<PAGE> 1
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
December 23, 1999
-------------
Date of Report
WOMEN.COM NETWORKS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-26055 13-4059516
- ------------------------ ------------------------ -------------------
(State of incorporation) (Commission File Number) (IRS Employer
Identification No.)
1820 GATEWAY DRIVE, SUITE 100
SAN MATEO, CALIFORNIA 94404
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(Address of principal executive offices)
(650) 378-6500
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(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
The following discussion contains forward-looking statements that
involve risk and uncertainties. Women.com's actual results could differ
materially from those discussed here. Factors that could cause or contribute to
such differences include, but are not limited to those discussed under the
heading "Risk Factors" in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 filed with the Commission. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's analysis only as of the date hereof. The Company undertakes
no obligation to release the results of any revision to these forward-looking
statements which may be made to reflect events or circumstances occurring after
the date hereof or to reflect the occurrence of unanticipated events.
WG Acquisition Corp., a Pennsylvania corporation and a wholly-owned
subsidiary of Women.com ("Merger Sub"), was merged with and into World Gaming
corporation, a Pennsylvania corporation ("WGC"), pursuant to an Agreement and
Plan of Merger and Reorganization, dated as of November 15, 1999, by and among
Women.com, WGC, Merger Sub and the principal stockholders of WGC (the
"Agreement"). The total consideration paid in the merger was approximately
$9,500,000 in cash in exchange for all outstanding shares of WGC common stock.
The terms of the Agreement were determined through arms' length negotiations
between Women.com and WGC. A copy of the agreement is included in this Report as
Exhibit 2.1.
The merger of Merger Sub with and into WGC (the "Merger") became
effective at the time of the filing of Articles of Merger with the Pennsylvania
Secretary of State on December 10, 1999 (the "Effective Time") after the
outstanding shares of WGC common stock, no par value per share ("WGC Common
Stock"), and the outstanding shares of Merger Sub common stock, par value $0.001
per share ("Merger Sub Common Stock"), approved the Merger. At the Effective
Time: (i) Merger Sub ceased to exist; (ii) WGC, as the surviving corporation in
the Merger, became a wholly-owned subsidiary of Women.com; and (iii) each share
of WGC Common Stock outstanding immediately prior to the Effective Time was
converted into the right to receive approximately $1.12 in cash.
The Merger is not intended to be a tax-free reorganization under the
Internal Revenue Code of 1986, as amended, and is expected to be accounted for
as a purchase.
Women.com Networks is a leading Internet network dedicated to women,
featuring award-winning editorial content, personalized services, community and
online shopping. The network is comprised of more than 90,000 pages of content
organized into 20 topical channels, including career, entertainment, family,
health, home, horoscopes, technology and Internet, and pregnancy. Women.com also
offers extensive membership services and benefits including personalized
content, personal home pages, e-mail, and access to community forums and clubs.
In addition, Women.com enjoys strategic relationships with The Hearst
Corporation and Rodale Press Inc., enabling Women.com to offer an online
newsstand featuring content from 12 of the world's leading women's magazines,
including Cosmopolitan, Good Housekeeping, Prevention and Redbook.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of the Business Acquired
The financial statements of World Gaming Corporation required to be
filed pursuant to Item 7(a) of Form 8-K were not available at the time of filing
of this Current Report on Form 8-K and will be filed on a Form 8-K/A as soon as
practicable, but in no event later than 60 days after the date this Form 8-K is
required to be filed.
(b) Pro Forma Financial Information
The Pro Forma Financial Information required to be filed pursuant to
Item 7(b) of Form 8-K was not available at the time of filing of this Current
Report on Form 8-K and will be filed on a Form 8-K/A as soon as practicable, but
in no event later than 60 days after the date this Form 8-K is required to be
filed.
(c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Agreement and Plan of Merger and Reorganization, dated as
of November 15, 1999, by and among Women.com Networks,
Inc., a Delaware corporation, WG Acquisition Corp, a
Pennsylvania corporation, World Gaming Corporation, a
Pennsylvania corporation, and the principal stockholders of
World Gaming Corporation.
23.1* Consent of PricewaterhouseCoopers LLP.
</TABLE>
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* To be filed by amendment
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WOMEN.COM NETWORKS, INC.
Date: December 23, 1999 /s/ Michael Perry
------------------------------------
Michael Perry
Chief Financial Officer
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Agreement and Plan of Merger and Reorganization, dated as
of November 15, 1999, by and among Women.com Networks,
Inc., a Delaware corporation, WG Acquisition Corp, a
Pennsylvania corporation, World Gaming Corporation, a
Pennsylvania corporation, and the principal stockholders of
World Gaming Corporation.
23.1* Consent of PricewaterhouseCoopers LLP.
</TABLE>
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* To be filed by amendment
<PAGE> 1
EXHIBIT 2.1
================================================================================
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
WOMEN.COM NETWORKS, INC.,
a Delaware corporation;
WG ACQUISITION CORP.,
a Pennsylvania corporation
WORLD GAMING CORPORATION,
a Pennsylvania corporation;
and
THE PRINCIPAL STOCKHOLDERS OF WORLD GAMING CORPORATION
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Dated as of November 15, 1999
---------------------------
================================================================================
<PAGE> 2
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of November 15, 1999, by and among: WOMEN.COM NETWORKS,
INC., a Delaware corporation ("Parent"); WG ACQUISITION CORP., a Pennsylvania
corporation ("Merger Sub"), WORLD GAMING CORPORATION, a Pennsylvania corporation
(the "Company"); and DONN CLENDENON, JACQUELINE PAUL, STEPHEN ROSSI, JAMES
HETTINGER, W. BRADLEY LINEBERGER and BEN FRANKLIN/PROGRESS CAPITAL FUND, L.P.
(the "Principal Stockholders"). Certain other capitalized terms used in this
Agreement are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of
Merger Sub into the Company in accordance with this Agreement and the
Pennsylvania Business Corporation Law (the "Merger"). Upon consummation of the
Merger, Merger Sub will cease to exist, and the Company will become a wholly
owned subsidiary of Parent.
B. This Agreement has been approved by the respective boards of
directors of Parent, Merger Sub and the Company.
C. The Principal Stockholders together own a total of 7,876,514 shares
(including options to purchase 1,000,000 shares and warrants to purchase 276,514
shares) of the Common Stock (with no par value) of the Company ("Company Common
Stock") constituting approximately 93% of the outstanding common stock of the
Company. Contemporaneously with the execution and delivery of this Agreement,
the Principal Stockholders are executing and delivering to Parent a Stockholder
Agreement of even date herewith.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Pennsylvania Business
Corporation Law.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley Godward LLP, 3000 Sand Hill Road, Building 3, Suite 230, Menlo Park,
California 94025 at 10:00 a.m. PST on December 10, 1999 (the "Scheduled Closing
Time"). (The date on which the Closing actually takes place is referred to in
this Agreement as the "Closing Date.") Contemporaneously with or as promptly as
practicable after the Closing, a properly executed Articles of Merger conforming
to the requirements of Section 1926 of the
1.
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Pennsylvania Business Corporation Law shall be filed with the Secretary of State
of the State of Pennsylvania. The Merger shall become effective at the time such
Articles of Merger are filed with and accepted by the Secretary of State of the
State of Pennsylvania (the "Effective Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. Unless
otherwise determined by Parent and the Company prior to the Effective Time:
(a) the Articles of Incorporation of the Surviving Corporation
shall be amended and restated as of the Effective Time to conform to Exhibit B;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub as in
effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the directors and officers of
Merger Sub immediately prior to the Effective Time.
1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.8(c), at the Effective Time, by virtue
of the Merger and without any further action on the part of Parent, Merger Sub,
the Company or any Stockholder of the Company:
(i) each share of Company Common Stock outstanding
immediately prior to the Effective Time shall be converted into
the right to receive the "Per Share Payment Amount" (as defined
in Section 1.5(b)); and
(ii) each share of the common stock (with no par value)
of Merger Sub outstanding immediately prior to the Effective
Time shall be converted into one share of common stock of the
Surviving Corporation.
(b) For purposes of this Agreement the "Per Share Payment
Amount" shall be the quotient obtained by dividing (A) $9,500,000 (the "Purchase
Price") by (B) the aggregate number of shares of Company Common Stock
outstanding immediately prior to the Effective Time (including any shares of
Company Common Stock issuable upon the exercise of outstanding Company Options
and Company Warrants).
1.6 EMPLOYEE STOCK OPTIONS. At the Effective Time, each stock option
that is then outstanding under the Company's Stock Option Plan, whether vested
or unvested (a "Company Option"), shall be canceled. At the Effective Time, each
outstanding warrant to purchase shares of the Company's capital stock (a
"Company Warrant") shall be canceled.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
holders of certificates representing shares of the Company's capital stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as Stockholders of the Company, and the stock transfer books of the
Company shall be closed with respect to all shares of such capital stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of the Company's capital stock shall be made on such stock transfer
books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of the Company's capital
stock (a "Company
2.
<PAGE> 4
Stock Certificate") is presented to the Surviving Corporation or Parent, such
Company Stock Certificate shall be canceled and shall be exchanged as provided
in Section 1.8.
1.8 EXCHANGE OF CERTIFICATES.
(a) As soon as practicable after the Effective Time, Parent will
send to the holders of Company Stock Certificates (i) a letter of transmittal in
customary form and containing such provisions as Parent may reasonably specify,
and (ii) instructions for use in effecting the surrender of Company Stock
Certificates in exchange for the cash payment. Upon surrender of a Company Stock
Certificate to Parent, together with a duly executed letter of transmittal and
such other documents as may be reasonably required by Parent, the holder of such
Company Stock Certificate shall be entitled to receive in exchange therefor the
amount such holder has the right to receive pursuant to the provisions of this
Section 1, and the Company Stock Certificate so surrendered shall be canceled.
Until surrendered as contemplated by this Section 1.8, each Company Stock
Certificate shall be deemed, from and after the Effective Time, to represent
only the right to receive upon such surrender the cash payment as contemplated
by this Section 1. If any Company Stock Certificate shall have been lost, stolen
or destroyed, Parent may, in its discretion and as a condition precedent to the
payment of any cash, require the owner of such lost, stolen or destroyed Company
Stock Certificate to provide an appropriate affidavit and to deliver a bond (in
such sum as Parent may reasonably direct) as indemnity against any claim that
may be made against Parent or the Surviving Corporation with respect to such
Company Stock Certificate.
(b) The Stockholders shall be solely responsible for the payment
of any and all income taxes related to the transactions contemplated hereby.
Parent and the Surviving Corporation shall be entitled to deduct and withhold
from any consideration payable or otherwise deliverable to any holder or former
holder of capital stock of the Company pursuant to this Agreement such amounts
as Parent or the Surviving Corporation may be required to deduct or withhold
therefrom under the Code or under any provision of state, local or foreign tax
law. To the extent such amounts are so deducted or withheld, such amounts shall
be treated for all purposes under this Agreement as having been paid to the
Person to whom such amounts would otherwise have been paid.
(c) Neither Parent nor the Surviving Corporation shall be liable
to any holder or former holder of capital stock of the Company for any cash
amounts, delivered to any public official pursuant to any applicable abandoned
property, escheat or similar law.
1.9 ESCROW.
(a) As soon as practicable after the Effective Time, the Escrow
Amount (as defined in Section 1.9(c)), without any act of any Stockholder of the
Company, will be deposited by Parent into an escrow fund (the "Escrow Fund") to
be governed by the terms set forth herein and the Escrow Agreement in the form
of Exhibit C (the "Escrow Agreement"). The Escrow Fund shall be available to
indemnify the Indemnitees as provided in Section 9.
(b) Subject to the following requirements, the Escrow Fund shall
remain in existence until the expiration of one year from the Effective Time
(the "Escrow Period"). Upon the expiration of such Escrow Period, the Escrow
Fund shall terminate; provided, however, that the portion of the Escrow Fund,
which, in the reasonable judgment of Parent, subject to the objection of the
Agent (as defined in Section 10.1) and the subsequent resolution of the claim in
the manner provided in the Escrow Agreement, are necessary to satisfy any
unsatisfied claims specified in any Claim Notice (as
3.
<PAGE> 5
defined in the Escrow Agreement) delivered to the Agent prior to the expiration
of such Escrow Period shall remain in the Escrow Fund (and the Escrow Fund shall
remain in existence) until such claims have been resolved. As soon as all such
claims have been resolved, Parent shall deliver to the Principal Stockholders
all cash remaining in the Escrow Fund and not required to satisfy such claims.
Deliveries of cash from the Escrow Fund to the Principal Stockholders pursuant
to this Section 1.9(b) and the Escrow Agreement shall be made in proportion to
their respective original contributions to the Escrow Fund.
(c) For purposes of this Agreement, "Escrow Amount" shall mean
the amount of cash to be paid in the Merger to the Principal Stockholders which
equals ten percent (10%) of the total amount to be paid to the Principal
Stockholders in the Merger. The amount of cash to be contributed to the Escrow
Fund by each Principal Stockholder shall be equal to the ratio of (A) the total
amount of cash to be paid in the Merger to such Principal Stockholder to (B) the
total amount of cash to be paid in the Merger to all Principal Stockholders.
1.10 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
not intended to constitute a reorganization within the meaning of Section 368 of
the Code.
1.11 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Corporation or Parent
with full right, title and possession of and to all rights and property of
Merger Sub and the Company, the officers and directors of the Surviving
Corporation and Parent shall be fully authorized (in the name of Merger Sub, in
the name of the Company and otherwise) to take such action.
1.12 CLOSING DATE BALANCE SHEET ADJUSTMENT. In addition to the portion
of the Purchase Price to be placed into the Escrow Fund pursuant to Section 1.9
above, an additional $150,000 (the "Balance Sheet Adjustment Amount") of the
amount to be paid to the Principal Stockholders in the Merger shall be added to
the Escrow Fund for purposes of satisfying any post-Closing Purchase Price
adjustments based on the Closing Date Balance Sheet (as defined below). The
amount of cash to be contributed to the Escrow Fund by each Principal
Stockholder shall be equal to the ratio of (A) the total amount of cash to be
paid in the Merger to such Principal Stockholder to (B) the total amount of cash
to be paid in the Merger to all Principal Stockholders. The Agent shall cause a
balance sheet of the Company as of the Closing Date (the "Closing Date Balance
Sheet") to be prepared as soon as practicable following the Closing, and in any
event within seven (7) days of the Closing. Agent shall cooperate with Parent
and Parent's independent auditors in the auditing of the Closing Date Balance
Sheet and cause the Company's independent auditors to do the same. Parent's
independent auditors shall complete the audit of the Closing Date Balance Sheet
within thirty (30) days following receipt of the Closing Date Balance Sheet from
the Agent. Agent further agrees to provide Parent with all information
reasonably requested by Parent for use in the audit of the Closing Date Balance
Sheet and to cause the Company's independent auditors to do the same. If the
working capital of the Company as of the Closing Date (the "Actual Working
Capital Amount") based on the audited Closing Date Balance Sheet exceeds
$150,000 (the "Target Working Capital Amount"), then Parent shall promptly, and
in any event within ten (10) days, (i) cause the Balance Sheet Adjustment Amount
to be released to the Principal Stockholders from the Escrow Fund and (ii) pay
to the Agent on behalf of the Principal Stockholders the amount by which the
Actual Working Capital Amount exceeds the Target Working Capital Amount. If,
however, the Actual Working Capital Amount is less than the Target Working
Capital Amount, then the Purchase Price shall be reduced by the difference (the
"Working Capital Deficiency") and (i) Agent shall promptly, and in any event
within ten (10) days, cause the Working Capital Deficiency to be released to
4.
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Parent from the Escrow Fund and (ii) Parent shall promptly, and in any event
within ten (10) days, cause the Balance Sheet Adjustment Amount less the Working
Capital Deficiency to be released to the Principal Stockholders from the Escrow
Fund.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL
STOCKHOLDERS
The Company and the Principal Stockholders jointly and severally
represent and warrant, to and for the benefit of the Indemnitees, and except as
set forth on the Disclosure Schedule attached hereto, as follows:
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Pennsylvania and
has all necessary power and authority: (i) to conduct its business in the manner
in which its business is currently being conducted; (ii) to own and use its
assets in the manner in which its assets are currently owned and used; and (iii)
to perform its obligations under all Company Contracts.
(b) The Company has not 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 "World Gaming
Corporation," "bingoonline.com" and "buglebingo.com."
(c) The Company is not and has not been required to be
qualified, authorized, registered or licensed to do business as a foreign
corporation in any jurisdiction other than the jurisdictions identified in Part
2.1 of the Disclosure Schedule, except where the failure to be so qualified,
authorized, registered or licensed has not had and will not have a Material
Adverse Effect on the Company. The Company is in good standing as a foreign
corporation in each of the jurisdictions identified in Part 2.1 of the
Disclosure Schedule.
(d) Part 2.1 of the Disclosure Schedule accurately sets forth
(i) the names of the members of the Company's board of directors, (ii) the names
of the members of each committee of the Company's board of directors, and (iii)
the names and titles of the Company's officers.
(e) The Company does not own any controlling interest in any
Entity and the Company has never owned, beneficially or otherwise, any shares or
other securities of, or any direct or indirect equity interest in, any Entity.
The Company has not agreed and is not obligated to make any future investment in
or capital contribution to any Entity. The Company has not guaranteed and is not
responsible or liable for any obligation of any of the Entities in which it owns
or has owned any equity interest.
2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to Parent accurate and complete copies of: (1) the Company's Articles
of Incorporation and bylaws, including all amendments thereto; (2) the stock
records of the Company; and (3) the minutes and other records of the meetings
and other proceedings (including any actions taken by written consent or
otherwise without a meeting) of the stockholders of the Company, the board of
directors of the Company and all committees of the board of directors of the
Company. There have been no formal meetings or other proceedings of the
stockholders of the Company, the board of directors of the Company or any
committee of the board of directors of the Company that are not fully reflected
in such minutes or other records. There has not
5.
<PAGE> 7
been any violation of any of the provisions of the Company's Articles of
Incorporation or bylaws, and the Company has not taken any action that is
inconsistent in any material respect with any resolution adopted by the
Company's stockholders, the Company's board of directors or any committee of the
Company's board of directors. The books of account, stock records, minute books
and other records of the Company are accurate, up-to-date and complete in all
material respects, and have been maintained in accordance with prudent business
practices.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of: (i)
15,000,000 shares of Common Stock (with no par value), of which 7,097,187 shares
have been issued and are outstanding as of the date of this Agreement; and (ii)
5,000,000 shares of Preferred Stock (with $1.00 par value), none of which are
outstanding as of the date of this Agreement. All of the outstanding shares of
Company Common Stock have been duly authorized and validly issued, and are fully
paid and non-assessable. None of the shares of Company Common Stock is subject
to a repurchase option held by the Company.
(b) The Company has reserved 1,100,000 shares of Company Common
Stock for issuance under its Stock Option Plan, of which options to purchase
1,100,000 shares are outstanding as of the date of this Agreement. The Company
has reserved 276,514 shares of Company Common Stock for issuance upon the
exercise of outstanding Company Warrants. All outstanding Company Options and
Company Warrants will either be exercised prior to the Effective Time or will be
canceled. Part 2.3 of the Disclosure Schedule accurately sets forth, with
respect to each Company Option and Company Warrant that is outstanding as of the
date of this Agreement: (i) the name of the holder of such Company Option or
Company Warrant, (ii) the total number of shares of Company Common Stock that
are subject to such Company Option or Company Warrant and (iii) the per share
exercise price of such Company Option or Company Warrant. Except for the Company
Options and Company Warrants outstanding on the date of this Agreement, 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; (iii) Contract under which the
Company is or may become obligated to sell or otherwise issue any shares of its
capital stock or any other securities; or (iv) to the best of the knowledge of
the Company and the Principal Stockholders, condition or circumstance that may
give rise to or provide a basis for the assertion of a claim by any Person to
the effect that such Person is entitled to acquire or receive any shares of
capital stock or other securities of the Company.
(c) All outstanding shares of Company Common Stock, and all
outstanding Company Options and Company Warrants, have been issued and granted
in compliance with (i) all applicable securities laws and other applicable Legal
Requirements, and (ii) all requirements set forth in applicable Contracts.
(d) Except as set forth in Part 2.3(d) of the Disclosure
Schedule, the Company has never repurchased, redeemed or otherwise reacquired
any shares of capital stock or other securities of the Company. All securities
so reacquired by the Company were reacquired in compliance with (i) the
applicable provisions of the Pennsylvania Business Corporation Law and all other
applicable Legal Requirements, and (ii) all requirements set forth in applicable
restricted stock purchase agreements and other applicable Contracts.
6.
<PAGE> 8
2.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):
(i) The audited balance sheets of the Company as of
December 31, 1996 and 1997, and the related audited income
statements, statements of stockholders' equity and statements of
cash flows of the Company for the years then ended, together
with the notes thereto and the unqualified report and opinion of
Smart & Associates, LLP relating thereto;
(ii) the unaudited balance sheet of the Company as of
December 31, 1998, and the related unaudited income statement,
statement of stockholders' equity and statement of cash flows of
the Company for the year then ended, together with the notes
thereto; and
(iii) the unaudited balance sheet of the Company as of
September 30, 1999 (the "Interim Balance Sheet"), and the
related unaudited income statement, statement of stockholders'
equity and statement of cash flows of the Company for the nine
months then ended, together with the notes thereto.
(b) The Company Financial Statements are accurate and complete
in all material respects and present fairly the financial position of the
Company as of the respective dates thereof and the results of operations and
cash flows of the Company for the periods covered thereby. The Company Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered.
(c) Prior to the Closing, the Company shall deliver audited
balance sheets of the Company as of December 31, 1998 and September 30, 1999,
and the related audited income statements, statements of stockholders' equity
and statements of cash flows of the Company for the year and nine months then
ended, together with the notes thereto and the unqualified report and opinion of
Smart & Associates, LLP relating thereto. The audited financial statements to be
delivered pursuant to this Section 2.4(c) shall be included in the definition of
"Company Financial Statements" for purposes of this Agreement.
2.5 ABSENCE OF CHANGES. Since the Interim Balance Sheet Date:
(a) there has not been any material adverse change in the
Company's business, condition, assets, liabilities, operations, financial
performance or prospects, and, to the best of the knowledge of the Company and
the Principal Stockholders, no event has occurred that will, or could reasonably
be expected to, have a Material Adverse Effect on the Company;
(b) there has not been any material loss, damage or destruction
to, or any material interruption in the use of, any of the Company's assets
(whether or not covered by insurance);
(c) 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, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
7.
<PAGE> 9
(d) the Company has not sold, issued or authorized the issuance
of (i) any capital stock or other security (except for Company Common Stock
issued upon the exercise of outstanding Company Options), (ii) any option or
right to acquire any capital stock or any other security, or (iii) any
instrument convertible into or exchangeable for any capital stock or other
security;
(e) the Company has not amended or waived any of its rights
under, or permitted the acceleration of vesting under, (i) any provision of its
Stock Option Plan, (ii) any provision of any agreement evidencing any
outstanding Company Option, or (iii) any restricted stock purchase agreement;
(f) there has been no amendment to the Company's Articles of
Incorporation or bylaws, and the Company has not effected or been a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(g) the Company has not formed any subsidiary or acquired any
equity interest or other interest in any other Entity;
(h) the Company has not made any capital expenditure which, when
added to all other capital expenditures made on behalf of the Company since
September 30, 1999, exceeds $25,000;
(i) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that is or would
constitute a Material Contract (as defined in Section 2.10(a)), or (ii) amended
or prematurely terminated, or waived any material right or remedy under, any
such Contract;
(j) the Company has not (i) acquired, leased or licensed any
right or other asset from any other Person, (ii) sold or otherwise disposed of,
or leased or licensed, any right or other asset to any other Person, or (iii)
waived or relinquished any right, except for immaterial rights or other
immaterial assets acquired, leased, licensed or disposed of in the ordinary
course of business and consistent with the Company's past practices;
(k) the Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness;
(l) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with the Company's past practices;
(m) the Company has not (i) lent money to any Person (other than
pursuant to routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed money;
(n) the Company has not (i) established or adopted any Employee
Benefit Plan, (ii) 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, or (iii) hired any new employee;
(o) the Company has not changed any of its methods of accounting
or accounting practices in any respect;
8.
<PAGE> 10
(p) the Company has not made any Tax election;
(q) the Company has not commenced or settled any Legal
Proceeding;
(r) the Company has not entered into any material transaction or
taken any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(s) the Company has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(r)" above.
2.6 TITLE TO ASSETS.
(a) The Company owns, and has good, valid and marketable title
to, all assets purported to be owned by it, including: (i) all assets reflected
on the Interim Balance Sheet; (ii) all assets referred to in Parts 2.7(b) and
2.9 of the Disclosure Schedule and all of the Company's rights under the
Contracts identified in Part 2.10 of the Disclosure Schedule; and (iii) all
other assets reflected in the Company's books and records as being owned by the
Company. All of said assets are owned by the Company free and clear of any liens
or other Encumbrances, except for (x) any lien for current taxes not yet due and
payable, and (y) minor liens that have arisen in the ordinary course of business
and that do not (in any case or in the aggregate) materially detract from the
value of the assets subject thereto or materially impair the operations of the
Company.
(b) Part 2.6 of the Disclosure Schedule identifies all assets
that are material to the business of the Company and that are being leased or
licensed to the Company.
2.7 BANK ACCOUNTS; RECEIVABLES.
(a) Part 2.7(a) of the Disclosure Schedule provides accurate
information with respect to each account maintained by or for the benefit of the
Company at any bank or other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate
and complete breakdown and aging of all accounts receivable, notes receivable
and other receivables of the Company as of the Interim Balance Sheet Date. All
existing accounts receivable of the Company (including those accounts receivable
reflected on the Interim Balance Sheet that have not yet been collected and
those accounts receivable that have arisen since the Interim Balance Sheet Date
and have not yet been collected) (i) represent valid obligations of customers of
the Company arising from bona fide transactions entered into in the ordinary
course of business, (ii) are current and will be collected in full when due,
without any counterclaim or set off (net of an allowance for doubtful accounts
not to exceed $25,000 in the aggregate).
2.8 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets
owned by or leased to the Company are adequate for the uses to which they are
being put, are in good condition and repair (ordinary wear and tear excepted)
and are adequate for the conduct of the Company's business in the manner in
which such business is currently being conducted.
9.
<PAGE> 11
(b) The Company does not own any real property or any interest
in real property, except for the leasehold created under the real property lease
identified in Part 2.10 of the Disclosure Schedule.
2.9 PROPRIETARY ASSETS.
(a) Part 2.9(a)(i) of the Disclosure Schedule sets forth, with
respect to each Company Proprietary Asset registered with any Governmental Body
or for which an application has been filed with any Governmental Body, (i) a
brief description of such Proprietary Asset, and (ii) the names of the
jurisdictions covered by the applicable registration or application. Part
2.9(a)(ii) of the Disclosure Schedule identifies and provides a brief
description of all other Company Proprietary Assets owned by the Company. Part
2.9(a)(iii) of the Disclosure Schedule identifies and provides a brief
description of each Proprietary Asset licensed to the Company by any Person
(except for any Proprietary Asset that is licensed to the Company under any
third party software license generally available to the public at a cost of less
than $10,000), and identifies the license agreement under which such Proprietary
Asset is being licensed to the Company. The Company has good, valid and
marketable title to all of the Company Proprietary Assets identified in Parts
2.9(a)(i) and 2.9(a)(ii) of the Disclosure Schedule, free and clear of all liens
and other Encumbrances, and has a valid right to use all Proprietary Assets
identified in Part 2.9(a)(iii) of the Disclosure Schedule. The Company is not
obligated to make any payment to any Person for the use of any Company
Proprietary Asset. The Company has not developed jointly with any other Person
any Company Proprietary Asset with respect to which such other Person has any
rights.
(b) The Company has taken all measures and precautions necessary
to protect and maintain the confidentiality and secrecy of all Company
Proprietary Assets (except Company Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all Company Proprietary Assets. The Company has not (other than pursuant to
license agreements identified in Part 2.10 of the Disclosure Schedule) disclosed
or delivered to any Person, or permitted the disclosure or delivery to any
Person of, (i) the source code, or any portion or aspect of the source code, of
any Company Proprietary Asset, or (ii) the object code, or any portion or aspect
of the object code, of any Company Proprietary Asset.
(c) None of the Company Proprietary Assets infringes or
conflicts with any Proprietary Asset owned or used by any other Person. The
Company is not infringing, misappropriating or making any unlawful use of, and
the Company has not at any time infringed, misappropriated or made any unlawful
use of, or received any notice or other communication (in writing or otherwise)
of any actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any Proprietary Asset owned or used by any other Person. To the
best of the knowledge of the Company and the Principal Stockholders, no other
Person is infringing, misappropriating or making any unlawful use of, and no
Proprietary Asset owned or used by any other Person infringes or conflicts with,
any Company Proprietary Asset.
(d) The Company Proprietary Assets constitute all the
Proprietary Assets necessary to enable the Company to conduct its business in
the manner in which such business has been and is being conducted. (i) The
Company has not licensed any of the Company Proprietary Assets to any Person,
and (ii) the Company has not entered into any covenant not to compete or
Contract limiting its ability to exploit fully any of its Proprietary Assets or
to transact business in any market or geographical area or with any Person.
10.
<PAGE> 12
(e) (i) All current and former employees of the Company have
executed and delivered to the Company an agreement (containing no exceptions to
or exclusions from the scope of its coverage) that is substantially identical to
the form of Confidential Information and Invention Assignment Agreement
previously delivered to Parent, and (ii) all current and former consultants and
independent contractors to the Company have executed and delivered to the
Company an agreement (containing no exceptions to or exclusions from the scope
of its coverage) that is substantially identical to the form of Consultant
Confidential Information and Invention Assignment Agreement previously delivered
to Parent.
2.10 CONTRACTS.
(a) Part 2.10 of the Disclosure Schedule identifies:
(i) each Company Contract relating to the employment of,
or the performance of services by, any employee, consultant or
independent contractor;
(ii) each Company Contract relating to the acquisition,
transfer, use, development, sharing or license of any technology
or any Proprietary Asset;
(iii) each Company Contract imposing any restriction on
the Company's right or ability (A) to compete with any other
Person, (B) to acquire any product or other asset or any
services from any other Person, to sell any product or other
asset to or perform any services for any other Person or to
transact business or deal in any other manner with any other
Person, or (C) develop or distribute any technology;
(iv) each Company Contract creating or involving any
agency relationship, distribution arrangement or franchise
relationship;
(v) each Company Contract relating to the acquisition,
issuance or transfer of any securities;
(vi) each Company Contract relating to the creation of
any Encumbrance with respect to any asset of the Company;
(vii) each Company Contract involving or incorporating
any guaranty, any pledge, any performance or completion bond,
any indemnity or any surety arrangement;
(viii) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues,
profits, losses, costs or liabilities;
(ix) each Company Contract relating to the purchase or
sale of any product or other asset by or to, or the performance
of any services by or for, any Related Party (as defined in
Section 2.18);
(x) each Company Contract constituting or relating to a
Government Contract or Government Bid;
(xi) any other Company Contract that was entered into
outside the ordinary course of business or was inconsistent with
the Company's past practices;
11.
<PAGE> 13
(xii) any other Company Contract that has a term of more
than 60 days and that may not be terminated by the Company
(without penalty) within 60 days after the delivery of a
termination notice by the Company; and
(xiii) any other Company Contract that contemplates or
involves (A) the payment or delivery of cash or other
consideration in an amount or having a value in excess of
$10,000 in the aggregate, or (B) the performance of services
having a value in excess of $10,000 in the aggregate.
(Contracts in the respective categories described in clauses "(i)" through
"(xiii)" above are referred to in this Agreement as "Material Contracts.")
(b) The Company has delivered to Parent accurate and complete
copies of all written Contracts identified in Part 2.10 of the Disclosure
Schedule, including all amendments thereto. Part 2.10 of the Disclosure Schedule
provides an accurate description of the terms of each Company Contract that is
not in written form. Each Contract identified in Part 2.10 of the Disclosure
Schedule is valid and in full force and effect, and, to the best of the
knowledge of the Company and the Principal Stockholders, is enforceable by the
Company in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies.
(c) Except as set forth in Part 2.10 of the Disclosure Schedule:
(i) the Company has not violated or breached, or
committed any default under, any Company Contract, and, to the
best of the knowledge of the Company and the Principal
Stockholders, no other Person has violated or breached, or
committed any default under, any Company Contract;
(ii) to the best of the knowledge of the Company and the
Principal Stockholders, no event has occurred, and no
circumstance or condition exists, that (with or without notice
or lapse of time) will, or could reasonably be expected to, (A)
result in a violation or breach of any of the provisions of any
Company Contract, (B) give any Person the right to declare a
default or exercise any remedy under any Company Contract, (C)
give any Person the right to accelerate the maturity or
performance of any Company Contract, or (D) give any Person the
right to cancel, terminate or modify any Company Contract;
(iii) since inception, the Company has not received any
notice or other communication regarding any actual or possible
violation or breach of, or default under, any Company Contract;
and
(iv) the Company has not waived any of its material
rights under any Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the
terms of any Company Contract to renegotiate, any amount paid or payable to the
Company under any Material Contract or any other material term or provision of
any Material Contract.
12.
<PAGE> 14
(e) The Contracts identified in Part 2.10 of the Disclosure
Schedule collectively constitute all of the Contracts necessary to enable the
Company to conduct its business in the manner in which its business is currently
being conducted.
(f) Part 2.10 of the Disclosure Schedule identifies and provides
a brief description of each proposed Contract as to which any bid, offer, award,
written proposal, term sheet or similar document has been submitted or received
by the Company since September 30, 1999.
(g) Part 2.10 of the Disclosure Schedule provides an accurate
description and breakdown of the Company's backlog under Company Contracts.
2.11 LIABILITIES. The Company has no accrued, contingent or other
liabilities of any nature, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (a)
liabilities identified as such in the "liabilities" column of the Interim
Balance Sheet; (b) accounts payable or accrued salaries that have been incurred
by the Company since September 30, 1999 in the ordinary course of business and
consistent with the Company's past practices; (c) liabilities under the Company
Contracts identified in Part 2.10 of the Disclosure Schedule, to the extent the
nature and magnitude of such liabilities can be specifically ascertained by
reference to the text of such Company Contracts; and (d) the liabilities
identified in Part 2.11 of the Disclosure Schedule.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at all
times since inception been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and will not have a Material Adverse Effect on the Company. Since
inception, the Company has not received any notice or other communication from
any Governmental Body regarding any actual or possible violation of, or failure
to comply with, any Legal Requirement.
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by the Company, and the
Company has delivered to Parent accurate and complete copies of all Governmental
Authorizations identified in Part 2.13 of the Disclosure Schedule. The
Governmental Authorizations identified in Part 2.13 of the Disclosure Schedule
are valid and in full force and effect, and collectively constitute all
Governmental Authorizations necessary to enable the Company to conduct its
business in the manner in which its business is currently being conducted. The
Company is, and at all times since inception has been, in substantial compliance
with the terms and requirements of the respective Governmental Authorizations
identified in Part 2.13 of the Disclosure Schedule. Since inception, the Company
has not received any notice or other communication from any Governmental Body
regarding (a) any actual or possible violation of or failure to comply with any
term or requirement of any Governmental Authorization, or (b) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.
2.14 TAX MATTERS.
(a) 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 (the "Company Returns") (i) have been or will be
filed on or before the applicable due date (including any extensions of such due
date), and (ii) have been, or will be when filed, accurately and completely
prepared in all material respects in compliance with all applicable Legal
Requirements. All amounts
13.
<PAGE> 15
shown on the Company Returns to be due on or before the Closing Date have been
or will be paid on or before the Closing Date. The Company has delivered to
Parent accurate and complete copies of all Company Returns filed since
inception.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles. The Company
will establish, in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period from
September 30, 1999 through the Closing Date, and the Company will disclose the
dollar amount of such reserves to Parent on or prior to the Closing Date.
(c) No Company Return relating to income Taxes has ever been
examined or audited by any Governmental Body. There have been no examinations or
audits of any Company Return. The Company has delivered to Parent accurate and
complete copies of all audit reports and similar documents (to which the Company
has access) relating to the 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.
(d) No claim or Proceeding is pending or has been threatened
against or with respect to the Company in respect of any Tax. There are no
unsatisfied liabilities for Taxes (including liabilities for interest, additions
to tax and penalties thereon and related expenses) with respect to any notice of
deficiency or similar document received by the Company with respect to any Tax
(other than liabilities for Taxes asserted under any such notice of deficiency
or similar document which are being contested in good faith by the Company and
with respect to which adequate reserves for payment have been established).
There are no liens for Taxes upon any of the assets of the Company except liens
for current Taxes not yet due and payable. 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 the Company 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.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the
Code. 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.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.15(a) of the Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by the Company for
the benefit of any employee of the Company ("Employee"), except for Plans which
would not require the Company to make payments or provide benefits having a
value in excess of $10,000 in the aggregate.
14.
<PAGE> 16
(b) The Company does not maintain, sponsor or contribute to,
and, to the best of the knowledge of the Company and the Principal Stockholders,
has not at any time in the past maintained, sponsored or contributed to, any
employee pension benefit plan (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), whether or not
excluded from coverage under specific Titles or Merger Subtitles of ERISA) for
the benefit of Employees or former Employees (a "Pension Plan").
(c) The Company maintains, sponsors or contributes only to those
employee welfare benefit plans (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles or Merger Subtitles of ERISA)
for the benefit of Employees or former Employees which are described in Part
2.15(c) of the Disclosure Schedule (the "Welfare Plans"), none of which is a
multiemployer plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered to
Parent:
(i) an accurate and complete copy of such Plan
(including all amendments thereto);
(ii) an accurate and complete copy of the annual report,
if required under ERISA, with respect to such Plan for the last
two years;
(iii) an accurate and complete copy of the most recent
summary plan description, together with each Summary of Material
Modifications, if required under ERISA, with respect to such
Plan, and all material employee communications relating to such
Plan;
(iv) if such Plan is funded through a trust or any third
party funding vehicle, an accurate and complete copy of the
trust or other funding agreement (including all amendments
thereto) and accurate and complete copies the most recent
financial statements thereof;
(v) accurate and complete copies of all Contracts
relating to such Plan, including service provider agreements,
insurance contracts, minimum premium contracts, stop-loss
agreements, investment management agreements, subscription and
participation agreements and recordkeeping agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service
with respect to such Plan (if such Plan is intended to be
qualified under Section 401(a) of the Code).
(e) The Company is not required to be, and, to the best of the
knowledge of the Company and the Principal Stockholders, has never been required
to be, treated as a single employer with any other Person under Section
4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code. The Company
has never been a member of an "affiliated service group" within the meaning of
Section 414(m) of the Code. To the best of the knowledge of the Company and the
Principal Stockholders, the Company has never made a complete or partial
withdrawal from a multiemployer plan, as such term is defined in Section 3(37)
of ERISA, resulting in "withdrawal liability," as such term is defined in
Section 4201 of ERISA (without regard to subsequent reduction or waiver of such
liability under either Section 4207 or 4208 of ERISA).
15.
<PAGE> 17
(f) The Company does not have any plan or commitment to create
any additional Welfare Plan or any Pension Plan, or to modify or change any
existing Welfare Plan or Pension Plan (other than to comply with applicable law)
in a manner that would affect any Employee.
(g) No Welfare Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former Employee after
any such Employee's termination of service (other than (i) benefit coverage
mandated by applicable law, including coverage provided pursuant to Section
4980B of the Code, (ii) deferred compensation benefits accrued as liabilities on
the Interim Balance Sheet, and (iii) benefits the full cost of which are borne
by current or former Employees (or the Employees' beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a
group health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
(i) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements, including
but not limited to ERISA and the Code.
(j) Each of the Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination from the Internal
Revenue Service, and neither the Company nor any of the Principal Stockholders
is aware of any reason why any such determination letter should be revoked.
(k) Neither the execution, delivery or performance of this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any payment (including any bonus,
golden parachute or severance payment) to any current or former Employee or
director of the Company (whether or not under any Plan), or materially increase
the benefits payable under any Plan, or result in any acceleration of the time
of payment or vesting of any such benefits.
(l) Part 2.15(l) of the Disclosure Schedule contains a list of
all salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. The Company is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its Employees.
All of the Company's employees are "at will" employees.
(m) Part 2.15(m) of the Disclosure Schedule identifies each
Employee who is not fully available to perform work because of disability or
other leave and sets forth the basis of such leave and the anticipated date of
return to full service.
(n) The Company is in compliance in all material respects with
all applicable Legal Requirements and Contracts relating to employment,
employment practices, wages, bonuses and terms and conditions of employment,
including employee compensation matters.
(o) The Company has good labor relations, and none of the
Principal Stockholders has any reason to believe that (i) the consummation of
the Merger or any of the other transactions contemplated by this Agreement will
have a material adverse effect on the Company's labor relations, or (ii) any of
the Company's employees intends to terminate his or her employment with the
Company.
16.
<PAGE> 18
2.16 ENVIRONMENTAL MATTERS. The Company is in compliance in all material
respects with all applicable Environmental Laws, which compliance includes the
possession by the Company of all permits and other Governmental Authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof. The Company has not received any notice or other
communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that the Company is not in
compliance with any Environmental Law, and, to the best of the knowledge of the
Company and the Principal Stockholders, there are no circumstances that may
prevent or interfere with the Company's compliance with any Environmental Law in
the future. To the best of the knowledge of the Company and the Principal
Stockholders, no current or prior owner of any property leased or controlled by
the Company has received any notice or other communication (in writing or
otherwise), whether from a Government Body, citizens group, employee or
otherwise, that alleges that such current or prior owner or the Company is not
in compliance with any Environmental Law. All Governmental Authorizations
currently held by the Company pursuant to Environmental Laws are identified in
Part 2.16 of the Disclosure Schedule. (For purposes of this Section 2.16: (i)
"Environmental Law" means any federal, state, local or foreign Legal Requirement
relating to pollution or protection of human health or the environment
(including ambient air, surface water, ground water, land surface or subsurface
strata), including any law or regulation relating to emissions, discharges,
releases or threatened releases of Materials of Environmental Concern, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern;
and (ii) "Materials of Environmental Concern" include chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and any
other substance that is now or hereafter regulated by any Environmental Law or
that is otherwise a danger to health, reproduction or the environment.)
2.17 INSURANCE. Part 2.17 of the Disclosure Schedule identifies all
insurance policies maintained by, at the expense of or for the benefit of the
Company and identifies any material claims made thereunder, and the Company has
delivered to Parent accurate and complete copies of the insurance policies
identified on Part 2.17 of the Disclosure Schedule. Each of the insurance
policies identified in Part 2.17 of the Disclosure Schedule is in full force and
effect. Since inception, the Company has not received any notice or other
communication regarding any actual or possible (a) cancellation or invalidation
of any insurance policy, (b) refusal of any coverage or rejection of any claim
under any insurance policy, or (c) material adjustment in the amount of the
premiums payable with respect to any insurance policy.
2.18 RELATED PARTY TRANSACTIONS. (a) No Related Party has, and no
Related Party has at any time since inception had, any direct or indirect
interest in any material asset used in or otherwise relating to the business of
the Company; (b) no Related Party is, or has at any time since inception been,
indebted to the Company; (c) since inception, no Related Party has entered into,
or has had any direct or indirect financial interest in, any material Contract,
transaction or business dealing involving the Company; (d) no Related Party is
competing, or has at any time since inception competed, directly or indirectly,
with the Company; and (e) no Related Party has any claim or right against the
Company (other than rights under company Options and rights to receive
compensation for services performed as an employee of the Company). (For
purposes of the Section 2.18 each of the following shall be deemed to be a
"Related Party": (i) each of the Stockholders; (ii) each individual who is, or
who has at any time since inception been, an officer of the Company; (iii) each
member of the immediate family of each of the individuals referred to in clauses
"(i)" and "(ii)" above; and (iv) any trust or other Entity (other than the
Company) in which any one of the individuals referred to in clauses "(i)",
"(ii)" and "(iii)" above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting, proprietary or
equity interest.)
17.
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2.19 LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Legal Proceeding, and (to the best of
the knowledge of the Company and the Principal Stockholders) no Person has
threatened to commence any Legal Proceeding: (i) that involves the Company or
any of the assets owned or used by the Company or any Person whose liability the
Company has or may have retained or assumed, either contractually or by
operation of law; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the Merger
or any of the other transactions contemplated by this Agreement. To the best of
the knowledge of the Company and the Principal Stockholders, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
will, or that could reasonably be expected to, give rise to or serve as a basis
for the commencement of any such Legal Proceeding.
(b) No Legal Proceeding has ever been commenced by or has ever
been pending against the Company.
(c) There is no order, writ, injunction, judgment or decree to
which the Company, or any of the assets owned or used by the Company, is
subject. None of the Stockholders is subject to any order, writ, injunction,
judgment or decree that relates to the Company's business or to any of the
assets owned or used by the Company. To the best of the knowledge of the Company
and the Principal Stockholders, no officer or other employee of the Company is
subject to any order, writ, injunction, judgment or decree that prohibits such
officer or other employee from engaging in or continuing any conduct, activity
or practice relating to the Company's business.
2.20 AUTHORITY; BINDING NATURE OF AGREEMENT.
(a) The Company has the absolute and unrestricted right, power and
authority to enter into and to perform its obligations under this Agreement; and
the execution, delivery and performance by the Company of this Agreement have
been duly authorized by all necessary action on the part of the Company and its
board of directors. This Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
(b) Each Principal Stockholder has the absolute and unrestricted right,
power and authority or capacity to enter into and to perform such Principal
Stockholder's obligations under this Agreement and each of the Transactional
Agreements to which such Principal Stockholder is or may become a party. This
Agreement constitutes the legal, valid and binding obligation of each of the
Principal Stockholders, enforceable against each of the Principal Stockholders
in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies. Upon the execution of each of the other Transactional Agreements at
the Closing, each of such other Transactional Agreements will constitute the
legal, valid and binding obligation of each of the Principal Stockholders,
enforceable against each of the Principal Stockholders in accordance with its
terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
2.21 NON-CONTRAVENTION; CONSENTS. Neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation
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of the Merger or any of the other transactions contemplated by this Agreement,
will directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of the Company's Articles of Incorporation or bylaws, or
(ii) any resolution adopted by the Company's Stockholders, the Company's board
of directors or any committee of the Company's board of directors;
(b) 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 contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which the Company, or any of the assets owned or used by the
Company, is subject;
(c) contravene, conflict with or result in a 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 that otherwise relates to the Company's business
or to any of the assets owned or used by the Company;
(d) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any Company Contract that is
or would constitute a Material Contract, or give any Person the right to (i)
declare a default or exercise any remedy under any such Company Contract, (ii)
accelerate the maturity or performance of any such Company Contract, or (iii)
cancel, terminate or modify any such Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company).
The Company is not and will not be required to make any filing with or give any
notice to, or to obtain any Consent from, any Person in connection with (x) the
execution, delivery or performance of this Agreement or any of the other
agreements referred to in this Agreement, or (y) the consummation of the Merger
or any of the other transactions contemplated by this Agreement.
2.22 FULL DISCLOSURE. This Agreement (including the Disclosure Schedule)
does not, and the Stockholders' Closing Certificate will not, (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact, or (ii) omit to state any material fact or necessary in
order to make the representations, warranties and information contained and to
be contained herein and therein (in the light of the circumstances under which
such representations, warranties and information were or will be made or
provided) not false or misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and
warrant to the Company and the Principal Stockholders as follows:
3.1 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance by
Parent and Merger Sub of this Agreement have been duly
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authorized by all necessary action on the part of Parent and Merger Sub and
their respective boards of directors. No vote of Parent's stockholders is needed
to approve the Merger. This Agreement constitutes the legal, valid and binding
obligation of Parent and Merger Sub, enforceable against them in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
3.2 ORGANIZATION AND GOOD STANDING. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction or incorporation. Each of Parent and Merger Sub
has the corporate power to own its properties and to carry on its business as
now being conducted and is duly qualified to do business and is in good standing
in each jurisdiction in which the failure to be so qualified and in good
standing would have a Material Adverse Effect on Parent.
3.3 NO VIOLATIONS. The execution, delivery and performance by Parent and
Merger Sub of this Agreement and the transactions contemplated hereby will not
result in a breach or violation of, or a default under, any law, rule or
regulation, order, judgment or decree applicable to Parent or Merger Sub, any
material agreement to which either of them is a party or by which either of them
or their respective properties are bound, or in a breach or a default under
their respective Certificates of Incorporation or Bylaws, other than any breach,
violation or default that would not have a Material Adverse Effect on Parent.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY AND THE PRINCIPAL STOCKHOLDERS
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives to: (a) provide Parent and Parent's
Representatives with reasonable access to the Company's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to the Company; and (b)
provide Parent and Parent's Representatives with copies of such existing books,
records, Tax Returns, work papers and other documents and information relating
to the Company, and with such additional financial, operating and other data and
information regarding the Company, as Parent may reasonably request.
4.2 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing Period:
(a) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;
(b) the Company shall use reasonable efforts to preserve intact
its current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with the Company;
(c) the Company shall keep in full force all insurance policies
identified in Part 2.17 of the Disclosure Schedule;
(d) the Company shall cause its officers to report regularly
(but in no event less frequently than weekly) to Parent concerning the status of
the Company's business;
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(e) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and shall not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities;
(f) the Company shall not sell, issue or authorize the issuance
of (i) any capital stock or other security, (ii) any option or right to acquire
any capital stock or other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security (except that the Company
shall be permitted (x) to grant stock options to employees in accordance with
its past practices, (y) to issue Company Common Stock to employees upon the
exercise of outstanding Company Options and (z) issue Company Common Stock upon
the exercise of outstanding Company Warrants);
(g) the Company shall not amend or waive any of its rights under
(i) any provision of its Stock Option Plan, (ii) any provision of any agreement
evidencing any outstanding Company Option, or (iii) any provision of any
restricted stock purchase agreement;
(h) neither the Company nor any of the Principal Stockholders
shall amend or permit the adoption of any amendment to the Company's Articles of
Incorporation or bylaws, or effect or permit the Company to become a party to
any Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(i) the Company shall not form any subsidiary or acquire any
equity interest or other interest in any other Entity;
(j) the Company shall not make any capital expenditure, except
for capital expenditures that, when added to all other capital expenditures made
on behalf of the Company during the Pre-Closing Period, do not exceed $10,000
per month;
(k) the Company shall not (i) enter into, or permit any of the
assets owned or used by it to become bound by, any Contract that is or would
constitute a Material Contract, or (ii) amend or prematurely terminate, or waive
any material right or remedy under, any such Contract;
(l) the Company shall not (i) acquire, lease or license any
right or other asset from any other Person, (ii) sell or otherwise dispose of,
or lease or license, any right or other asset to any other Person, or (iii)
waive or relinquish any right, except for assets acquired, leased, licensed or
disposed of by the Company pursuant to Contracts that are not Material
Contracts;
(m) the Company shall not (i) lend money to any Person (except
that the Company may make routine travel advances to employees in the ordinary
course of business and may, consistent with its past practices, allow employees
to acquire Company Common Stock in exchange for promissory notes upon exercise
of Company Options), or (ii) incur or guarantee any indebtedness for borrowed
money;
(n) the Company shall not (i) establish, adopt or amend any
Employee Benefit Plan, (ii) pay any bonus or make any profit-sharing payment,
cash incentive payment or similar payment to, or increase the amount of the
wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees, or (iii)
hire any new employee whose aggregate annual compensation is expected to exceed
$50,000;
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(o) the Company shall not change any of its methods of
accounting or accounting practices in any material respect;
(p) the Company shall not make any Tax election;
(q) the Company shall not commence or settle any material Legal
Proceeding;
(r) the Company shall not agree or commit to take any of the
actions described in clauses "(e)" through "(q)" above.
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company shall promptly
notify Parent in writing of:
(i) the discovery by the Company of any event,
condition, fact or circumstance that occurred or existed on or
prior to the date of this Agreement and that caused or
constitutes an inaccuracy in or breach of any representation or
warranty made by the Company or any of the Principal
Stockholders in this Agreement;
(ii) any event, condition, fact or circumstance that
occurs, arises or exists after the date of this Agreement and
that would cause or constitute an inaccuracy in or breach of any
representation or warranty made by the Company or any of the
Principal Stockholders in this Agreement if (A) such
representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition,
fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the
date of this Agreement;
(iii) any breach of any covenant or obligation of the
Company or any of the Principal Stockholders; and
(iv) any event, condition, fact or circumstance that
would make the timely satisfaction of any of the conditions set
forth in Section 6 or Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 4.3(a) requires any change in the
Disclosure Schedule, 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 shall promptly deliver to Parent an update to the
Disclosure Schedule specifying such change. No such update shall be deemed to
supplement or amend the Disclosure Schedule for the purpose of (i) determining
the accuracy of any of the representations and warranties made by the Company or
any of the Principal Stockholders in this Agreement, or (ii) determining whether
any of the conditions set forth in Section 6 has been satisfied.
4.4 NO NEGOTIATION. During the Pre-Closing Period, neither the Company
nor any of the Principal Stockholders shall, directly or indirectly:
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(a) solicit or encourage the initiation of any inquiry, proposal
or offer from any Person (other than Parent) relating to a possible Acquisition
Transaction;
(b) participate in any discussions or negotiations or enter into
any agreement with, or provide any non-public information to, any Person (other
than Parent) relating to or in connection with a possible Acquisition
Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Parent) relating to a possible Acquisition Transaction.
The Company shall promptly notify Parent in writing of any material inquiry,
proposal or offer relating to a possible Acquisition Transaction that is
received by the Company or any of the Principal Stockholders during the
Pre-Closing Period.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the execution
of this Agreement, each party to this Agreement (a) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
Consents (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger and the other transactions contemplated by this Agreement. The Company
shall (upon request) promptly deliver to Parent a copy of each such filing made,
each such notice given and each such Consent obtained by the Company during the
Pre-Closing Period.
5.2 STOCKHOLDERS' CONSENT. The Company shall, in accordance with its
Articles of Incorporation and bylaws and the applicable requirements of the
Pennsylvania Business Corporation Law, solicit the consent of the Stockholders
as promptly as practicable for the purpose of permitting them to consider and to
vote upon and approve the Merger and this Agreement. Without limiting the
generality or the effect of anything contained in the Stockholder Agreements
being executed and delivered by the Principal Stockholders to Parent
contemporaneously with the execution and delivery of this Agreement, each
Principal Stockholder shall cause all shares of the capital stock of the Company
that are owned, beneficially or of record, by such Principal Stockholder on the
record date for the solicitation of the written consent of the Stockholders to
be voted in favor of the Merger and this Agreement at such meeting.
5.3 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, (a) neither the
Company nor any of the Principal Stockholders shall (and the Company shall not
permit any of its Representatives to) issue any press release or make any public
statement regarding this Agreement or the Merger, or regarding any of the other
transactions contemplated by this Agreement, without Parent's prior written
consent, and (b) Parent will not issue any press release or make any public
statement regarding this Agreement or the Merger without the Company's prior
written consent, except as required by law or the rules of The Nasdaq Stock
Market.
5.4 BEST EFFORTS. During the Pre-Closing Period, (a) the Company and the
Principal Stockholders shall use their best efforts to cause the conditions set
forth in Section 6 to be satisfied on a timely basis, and (b) Parent and Merger
Sub shall use their best efforts to cause the conditions set forth in Section 7
to be satisfied on a timely basis.
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5.5 NONCOMPETITION AGREEMENTS. At or prior to the Closing, each of the
Principal Stockholders shall execute and deliver to the Company and Parent a
Noncompetition Agreement in the form of Exhibit D.
5.6 TERMINATION OF AGREEMENTS The Company and the other parties to the
employment agreements listed on Part 2.10 of the Disclosure Schedule shall enter
into an agreement, reasonably satisfactory in form and content to Parent (and
conditioned and effective upon the Closing), terminating all of such employment
agreements. The Company and Donn and Khara Clendenon shall enter into an
agreement, reasonably satisfactory in form and content to Parent (and
conditioned and effective upon the Closing), terminating the Commercial Lease
dated October 1, 1998. The Company and 24/7 Media Inc. shall enter into an
agreement, reasonably satisfactory in form and content to Parent (and
conditioned and effective upon the Closing), terminating the Affiliate Agreement
dated January 14, 1999.
5.7 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Section 1.897 - 2(h)(2)
of the United States Treasury Regulations.
5.8 RELEASE. At the Closing, each of the Stockholders shall execute and
deliver to the Company and Parent a Release in the form of Exhibit E.
5.9 TERMINATION OF EMPLOYEE PLANS. At the Closing, the Company shall
terminate its Stock Option Plan, and shall ensure that no employee or former
employee of the Company has any rights under such Plan and that any liabilities
of the Company under such Plan (including any such liabilities relating to
services performed prior to the Closing) are fully extinguished at no cost to
the Company.
5.10 NO NEGOTIATION WITH ONLINE GAMING COMPANIES. During the Pre-Closing
Period, Parent shall not initiate discussions or negotiations relating to an
Acquisition Transaction with any Person involved in the online gaming business.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by the Company and the Principal Stockholders in this Agreement
and in each of the other agreements and instruments delivered to Parent in
connection with the transactions contemplated by this Agreement shall have been
accurate in all material respects as of the date of this Agreement (without
giving effect to any "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications, contained or incorporated
directly or indirectly in such representations and warranties), and shall be
accurate in all material respects as of the Scheduled Closing Time as if made at
the Scheduled Closing Time (without giving effect to any update to the
Disclosure Schedule and without giving effect to any "Material Adverse Effect"
or other materiality qualifications, or any similar qualifications, contained or
incorporated directly or indirectly in such representations and warranties).
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6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
the Company and the Principal Stockholders are required to comply with or to
perform at or prior to the Closing shall have been complied with and performed
in all respects.
6.3 STOCKHOLDER APPROVAL. The principal terms of the Merger shall have
been duly approved by the affirmative vote of 100% of the shares of Company
Common Stock entitled to vote with respect thereto.
6.4 CONSENTS. All Consents required to be obtained in connection with
the Merger and the other transactions contemplated by this Agreement (including
the Consents identified in Part 2.21 of the Disclosure Schedule) shall have been
obtained and shall be in full force and effect.
6.5 AGREEMENTS AND DOCUMENTS. Parent and the Company shall have received
the following agreements and documents, each of which shall be in full force and
effect:
(a) Noncompetition Agreements in the form of Exhibit D, executed
by the Principal Stockholders;
(b) a Release in the form of Exhibit E, executed by the
Stockholders;
(c) the agreements referred to in Section 5.6, executed by the
parties thereto;
(d) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Parent, executed by all employees and former
employees of the Company and by all consultants and independent contractors and
former consultants and former independent contractors to the Company who have
not already signed such agreements (including the individuals identified in Part
2.9(e) of the Disclosure Schedule);
(e) a legal opinion of Branden T. Burningham, dated as of the
Closing Date, in the form of Exhibit F;
(f) a certificate executed by the Principal Stockholders and
containing the representation and warranty of each Principal Stockholder that
each of the representations and warranties set forth in Section 2 is accurate in
all respects as of the Closing Date as if made on the Closing Date and that the
conditions set forth in Sections 6.1, 6.2, 6.3 and 6.4 have been duly satisfied
(the "Stockholders' Closing Certificate"); and
(g) written resignations of all directors of the Company,
effective as of the Effective Time.
6.6 FIRPTA COMPLIANCE. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 5.7.
6.7 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.8 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened
to commence any Legal Proceeding challenging or seeking the recovery of a
material amount of damages in connection
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with the Merger or seeking to prohibit or limit the exercise by Parent of any
material right pertaining to its ownership of stock of the Surviving
Corporation.
6.9 EMPLOYEES AND CONSULTANTS. Kim Northrop shall have agreed to become
an employee of Parent on terms acceptable to Parent. Lisa Thurin, Carter Burton,
Nancy Utter, Dawn Lodge and Pam Shephard shall have agreed to become engaged as
independent contractors to Parent on terms acceptable to Parent.
6.10 TERMINATION OF EMPLOYEE PLANS. The Company shall have provided
Parent with evidence, reasonably satisfactory to Parent, as to the termination
of the benefit plans referred to in Section 5.12.
6.11 MIGRATION. The Company and Parent shall have migrated the software
and databases relating to the "bingoonline.com" and "buglebingo.com" web sites
to Parent's servers to the satisfaction of Parent.
6.12 AUDIT. Parent shall have received the audited financial statements
contemplated by Section 2.4(c) and shall be satisfied with such audited
financial statements.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement (without
giving effect to any materiality or similar qualifications contained in such
representations and warranties), and shall be accurate in all material respects
as of the Scheduled Closing Time as if made at the Scheduled Closing Time
(without giving effect to any materiality or similar qualifications contained in
such representations and warranties).
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all respects.
7.3 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
SECTION 8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(a) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of Parent or Merger Sub to
comply with or perform any covenant or obligation of Parent or Merger Sub set
forth in this Agreement);
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(b) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 7 has become
impossible (other than as a result of any failure on the part of the Company or
any of the Principal Stockholders to comply with or perform any covenant or
obligation set forth in this Agreement or in any other agreement or instrument
delivered to Parent);
(c) by Parent at or after the Scheduled Closing Time if any
condition set forth in Section 6 has not been satisfied by the Scheduled Closing
Time;
(d) by the Company at or after the Scheduled Closing Time if any
condition set forth in Section 7 has not been satisfied by the Scheduled Closing
Time;
(e) by Parent if the Closing has not taken place on or before
December 31, 1999 (other than as a result of any failure on the part of Parent
to comply with or perform any covenant or obligation of Parent set forth in this
Agreement);
(f) by the Company if the Closing has not taken place on or
before December 31, 1999 (other than as a result of the failure on the part of
the Company or any of the Principal Stockholders to comply with or perform any
covenant or obligation set forth in this Agreement or in any other agreement or
instrument delivered to Parent); or
(g) by the mutual consent of Parent and the Company.
8.2 TERMINATION PROCEDURES. If Parent wishes to terminate this Agreement
pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e), Parent shall
deliver to the Company a written notice stating that Parent is terminating this
Agreement and setting forth a brief description of the basis on which Parent is
terminating this Agreement. If the Company wishes to terminate this Agreement
pursuant to Section 8.1(b), Section 8.1(d) or Section 8.1(f), the Company shall
deliver to Parent 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.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) neither the Company nor Parent shall be
relieved of any obligation or liability arising from any prior breach by such
party of any provision of this Agreement; (b) the parties shall, in all events,
remain bound by and continue to be subject to the provisions set forth in
Section 10; and (c) the Company shall, in all events, remain bound by and
continue to be subject to Section 5.3.
8.4 BREAK-UP FEE. If Parent wishes to terminate this Agreement other
than pursuant to Sections 8.1(a), 8.1(c) or 8.1(e), then Parent may do so but
must pay the Company within fifteen (15) days of such termination the cash sum
of $500,000 as liquidated damages.
SECTION 9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS, ETC.
(a) The representations and warranties made by the Principal
Stockholders (including the representations and warranties set forth in Section
2 and the representations and warranties set forth in the Stockholders' Closing
Certificate) shall survive the Closing and shall expire on the first
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anniversary of the Closing Date; provided, however, that if, at any time prior
to the first anniversary of the Closing Date, any Indemnitee (acting in good
faith) delivers to the Agent a written notice alleging the existence of an
inaccuracy in or a breach of any of the representations and warranties made by
the Principal Stockholders (and setting forth in reasonable detail the basis for
such Indemnitee's belief that such an inaccuracy or breach may exist) and
asserting a claim for recovery under Section 9.2 based on such alleged
inaccuracy or breach, then the claim asserted in such notice shall survive the
first anniversary of the Closing until such time as such claim is fully and
finally resolved.
(b) The representations, warranties, covenants and obligations
of the Company and the Principal Stockholders, and the rights and remedies that
may be exercised by the Indemnitees, shall not be limited or otherwise affected
by or as a result of any information furnished to, or any investigation made by
or knowledge of, any of the Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, each statement or other item
of information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
the Company and the Principal Stockholders in this Agreement.
9.2 INDEMNIFICATION BY PRINCIPAL STOCKHOLDERS.
(a) From and after the Effective Time (but subject to Section
9.1(a)), the Principal Stockholders, jointly and severally, shall hold harmless
and indemnify each of the Indemnitees from and against, and shall compensate and
reimburse each of the Indemnitees for, any Damages which are directly or
indirectly suffered or incurred by any of the Indemnitees or to which any of the
Indemnitees may otherwise become subject (regardless of whether or not such
Damages relate to any third-party claim) and which arise from or as a result of,
or are directly or indirectly connected with: (i) any inaccuracy in or breach of
any representation or warranty set forth in Section 2 or in the Stockholders'
Closing Certificate (without giving effect to any "Material Adverse Effect" or
other materiality qualification or any similar qualification contained or
incorporated directly or indirectly in such representation or warranty, but
giving effect to any update to the Disclosure Schedule delivered by the Company
to Parent prior to the Closing); (ii) any breach of any covenant or obligation
of the Company or any of the Principal Stockholders (including the covenants set
forth in Sections 4 and 5); or (iii) any Legal Proceeding relating to any
inaccuracy or breach of the type referred to in clause "(i)" or "(ii)" above
(including any Legal Proceeding commenced by any Indemnitee for the purpose of
enforcing any of its rights under this Section 9).
(b) The Principal Stockholders acknowledge and agree that, if
the Surviving Corporation suffers, incurs or otherwise becomes subject to any
Damages as a result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation, then (without limiting any of
the rights of the Surviving Corporation as an Indemnitee) Parent shall also be
deemed, by virtue of its ownership of the stock of the Surviving Corporation, to
have incurred Damages as a result of and in connection with such inaccuracy or
breach.
9.3 THRESHOLD; CEILING.
(a) Subject to Section 9.3(c), the Principal Stockholders shall
not be required to make any indemnification payment pursuant to Section
9.2(a)(i) until such time as the total amount of all Damages (whenever suffered
and whether arising from a single inaccuracy or breach or from multiple
inaccuracies or breaches of different representations and warranties) exceeds
$50,000 in the aggregate. If the total amount of such Damages exceeds $50,000 in
the aggregate, then the Indemnitees shall be
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entitled to be indemnified against and compensated and reimbursed for all of
such Damages, and not only the amount exceeding $50,000.
(b) Subject to Section 9.3(c), the maximum liability of each
Principal Stockholder under Section 9.2(a)(i) shall be equal to the total amount
to be received by such Principal Stockholder pursuant to this Agreement.
(c) The limitations set forth in Sections 9.3(a) and 9.3(b) on
the liability of the Principal Stockholders shall not apply in connection with
any inaccuracy or breach of which any of the Principal Stockholders has actual
knowledge on the Closing Date, provided that the provisions of this Section
9.3(c) shall not apply to Ben Franklin/Progress Capital Fund, L.P.
9.4 SATISFACTION OF INDEMNIFICATION CLAIM. In the event any Principal
Stockholder shall have any liability (for indemnification or otherwise) to any
Indemnitee under this Section 9, such Principal Stockholder shall satisfy such
liability by delivering to such Indemnitee the aggregate dollar amount of such
liability.
9.5 NO CONTRIBUTION. Each Principal Stockholder waives, and acknowledges
and agrees that he shall not have and shall not exercise or assert (or attempt
to exercise or assert), any right of contribution, right of indemnity or other
right or remedy against the Surviving Corporation in connection with any
indemnification obligation or any other liability to which he may become subject
under or in connection with this Agreement or the Stockholders' Closing
Certificate.
9.6 INTEREST. Any Principal Stockholder who is required to hold
harmless, indemnify, compensate or reimburse any Indemnitee pursuant to this
Section 9 with respect to any Damages shall also be liable to such Indemnitee
for interest on the amount of such Damages (for the period commencing as of the
date on which such Principal Stockholder first received notice of a claim for
recovery by such Indemnitee and ending on the date on which the liability of
such Principal Stockholder to such Indemnitee is fully satisfied by such
Stockholder) at a floating rate equal to the rate of interest publicly announced
by Bank of America, N.T. & S.A. from time to time as its prime, base or
reference rate.
9.7 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against the
Surviving Corporation, against Parent or against any other Person) with respect
to which any of the Principal Stockholders may become obligated to hold
harmless, indemnify, compensate or reimburse any Indemnitee pursuant to this
Section 9, Parent shall have the right, at its election, to proceed with the
defense of such claim or Legal Proceeding on its own. If Parent so proceeds with
the defense of any such claim or Legal Proceeding:
(a) all reasonable expenses relating to the defense of such
claim or Legal Proceeding shall be borne and paid exclusively by the Principal
Stockholders;
(b) each Principal Stockholder shall make available to Parent
any documents and materials in his possession or control that may be necessary
to the defense of such claim or Legal Proceeding; and
(c) Parent shall have the right to settle, adjust or compromise
such claim or Legal Proceeding with the consent of the Agent (as defined in
Section 10.1); provided, however, that such consent shall not be unreasonably
withheld.
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Parent shall give the Agent prompt notice of the commencement of any such Legal
Proceeding against Parent or the Surviving Corporation; provided, however, that
any failure on the part of Parent to so notify the Agent shall not limit any of
the obligations of the Principal Stockholders under this Section 9 (except to
the extent such failure materially prejudices the defense of such Legal
Proceeding).
9.8 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PARENT. No Indemnitee
(other than Parent or any successor thereto or assign thereof) shall be
permitted to assert any indemnification claim or exercise any other remedy under
this Agreement unless Parent (or any successor thereto or assign thereof) shall
have consented to the assertion of such indemnification claim or the exercise of
such other remedy.
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 AGENT. The Principal Stockholders hereby irrevocably appoint Donn
Clendenon as their agent for purposes of Section 9 (the "Agent"), and Donn
Clendenon hereby accepts his appointment as the Agent. Parent shall be entitled
to deal exclusively with the Agent on all matters relating to Section 9, and
shall be entitled to rely conclusively (without further evidence of any kind
whatsoever) on any document executed or purported to be executed on behalf of
any Stockholder by the Agent, and on any other action taken or purported to be
taken on behalf of any Stockholder by the Agent, as fully binding upon such
Stockholder. If the Agent shall die, become disabled or otherwise be unable to
fulfill his responsibilities as agent of the Principal Stockholders, then the
Principal Stockholders shall, within ten days after such death or disability,
appoint a successor agent and, promptly thereafter, shall notify Parent of the
identity of such successor. Any such successor shall become the "Agent" for
purposes of Section 9 and this Section 10.1. If for any reason there is no Agent
at any time, all references herein to the Agent shall be deemed to refer to the
Principal Stockholders. The Principal Stockholders agree to reimburse the Agent
promptly on a pro rata basis for all expenses incurred by the Agent in
connection with the performance of his duties hereunder and under the other
transactional agreements.
10.2 FURTHER ASSURANCES. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
10.3 FEES AND EXPENSES. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Parent and its Representatives with
respect to the Company's business (and the furnishing of information to Parent
and its Representatives in connection with such investigation and review), (b)
the negotiation, preparation and review of this Agreement (including the
Disclosure Schedule) and all agreements, certificates, opinions and other
instruments and documents delivered or to be delivered in connection with the
transactions contemplated by this Agreement, (c) the preparation and submission
of any filing or notice required to be made or given in connection with any of
the transactions contemplated by this Agreement, and the obtaining of any
Consent required to be obtained in connection with any of such transactions, and
(d) the consummation of the Merger; provided, however, that, to the extent the
total amount of all such fees, costs and expenses incurred by or for the benefit
of the Company (including all such fees, costs and expenses incurred prior to
the date of this Agreement and including the amount of all special bonuses and
other amounts that may become payable to any officers of the Company or other
Persons in connection with the consummation of the transactions contemplated by
this Agreement)
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exceeds $100,000 in the aggregate, such fees, costs and expenses shall be borne
and paid by the Principal Stockholders and not by the Company.
10.4 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to Parent: Women.com Networks, Inc.
1820 Gateway Drive, Suite 100
San Mateo, CA 94404
Attention: Vincent P. Pangrazio
Facsimile: (650) 571-9486
if to the Company World Gaming Corporation
or any of the 309 North Third Street, Suite 100
Principal Stockholders: Philadelphia, PA 19106
Attention: Donn Clendenon
Facsimile: (215) 627-4860
with a copy to: Branden T. Burningham, Esq.
455 East Fifth South, Suite 205
Salt Lake City, Utah 84111
Facsimile: (801) 355-7126
10.6 CONFIDENTIALITY. Without limiting the generality of anything
contained in Section 5.3, on and at all times after the Closing Date, each
Principal Stockholder shall keep confidential, and shall not use or disclose to
any other Person, any non-public document or other non-public information in
such Principal Stockholder's possession that relates to the business of the
Company or Parent.
10.7 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
10.8 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.
10.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
10.10 GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed in all respects by, the internal laws of the State of
Pennsylvania (without giving effect to principles of conflicts of laws).
31.
<PAGE> 33
10.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); the Principal Stockholders and
their respective personal representatives, executors, administrators, estates,
heirs, successors and assigns (if any); Parent and its successors and assigns
(if any); and Merger Sub and its successors and assigns (if any). This Agreement
shall inure to the benefit of: the Company; the Company's stockholders (to the
extent set forth in Section 1.5); Parent; Merger Sub; the other Indemnitees
(subject to Section 9.8); and the respective successors and assigns (if any) of
the foregoing. Parent may freely assign any or all of its rights under this
Agreement (including its indemnification rights under Section 9), in whole or in
part, to any other Person without obtaining the consent or approval of any other
party hereto or of any other Person.
10.12 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this Agreement,
such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.
10.13 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
10.14 AMENDMENTS. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.15 SEVERABILITY. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.16 PARTIES IN INTEREST. Except for the provisions of Sections 1.5 and
9, none of the provisions of this Agreement is intended to provide any rights or
remedies to any Person other than the parties hereto and their respective
successors and assigns (if any).
10.17 ENTIRE AGREEMENT. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and
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supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter hereof and thereof; provided, however,
that the letter agreements executed on behalf of Parent on and the Company on
September 3, 1999 and November 1, 1999 shall not be superseded by this Agreement
and shall remain in effect in accordance with its terms until the earlier of (a)
the Effective Time, or (b) the date on which such letter agreement is terminated
in accordance with its terms.
10.18 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
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The parties hereto have caused this Agreement to be executed and
delivered as of November 15, 1999.
WOMEN.COM NETWORKS, INC., WORLD GAMING CORPORATION,
a Delaware corporation a Pennsylvania corporation
By: /s/ Marleen McDaniel By: /s/ Donn Clendenon
--------------------------------- ---------------------------------
Title: CEO and President Title: Chief Executive Officer
------------------------------ ------------------------------
WG ACQUISITION CORP., PRINCIPAL STOCKHOLDERS:
a Pennsylvania corporation
/s/ Donn Clendenon
------------------------------------
DONN CLENDENON
By: /s/ Marleen McDaniel
---------------------------------
/s/ Jacqueline Paul
------------------------------------
Title: President JACQUELINE PAUL
------------------------------
/s/ Stephen Rossi
------------------------------------
STEPHEN ROSSI
/s/ James Hettinger
------------------------------------
JAMES HETTINGER
/s/ W. Bradley Lineberger
------------------------------------
W. BRADLEY LINEBERGER
BEN FRANKLIN/PROGRESS CAPITAL FUND,
L.P. BY PROGRESS CAPITAL, INC., ITS
GENERAL PARTNER
By: /s/ Janet E. Paroo
---------------------------------
Title: President
------------------------------
<PAGE> 36
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital
stock or other equity security of the Company (other than common stock
issued to employees of the Company, upon exercise of Company Options or
otherwise, in routine transactions in accordance with the Company's past
practices), (ii) any option, call, warrant or right (whether or not
immediately exercisable) to acquire any capital stock or other equity
security of the Company (other than stock options granted to employees
of the Company in routine transactions in accordance with the Company's
past practices), or (iii) any security, instrument or obligation that is
or may become convertible into or exchangeable for any capital stock or
other equity security of the Company; or
(c) any merger, consolidation, business combination,
reorganization or similar transaction involving the Company.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached (including the Disclosure
Schedule), as it may be amended from time to time.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which the Company is a party; (b) by which the Company or any of its assets is
or may become bound or under which the Company has, or may become subject to,
any obligation; or (c) under which the Company has or may acquire any right or
interest.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
DAMAGES. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
i.
<PAGE> 37
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule
(dated as of the date of the Agreement) delivered to Parent on behalf of the
Company and the Principal Stockholders.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENT BID. "Government Bid" shall mean any quotation, bid or
proposal submitted to any Governmental Body or any proposed prime contractor or
higher-tier subcontractor of any Governmental Body.
GOVERNMENT CONTRACT. "Government Contract" shall mean any prime
contract, subcontract, letter contract, purchase order or delivery order
executed or submitted to or on behalf of any Governmental Body or any prime
contractor or higher-tier subcontractor, or under which any Governmental Body or
any such prime contractor or subcontractor otherwise has or may acquire any
right or interest.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
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,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal, foreign
or other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
INDEMNITEES. "Indemnitees" shall mean the following Persons: (a) Parent;
(b) Parent's current and future affiliates (including the Surviving
Corporation); (c) the respective Representatives of the Persons referred to in
clauses "(a)" and "(b)" above; and (d) the respective successors and assigns of
the Persons referred to in clauses "(a)", "(b)" and "(c)" above; provided,
however, that the Stockholders shall not be deemed to be "Indemnitees."
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
ii.
<PAGE> 38
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to
have a "Material Adverse Effect" on the Company if such violation or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement or
in the Stockholders' Closing Certificate but for the presence of "Material
Adverse Effect" or other materiality qualifications, or any similar
qualifications, in such representations and warranties) would have a material
adverse effect on the Company's business, condition, assets, liabilities,
operations, financial performance or prospects.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), 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, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; or (b) right to use or exploit any of the
foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933,
as amended.
STOCKHOLDER. "Stockholder" means a stockholder of World Gaming
Corporation.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains 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, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
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 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.
iii.
<PAGE> 39
LIST OF EXHIBITS
Exhibit A Certain Definitions
Exhibit B Articles of Incorporation of the Surviving Corporation
Exhibit C Escrow Agreement
Exhibit D Form of Noncompetition Agreement
Exhibit E Form of Release
Exhibit F Form of Opinion of Branden T. Burningham
