
the Company or the Selling Shareholders; provided, that the liability of each of
--------
the Passive Selling Shareholders for such Damages shall be limited to such
Passive Selling Shareholder's pro rata share of the Merger Consideration except
to the extent that such Damages result from fraud or intentional
misrepresentation on the part of such Passive Selling Shareholder. For purposes
of this Section 11.2(a) only, the term "Transactional Agreements" shall not
include the Employment and Non-Competition Agreements.
(b) After Closing, no Person shall be required to indemnify any
Indemnitee with respect to any claim for indemnification pursuant to Section
11.2(a) unless and until the aggregate amount of indemnifiable Damages suffered
by all Indemnitees subject to indemnification pursuant to this Agreement exceeds
One Hundred Thousand Dollars ($100,000) (the "Threshold"), at which point the
---------
indemnifying Person shall indemnify the full amount of such claims and all
claims thereafter, subject to any other applicable limitations in this Section
11.2 on the indemnifying Person's indemnification obligations. The aggregation
of claims must only reach the Threshold once, and after such point the
Indemnitees may seek indemnification for all claims which may arise under this
Section 11.2.
(c) The Selling Shareholders acknowledge and agree that if there is
any breach of any representation, warranty or other provision relating to the
Selling Shareholders or the Company's business, condition, assets, liabilities,
operations, financial performance, net income or prospects (or any aspect or
portion thereof), then the Purchaser itself shall be deemed, by virtue of its
ownership of the Stock, to have incurred Damages, if any, as a result of such
breach, and Purchaser shall be entitled to such indemnification as may be
available pursuant to the terms of this Section 11. Nothing contained in this
Section 11.2(c) shall have the effect of (i) limiting the circumstances under
which the Purchaser may otherwise be deemed to have
45
<PAGE>
incurred Damages for purposes of this Agreement, (ii) limiting the other types
of Damages that the Purchaser may be deemed to have incurred (whether in
connection with any such breach or otherwise), or (iii) limiting the rights of
the Purchaser or any of the other Indemnitees under this Section 11.2.
(d) The number of shares of Purchaser Stock to be released to
Purchaser pursuant to the terms of the Escrow Agreement shall be calculated by
dividing the dollar amount of the Damages incurred by the Indemnitee by the
Average Purchaser Stock Price prior to the date Escrow Agent makes a payment to
an Indemnitee.
(e) The Selling Shareholders are not required to make any
indemnification payment hereunder unless a claim is initiated prior to the
Indemnification Termination Date in the manner set forth in the Escrow
Agreement.
11.3 No Contribution.
It is the intention of the parties that after the Closing the remedy for
the Purchaser or any Indemnitee seeking indemnification from the Selling
Shareholders hereunder shall be a remedy solely against the Selling Shareholders
and not against the Company; accordingly, the Selling Shareholders agree to
waive any right of contribution or right of indemnity between the Company and
such Selling Shareholder in connection with any indemnification obligation of
such Selling Shareholder to any Indemnitee arising under the Transactional
Agreements. The Selling Shareholders further acknowledge that the waivers,
acknowledgments and agreements of such Selling Shareholders contained in this
Section are an essential inducement to the Purchaser in entering into this
Agreement and agreeing to consummate the Transactions.
11.4 Setoff.
In addition to any rights of setoff or other rights that any Person may
have at common law or otherwise, each Person shall have the right to set off any
amount that may be owed to it by the other under this Section 11 against any
amount otherwise payable by such Person hereunder.
11.5 Defense of Third Party Claims.
In the event of the assertion or commencement by any Person of any claim or
Proceeding (whether against the Purchaser, the Company, the Selling
Shareholders, any other Indemnitee or any other Person) with respect to which a
party hereto may become obligated hereunder to indemnify, hold harmless,
compensate or reimburse any Indemnitee pursuant to this Section 11, the party to
be indemnified (the "Indemnified Party") shall reasonably promptly, but in any
-----------------
event within thirty (30) days following the Indemnified Party's actual knowledge
thereof, notify the Person providing the indemnification hereunder (the
"Indemnifying Party") of such claim or Proceeding by providing notice to the
- -------------------
Selling Shareholders. In any such event, the Indemnified Party may proceed with
the defense of such claim or Proceeding and the Indemnifying Party shall bear
and pay all reasonable costs and expenses (including attorneys fees and costs)
in connection with the Indemnified Party's defense of any such claim or
Proceeding (whether or not incurred by the Indemnified Party); provided, that
all such expenses paid by the Selling
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Shareholders, combined with any other indemnification, will in no event exceed
the respective indemnification limitations set forth in Section 11.2(a).
If the Indemnified Party so proceeds with the defense of any such claim or
Proceeding:
(a) all expenses reasonably incurred and relating to the defense of
such claim or Proceeding (whether or not incurred by the Indemnified Party)
shall be borne and paid exclusively by the Indemnifying Party;
(b) the Indemnifying Party shall make available to the Indemnified
Party any documents and materials in the possession or control of the
Indemnifying Party that may be necessary to the defense of such claim or
Proceeding;
(c) the Indemnified Party shall keep the Selling Shareholders
informed of all material developments and events relating to such claim or
Proceeding;
(d) the Selling Shareholders shall have the right to participate in
the defense of such claim or Proceeding at their own expense; and
(e) the Indemnified Party shall not settle, adjust or compromise such
claim or Proceeding without the prior written consent of the Selling
Shareholders, which consent shall not be unreasonably withheld.
11.6 Sole Remedy.
Other than (i) rights to equitable relief, and (ii) the right to seek
recovery for Damages suffered from (x) any fraud or intentional
misrepresentation on the part of the Company or the Selling Shareholders and (y)
the breach of any covenants or obligations under this Agreement or any of the
other Transactional Agreements to be performed after the Closing, the sole
remedy available to any Indemnitee or other Person for breaches of this
Agreement or the other Transactional Agreements shall be limited to the rights
set forth in this Section 11. The maximum aggregate amounts payable by the
Company or the Selling Shareholders, as the case may be, to any and all
Indemnitees for any and all Damages arising out of, or in connection with, this
Agreement, any Transactional Agreement, any certificate, any other document
delivered, or any of the Transactions, are the amounts specified as limitations
in Section 11.2(a) hereof. In no event will any other Person except the named
Indemnitees have any rights to any payments whatsoever.
11.7 Exercise of Remedies by Indemnitees Other than Purchaser and by
Selling Shareholders.
No Person other than an Indemnitee (or any successor or assignee thereof)
shall be permitted to assert any indemnification claim or exercise any other
remedy under this Agreement unless the Purchaser, the Company and the Selling
Shareholders (or any successor assignee thereof) shall have consented to the
assertion of such indemnification claim or the exercising of such other remedy.
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<PAGE>
12. Miscellaneous.
12.1 Further Assurances.
Each party hereto shall execute and/or 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.
12.2 Fees and Expenses.
Subject to the provisions of this Agreement (including the indemnification
and other obligations of the Selling Shareholders pursuant to Section 11), each
party shall bear and pay all fees, costs and expenses that have been incurred or
that are in the future incurred by or on behalf of such party in connection with
the Transactions; provided, that, the Selling Shareholders shall bear and pay
all fees, costs and expenses incurred on behalf of the Company and the Key
Employees in connection with the negotiation of this Agreement and the
Transactional Agreements in excess of Forty Thousand Dollars ($40,000).
12.3 Attorneys' Fees.
If any legal action or other legal proceeding (including arbitration)
relating to the Transactions or the enforcement of any provision of any of the
Transactional Agreements 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).
12.4 Taxes.
(a) The Selling Shareholders shall be responsible for sales, use and
transfer taxes, including but not limited to any value added, stock transfer,
gross receipts, stamp duty and real, personal or intangible property transfer
taxes, due by reason of the consummation of the Transactions, including but not
limited to any interest or penalties in respect thereof.
(b) In consultation with the Purchaser, the Selling Shareholders
shall cause to be filed any Company Returns for periods ending on or before the
Closing Date, and shall pay any Tax due thereon. The Selling Shareholders shall
prepare all Company Returns due after the Closing Date (the "Final Returns") in
conjunction with the Company's accountants (and shall pay any fees due such
accountants for their assistance in the preparation of the Final Returns) and in
a manner consistent with the Company's previously filed returns; provided that
in all events the Final Returns shall be prepared in a manner consistent with
applicable law.
12.5 Governing Law; Arbitration.
(a) This Agreement is to be construed in accordance with and governed
by the laws of the State of California (as permitted by Section 1646.5 of the
California Civil Code or any similar successor provision), without giving effect
to any choice of law rule that would cause
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<PAGE>
the application of the laws of any jurisdiction other than the State of
California to the rights and duties of the parties.
(b) Any controversy or claim arising out of or relating to this
Agreement, or breach thereof, shall be settled by arbitration administered by
the American Arbitration Association in accordance with its then existing
Commercial Arbitration rules and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. The
arbitrator shall be appointed by mutual agreement of Purchaser and Selling
Shareholders holding at least 75% of the Purchaser Stock allocated to the
Selling Shareholders as part of the Merger Consideration, but, if the Purchaser
and all of the Selling Shareholders fail to agree, the arbitrator shall be
appointed by the American Arbitration Association in accordance with its then
existing rules. The place of the arbitration shall be San Francisco, California
and the governing law shall be the laws of the State of California in accordance
with Section 12.5(a) of this Agreement.
12.6 Successors and Assigns.
Except as otherwise expressly provided herein, the provisions hereof shall
inure to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto and the Indemnitees and shall
inure to the benefit of and be enforceable by each person who shall be a holder
of the Stock from time to time. None of the parties hereto may assign any of
its or their rights or obligations hereunder to any other party (by contract,
operation of law or otherwise) without the prior written consent of the other,
which consent shall not be unreasonably withheld, and any attempted assignment
in violation thereof shall be void and of no effect.
12.7 Entire Agreement.
The Transactional Agreements, the Schedules and the Exhibits thereto and
the other documents contemplated expressly thereby constitute the full and
entire understanding and agreement among the parties thereto with regard to the
subjects 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.
12.8 Separability.
In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
12.9 Amendments.
This Agreement may be amended or modified only upon the mutual written
consent of the Selling Shareholders holding at least 75% of the Purchaser Stock
allocated to the Selling Shareholders as part of the Merger Consideration, the
Company and the Purchaser. Any amendment or modification effected pursuant to
this Section 12.9 shall be binding upon the Selling Shareholders, the Company,
the Purchaser and Merger Sub.
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12.10 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 express delivery service or by telecopier during business hours) to
the address or telecopier number set forth beneath the name of such party below
(or to such other address or telecopier number as such party shall have
specified in a written notice given to the other parties hereto), with a
confirming copy of any notice by telecopier sent promptly by hand, registered
mail, courier or express delivery service:
if to the Company:
MightyMail Networks, Inc.
50 California Street, Suite 470
San Francisco, CA 94111
Attention: Tyler Peppel
Telecopier: (415) 392-3834
with a copy to:
Howard, Rice, Nemerovski, Canady, Falk & Rabkin, a Professional Corporation
Three Embarcadero Center, 7th Floor
San Francisco, CA 94111
Attention: Paul R. Rogers
Telecopier: (415) 217-5910
if to the Selling Shareholders, to their addresses set forth on the signature
page hereof;
if to the Purchaser:
XOOM.com, Inc.
300 Montgomery Street
Third Floor
San Francisco, California 94104
Attention: Rajesh A. Aji, Esq.
Telecopier: 415-445-2526
with a copy to:
Morrison & Foerster llp
425 Market Street
San Francisco, California 94105
Attention: Bruce Alan Mann, Esq.
Telecopier: 415-268-7522
50
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12.11 Publicity and Use of Confidential Information.
(a) Notwithstanding anything to the contrary contained in any
agreement among the parties hereto, the Purchaser shall have the right to
disclose the Company's financial statements and related information, the terms
of this Agreement and the identity of the Company to potential investors of the
Purchaser, through the use of printed offering materials or otherwise or as
otherwise required by applicable legal requirements.
(b) The Selling Shareholders, on the one hand, and Purchaser, on the
other, shall keep strictly confidential, and shall not use, or disclose to any
other Person, any non-public document or other information in the Selling
Shareholders' possession, on the one hand, and in Purchaser's possession, on the
other, that relates directly or indirectly to the business of the Company, the
Purchaser or any affiliate of the Purchaser; provided, that Purchaser or the
-------- ----
Selling Shareholders may disclose such non-public information as required by any
applicable law or rule to which Purchaser or the Selling Stockholders is
subject, including the Exchange Act and the rules of the National Association of
Securities Dealers, Inc.
(c) The Selling Shareholders shall not issue or disseminate any press
release or other publicity concerning any of the Transactions, or permit any
press release or other publicity concerning any of the Transactions to be issued
or otherwise disseminated by or on behalf of the Selling Shareholders without
the Purchaser's prior written consent, and the Selling Shareholders shall
continue to keep the terms of this Agreement and the other Transactional
Agreements strictly confidential.
12.12 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument.
12.13 Delays or Omissions; Waivers.
(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 or waiver 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.
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12.14 Remedies Cumulative; Specific Performance.
All remedies, either under this Agreement or by law or otherwise afforded
to the parties hereto, shall be cumulative and not alternative. Each of the
parties agrees that:
(a) in the event of any breach or threatened breach by a party of any
covenant, obligation or other provision set forth in this Agreement, the 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; and
(b) neither the Purchaser nor any other Indemnitee, on the one hand,
nor the Selling Shareholders, on the other, shall be required to provide any
bond or other security in connection with any such decree, order or injunction
or in connection with any related action or Proceeding.
12.15 Headings.
The underlined 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.
12.16 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 specified, all references in this Agreement
to "Sections," "Exhibits" and "Schedules" are intended to refer to Sections of
this Agreement and Exhibits and Schedules to this Agreement.
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In Witness Whereof, the parties hereto have executed this Agreement and
Plan of Merger as of the date set forth in the first paragraph hereof.
Company: MightyMail Networks, Inc.
a California corporation
By: /s/ Tyler Peppel
--------------------------
Name: Tyler Peppel
Title: President
Purchaser: XOOM.com, Inc.
a Delaware corporation
By: /s/ Laurent Massa
-------------------------
Name: Laurent Massa
Title: President
Merger Sub: XOOM Acquisition Sub, Inc.
a Delaware corporation
By: /s/ Laurent Massa
-------------------------
Name: Laurent Massa
Title: President
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Selling Shareholder:
Address: /s/ Tyler Peppel
------------------------------------
50 California Street, Suite 470 Tyler Peppel
San Francisco, CA 94111
Selling Shareholder:
Address: /s/ Peter R. Kaufman
------------------------------------
c/o ETC Direct, Inc. Peter R. Kaufman
One Bradley Road, Bldg. 305
Woodbridge, CT 06525
Selling Shareholder: McKenzie Webster Limited
a British West Indies Company
Address:
c/o Rolv Heggenhougen
425 Palm Avenue By: /s/ Rolv Heggenhougen
Fort Lauderdale, FL 33312 ---------------------------------
Name: Rolv Heggenhougen
Title:
Selling Shareholder: The Virtual Option Inc.
Address: By: /s/ Michael Klem
---------------------------------
6320 Windermere Circle Name: Michael Klem
Rockville, MD 20852 Title: President
Selling Shareholder:
Selling Shareholder: Arba, LLC,
a California limited liability company
Address:
c/o David Pell
Arba Seed Investment Group By: /s/ David Pell
600 Harrison Street, #100 -----------------------------------
San Francisco, CA 94107 Name: David Pell
Title:
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Selling Shareholder:
Address: /s/ Jody Sherman
-------------------------------
1690 lark Avenue Jody Sherman
Redwood City, CA 94061
Selling Shareholder:
Address: /s/ Lowell Kaufman
-------------------------------
1690 lark Avenue Lowell Kaufman
Redwood City, CA 94061
Selling Shareholder: Amicus Investments, LLC,
a California limited liability company
Address:
c/o Bob Zipp
188 The Embarcadero, Third Floor By: /s/ Bob Zipp
San Francisco, CA 94105 ----------------------------
Name: Bob Zipp
Title:
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Index of Schedules and Exhibits
Schedule I Schedule of Selling Shareholders
Schedule II Schedule of Company Options
Schedule III Disclosure Schedule
Exhibit A Certain Definitions
Exhibit B Form of Escrow Agreement
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Employment and Non-Competition Agreement
Exhibit E Form of Legal Opinion of Howard, Rice, Nemerovski,
Canady, Falk & Rabkin
Exhibit F Form of Legal Opinion of Morrison & Foerster LLP,
counsel to Purchaser
Exhibit G Financial Statements of the Company
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Agreement and Plan of Merger
Exhibit A
Certain Definitions
For purposes of this Agreement:
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale or other disposition of all or any portion of the Company's
business or assets (other than in the Ordinary Course of Business);
(b) the issuance, sale or other disposition of (i) any capital stock of
the Company, (ii) any option, call, warrant or right (whether or not
immediately exercisable) to acquire any capital stock of the Company,
or (iii) any security, instrument or obligation that is or may become
convertible into or exchangeable for any capital stock of the Company;
or
(c) any merger, consolidation, business combination, share exchange,
reorganization or similar transaction involving the Company.
Agreement. "Agreement" shall mean the Agreement and Plan of Merger to
which this Exhibit A is attached (including the Disclosure Schedule and all
other schedules and exhibits attached thereto), as it may be amended from time
to time.
Average Purchaser Stock Price. "Average Purchaser Stock Price" shall refer
to the lesser of (i) the average of the closing price of the Common Stock of the
Purchaser on the Nasdaq Stock Market for the twenty (20) trading days ending on
the last trading day prior to a given date, or (ii) the closing price of the
Common Stock of the Purchaser on the Nasdaq Stock Market on the last trading day
on the day prior to a given date.
Best Efforts. "Best Efforts" shall mean the efforts that a prudent Person
desiring to achieve a particular result would use in order to ensure that such
result is achieved as expeditiously as possible.
Certificates. "Certificates" shall have the meaning specified in Section
3.2(a).
Closing. "Closing" shall have the meaning specified in Section 3.4.
Closing Date. "Closing Date" shall have the meaning specified in Section
3.4.
Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
Common Stock. "Common Stock" shall mean the common stock, $.001 par value
per share, of the Company.
Company. "Company" shall mean MightyMail Networks, Inc., a California
corporation.
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Company Board. "Company Board" shall mean the members of the board of
directors of the Company.
Company Closing Certificate. "Company Closing Certificate" shall have the
meaning specified in Section 4.1(c)(vi).
Company Contract. "Company Contract" shall mean any contract listed on the
Disclosure Schedule.
Company Options. "Company Options" shall refer to those options granted by
the Company, or proposed to be granted prior to the Closing Date, to purchase
shares of the Common Stock of the Company as set forth on Schedule II attached
hereto.
Company Preferred Stock. "Company Preferred Stock" shall have the meaning
specified in Section 5.3(a).
Company Returns. "Company Returns" shall have the meaning specified in
Section 5.14(b).
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Constituent Corporations. "Constituent Corporations" shall refer to the
Company and Merger Sub.
Contract. "Contract" shall mean, with respect to any Person, any written
or oral or other contract, arrangement or other agreement to which such Person
is a party or by which its properties or assets may be bound or affected or
under which it or its respective business, properties or assets receive
benefits.
Damages. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, Liability, settlement, judgment, award, fine, penalty,
Tax, fee (including any legal fee resulting from, but not limited to, the
defense of third party claims pursuant to Section 11.5 of this Agreement, expert
fee, accounting fee or advisory fee), charge, cost (including any cost of
investigation) or expense of any nature.
Defined Benefit Plan. "Defined Benefit Plan" shall mean either a plan
described in Section 3(35) of ERISA or a plan subject to the minimum funding
standards set forth in Section 302 of ERISA and Section 412 of the Code.
Disclosure Schedule. "Disclosure Schedule" shall have the meaning
specified in the introductory paragraph to Section 5.
Disclosure Schedule Update. "Disclosure Schedule Update" shall have the
meaning specified in Section 7.5(b).
Dissenting Holder. "Dissenting Holder" shall have the meaning specified in
Section 3.6(a).
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Dissenting Shares. "Dissenting Shares" shall have the meaning specified in
Section 3.6(a).
Effective Time. "Effective Time" shall have the meaning specified in
Section 1.2.
Employment and Non-Competition Agreement. "Employment and Non-Competition
Agreement" shall refer to the employment contract by and between Purchaser and
each of the Key Employees substantially in the form of Exhibits E.
End-User Licenses. "End-User Licenses" shall have the meaning specified in
Section 5.6.
Entity. "Entity" shall mean any corporation (including any non profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust or company (including any limited
liability company or joint stock company).
Environmental Law. "Environmental Law" shall mean any federal, state,
local or foreign legal requirement relating to pollution or protection of human
health or the environment.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
Escrow Account. "Escrow Account" shall have the mean the account into
which the Holdback Amount is deposited.
Escrow Agent. "Escrow Agent" shall refer to USBank Trust, N.A.
Escrow Agreement. "Escrow Agreement" shall have the meaning specified in
Section 1.4.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
Exchange Ratio. "Exchange Ratio" shall have the meaning specified in
Section 3.1(b).
Final Returns. "Final Returns" shall have the meaning specified in Section
12.4(b).
Financial Statements. "Financial Statements" shall have the meaning
specified in Section 5.8(a).
First Milestone Date. "First Milestone Date" shall have the meaning
specified in Section 4.1 of the Escrow Agreement.
Follow-On Offering. "Follow-On Offering" shall have the meaning specified
in Section 9.6.
GAAP. "GAAP" shall mean generally accepted accounting principles.
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Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, approval, consent,
permission, clearance, waiver, certification, designation,
registration, qualification or authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental
Body or pursuant to any legal requirement; or
(b) right under any Contract with any Governmental Body.
Governmental Body. "Governmental Body" shall mean any:
(a) nation, principality, state, province, territory, county,
municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government; or
(c) individual, Entity or body exercising, or entitled to exercise, any
executive, legislative, judicial, administrative, regulatory, police,
military or taxing authority or power of any nature.
Hazardous Materials. "Hazardous Material" shall mean any substance,
chemical, waste or other material which is or may be listed, defined or
otherwise identified as hazardous, toxic or dangerous under any legal
requirement, as well as any asbestos, polychlorinated biphenyls ("PCBs"),
petroleum, petroleum product or by-product, crude oil, natural gas, natural gas
liquids, liquefied natural gas, or synthetic gas useable for fuel, and "source,"
"special nuclear," and "by-product" material as defined in the Atomic Energy Act
of 1954, 42 U.S.C. (S)(S) 2011 et seq.
Holdback Amount. "Holdback Amount" shall have the meaning specified in
Section 1.4.
Indemnification Portion. "Indemnification Portion" shall have the meaning
specified in Section 1.1 of the Escrow Agreement.
Indemnification Termination Date. "Indemnification Termination Date" shall
have the meaning specified in Section 3.2 of the Escrow Agreement.
Indemnified Party. "Indemnified Party" shall have the meaning specified in
Section 11.6.
Indemnifying Party. "Indemnifying Party" shall have the meaning specified
in Section 11.6.
Indemnitee. "Indemnitee" shall have the meaning specified in Section
11.2(a).
Information Statement. "Information Statement" shall have the meaning
specified in Section 8.1(b).
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Key Employees. "Key Employees" shall refer to each of Tyler Peppel, Jody
Sherman and Lowell Kaufman.
Leased Premises. "Leased Premises" shall mean the premises and facilities
identified in Part 5.9(d) of the Disclosure Schedule.
Liability. "Liability" shall mean any debt, obligation, duty or liability
of any nature (including any unknown, undisclosed, unmatured, unaccrued,
unasserted, contingent, indirect, conditional, implied, vicarious, derivative,
joint, several or secondary liability), regardless of whether such debt,
obligation, duty or liability would be required to be disclosed on a balance
sheet prepared in accordance with generally accepted accounting principles and
regardless of whether such debt, obligation, duty or liability is immediately
due and payable.
Member of the Controlled Group. "Member of the Controlled Group" shall
mean each trade or business, whether or not incorporated, which would be treated
as a single employer with the Company under Section 4001 of ERISA or Section
414(b), (c), (m) or (o) of the Code.
Merger. "Merger" shall have the meaning specified in Recital A.
Merger Consideration. "Merger Consideration" shall have the meaning
specified in Section 1.3.
Merger Sub. "Merger Sub" shall refer to XOOM Acquisition Sub, Inc., a
Delaware corporation.
Merger Sub Board. "Merger Sub Board" shall refer to the Board of Directors
of Merger Sub.
Milestone Portion. "Milestone Portion" shall have the meaning specified in
Section 1.1 of the Escrow Agreement.
Multiemployer Plan. "Multiemployer Plan" shall mean a plan described in
Section 3(37) of ERISA.
Option Plan. "Option Plan" shall have the meaning specified in Section
3.1(c)(i).
Option Pool. "Option Pool" shall mean the number of shares of Common Stock
reserved for the grant of options under the Option Plan.
Order. "Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling, subpoena, writ or
award that is or has been issued, made, entered, rendered or otherwise
put into effect by or under the authority of any court, administrative
agency or other Governmental Body or any arbitrator or arbitration
panel; or
(b) Contract with any Governmental Body that is or has been entered into
in connection with any Proceeding.
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Ordinary Course of Business. An action taken by or on behalf of the
Company shall not be deemed to have been taken in the "Ordinary Course of
Business" unless:
(a) such action is recurring in nature, is consistent with the Company's
past practices and is taken in the ordinary course of the Company's
normal day to day operations;
(b) such action is taken in accordance with sound and prudent business
practices;
(c) such action is not required to be authorized by the Company's
shareholders, the Company Board or any committee of the Company Board
and does not require any other separate or special authorization of
any nature; and
(d) such action is similar in nature and magnitude to actions customarily
taken, without any separate or special authorization, in the ordinary
course of the normal day to day operations of other Entities that are
engaged in businesses similar to the Company's business.
Passive Selling Shareholders. "Passive Selling Shareholders" shall refer
to Peter Kaufman, The Virtual Option Inc. and Arba Seed Investments.
Person. "Person" shall mean any individual, Entity or Governmental Body.
Plans. "Plans" shall have the meaning specified in Section 5.23(a).
Pre-Closing Period. "Pre-Closing Period" shall mean the period from the
date of this Agreement until the Closing Date.
Proceeding. "Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), hearing,
inquiry, audit or investigation that is or has been commenced, brought,
conducted or heard by or before, or that otherwise has involved or may involve,
any Governmental Body or any arbitrator or arbitration panel.
Proprietary Asset. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered and whether or not
relating to a published work), trademark application, trade name, fictitious
business name, service mark (whether registered or unregistered), service mark
application, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know how, franchise,
system, computer software, invention, design, blueprint, proprietary product,
technology, proprietary right or other intellectual property right or intangible
asset.
Purchaser. "Purchaser" shall mean XOOM.com, Inc., a Delaware corporation.
Purchaser Board. "Purchaser Board" shall refer to the Board of Directors
of Purchaser.
Purchaser Closing Certificate. "Purchaser Closing Certificate" hall have
the meaning specified in Section 4.2(c)(v).
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Purchaser Contract. "Purchaser Contract" shall refer to those contracts
required by Regulation S-K to be filed in connection with the Purchaser SEC
Reports.
Purchaser Option Plan. "Purchaser Option Plan" shall refer to the 1998
Stock Incentive Plan of Purchaser.
Purchaser SEC Reports. "Purchaser SEC Reports" shall have the meaning
specified in Section 6.7(a).
Purchaser Stock. "Purchaser Stock" shall refer to the Common Stock of
Purchaser, par value $.0001 per share, to be issued in connection with the
Transactions.
Related Party. Each of the following shall be deemed to be a "Related
Party":
(a) the Selling Shareholders;
(b) each individual who is, or who has at any time been, an officer of the
Selling Shareholders or the Company;
(c) each member of the family of each of the individuals referred to in
clause (b) above; and
(d) any Entity (other than the Selling Shareholders or the Company) in
which any one of the Persons referred to in clause (a), (b) or (c)
above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting,
proprietary or equity interest.
Rights Agreement. "Rights Agreement" shall refer to that certain
Registration Rights Agreement by and among the Purchaser and the Selling
Shareholders substantially in the form of Exhibit C attached hereto.
SEC. "SEC" shall mean the Securities and Exchange Commission.
Second Milestone Date. "Second Milestone Date" shall have the meaning
specified in Section 4.2 of the Escrow Agreement.
Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.
Selling Shareholders. "Selling Shareholders" shall refer to those
individuals and Entities listed on Schedule I hereto.
Selling Shareholders Closing Certificate. "Selling Shareholders Closing
Certificate" shall have the meaning specified in Section 4.1(c)(vi).
Stock. "Stock" shall have the meaning specified in Section 3.1(b).
Surviving Corporation. "Surviving Corporation" shall have the meaning
specified in Section 1.1.
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Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, estimated tax, gross receipts tax, value added tax, surtax,
excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, occupation tax, inventory tax, occupancy tax,
withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), that is, has been or
in the future may be (a) imposed, assessed or collected by or under the
authority of any Governmental Body, or (b) payable pursuant to any tax sharing
agreement or similar Contract.
Tax Return. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information that
is, has been or in the future may be filed with or submitted to, or required to
be filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or compliance with any
legal requirement relating to any Tax.
Threshold. "Threshold" shall have the meaning specified in Section
11.2(b).
Transaction Expenses. "Transaction Expenses" shall mean all fees, costs
and expenses including, without limitation all attorneys' fees, that have been
incurred or that are in the future incurred by or on behalf of the Company or
the Selling Shareholders in connection with the sale of the Stock and the
preparation, execution and delivery of the Transactional Agreements.
Transactional Agreements. "Transactional Agreements" shall mean the
Agreement, the Rights Agreement, the Employment and Non-Competition Agreement,
the Escrow Agreement, the Selling Shareholders and Company Closing Certificates,
the Purchaser Closing Certificate, and all other agreements, certificates and
instruments executed or contemplated to be executed by any of the parties hereto
in connection with the Transactions.
Transactions. "Transactions" shall mean (a) the execution and delivery of
this Agreement and the other Transactional Agreements and (b) all the
transactions contemplated by this Agreement and the other Transactional
Agreements.
Unaudited Interim Balance Sheet. "Unaudited Interim Balance Sheet" shall
have the meaning specified in Section 5.8(a)(ii).
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