<PAGE>
As filed with the Securities and Exchange Commission on November 26, 1999
Registration No. 333-88019
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 5
To
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
HEALTHCENTRAL.COM
(Exact Name of Registrant as Specified in Its Charter)
Delaware 7375 94-3250851
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification
Incorporation or Classification Code Number)
Organization) Number)
6001 Shellmound Street, Suite 800
Emeryville, CA 94608
(510) 250-2500
(Address, Including Zip Code, and Telephone Number, Including Area
Code, of Registrant's Principal Executive Offices)
---------------
Albert L. Greene
Chief Executive Officer
HealthCentral.com
6001 Shellmound Street, Suite 800
Emeryville, CA 94608
(510) 250-2500
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
---------------
Copies to:
Mark A. Medearis Craig S. Andrews
Laurel Finch David G. Odrich
Scott Ring Jeffrey C. Thacker
Gene Yoon Michelle A. Lara
VENTURE LAW GROUP BROBECK, PHLEGER & HARRISON LLP
A Professional Corporation 550 West "C" Street
2800 Sand Hill Road Suite 1300
Menlo Park, CA 94025 San Diego, CA 92101
---------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
---------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
The purpose of this Amendment No. 5 is solely to file certain exhibits to
the Registration Statement, as set forth below in Item 16(a) of Part II.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by HealthCentral.com in
connection with the sale of the common stock being registered. All amounts are
estimates except the Securities and Exchange Commission registration fee, the
NASD filing fee and the Nasdaq National Market listing fee.
<TABLE>
<CAPTION>
Amount
to be Paid
-------------
<S> <C>
Securities and Exchange Commission registration fee .......... $ 26,375.25
NASD filing fee............................................... 9,987.50
Nasdaq National Market listing fee............................ 95,000.00
Printing and engraving expenses............................... 400,000.00
Legal fees and expenses....................................... 550,000.00
Accounting fees and expenses.................................. 400,000.00
Blue Sky qualification fees and expenses...................... 5,000.00
Transfer Agent and Registrar fees............................. 12,602.25
-------------
Total..................................................... $1,500,000.00
=============
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended. Article XII of
our certificate of incorporation (Exhibit 3.3 hereto) and Article VI of our
Bylaws (Exhibit 3.5 hereto) provide for indemnification of HealthCentral.com's
directors, officers, employees and other agents to the maximum extent
permitted by Delaware Law. In addition, HealthCentral.com has entered into
Indemnification Agreements (Exhibit 10.24 hereto) with certain officers and
directors. The Underwriting Agreement (Exhibit 1.1) also provides for cross-
indemnification among HealthCentral.com and the underwriters with respect to
certain matters, including matters arising under the Securities Act.
Item 15. Recent Sales of Unregistered Securities
(a) Since September 1, 1996, the Registrant has issued and sold the
following unregistered securities:
(1) In December 1998, the Registrant issued and sold shares of Series A
Preferred Stock convertible into an aggregate of 1,012,500 shares of
common stock, and warrants to purchase 486,000 shares of Series A
Preferred Stock at a purchase price of $2.00 to investors.
(2) In May 1999, the Registrant issued a warrant to purchase 12,249 shares
of Series A Preferred Stock at a purchase price of $2.00 per share to
individuals affiliated with a lender in connection with a financing
transaction.
(3) In April 1999, the Registrant issued a warrant to purchase 73,896
shares of Common Stock at a purchase price of $6.50 per share to a
strategic partner.
(4) In July 1999, the Registrant issued promissory notes in the aggregate
principal amount of $600,000 to investors and warrants to purchase an
aggregate of 16,664 shares of common stock at a purchase price of $3.60
per share to investors.
II-1
<PAGE>
(5) In July 1999, we issued a promissory note in the principal amount of
$100,000 to an individual. The principal amount of this note was
converted into shares of Series B Preferred Stock and the interest was
paid in full in September 1999.
(6) In August 1999, the Registrant issued 2,104,770 shares of its common
stock to individuals in connection with an acquisition of a company.
(7) In August and September 1999, the Registrant issued and sold shares of
Series B Preferred Stock convertible into an aggregate of 4,038,455
shares of common stock to investors for an aggregate purchase price of
$20,999,998.50.
(8) In August 1999, we issued promissory notes in the aggregate principal
amount of $300,000 and warrants to purchase 8,333 shares of Series B
Preferred Stock at a purchase price of $3.60 per share to a stockholder
in connection with a bridge financing. The principal amount of this
note was converted into shares of Series B Preferred Stock and the
interest was paid in full in September 1999.
(9) In August 1999, the Registrant issued to Hambrecht & Quist LLC a
warrant to purchase 69,231 shares of Series B Preferred Stock at a
purchase price of $5.20 per share.
(10) In October 1999, the Registrant issued or reserved for issuance upon
the exercise of options a total of 1,579,065 shares of its common
stock to individuals and entities in connection with an acquisition
of a company.
(11) In October 1999, the Registrant issued 836,422 shares to individuals
in connection with an acquisition of a company.
(12) As of September 30, 1999, 398,916 shares of common stock had been
issued upon exercise of options or pursuant to restricted stock
purchase agreements and 1,756,157 shares of common stock were issuable
upon exercise of outstanding options under the Registrant's 1998 Stock
Plan.
(13) As of September 30, 1999, 250,000 shares of common stock were
issuable upon exercise of outstanding options under the Registrants'
1999 Stock Plan.
(14) In August 1998, the Registrant effected a 1.844-for-1 split of its
outstanding common stock in which every outstanding share of common
stock was split into 1.844 shares of common stock.
(15) Prior to the completion of this offering, the Registrant intends to
effect a five-for-four split of its outstanding common stock in which
every outstanding share of common stock will be split into 1.25 shares
of common stock.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
All of the foregoing information gives effect to the five-for-four split of
the Registrant's common stock to be effected prior to completion of the
offering. The issuances described in Items 15(a)(1) through 15(a)(11) as well
as the issuances in 15(a)(13) were deemed to be exempt from registration under
the Securities Act in reliance upon Section 4(2) thereof as transactions by an
issuer not involving any public offering. The issuances described in Items
15(a)(12) were deemed exempt from the registration under the Securities Act in
reliance upon Rule 701 promulgated thereunder in that they were offered and
sold either pursuant to written compensatory benefit plans or pursuant to a
written contract relating to compensation, as provided by Rule 701. In
addition, such issuances were deemed to be exempt from registration under
Section 4(2) of the Securities Act as transactions by an issuer not involving
any public offering. The issuances described in Items 15(a)(14) and (15) were
or will be exempt from registration under Section 2(3) of the Securities Act on
the basis that such transaction did not involve a "sale" of securities. The
recipients of securities in each such transaction represented their intentions
to acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate legends were
affixed to the securities issued in such transactions. All recipients had
adequate access, through their relationships with the Company, to information
about the Registrant.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1** Form of Underwriting Agreement (subject to negotiation).
3.1** Second Amended and Restated Articles of Incorporation of the
Registrant (current).
3.2** Amended and Restated Certificate of Incorporation of the Registrant
(as proposed for reincorporation in Delaware).
3.3** Amended and Restated Certificate of Incorporation of the Registrant
(as proposed for public company).
3.4** Bylaws of the Registrant, as amended (current).
3.5** Amended and Restated Bylaws of the Registrant (as proposed for
public company).
4.1** Specimen Stock Certificate.
5.1* Opinion of Venture Law Group regarding the legality of the common
stock being registered.
10.1** First Amended and Restated Investors' Rights Agreement dated August
27, 1999 between the Registrant and certain investors.
10.2** 1999 Stock Plan, as amended, and form of stock option agreements and
restricted stock purchase agreements.
10.3** Amended and Restated 1998 Stock Plan, as amended, and form of stock
option agreements and restricted stock purchase agreements.
10.4** 1999 Employee Stock Purchase Plan, and form of subscription
agreement.
10.5** 1999 Directors' Stock Option Plan, and form of stock option
agreement.
10.6** Form of Common Stock Agreement between the Registrant and each of
Dean S. Edell M.D. and James J. Hornthal.
10.7** Engagement Letter between the Registrant and Hambrecht & Quist dated
March 22, 1999.
10.8** Consulting Agreement between the Registrant and Michael D. McDonald
dated August 12, 1999.
10.9** Employment Agreements between the Registrant and each of Deryk Van
Brunt and Marcos A. Athanasoulis.
10.10** Employment Agreement between the Registrant and Albert Greene dated
August 16, 1999.
10.11** Offer Letter from the Registrant to C. Fred Toney dated June 16,
1999.
10.12** Letter Agreement between the Registrant and Ann Marie Buddrus dated
August 4, 1999.
10.13** Lock-Up Agreement between the Registrant and Dr. Dean S. Edell dated
August 27, 1999.
10.14** Form of Change of Control Agreement between the Registrant and
Albert L. Greene.
10.15** License and Confidential Information Agreement between the
Registrant and Dr. Dean S. Edell dated May 14, 1999.
10.16** Office Lease between the Registrant and Christie Avenue Partners JS
dated March 26, 1999.
10.17** Landlord's Consent and Agreement (Sublease) between the Registrant
and Burnham Pacific Operating Partnership, L.P. dated July 22, 1999.
10.18** Joint Development Agreement/Base Agreement by and between the
Registrant, Windom Health Enterprises and Global Health Initiatives
dated August 12, 1999.
10.19+** Co-Branded Site Agreement by and between the Registrant, Graedon
Enterprises, Inc., and Joe Graedon and Teresa Graedon dated
September 9, 1999.
10.20+*** Agreement between the Registrant and AltaVista Company dated
September 27, 1999.
10.21*** Agreement and Plan of Reorganization by and between the Registrant,
HC2 Acquisition Corporation and ePills, Inc. dated September 28,
1999.
10.22+** Internet Fulfillment Services Agreement between ePills, Inc. and
Bergen Brunswig Drug Company dated September 16, 1999.
10.23+** Pharmacy Services Fulfillment Agreement between ePills, Inc. and
Medi-Mail, Inc. dated August 1999.
10.24** Form of Indemnification Agreement.
10.25** Agreement and Plan of Reorganization by and between Registrant and
RxList.com dated October 25, 1999.
10.26** Industrial Lease between ePills.com and H.S.P. dated May 4, 1999.
10.27+** Co-Branding Content Agreement between the Registrant and MediaLinx
Interactive, L.P. dated June 30, 1999.
10.28+** Advertising Insertion Order between ePills, Inc. and America Online,
Inc. dated August 20, 1999.
10.29** Assumed HealthCentralRx.com 1999 Stock Option Plan and form of
incentive stock option agreement.
21.1** List of subsidiaries.
23.1** Form of Consent of Independent Accountants.
23.1b** Consent of Independent Accountants.
23.1c** Consent of Independent Accountants.
23.2 Consent of Attorney (See Exhibit 5.1).
24.1** Power of Attorney.
27.1** Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
*** Supersedes exhibit previously filed.
+ Certain information on this exhibit has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect
to the omitted portions.
II-3
<PAGE>
(b) Financial Statement Schedules
All financial statement schedules have been omitted because they are not
required, are not applicable or because the information required to be included
in such schedules is included in the financial statements or notes thereto.
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 5 to Registration Statement on Form S-1 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
city of Emeryville, State of California, on November 26, 1999.
HEALTHCENTRAL.COM
/s/ C. Fred Toney
By:__________________________________
C. Fred Toney
Senior Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 5 to Registration Statement on Form S-1 has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* President, Chief Executive November 26, 1999
____________________________________ Officer and Director
Albert L. Greene (Principal Executive
Officer)
/s/ C. Fred Toney Chief Financial Officer November 26, 1999
____________________________________ (Principal Financial and
C. Fred Toney Accounting Officer)
* Co-Chairman of the Board November 26, 1999
____________________________________
James J. Hornthal
* Co-Chairman of the Board November 26, 1999
____________________________________
Michael D. McDonald
* Director November 26, 1999
____________________________________
Louis M. Andersen
* Director November 26, 1999
____________________________________
Sheryle J. Bolton
* Director November 26, 1999
____________________________________
Annette Campbell-White
* Director November 26, 1999
____________________________________
Dean S. Edell
* Director November 26, 1999
____________________________________
Wesley D. Sterman
* Director November 26, 1999
____________________________________
Robin Wolaner
</TABLE>
*Power of Attorney
/s/ C. Fred Toney
By: ___________________________
C. Fred Toney
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1** Form of Underwriting Agreement (subject to negotiation).
Second Amended and Restated Articles of Incorporation of the
3.1** Registrant (current).
3.2** Amended and Restated Certificate of Incorporation of the Registrant
(as proposed for reincorporation in Delaware).
Amended and Restated Certificate of Incorporation of the Registrant
3.3** (as proposed for public company).
3.4** Bylaws of the Registrant, as amended (current).
Amended and Restated Bylaws of the Registrant (as proposed for
3.5** public company).
4.1** Specimen Stock Certificate.
Opinion of Venture Law Group regarding the legality of the common
5.1* stock being registered.
10.1** First Amended and Restated Investors' Rights Agreement dated August
27, 1999 between the Registrant and certain investors.
1999 Stock Plan, as amended, and form of stock option agreements and
10.2** restricted stock purchase agreements.
10.3** Amended and Restated 1998 Stock Plan, as amended, and form of stock
option agreements and restricted stock purchase agreements.
1999 Employee Stock Purchase Plan, and form of subscription
10.4** agreement.
1999 Directors' Stock Option Plan, and form of stock option
10.5** agreement.
10.6** Form of Common Stock Agreement between the Registrant and each of
Dean S. Edell M.D. and James J. Hornthal.
Engagement Letter between the Registrant and Hambrecht & Quist dated
10.7** March 22, 1999.
Consulting Agreement between the Registrant and Michael D. McDonald
10.8** dated August 12, 1999.
Employment Agreements between the Registrant and each of Deryk Van
10.9** Brunt and Marcos A. Athanasoulis.
Employment Agreement between the Registrant and Albert Greene dated
10.10** August 16, 1999.
Offer Letter from the Registrant to C. Fred Toney dated June 16,
10.11** 1999.
Letter Agreement between the Registrant and Ann Marie Buddrus dated
10.12** August 4, 1999.
Lock-Up Agreement between the Registrant and Dr. Dean S. Edell dated
10.13** August 27, 1999.
Form of Change of Control Agreement between the Registrant Albert L.
10.14** Greene.
10.15** License and Confidential Information Agreement between the
Registrant and Dr. Dean S. Edell dated May 14, 1999.
Office Lease between the Registrant and Christie Avenue Partners JS
10.16** dated March 26, 1999.
10.17** Landlord's Consent and Agreement (Sublease) between the Registrant
and Burnham Pacific Operating Partnership, L.P. dated July 22, 1999.
10.18** Joint Development Agreement/Base Agreement by and between the
Registrant, Windom Health Enterprises and Global Health Initiatives
dated August 12, 1999.
10.19+** Co-Branded Site Agreement by and between the Registrant, Graedon
Enterprises, Inc., and Joe Graedon and Teresa Graedon dated
September 9, 1999.
Agreement between the Registrant and AltaVista Company dated
10.20+*** September 27, 1999.
10.21*** Agreement and Plan of Reorganization by and between the Registrant,
HC Acquisition Corporation and ePills, Inc. dated September 28,
1999.
10.22+** Internet Fulfillment Services Agreement between ePills, Inc. and
Bergen Brunswig Drug Company dated September 16, 1999.
Pharmacy Services Fulfillment Agreement between ePills, Inc. and
10.23+** Medi-Mail, Inc. dated August 1999.
10.24** Form of Indemnification Agreement.
Agreement and Plan of Reorganization by and between Registrant and
10.25** RxList.com dated October 25, 1999.
10.26** Industrial Lease between ePills.com and H.S.P. dated May 4, 1999.
Co-Branding Content Agreement between Registrant and MediaLinx
10.27+** Interactive, L.P. dated June 30, 1999.
Advertising Insertion Order between ePills, Inc. and America Online,
10.28+** Inc. dated August 20, 1999.
10.29** Assumed HealthCentralRx.com 1999 Stock Option Plan and form of
incentive stock option agreement.
21.1** List of subsidiaries.
23.1** Form of Consent of Independent Accountants.
23.1b** Consent of Independent Accountants.
23.1c** Consent of Independent Accountants.
23.2 Consent of Attorney (See Exhibit 5.1).
24.1** Power of Attorney
27.1** Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
*** Supersedes exhibit previously filed.
+ Certain information on this exhibit has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect
to the omitted portions.
<PAGE>
EXHIBIT 10.20
EXECUTION COPY
--------------
AGREEMENT
THIS AGREEMENT ("Agreement") is made and effective as of September 27, 1999
(the "Effective Date") by and between AltaVista Company, a Delaware corporation
with principal business offices at 529 Bryant Street, Palo Alto, California
94301 (together with its Affiliates, "AltaVista"), and HealthCentral.com, Inc.,
a California corporation with principal business offices at 6001 Shellmound St.,
Suite 800, Emeryville, California 94608 ("HealthCentral").
RECITALS
--------
WHEREAS, HealthCentral is the owner and provider of health related Web
sites, which provide access to health content and information appearing on the
Internet at www.HealthCentral.com. For purposes of this Agreement, HealthCentral
Content, as defined herein, shall appear on Web pages on the AltaVista
Platforms, as defined herein, with both AltaVista brand features and
HealthCentral brand features; and
WHEREAS, as used in this Agreement, "Web" refers to the World Wide Web,
that part of the Internet designed to allow easier navigation of the network of
computers through the use of graphical user interfaces and hypertext links
between different addresses. A "Web page" or "page" or a "Web site" permits an
end user to view and interact with companies on the Web by displaying the
content through the aforementioned graphical interfaces. "Internet" means a
global network of interconnected computer networks, each using the Transmission
Control Protocol/Internet Protocol and/or such other standard network
interconnection protocols as may be adapted from time to time; and
WHEREAS, AltaVista also maintains and/or manages certain Web pages which
may be delivered to users worldwide via email, desktop "channels" or Internet
"push" technologies which may incorporate content supplied by AltaVista by third
parties for the purpose of providing value to AltaVista users and providing
access to the content, products and/or services of such third parties; and
WHEREAS, AltaVista is also in the business of developing Web-page
platforms, providing Web-based search capabilities, and developing and serving
other Web sites on behalf of its customers and business partners; and
WHEREAS, AltaVista and its Affiliates customarily enter into third party
agreements that provide for customization of one or more AltaVista Platforms.
The customized AltaVista Platforms may be branded using third parties' names, or
co-branded with any combination of AltaVista's, AltaVista's Affiliates and third
parties' names. Pursuant to the terms and conditions of this Agreement, through
the process of AltaVista Platforms customization, any amount of content,
advertising or other features may be modified, added or deleted; and
CERTAIN INFORMATION ON THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
<PAGE>
WHEREAS, AltaVista desires to license the HealthCentral Content from
HealthCentral for its AltaVista Platforms and AltaVista and HealthCentral wish
to distribute the Content through one or more AltaVista Platforms.
NOW THEREFORE, in consideration of the agreements, covenants and conditions
set forth herein, intending to be legally bound, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following terms will have the
following specified meanings:
1.1 "Above the Fold" means situated within the portion of a page that
is designed to be visible on a standard computer screen at a resolution of [*]
(such resolution to be updated by AltaVista at its sole discretion in good faith
and to be consistent with the design of the AltaVista Platform throughout the
Term as appropriate) without requiring the user to scroll horizontally or
vertically through the page.
1.2 "Advertising Impression" means (i) a banner or other GIF
advertisement for HealthCentral and/or any of its Affiliates; (ii) a Text Link
Advertisement to the HealthCentral Site; or (iii) a Contextual Advertising Unit.
1.3 "Affiliate" means, with respect to a party, any Person that,
directly or indirectly, Controls, or is Controlled by, or is under common
Control with, such party.
1.4 "AltaVista Health Channel" means that area of the AltaVista
Platform that is accessed from the "Health" link (or other comparable link
regardless of name that provides access to the AltaVista Health Channel) on the
AltaVista Platform Home Page.
1.5 "AltaVista Health Channel Home Page" means with respect to the
AltaVista Health Channel, the first page that is displayed to the user within
the Channel.
1.6 "AltaVista Marks" means the AltaVista trademarks, service marks,
logos and domain names.
1.7 "AltaVista Platform" means a generic set of domestic Web pages,
and any domestic Mirror Site, that may also function together as a Web site.
The AltaVista Platforms may contain any or all of the following domestic sites:
an Internet index, a search tool, advertising, or any other feature that might
be desirable on a Web homepage. As used herein, the term "AltaVista Platforms"
shall include generic and customized AltaVista Platforms, including but not
limited to domestic sites and channels, such as an AltaVista.com, My AltaVista,
AV.com, Microav.com, the AltaVista Channels, My AV, Shopping.com and Zip2.com.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
2
<PAGE>
1.8 "AltaVista Search Results Page" means the page on the AltaVista
Platform containing the results of a search query entered by a User.
1.9 "AltaVista Platform Home Page" means with respect to the
AltaVista Platform, the page that is displayed to the user when the URL
www.altavista.com is entered.
1.10 "Co-Branded Page" means a Web page that has HealthCentral
Content and/or the Health Central Mark in the Masthead.
1.11 "Contextual Advertising Unit" means an advertisement whose
subject matter is relevant to the content to which it is adjacent and that links
to a relevant page on the HealthCentral Site.
1.12 "Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether by contract or through the ownership of voting securities,
including the ownership of more than fifty percent (50%) of the equity,
partnership or similar interest in such Person.
1.13 "Damages" means judgments, losses, deficiencies, damages,
liabilities, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses).
1.14 "HealthCentral Competitors" means the companies listed on
Schedule 1.14 which are directly competitive to the business of HealthCentral.
- -------------
1.15 "HealthCentral Content" means the content set forth on Schedule
--------
1.15, as may be amended from time to time by mutual agreement of the Parties.
- ----
1.16 "HealthCentral Mark" means the mark set forth on Schedule 1.16.
-------------
1.17 "HealthCentral Site" means the site currently located at
healthcentral.com any healthcentral.com network sites, any Mirror Site and any
site owned or controlled by HealthCentral or its Affiliates that provides health
related content and/or information.
1.18 "including" or "include," when used herein, shall be deemed to be
followed by the words "without limitation."
1.19 "Masthead" means the top area of each page within the AltaVista
Health Channel containing the branded name for the Channel. An example of the
current Masthead is set forth on Schedule 1.19.
-------------
1.20 "Mirror Site" means an Internet site that (a) contains the exact
form and content of a site, (b) is located at a geographic location distinct
from a site, and (c) is created for the purpose of improving the performance of
and accessibility to a site.
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1.21 "Other AltaVista Channels" means channels other than the Health
Channel on the AltaVista Platform that, in AltaVista's sole discretion, relate
to health, including but not limited to, children, family, sports, fitness,
nutrition, men and women.
1.22 "Party" or "Parties" means each of AltaVista and any of its
Affiliates and HealthCentral and any of its Affiliates.
1.23 "Person" means any individual, corporation, partnership, limited
liability company, trust, association or other entity or organization, including
any governmental or political subdivision or any agency or instrumentality
thereof.
1.24 "Search Partner Tile" means an advertisement on the AltaVista
Search Results Page of approximately 88 pixels by 31 pixels.
1.25 "Start Date" means the earlier of (a) launch of the AltaVista
Health Channel and (b) January 15, 2000.
1.26 "Term" shall have the meaning set forth in Section 10.1.
1.27 "Text Link Advertisement" means a text link on the AltaVista
Platform that is not located or placed within any health content provided by
HealthCentral.
1.28 "Third Party" means any Person that is not a party hereto or a
wholly owned Affiliate of a party hereto.
1.29 "User Data" means all data entered by a user or otherwise
relating to a user's experience on a site, including demographic data and e-
commerce activity.
ARTICLE II
CO-BRANDING AND DESIGN
2.1 Masthead. HealthCentral hereby grants to AltaVista a non-
--------
exclusive, worldwide, royalty free, license for the Term to incorporate the
HealthCentral Mark within the Masthead. AltaVista shall display the Masthead on
every page of the AltaVista Health Channel; provided, however, that the
--------
HealthCentral Mark shall only be included in the Masthead with respect to all
AltaVista Health Channel pages that feature HealthCentral Content. [*] on the
design of the Masthead, and the incorporation of the HealthCentral Mark within
the Masthead.
2.2 Channel Design. During the Term of this Agreement, [*]
--------------
the visual appearance of (a) the AltaVista Health Channel Home Page and (b) any
page within the AltaVista Health Channel containing HealthCentral Content;
provided, however, AltaVista shall in good faith make the final determination
- --------
with respect to design decisions (except the initial design), and AltaVista
shall make reasonable efforts that such design shall be consistent with the rest
of the AltaVista Platform.
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2.3 Return Links. HealthCentral shall display a return link,
------------
subject to design specifications, to the AltaVista Health Channel on: (a) all
pages of the HealthCentral Site viewed by a user who originated from a page on
the AltaVista Health Channel; and (b) any and all subsequent pages of the
HealthCentral Site viewed by such user. Such link shall return the user to the
page on the AltaVista Health Channel from which the user initially linked to the
HealthCentral Site. The parties shall agree on the minimum size of such return
link.
ARTICLE III
USE OF HEALTHCENTRAL CONTENT
3.1 Grant of License. HealthCentral hereby grants to AltaVista a
----------------
non-exclusive, worldwide, royalty free license for the Term, to display and
distribute the HealthCentral Content on the AltaVista Health Channel, and to
make such copies as are necessary to make such display and distribution.
HealthCentral shall have the obligation, at its own expense, to obtain all
necessary Third Party rights and licenses to make the foregoing grant of rights
to AltaVista.
3.2 Transmission and Timeliness of Content. The protocols for
--------------------------------------
transmitting the HealthCentral Content from HealthCentral to AltaVista are set
forth on Schedule 3.2. HealthCentral shall ensure that substantially all of the
------------
HealthCentral Content is delivered on a timely basis such that AltaVista is in
possession of the HealthCentral Content, (a) prior to such HealthCentral Content
being provided to any Third Party, and (b) [*] after such HealthCentral Content
is displayed on the HealthCentral Site.
3.3 Use of Content. AltaVista shall cooperate with HealthCentral
--------------
regarding the placement and use of the HealthCentral Content, provided that
--------
AltaVista shall make the final determination regarding any Content placement and
use issues. AltaVista shall have no obligation to use every item of the
HealthCentral Content, and may edit individual HealthCentral Content items in
its sole discretion within the guidelines of Schedule 3.3 (which shall be
------------
updated and mutually agreed among the Parties every ninety (90) days throughout
the Term of this Agreement) in order to meet AltaVista Platform format
requirements; provided, however, AltaVista shall have the right to edit the
headlines and develop abstracts and summaries of any HealthCentral Content.
3.4 Editorial Control of the Content. HealthCentral shall have
--------------------------------
complete editorial control over the topics covered by, and creation of, the
HealthCentral Content, provided that AltaVista shall have reasonable input into
--------
the selection of topics covered by HealthCentral.
3.5 Archive. During the Term, and subject to the terms of any Third
-------
Party content license agreements with HealthCentral, AltaVista shall have the
right to archive any of the HealthCentral Content including current and future,
provided by HealthCentral to AltaVista hereunder, as provided in Schedule 3.3,
------------
and to provide users with the ability to search for and retrieve HealthCentral
Content that was previously displayed on the AltaVista Health Channel.
AltaVista shall destroy such archived content promptly following the expiration
or termination of
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
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this Agreement. AltaVista shall promptly comply with any good faith request by
HealthCentral to remove archived HealthCentral Content as necessary for
HealthCentral to comply with its Third Party agreements.
3.6 Content Quality. HealthCentral shall use reasonable efforts to
---------------
ensure that, throughout the Term, the quality of the HealthCentral Content is
comparable to the content offered on the sites of the HealthCentral
Competitors (including, timeliness,); provided that the quality of the
HealthCentral Content shall always be at least as high as it exists as of the
Effective Date. HealthCentral acknowledges that a breach of this Section 3.6
shall give AltaVista a right to terminate this Agreement; provided, however,
that HealthCentral may have an opportunity to cure such breach within seventy
five (75) days after receiving a termination notice from AltaVista.
3.7 Exclusivity. HealthCentral shall be the exclusive health content
-----------
provider for the AltaVista Health Channel and throughout the AltaVista Platform;
----------------------------------
provided that in the event that AltaVista requests health-related content not
- --------
then-currently provided by HealthCentral, AltaVista shall provide HealthCentral
with a reasonably detailed written description of the content requested
("Content Notice'). HealthCentral shall have a [*] to provide such content. In
the event HealthCentral is unable to make such content available to AltaVista
commencing on or before [*], AltaVista may obtain such content from a Third
Party (including any of the HealthCentral Competitors listed on Schedule 1.14),
-------------
and thereafter (i) HealthCentral shall have no further right to
provide the content requested in the Content Notice, and (ii) AltaVista shall
have no further obligation to HealthCentral with respect to such content
AltaVista shall in good faith use its reasonable efforts to integrate any
content received from a Third Party into the AltaVista Health Channel consistent
with the then current design of the AltaVista Health Channel.
In the event AltaVista creates, develops, and maintains additional
channels with Third Parties within the AltaVista Platform, which contain health
related content, AltaVista shall in good faith use its reasonable efforts to
utilize content generated by HealthCentral for such other channels, unless such
content is not substantially similar to the content offered by such Third Party.
AltaVista shall have the right to incorporate any and all headline
health related news stories delivered to AltaVista by nationally or
internationally recognized newspaper, news source, or media company, on the
AltaVista Health Channel so long as such content is not available by
HealthCentral on a timely basis.
3.7 International Opportunities. The parties hereby acknowledge that
---------------------------
the terms and conditions of this Agreement shall relate only to the domestic
versions of AltaVista Health Channel and the AltaVista Platform. However, as
AltaVista develops and operates international Web sites or channels with
respect to international content, information, search or otherwise, AltaVista
shall in good faith use its reasonable efforts to provide HealthCentral an
opportunity to first negotiate the terms and conditions of a business
relationship with the AltaVista entity or
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THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTION.
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division operating and/or developing such Web sites. In the event
HealthCentral is not able to negotiate the terms and conditions with such
AltaVista entity, HealthCentral shall have a right of first refusal to at
least match the terms and conditions and breadth and depth of content,
including, but not limited to amount of content, timeliness of content,
quality of writing, and topics covered, offered by a Third Party; provided,
however, if HealthCentral cannot at least match such terms, conditions, and
content, the AltaVista entity or division operating and/or developing such
international Web site may enter into an agreement with such Third Party. This
Section 3.7 in its entirety is subject to the approval of each AltaVista
entity or division operating and/or developing any such Web sites and
AltaVista shall use its best efforts to obtain such approvals within thirty
(30) days of the Effective Date.
ARTICLE IV
HEALTHCENTRAL ADVERTISING
4.1 Contextual Advertising Units. Each Co-Branded Page on the
----------------------------
AltaVista Health Channel shall contain at least one Contextual Advertising Unit.
The design, size and placement of the Contextual Advertising Units shall be
subject to mutual approval of the Parties; provided, that such Units shall
---------
always be displayed Above the Fold and that such Units shall contain up to three
links. These links may connect to any web site in the HealthCentral.com
network. In addition, such links may contain at most one (1) sponsorship
textual attribution with respect to only such sponsors name (i.e. "sponsored by
[name of company or name of brand]); provided, however, that such links shall
--------
not (i) be allowed to appear on the AltaVista Health Channel Home Page, and (ii)
link directly to such sponsor. In connection with any sponsorship textual
attribution, (i) AltaVista shall every ninety (90) days during the Term of this
Agreement provide a list of [*] that HealthCentral may not be allowed to sell
any textual sponsorships to such sponsors and (ii) HealthCentral shall provide
AltaVista with fourteen (14) days notification prior to any sponsorship
placement of any and all sponsors in which HealthCentral intends to sell any
textual sponsorships.
4.2 Allocation of Advertising Impressions During Term. AltaVista
-------------------------------------------------
shall use its best efforts to display HealthCentral Advertising Impressions
evenly on a monthly basis pursuant to the following schedule during the Term:
(a) During the first twelve months after the Start Date ("Year
1"), [*] Advertising Impressions;
(b) During the second twelve month period after the Start Date
("Year 2"), [*] Advertising Impressions; and
(c) During the third twelve month period after the Start Date
("Year 3"), [*] Advertising Impressions.
4.3 Allocation of Advertising Impressions Across the AltaVista
----------------------------------------------------------
Platform.
- --------
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(a) Year One. The guaranteed Advertising Impressions during
--------
Year 1, set forth in Section 4.2 above, shall be distributed
among the AltaVista Home Page, the AltaVista Search Results
Page, the AltaVista Health Channel, and Other AltaVista
Channels as follows:
AltaVista Home Page
-------------------
(i) Advertisement GIFS and text links: [*] impressions
AltaVista Search Results Page (when "Health" or health-
------------------------------------------------------
related keywords are included as a query):
-----------------------------------------
(i) Banners: [*] impressions
(ii) Search Partner Tiles: [*] impressions
AltaVista Health Channel:
------------------------
(i) Banners: [*] impressions
(ii) Contextual Advertising Units: [*] impressions
Other AltaVista Channels or Directories (categorized search
-----------------------------------------------------------
result listings):
-----------------
(i) Banners: [*] impressions.
(b) Year Two. The number and distribution of Advertising
--------
Impressions during Year 2 shall be [*] of those set forth
above in Section 4.3(a) for Year 1, subject to revision by
mutual agreement of the Parties.
(c) Year Three. The number and distribution of Advertising
----------
Impressions during Year 3 shall be [*] of those set forth
above in Section 4.3(b) for Year 2, subject to revision by
mutual agreement of the Parties.
4.4 Accounting. In determining the number of Advertising Impressions
----------
displayed by AltaVista pursuant to Section 4.2:
(a) A minimum of [*] of the Advertising Impressions shall be from
pages containing only one Advertising Impression;
(b) A maximum of [*] of the Advertising Impressions may be from pages
containing two Advertising Impressions;
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(c) A maximum of [*] of the Advertising Impressions may be from pages
containing three or more Advertising Impressions;
(d) Additional Advertising Impressions (beyond those permitted by
Sections 4.4(b) and (c) from pages with more than one Advertising
Impressions may not be credited towards the make up of any
shortfalls (as provided for in Section 7.3) or the Performance
Thresholds in Section 8.2.
(e) The inclusion of the HealthCentral Mark in the Masthead pursuant
to Section 2.1 shall not be counted as an Advertising Impression.
4.5 Location. All HealthCentral Advertising Impressions shall appear
--------
above the Fold.
4.6 Monitoring and Reporting; Reallocation. AltaVista shall monitor
--------------------------------------
the number of HealthCentral Advertising Impressions, and provide written reports
thereof, including number of impressions and number of visitors to
HealthCentral, on a weekly basis, as appropriate, consistent with AltaVista's
reporting policies. AltaVista and HealthCentral shall mutually agree to on any
plans to reallocate Advertising Impressions between banners and Contextual
Advertising Units and to reposition Advertising Impressions within the AltaVista
Platform, where available, as necessary in order to at least meet the
requirements of Section 4.2 and maximize the performance hereunder.
4.7 Advertising of HealthCentral Competitors. AltaVista shall not
----------------------------------------
display any advertisements of any HealthCentral Competitor on the AltaVista
Health Home Page or any page throughout the AltaVista Platform, containing
HealthCentral Content. Subject to the foregoing, there shall be no other limit
on the type or number of advertisements that AltaVista may display within the
AltaVista Platform, including within the AltaVista Health Channel HealthCentral
may update the list of HealthCentral Competitors with other companies
competitive to HealthCentral once every 3 months during the Term, upon thirty
(30) days notice to AltaVista, provided that the list may never contain more
--------
than seven (7) companies.
4.8 Deep Links to HealthCentral Site. AltaVista shall configure the
--------------------------------
navigation of the AltaVista Health Channel such that no more than the third
click from the AltaVista Health Homepage will bring a user to a related page on
the HealthCentral Site.
ARTICLE V
E-COMMERCE
5.1 E-commerce Business Model. The Parties shall mutually agree to
-------------------------
jointly create and develop an e-commerce business model with respect to the
AltaVista Health Channel within ninety (90) calendar days of the Effective Date
[*].
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ARTICLE VI
DATA RIGHTS
6.1 AltaVista Data. AltaVista shall own all demographic and e-
--------------
commerce User Data collected on the AltaVista Health Channel. AltaVista shall
make available to HealthCentral, subject to AltaVista's privacy policies and
applicable law, and Third Party obligations, User Data from those pages of the
AltaVista Health Channel containing HealthCentral Content, solely for
HealthCentral's own use. HealthCentral shall not sell, license or otherwise
distribute such User Data to any Third Party.
6.2 HealthCentral Data. HealthCentral shall own all User Data
------------------
collected on the HealthCentral Site.
ARTICLE VII
FEES AND PAYMENTS
7.1 Initial Fee. Within seven (7) calendar days after the Effective
-----------
Date and upon mutual agreement of the initial AltaVista Health Channel design,
HealthCentral shall pay AltaVista a non-refundable initial fee (the "Initial
Fee") of one million dollars ($1,000,000). In no event shall the Initial Fee
be paid after September 30, 1999.
7.2 Annual Fees. During the Term, HealthCentral shall make annual
-----------
cash payments to AltaVista as set forth below. Such payments for each year
indicated are payable in equal monthly installments during that year, as
follows:
(a) During Year 1, [*];
(b) During Year 2, [*]; and
(c) During the Year 3, [*].
The first such payment shall be due on the Start Date, and subsequent payments
shall be due on the first day of each month thereafter.
7.3 Fee Reduction. In the event that AltaVista delivers [*] or less
-------------
of the guaranteed number of Advertising Impressions set forth in Sections 4.2
and 4.3 (prorated evenly on a monthly basis over the twelve (12) month period),
for the first six month period or second six month period of any year, then
AltaVista shall have seventy-five (75) calendar days following the end of such
six month period to make up the shortfall. For purposes of this Section, "to
make up the shortfall" shall mean that AltaVista shall have delivered one
hundred (100%) percent of the prorated number of Advertising Impressions due for
such
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THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
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seventy-five day period, plus additional Advertising Impressions in an amount
equal to the number of Advertising Impressions which AltaVista failed to deliver
during the six month period in question. In the event that AltaVista has failed
to make up the shortfall, then the monthly fees payable during the six months
following the seventy-five (75) day period shall be reduced by [*].
In the event AltaVista makes up any shortfall and as a result, the
guaranteed number of Advertising Impressions is greater than [*] and less than
one hundred (100%) percent during any six month period and corresponding cure
period (the "Shortfall Spread"), the Shortfall Spread shall be carried forward
to any following period on a cumulative basis with potential corresponding fee
reduction or termination (as provided for above) until AltaVista makes up any
such shortfall. For example, if AltaVista is at [*] of target (as set forth in
Schedule 8.2) for each of two six month periods and the shortfall was not
cured, and therefore the Shortfall Spread of [*] in the first six (6) months
is added to the Shortfall Spread of [*] in the second six (6) months to amount
to a cumulative total of a [*] Shortfall Spread, as a result the fees are
decreased as provided for in this Section 7.3.
During any period in which the payments have been reduced as provided
for above, if AltaVista shall make up the shortfall, upon making up any and all
shortfalls, all payments, including former payments due during such period and
any subsequent payments, due hereunder shall be restored to the original payment
structure.
7.4 Late Payments. All amounts owed hereunder not paid when due and
-------------
payable will bear interest from the date such amounts are due and payable at the
lesser of (a) 1.5 percent per month and (b) the maximum allowable rate of
interest in the State of California for transactions between sophisticated
commercial parties.
7.5 Taxes. In addition to the amounts set forth above, HealthCentral
-----
shall pay to AltaVista or to the relevant taxing authority, as appropriate,
[*] applicable sales, use, goods and services, value added or other taxes
payable under this Agreement (other than taxes levied or imposed on
AltaVista's income). In all cases, the amounts due under this Agreement will
be [*].
7.6 Advertising Revenue. Any and all advertising on the Co-Branded
-------------------
Pages shall be sold by AltaVista and the revenue generated by such advertising
shall be retained solely by AltaVista (except for the textual sponsorship, which
can be sold by HealthCentral).
ARTICLE VIII
EQUITY GRANT AND WARRANTS
8.1 Equity Grants. At the end of each of Year 1, Year 2, and, if
-------------
this Agreement is not terminated earlier in accordance with Section 10.2(a),
Year 3 of the Agreement, HealthCentral shall issue AltaVista shares of common
stock of HealthCentral (the "HealthCentral Common Stock") with the number of
shares issued at the end of each such Year
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equal to the quotient of [*] divided by the Year End Price for such Year. The
"Year End Price" means: (i) in the event that the HealthCentral Common Stock
is publicly traded on a nationally recognized exchange or on the Nasdaq
National Market on the last day of such Year, the average closing price per
share of the HealthCentral Common Stock for the ten (10) trading days prior to
the last day of such Year, or (ii) in the event the HealthCentral Common Stock
is not publicly traded, the fair market value of the HealthCentral Common
Stock as of the last day of such Year, as determined in good faith and
substantiated by the Board of Directors of HealthCentral; provided, however,
--------
that notwithstanding the previous formula in no event shall the shares issued
to AltaVista at the end of such Year be greater than [*] shares or less than
[*] shares (except in the case of Year 3 if there is an early termination
pursuant to Section 10.2(a) in which case no shares will be issued).
8.2 Warrants. On the last day of each of Year 1, Year 2, and if this
--------
Agreement is not terminated in accordance with Section 10.2(a), Year 3 (each of
which shall be an "Issuance Date"), HealthCentral shall grant to AltaVista a
warrant (collectively, the "Warrants") to purchase that number of shares of
HealthCentral Common Stock as set forth for such Year on Schedule 8.2 (up to a
------------
maximum of [*] shares) provided that AltaVista has met the applicable
--------
performance threshold (the "Performance Thresholds") set forth on Schedule 8.2
------------
for such Year. Each such Warrant shall be exercisable for a period of sixty days
after the applicable Issuance Date, and the exercise price per share for the
Warrants issued, if any, shall be as follows: (i) [*] for a Warrant issued
during or at the end of Year 1; [*] for a Warrant issued during or at the end of
Year 2; and [*] for a Warrant issued during or at the end of Year 3. Each of the
Warrants granted to AltaVista shall provide AltaVista with a right to make a
cashless exercise of such Warrants.
8.3 Registration Rights. The Company will use its best efforts to
-------------------
amend the First Amended and Restated Investors' Rights Agreement dated August
27, 1999 between the Company and certain investors, a copy of which is attached
as Exhibit 8.3 (the "Investor Rights Agreement") to include the shares of
-----------
HealthCentral Common Stock (including shares issuable pursuant to Section 8.1 or
8.2, if any) as Registrable Securities thereunder solely for the purpose of
granting AltaVista piggy back registration rights (the "Piggy Back Registration
Rights") for such shares, subject to AltaVista's adherence to all the terms of
the Investor Rights Agreement, as amended, including but not limited to market
standoff provisions and cutback provisions regarding the number of shares that
AltaVista may sell in any such offering. If the Company is unable to amend the
Investor Rights Agreement to include the shares issued and issuable to
AltaVista, then the Company shall hereby grant AltaVista piggyback registration
rights with respect to any shares of HealthCentral Common Stock to be issued to
AltaVista during the Term of this Agreement, whether in the form of an equity
grant or an exercise of Warrants. Pursuant to such Piggy Back Registration
Rights, AltaVista shall have the right to include all or any portion of the
shares of HealthCentral Common Stock then held by AltaVista in any Registration
Statement on Form S-1 or S-3 filed by HealthCentral with the Securities and
Exchange Commission during the Term of this Agreement and for a period of one
(1) year after termination of this Agreement subject to, including but not
limited to market standoff provisions and cutback provisions regarding the
number of shares that AltaVista may sell in any such offering; provided,
--------
however, that AltaVista shall not have any Piggy Back Registration Rights in
connection with
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any Registration Statement with respect to any initial public offering of
HealthCentral Common Stock.
8.4 Adjustment for Recapitalization. In the event HealthCentral
-------------------------------
shall at any time subdivide its outstanding shares of HealthCentral Common Stock
by recapitalization, reclassification or split-up thereof, or if HealthCentral
shall declare a stock dividend or distribute shares of HealthCentral Common
Stock to its shareholders, the number of shares of HealthCentral Common Stock to
be issued pursuant to Sections 8.1 and 8.2 immediately prior to such subdivision
shall be proportionately increased and the Exercise Price per share shall be
proportionately decreased, and if HealthCentral shall at any time combine the
outstanding shares of HealthCentral Common Stock by recapitalization,
reclassification or combination thereof, the number of shares of HealthCentral
Common Stock to be issued pursuant to Sections 8.1 and 8.2 immediately prior to
such combination shall be proportionately decreased and the Exercise Price per
share shall be proportionately increased. Any such adjustments pursuant to this
Section 8.4 shall be effective at the close of business on the effective date of
such subdivision or combination or, if any adjustment is the result of a stock
dividend or distribution, then the effective date for such adjustment shall be
the record date therefor.
ARTICLE IX
INTELLECTUAL PROPERTY RIGHTS
9.1 Ownership by AltaVista. HealthCentral acknowledges that, as
----------------------
between it and AltaVista, AltaVista owns all right, title and interest in and to
all intellectual property contained on the AltaVista Platform, including the
AltaVista Marks and the AltaVista Health Channel, except for the HealthCentral
Mark and HealthCentral Content. HealthCentral understands and agrees that its
use of any of the foregoing AltaVista property in connection with this Agreement
shall not create in it any right, title or interest, in or to such property, and
that all such use and goodwill associated with any such use shall inure to the
benefit of AltaVista.
9.2 Ownership by HealthCentral. AltaVista acknowledges that, as
--------------------------
between it and HealthCentral, HealthCentral owns all right, title and interest
in and to all intellectual property contained on the HealthCentral Mark, the
HealthCentral Content and the HealthCentral Site. AltaVista understands and
agrees that its use of any of the foregoing HealthCentral property in connection
with this Agreement shall not create in it any right, title or interest, in or
to such property, and that all such use and goodwill associated with any such
use shall inure to the benefit of HealthCentral.
9.3 Trademark Quality Control. Each Party's use of the other's
-------------------------
trademark shall be in accordance with such Party's policies regarding trademark
usage. In the event that a Party determines that its trademarks are being used
by the other Party in a manner that is inconsistent with its quality standards
and reasonably demonstrates such inconsistency to the other Party, such other
Party shall within thirty (30) days thereafter cure such inconsistency; provided
--------
that if either party does not cure such inconsistency within such period, such
party shall be in breach of this Agreement.
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Each of the Parties hereto shall use the other party's logos and/or
trademarks in accordance with each parties' respective trademark and/or logo
usage policies.
ARTICLE X
TERM AND TERMINATION
10.1 Term. This Agreement shall begin on the Effective Date, and
----
shall expire three (3) years after the Start Date (the "Term"), unless
terminated earlier as provided below.
10.2 Termination by Either Party. This Agreement shall be subject to
---------------------------
termination upon the occurrence of any of the following events:
(a) Either Party may terminate prior to the commencement of Year
3 by providing written notice to the other Party at least
ninety (90) calendar days prior to the end of Year 2. Such
termination shall be effective as of the commencement of
Year 3. If the foregoing termination occurs, subject to
Sections 10.3 and 10.4, all obligations of the Parties
relating to Year 3 of the Agreement shall not apply.
(b) HealthCentral may terminate if AltaVista fails to deliver at
least [*] of the guaranteed number of Advertising
Impressions, set forth in Section 4.2 and 4.3 (prorated
evenly on a monthly basis over a twelve (12) month period),
for any consecutive six (6) month period, provided that
--------
AltaVista shall have ninety (90) calendar days following the
end of such six month period within which to make up the
shortfall by delivering more than [*] of the guaranteed
number of Advertising Impressions. In the event AltaVista
delivers more than [*] of the guaranteed number of
Advertising Impressions, HealthCentral shall no longer have
a right to terminate this Agreement pursuant to this
section. Such termination shall become effective upon sixty
(60) calendar days' written notice to AltaVista.
(c) AltaVista may terminate this Agreement pursuant to Section
3.6.
(d) Either Party may terminate if the other commits a material
breach of this Agreement that is not cured within thirty
(30) calendar days after receipt of written notice of the
breach.
(e) Either party may terminate immediately upon notice if:
(i) either Party files a petition for bankruptcy or is
adjudicated a bankrupt;
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTION.
14
<PAGE>
(ii) a petition in bankruptcy is filed against either Party
and such petition is not removed or resolved within
ninety (90) calendar days;
(iii) either Party becomes insolvent or makes an assignment
for the benefit of its creditors or an arrangement for
its creditors pursuant to any bankruptcy law;
(iv) either Party discontinues its business; or
(v) a receiver is appointed for either Party or its
business.
(f) Either party may terminate if the other Party has any change
in the actual or beneficial ownership or control of more
than fifty percent (50%) of its voting stock in one or more
related transactions such that after such transaction(s)
fifty percent (50%) or more of such voting stock is held or
controlled by an entity, other than a Party hereto, that is
a direct competitor of the other Party, then the other Party
shall have the right, exercisable in its sole discretion, to
terminate. Such termination shall be effective upon thirty
(30) calendar days written notice, and must be given at any
time within thirty (30) calendar days following the closing
of such transaction(s).
10.3 Effect of Termination.
---------------------
(a) Termination of this Agreement by either Party shall not act
as a waiver of any breach of this Agreement and shall not
act as a release of either Party hereto from any liability
for breach of such Party's obligations under this Agreement.
(b) Within forty-five (45) calendar days following the
expiration or termination of this Agreement, each Party
shall pay to the other Party all sums, if any, due and owing
as of the date of expiration or termination, net of any
amounts due from the other Party as of such date.
10.4 Survival. The respective rights and obligations of AltaVista and
--------
HealthCentral under the provisions of Articles 8.3 (registration rights with
respect to previously issued securities) through 16 shall survive expiration or
termination of this Agreement.
15
<PAGE>
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
11.1 Mutual Representations and Warranties. Each Party hereby
-------------------------------------
represents and warrants to the other Party that:
(a) It is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation and has all the 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 enter into this Agreement and
perform its obligations under this Agreement; and
(b) Its execution and delivery of this Agreement, and the
performance of its obligations and duties hereunder, do not
and will not (i) conflict with or result in any breach of
any provision of its certificate of incorporation or by-
laws, (ii) require any filing with, or permit,
authorization, consent or approval of, any governmental
entity, (iii) result in a violation or breach of, or
constitute a default (or give rise to any right of
termination, cancellation or acceleration) under, any terms,
conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other
instrument or obligation to which it is a party or by which
any of its properties or assets may be bound, (iv) violate
any order, writ, injunction, decree, statute, rule or
regulation applicable to it, excluding from the foregoing
clauses (ii), (iii) and (iv) such filings, violations,
breaches or defaults which would not, individually or in the
aggregate, have a material adverse effect on it or its
ability to perform under this Agreement.
11.2 Representations and Warranties by HealthCentral. HealthCentral
-----------------------------------------------
represents and warrants that:
(a) The HealthCentral Content (as delivered to AltaVista) will
not contain any matter which constitutes a libel, slander or
violation of any personal proprietary or privacy right of
any Third Party;
(b) The HealthCentral Content (as delivered to AltaVista) will
not infringe the intellectual property rights of any Third
Party;
(c) The HealthCentral Content (as delivered to AltaVista) will
not violate any laws, regulations, statutes or warranties;
16
<PAGE>
(d) To our knowledge, the HealthCentral Content (as delivered to
AltaVista) will be accurate, complete, timely, and correct
in all respects
(e) All action on the part of HealthCentral for the
authorization, execution, delivery and performance of all
its obligations under this Agreement or any document
contemplated hereby has been taken including resolutions
related to this Agreement and the issuance of shares
HealthCentral Common Stock pursuant to Sections 8.1 and 8.2.
This Agreement, when executed and delivered by HealthCentral
will constitute the valid and binding obligation of
HealthCentral, and will be enforceable against it in
accordance with its terms;
(f) As of the date of this Agreement, the capitalization of
HealthCentral is set forth on Schedule 11.2 (f) hereto. All
-----------------
the outstanding capital stock of HealthCentral is duly
authorized, validly issued, fully paid and nonassessable.
Except as set forth on Schedule 11.2 (f), there are no
-----------------
shares of capital stock of HealthCentral authorized, issued
or outstanding, and there are no existing options, warrants,
calls, pre-emptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character,
relating to issued or unissued capital stock of
HealthCentral obligating HealthCentral to issue, transfer or
sell or cause to be issued, transferred or sold any shares
of its capital stock. There are no voting trusts or other
agreements or understandings to which HealthCentral is a
party and to the best of HealthCentral's knowledge there are
no agreements or understandings between holders of capital
stock of HealthCentral with respect to the voting of such
stock;
(g) True and complete copies of the financial statements of
HealthCentral, together with the related auditors reports,
have been provided to AltaVista. Such financial statements
have been prepared from, are in accordance with and
accurately reflect, the books and records of HealthCentral,
comply in all material respects with applicable accounting
requirements, have been prepared in accordance with
generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may
be stated in the notes thereto) and fairly present the
financial position and the results of operations and cash
flows (and changes in financial position, if any) of
HealthCentral as of the times and for the periods referred
to therein (subject, in the case of unaudited statements, to
normally recurring year-end audit adjustments which are not
material);
17
<PAGE>
(h) The shares of HealthCentral Common Stock issuable pursuant
to Section 8.1 of this Agreement, and upon exercise of the
Warrants when issued, sold and delivered in compliance with
this Agreement and the Warrants, will be duly authorized,
validly issued, fully paid and nonassessable, will be free
of any liens and encumbrances and will not be subject to any
preemptive rights, rights of first refusal or redemption
rights; and
(i) The issuance of shares of HealthCentral Common Stock
pursuant to Section 8.1 of this Agreement, the Warrants and
shares of HealthCentral Common Stock issuable upon exercise
of the Warrants constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act
of 1933, as amended.
11.3 Representations and Warranties by AltaVista. AltaVista
-------------------------------------------
represents and warrants that:
(a) AltaVista will operate and maintain the AltaVista Health
Channel in compliance with all applicable laws, regulations,
statutes, and warranties.
(b) All action on the part of AltaVista for the authorization,
execution, delivery and performance of all its obligations
under this Agreement or any document contemplated hereby has
been taken. This Agreement, when executed and delivered by
AltaVista will constitute the valid and binding obligation
of AltaVista, and will be enforceable against it in
accordance with its terms.
11.4 No Other Representations or Warranties. Each Party acknowledges
--------------------------------------
that the other Party makes no representations, warranties or agreements related
to the subject matter hereof that are not expressly provided for in this
Agreement.
ARTICLE XII
INDEMNIFICATION AND REMEDIES
12.1 HealthCentral Indemnity. HealthCentral shall indemnify, defend
-----------------------
and hold AltaVista harmless from and against all Damages incurred in connection
with or arising from any claim that: (a)HealthCentral violated any
representation or warranty hereunder; (b) HealthCentral breached any covenant or
agreement by HealthCentral under this Agreement; (c) the HealthCentral Marks,
the HealthCentral Site, the HealthCentral Content (as delivered to AltaVista
hereunder) or any other materials provided by HealthCentral hereunder violate
the intellectual property or other rights of any Third Party; or (d) any claim
by a Third Party regarding HealthCentral's performance or non-performance of its
obligations under this Agreement.
18
<PAGE>
12.2 AltaVista Indemnity. AltaVista shall indemnify, defend and hold
-------------------
HealthCentral harmless from and against all Damages incurred in connection with
or arising from any claim that: (a) AltaVista violated any representation or
warranty hereunder; (b) AltaVista breached any covenant or agreement by
AltaVista under this Agreement; (c) the AltaVista Marks or the AltaVista
Platform (excluding any items covered by 12.1(c)), or any material modifications
made by AltaVista to the HealthCentral Marks or the HealthCentral Content,
violate the intellectual property or other rights of any Third Party; or (d) any
claim by a Third Party regarding AltaVista's performance or non-performance of
its obligations under this Agreement.
12.3 Indemnification Procedure
-------------------------
(a) A party seeking indemnification (the "Indemnified Party")
shall promptly notify the other party (the "Indemnifying
Party") in writing of any claim for indemnification,
provided, that failure to give such notice shall not relieve
--------
the Indemnifying Party of any liability hereunder (except to
the extent the Indemnifying Party has suffered actual
material prejudice by such failure).
(b) The Indemnified Party shall tender sole defense and control
of such claim to the Indemnifying Party. The Indemnified
Party shall, if requested by the Indemnifying Party, give
reasonable assistance to the Indemnifying Party in defense
of any claim. The Indemnifying Party shall reimburse the
Indemnified Party for any reasonable legal expenses directly
incurred from providing such assistance, as such expenses
are incurred.
(c) The Indemnifying Party shall have the right to consent to
the entry of judgment with respect to, or otherwise settle,
an indemnified claim with the prior written consent of the
Indemnified Party, which consent shall not be unreasonably
withheld; provided, however, that the Indemnified Party may
-------- -------
withhold its consent if any such judgment or settlement
imposes any unreimbursed monetary or continuing non-monetary
obligation on such Party or does not include an
unconditional release of that Party and its Affiliates from
all liability in respect of claims that are the subject
matter of the indemnified claim.
12.4 Remedies Cumulative. Except as otherwise expressly specified
-------------------
herein, the rights and remedies granted to each Party under this Agreement are
cumulative and in addition to, and not in lieu of, any other rights or remedies
that such Party may possess at law or in equity.
19
<PAGE>
ARTICLE XIII
CONFIDENTIALITY
13.1 Confidential Information. "Confidential Information" means
------------------------
information about the disclosing Party's business or activities that are
proprietary or confidential, which shall include all business, financial,
technical and other information of a Party marked or designated by such Party as
"confidential" or "proprietary"; provided that information shall not be
considered Confidential Information of a disclosing Party if it can be shown
that such information: (i) is known to the recipient on the Effective Date
directly or indirectly from a source other than one having an obligation of
confidentiality to the disclosing Party; (ii) hereafter becomes known
(independently of disclosure by the disclosing Party) to the recipient directly
or indirectly from a source other than one having an obligation of
confidentiality to the disclosing Party; (iii) becomes publicly known or
otherwise ceases to be confidential, except through a breach of this Agreement
by the recipient; or (iv) was independently developed by the recipient without
use of Confidential Information of the other Party. Confidential Information
may be disclosed to a legal, judicial or governmental entity provided that the
--------
disclosing Party has been given notice by the recipient so that the disclosing
Party can seek a protective order or the appropriate protection for the
Confidential Information.
13.2 Protection of Confidential Information. The Parties recognize
--------------------------------------
that, in connection with the performance of this Agreement, each of them may
disclose to the other its Confidential Information, including the creation of
materials and the development of technology and techniques that are not
generally known in the industry. The Party receiving any Confidential
Information of the other Party agrees to maintain the confidential status of
such Confidential Information and not to use any such Confidential Information
for any purpose other than the purposes for which it was originally disclosed to
the receiving Party, and not to disclose any of such Confidential Information to
any Third Party.
13.3 Permitted Disclosure. The Parties acknowledge and agree that
--------------------
each may disclose any given Confidential Information: (i) as required by law or
generally accepted accounting practices; (ii) to their respective directors,
officers, employees, attorneys, accountants and other advisors or independent
contractors, who are under an obligation of confidentiality no less stringent
than set forth herein, on a "need-to-know" basis; (iii) to their respective
Affiliates; or (iv) in connection with disputes or litigation between the
Parties that related to such Confidential Information and each Party shall
endeavor to limit disclosure to that purpose.
13.4 Applicability. The foregoing obligations shall apply to
-------------
directors, officers, employees and representatives of the Parties and any other
person to whom the Parties have delivered copies of, or permitted access to,
such Confidential Information in connection with the performance of this
Agreement, and each Party shall advise each of the above of the obligations set
forth in this Article 13.
13.5 Third Party Confidential Information. Any confidential
------------------------------------
information of a Third Party disclosed to either AltaVista or
20
<PAGE>
HealthCentral shall be treated by AltaVista or HealthCentral, as the case may
be, in accordance with the terms under which such Third Party confidential
information was disclosed; provided that the Party disclosing such Third Party
--------
confidential information shall first notify the other Party that such
information constitutes Third Party confidential information and the terms
applicable to such Third Party confidential information.
13.6 Confidentiality of Agreement. Except as required by law
----------------------------
(including disclosures necessary or appropriate in filings with the Securities
Exchange Commission) or generally accepted accounting principles, and except to
assert its rights hereunder or for disclosures on a "need-to-know" basis to its
own officers, directors, employees and professional advisers or to prospective
investors or acquirers in connection with an investment in or acquisition of
such Party, each Party hereto agrees that neither it, nor its directors,
officers, employees, consultants or agents shall disclose the specific terms of
this Agreement without the prior consent of the other Party.
13.7 Public Disclosure. In connection with any public disclosure or
-----------------
filing with any governmental agency, including the Securities and Exchange
Commission, HealthCentral agrees to seek confidential treatment of the terms and
conditions of this Agreement. Such confidential treatment request shall not be
filed without the prior written consent of AltaVista not to be unreasonably
withheld. In addition, any description of this Agreement in any publicly filed
document by HealthCentral shall not be filed without the prior written consent
of AltaVista, not to be unreasonably withheld.
The parties acknowledge and agree that neither party may, at any time,
issue any press release or make any other disclosure about this Agreement, its
term or its existence, including but not limited to any disclosure to its
shareholders or other vendors, without the prior written approval of the other
party. If, however, a party determines, upon the opinion of counsel, that
disclosure regarding the other party, its Affiliates, this Agreement and/or the
relationship between such party and the other party and its Affiliates is
required by law or otherwise desirable, then disclosure shall be permitted, but
only after the other party is given the opportunity to review and reasonably
revise all such written disclosure. Under such circumstances, a copy of any such
written documentation shall be provided to the other party at least three (3)
business days (or as promptly as possible in the event three (3) business days
is not practicable) prior to its expected disclosure.
ARTICLE XIV
DISCLAIMER OF WARRANTIES
14.1 HEALTHCENTRAL HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS
EXPLICITLY PROVIDED FOR IN SECTION 11.3, THE ALTAVISTA PLATFORM AND THE
ALTAVISTA HEALTH CHANNEL ARE PROVIDED "AS IS, WITH ALL FAULTS," AND THAT
ALTAVISTA MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO (A)
THE USEFULNESS, ACCURACY, COMPLETENESS, FEASIBILITY, RELIABILITY OR
EFFECTIVENESS OF THE ALTAVISTA PLATFORM OR THE ALTAVISTA HEALTH CHANNEL; (B)
THAT THE
21
<PAGE>
ALTAVISTA PLATFORM OR THE ALTAVISTA HEALTH CHANNEL WILL OPERATE UNINTERRUPTED OR
ERROR-FREE; OR (C) THAT DEFECTS IN THE ALTAVISTA PLATFORM OR THE ALTAVISTA
HEALTH CHANNEL HAVE BEEN OR WILL BE CORRECTED. WITHOUT LIMITING THE FOREGOING,
ALTAVISTA HEREBY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND NONINFRINGEMENT. IN NO EVENT SHALL ALTAVISTA BE LIABLE TO
HEALTHCENTRAL FOR ANY FAILURE, DISRUPTION, DOWNTIME, INTERRUPTION, INCORRECT
LINKAGE, DELAY, INACCURACY OR OTHER NONPERFORMANCE OF THE ALTAVISTA PLATFORM OR
THE ALTAVISTA HEALTH CHANNEL.
14.2 ALTAVISTA HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS PROVIDED FOR
IN SECTION 11.2, THE HEALTHCENTRAL SITE AND THE HEALTHCENTRAL CONTENT ARE
PROVIDED "AS IS, WITH ALL FAULTS" AND THAT HEALTHCENTRAL MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO (A) THAT THE
HEALTHCENTRAL SITE WILL OPERATE UNINTERRUPTED OR ERROR-FREE; OR (B) THAT DEFECTS
IN THE HEALTHCENTRAL SITE HAVE BEEN OR WILL BE CORRECTED. WITHOUT LIMITING THE
FOREGOING, HEALTHCENTRAL HEREBY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. IN NO EVENT SHALL
HEALTHCENTRAL BE LIABLE TO ALTAVISTA FOR ANY FAILURE, DISRUPTION, DOWNTIME,
INTERRUPTION, INCORRECT LINKAGE, DELAY, INACCURACY OR OTHER NONPERFORMANCE OF
THE HEALTHCENTRAL SITE.
ARTICLE XV
LIMITATION OF LIABILITY
15.1 EXCEPT FOR A BREACH OF ARTICLE 13 ABOVE OR EXCEPT IN THE EVENT OF
GROSS NEGLIGENCE OR WILLFUL MISCONDUCTOR A CLAIM PURSUANT TO INDEMNIFICATION
OBLIGATIONS HEREIN, IN NO EVENT SHALL A PARTY TO THIS AGREEMENT BE LIABLE FOR
ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT
LIMITATION, FOR LOST PROFITS, IN ANY WAY ARISING OUT OF OR RELATING TO THIS
AGREEMENT, EVEN IN THE EVENT SUCH PARTY HAS BEEN ADVISED AS TO THE POSSIBILITY
OF SUCH DAMAGES.
ARTICLE XVI
MISCELLANEOUS
16.1 No Joint Venture. The sole relationship between the Parties
----------------
shall be that of independent contractors. No partnership, joint venture, or
other formal business relationship is hereby created between the Parties hereto.
Neither Party shall make any warranties or representations, or assume or create
any obligations, on the other Party's behalf except as may be
22
<PAGE>
expressly permitted hereunder or in writing by such other Party. Each Party
shall be solely responsible for the actions of all their respective employees,
agents and representatives.
16.2 Governing Law. This Agreement shall be interpreted and construed
-------------
in accordance with the laws of the State of California without regard to the
principles of conflicts of laws, and with the same force and effect as if fully
executed and performed therein, and the laws of the United States of America.
16.3 Amendment or Modification. This Agreement may not be amended,
-------------------------
modified or supplemented by the Parties in any manner, except by an instrument
in writing signed on behalf of each of the Parties by a duly authorized officer
or representative.
16.4 No Assignment. Neither Party shall transfer or assign any rights
-------------
or delegate any obligations hereunder, in whole or in part, whether voluntarily
or by operation of law, without the prior written consent of the other Party.
Any purported transfer, assignment or delegation by either Party without the
appropriate prior written approval shall be null and void and of no force or
effect. Notwithstanding the foregoing, without securing such prior consent,
either Party shall have the right to assign this Agreement and the obligations
hereunder to any successor of such Party by way of merger, consolidation,
reorganization or the acquisition of substantially all of the business and
assets of the assigning Party relating to the Agreement, provided however that
--------
the foregoing shall not be construed to limit a Party 's right to terminate this
Agreement in accordance with Article 10.
16.5 Notices. Any notice or other communication to be given hereunder
-------
shall be in writing and shall be (as elected by the Party giving such notice):
(i) personally delivered; (ii) transmitted by postage prepaid registered or
certified mail, return receipt requested; (iii) deposited prepaid with a
nationally recognized overnight courier service; or (iv) sent by facsimile.
Unless otherwise provided herein, all notices shall be deemed to have been duly
given on: (a) the date of receipt (or if delivery is refused, the date of such
refusal) if delivered personally or by courier; (b) three (3) days after the
date of posting if transmitted by mail; or (c) if transmitted by facsimile, the
date a confirmation of transmission is received. Either Party may change its
address for purposes hereof on not less than three (3) days prior notice to the
other Party. Notices hereunder shall be directed to, unless otherwise instructed
by the receiving Party:
If to AltaVista to:
------------------
529 Bryant Street
Palo Alto, California 94301
Attn: Stephanie A. Lucie
If to HealthCentral, to
-----------------------
HealthCentral.com, Inc.
6001 Shellmound St., Suite 800
23
<PAGE>
Emeryville, CA 94608
Attn: Fred Toney
with a copy to
--------------
Venture Law Group
2800 Sand Hill Road Menlo Park, CA 94025
Attn: Mark A. Medearis
16.6 Entire Agreement. This Agreement represents the entire
----------------
agreement of the Parties with respect to the subject matter hereof and
supersedes all prior and/or contemporaneous agreements and understandings,
written or oral between the Parties with respect to the subject matter hereof.
16.7 Waiver. Any of the provisions of this Agreement may be waived
------
by the Party entitled to the benefit thereof. Neither Party shall be deemed, by
any act or omission, to have waived any of its rights or remedies hereunder
unless such waiver is in writing and signed by the waiving Party, and then only
to the extent specifically set forth in such writing. A waiver with reference to
one event shall not be construed as continuing or as a bar to or waiver of any
right or remedy as to a subsequent event.
16.8 No Third Party Beneficiaries. Nothing express or implied in
----------------------------
this Agreement is intended to confer, nor shall anything herein confer, upon any
person other than the Parties and the respective successors or assigns of the
Parties, any rights, remedies, obligations or liabilities whatsoever.
16.9 Fees and Expenses. Each Party shall be responsible for the
------------------
payment of its own costs and expenses, including attorney's fees and expenses,
in connection with the negotiation and execution of this Agreement.
16.10 Severability. If the application of any provisions of this
------------
Agreement to any particular facts of circumstances shall be held to be invalid
or unenforceable by any court of competent jurisdiction, then: (i) the validity
and enforceability of such provision or provisions as applied to any other
particular facts or circumstances and the validity of other provisions of this
Agreement shall not in any way be affected or impaired thereby; and (ii) such
provision or provisions shall be reformed without further action by the Parties
hereto and only to the extent necessary to make such provision or provisions
valid and enforceable when applied to such particular facts and circumstances.
16.11 Counterparts; Facsimiles. This Agreement may be executed in
------------------------
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, and such counterparts together shall constitute one and
the same instrument. Each Party shall receive a duplicate original of the
counterpart copy or copies executed by it. For purposes hereof, a facsimile copy
of this Agreement, including the signature pages hereto, shall be deemed
24
<PAGE>
to be an original. Notwithstanding the foregoing, the Parties shall each deliver
original execution copies of this Agreement to one another as soon as
practicable following execution thereof.
25
<PAGE>
EXECUTION COPY
--------------
IN WITNESS WHEREOF, the Parties to this Agreement by their duly authorized
representatives have executed this Agreement as of the date first above written.
AltaVista Company HealthCentral.com, Inc.
By: /s/ Rod Schrock By: /s/ Albert L. Greene
Name: Rod Schrock Name: Albert L. Greene
Title: Chief Executive Officer Title: President &
Chief Executive Officer
26
<PAGE>
Schedule 1.14 - HealthCentral Competitors
As of September 27, 1999:
1. DrKoop.com
2. WebMD/Healtheon
3. BetterHealth/AllHealth
4. DiscoveryHealth
5. IntelliHealth
6. Thrive Online
7. OnHealth
27
<PAGE>
Schedule 1.15 - HealthCentral Content
Subject to the design phase, the HealthCentral Content will be substantially
similar to the following:
AltaVista Content Overview
<TABLE>
<CAPTION>
GUIDE
<S> <C> <C> <C> <C>
Co-branded
pages on AV
Co-branded
pages on HC
* and underlining = Special Exclusive For AV
- --------------------------------------------------
Level 1: Level 2: Level 3:
- -------------------------------------------------
DAILY FEATURES Home Page Brief Page Full Text
Page
- --------------------------------------------------
HEALTH NEWS, DAILY M-F
News
Daily Newsletter
DR. DEAN - DAILY - M-F
Dean Topic
Dean Question
Ask Dr. Dean
TV Report (text)
*Special AV Question of the Day
- --------------------------------------------------
*Special AV Dr. Dean: Classics
- --------------------------------------------------
Dr. Dean Digest Daily Newsletter
TV Report: Audio/Slide Show (Q1)
TV Report Streaming Video (Q1)
- --------------------------------------------------
WEEKLY FEATURES Level 1: Level 2: Level 3:
- --------------------------------------------------
Home Page Brief Page Full Text
Page
WEEKLY NEWS FEATURES
Mystery Photo
Mystery Photo Archives
News Quiz
Poll
WEEKLY COLUMNISTS
Flower, Futurist, Current (1x/wk)
Flower, Futurist, Archives
London, Humorist, Current (1x/wk)
London, Humorist, Archives
Schmalz, Librarian, Current (1x/wk)
Schmalz, Librarian, Archives
ASK A DOCTOR (Launches 10/15)
Questions and Answers (27x/wk)
Doctor Profiles (3x/wk)
Future Topics Calendar
List of Archives
Ask A Doctor Weekly Newsletter
</TABLE>
28
<PAGE>
<TABLE>
<S> <C> <C> <C>
PEOPLES PHARMACY (Launches 11/1)
Drug Column
Herbal Column
Questions and Answers
Ask PP
*AV Special Question and Answer
- --------------------------------------------------
TOPIC NEWSLETTERS
*40 Monthly Topic Newsletters - Co-Branded
- --------------------------------------------------
- --------------------------------------------------
MONTHLY FEATURES Level 1: Level 2: Level 3:
- --------------------------------------------------
Home Page Brief Page Full Text
Page
TOPIC NEWSLETTERS
**50 Monthly Topic Newsletters - Co-Branded
- --------------------------------------------------
PEOPLES PHARMACY
Monthly Radio Program Guide
- ---------------------------------------------------
STATIC/REFERENCE CONTENT
- --------------------------------------------------
HEALTH NEWS (3 Years)
News Archives
DR. DEAN - DAILY - M-F
Dean Topic Archives (from 11/1/98)
Dean Question Archives (from 11/1/98)
TV Report (text) (3 years)
ASK A DOCTOR (Launches 10/15)
Questions and Answers Archives
Doctor Profiles Archives
PEOPLES PHARMACY (Launches 11/1)
Drug Column Archives
Herbal Column Archives
Questions and Answers Archives
Herb Monographs (50)
In-Depth Guides (27)
Top 20 Home Remedies (Q4)
Alternative Medicine Columns (Q4)
PP Drug Database (Q1)
CENTERS
90 Topic Centers
LIBRARY
*Windom/HealthCentral.com Library (750) (not on HC)
- --------------------------------------------------
Adam.com Encyclopedias (6,000)
Clinical Pharmacology Drug DB (900)
PERSONAL FEATURES
Cool Tools (10-15)
Alcohol and Substance Abuse Mini-Profile
Diet and Nutrition Mini-Profile
Fitness and Exercise Mini-Profile
Stress Mini-Profile
Sexual Health Mini-Profile
LifeView - Health Risk Assessment
</TABLE>
29
<PAGE>
Schedule 1.16 - HealthCentral Mark
These are the current HealthCentral Marks. These will be updated as needed.
[LOGO OF HEALTHCENTRAL]
HealthCentral.com
HealthCentral.com Network
30
<PAGE>
Schedule 1.19 - AltaVista Health Channel Masthead
The parties shall mutually agree on the design of the Masthead, and the
incorporation of the HealthCentral Mark within the Masthead. The foregoing
notwithstanding, the HealthCentral logo shall be of a size that is clear and
explicit.
31
<PAGE>
Schedule 3.2 - Protocol For Transmission Of HealthCentral Content To AltaVista
The following represents two protocols that would be acceptable to
HealthCentral.com.
Option 1:
XML content feed.
In this type of feed, HealthCentral sets up a URL (i.e.
feeds.healthcentral.com/altavista/newsfeed.xml). This page returns a properly
formatted news feed. For example a news feed with one story might look like:
Dr. Dean Edell www.healthcentral.com Could All The Ointments I Use Interact?
Drugs and Medications
Terry: When I got out of the shower the other morning, I sprinkled powder on my
athlete's foot, dabbed hydrocortisone on my poison oak, and smeared sunscreen
all over.
Could these ointments interact and affect each other somehow?
Dr. Dean: The way you're slapping everything on there reminds me of the over-
enthusiasm when Rogaine first came on the market. Men were glopping on so much
Rogaine they were growing hair on their foreheads.
There are about four thousand drugs on the market, meaning there are four
thousand times four thousand possible interactions. Of these 16 million
combinations, each has about 10 different side effects. So there are 160 million
things to keep track of and, of course, no one can and no one does.
Ointments and topical preparations are probably studied the least because they
aren't considered very critical. But even topicals have side effects and they
can be absorbed into the body.
Pharmacological contraindications are in place for some ointments. Cortisone,
for example, works by reducing both inflammation and the body's immune response.
It is, therefore, not recommended for certain kinds of infections because it
allows them to grow rapidly. On the other hand, cortisone is the drug of choice
after a transplant when we don't want the immune system fighting off the new
organ.
As I recall, cortisone is either useless for athlete's foot fungus or makes it
worse. So right away, you've got a conflict.
Your question is great, Terry, but I can't give you a specific answer. I'd say
you'd be wise to use as few of these things together at one time as is possible,
or at least try to use them on separate body parts.
http://www.healthcentral.com/centers/onecenter.cfm?center=Skin
Visit Our Skin and Hair Center
Wednesday September 22, 1999
Pros:
32
<PAGE>
. Content is available in a raw form and may be re-used in many different
ways on the partner site
. The feed includes information about the content and is not just a "blob" of
stuff
. The feed is separate from the presentation (i.e. UI). No changes are needed
to the feed even if the look and feel of the site changes dramatically.
Cons:
. Requires that the content is parsed on the partner side
. More complicated implementation
Option 2:
HTML Widgets
We can also provide preformatted chunks of html at a feed url. This URL can be
harvested by the third party and inserted directly into an HTML page. These
"widgets" are pre-formatted as specified with the partner site. For example an
html widget that creates a box with up to date headlines may be harvested and
placed wherever the latest headlines should be on the partner site. In some
cases the content may be directly included as an ilayer and/or iframe.
Pros:
. No parsing of the content feed is needed.
. Content may be directly inserted
. Easy Implementation
Cons:
. Any changes to formatting must be coordinated with both sides
. Content may be thought of as "blobs" without context or meaning. That is -
there is no way to know that one piece is a headline and one piece is the
summary of an article
Examples available upon request.
33
<PAGE>
Schedule 3.3 - Use of Content
AltaVista agrees to provide format guidelines including minimum and maximum word
and character counts for headlines, abstracts, subtitles and articles to be
supplied by HealthCentral.
AltaVista will not parse, rewrite, edit, or rearrange the display of
HealthCentral Content, except as provided above and pursuant to this Agreement.
AltaVista may modify the font, font size, spacing or color of the Content so
long as it does not result in the content becoming misleading or inaccurate.
AltaVista may correct any spelling errors.
In such case as a photo or graphic accompanies a text article, AltaVista will
use its reasonable efforts to display the photo or graphic in close proximity to
that story and in sufficient resolution so that it is easily comprehensible.
AltaVista will use its reasonable efforts not re-purpose photos or graphics for
other uses.
34
<PAGE>
Schedule 8.2 - Performance Threshold
35
<PAGE>
PERFORMANCE THRESHOLD SCHEDULE
Performance
Threshold #1
<TABLE>
<CAPTION>
Total Total
Equity Guaranteed Cumulative Cumulative
Year Cash Grants Total Value Impressions Impressions* Visitors Warrants**
- ---- ------ ------ ----------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 [*] [*] [*] [*] [*] [*] [*]
2 [*] [*] [*] [*] [*] [*] [*]
3 [*] [*] [*] [*] [*] [*] [*]
TOTAL [*] [*] [*] [*]
</TABLE>
* Total Impressions shall mean (i) for Performance Threshold #1, the
Guaranteed Impressions plus [*], and (ii) for Performance Threshold
#2 through #6, the Total Impressions of the preceding Performance
Threshold, plus [*].
** In the event Alta Vista delivers either the number of Total Cumulative
Impressions or the number of Total Cumulative Visitors set forth in each of
the six performance thresholds, HealthCentral shall issue the number of
Warrants set forth herein pursuant to the exercise price and terms and
conditions in Section 8.2 of this Agreement.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
1
<PAGE>
PERFORMANCE THRESHOLD SCHEDULE
Performance
Threshold #2
<TABLE>
<CAPTION>
Total Total
Equity Guaranteed Cumulative Cumulative
Year Cash Grants Total Value Impressions Impressions* Visitors Warrants**
- ---- ------ ------ ----------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 [*] [*] [*] [*] [*] [*] [*]
2 [*] [*] [*] [*] [*] [*] [*]
3 [*] [*] [*] [*] [*] [*] [*]
TOTAL [*] [*] [*] [*]
</TABLE>
* Total Impressions shall mean (i) for Performance Threshold #1, the
Guaranteed Impressions plus [*], and (ii) for Performance Threshold
#2 through #6, the Total Impressions of the preceding Performance
Threshold, plus [*].
** In the event Alta Vista delivers either the number of Total Cumulative
Impressions or the number of Total Cumulative Visitors set forth in each of
the six performance thresholds, HealthCentral shall issue the number of
Warrants set forth herein pursuant to the exercise price and terms and
conditions in Section 8.2 of this Agreement.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
2
<PAGE>
PERFORMANCE THRESHOLD SCHEDULE
Performance
Threshold #3
<TABLE>
<CAPTION>
Total Total
Equity Guaranteed Cumulative Cumulative
Year Cash Grants Total Value Impressions Impressions* Visitors Warrants**
- ---- ------ ------ ----------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 [*] [*] [*] [*] [*] [*] [*]
2 [*] [*] [*] [*] [*] [*] [*]
3 [*] [*] [*] [*] [*] [*] [*]
TOTAL [*] [*] [*] [*]
</TABLE>
* Total Impressions shall mean (i) for Performance Threshold #1, the
Guaranteed Impressions plus [*], and (ii) for Performance Threshold
#2 through #6, the Total Impressions of the preceding Performance
Threshold, plus [*].
** In the event Alta Vista delivers either the number of Total Cumulative
Impressions or the number of Total Cumulative Visitors set forth in each of
the six performance thresholds, HealthCentral shall issue the number of
Warrants set forth herein pursuant to the exercise price and terms and
conditions in Section 8.2 of this Agreement.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
3
<PAGE>
PERFORMANCE THRESHOLD SCHEDULE
Performance
Threshold #4
<TABLE>
<CAPTION>
Total Total
Equity Guaranteed Cumulative Cumulative
Year Cash Grants Total Value Impressions Impressions* Visitors Warrants**
- ---- ------ ------ ----------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 [*] [*] [*] [*] [*] [*] [*]
2 [*] [*] [*] [*] [*] [*] [*]
3 [*] [*] [*] [*] [*] [*] [*]
TOTAL [*] [*] [*] [*]
</TABLE>
* Total Impressions shall mean (i) for Performance Threshold #1, the
Guaranteed Impressions plus [*], and (ii) for Performance Threshold
#2 through #6, the Total Impressions of the preceding Performance
Threshold, plus [*].
** In the event Alta Vista delivers either the number of Total Cumulative
Impressions or the number of Total Cumulative Visitors set forth in each of
the six performance thresholds, HealthCentral shall issue the number of
Warrants set forth herein pursuant to the exercise price and terms and
conditions in Section 8.2 of this Agreement.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
4
<PAGE>
PERFORMANCE THRESHOLD SCHEDULE
Performance
Threshold #5
<TABLE>
<CAPTION>
Total Total
Equity Guaranteed Cumulative Cumulative
Year Cash Grants Total Value Impressions Impressions* Visitors Warrants**
- ---- ------ ------ ----------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 [*] [*] [*] [*] [*] [*] [*]
2 [*] [*] [*] [*] [*] [*] [*]
3 [*] [*] [*] [*] [*] [*] [*]
TOTAL [*] [*] [*] [*]
</TABLE>
* Total Impressions shall mean (i) for Performance Threshold #1, the
Guaranteed Impressions plus [*], and (ii) for Performance Threshold
#2 through #6, the Total Impressions of the preceding Performance
Threshold, plus [*].
** In the event Alta Vista delivers either the number of Total Cumulative
Impressions or the number of Total Cumulative Visitors set forth in each of
the six performance thresholds, HealthCentral shall issue the number of
Warrants set forth herein pursuant to the exercise price and terms and
conditions in Section 8.2 of this Agreement.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
5
<PAGE>
PERFORMANCE THRESHOLD SCHEDULE
Performance
Threshold #6
<TABLE>
<CAPTION>
Total Total
Equity Guaranteed Cumulative Cumulative
Year Cash Grants Total Value Impressions Impressions* Visitors Warrants**
- ---- ------ ------ ----------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 [*] [*] [*] [*] [*] [*] [*]
2 [*] [*] [*] [*] [*] [*] [*]
3 [*] [*] [*] [*] [*] [*] [*]
TOTAL [*] [*] [*] [*]
</TABLE>
* Total Impressions shall mean (i) for Performance Threshold #1, the
Guaranteed Impressions plus [*], and (ii) for Performance Threshold
#2 through #6, the Total Impressions of the preceding Performance
Threshold, plus [*].
** In the event Alta Vista delivers either the number of Total Cumulative
Impressions or the number of Total Cumulative Visitors set forth in each of
the six performance thresholds, HealthCentral shall issue the number of
Warrants set forth herein pursuant to the exercise price and terms and
conditions in Section 8.2 of this Agreement.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
6
<PAGE>
PERFORMANCE THRESHOLD SCHEDULE
CUMULATIVE MAXIMUM NUMBER OF
<TABLE>
<CAPTION>
Equity
------
Year Cash Grants Total Value IMPRESSIONS VISITORS WARRANTS
- ---- ------ ------ ----------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 [*] [*] [*] [*] [*] [*]
2 [*] [*] [*] [*] [*] [*]
3 [*] [*] [*] [*] [*] [*]
TOTAL [*] [*] [*] [*]
</TABLE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
7
<PAGE>
Schedule 11.2(f) - Capitalization Table
36
<PAGE>
Exhibit 8.3 - Investor Right's Agreement
37
<PAGE>
Exhibit 10.21
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
HEALTHCENTRAL.COM,
HC2 ACQUISITION CORPORATION
AND
EPILLS INC.
September 28, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
SCHEDULES
Company Disclosure Schedule
Buyer Disclosure Schedule
-i-
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
---------
entered into as of September 28, 1999, by and among HealthCentral.com, a
California corporation ("Buyer"), HC2 Acquisition Corporation, a Delaware
-----
corporation ("Merger Sub") and wholly owned subsidiary of Buyer, and Epills
----------
Inc., a Delaware corporation ("Company").
-------
RECITALS
--------
A. The Boards of Directors of Company, Buyer and Merger Sub believe it
is in the best interests of their respective companies and the shareholders of
their respective companies that Company and Merger Sub combine into a single
company through the statutory merger of Merger Sub with and into Company (the
"Merger") and, in furtherance thereof, have approved the Merger.
------
B. Pursuant to the Merger, among other things, all outstanding shares
of common stock of the Company shall be converted into shares of common stock
of the Buyer (the "Buyer Common Stock") at the rate specified herein.
------------------
C. Company, Buyer and Merger Sub desire to make certain representations
and warranties and other agreements in connection with the Merger.
D. As a condition and inducement to Buyer's willingness to enter into
this Agreement, certain Company stockholders holding at least 80% of the
issued and outstanding capital stock of the Company have, concurrently with
the execution of this Agreement, executed and delivered a Written Consent of
Stockholders in the form attached as Exhibit A (the "Stockholder Consent"),
--------- -------------------
pursuant to which such stockholders have, among other things, approved this
Agreement, the Merger and the transactions contemplated hereby.
E. As a condition and inducement to Buyer's willingness to enter into
this Agreement, Bergen Brunswig Drug Company ("Bergen Brunswig") and the
---------------
Company have, on or before the execution of this Agreement, executed and
delivered an agreement regarding OTC/HBA fulfillment in the form attached as
Exhibit B, and as amended by the Bergen Letter Agreement (the "Bergen
- --------- ------
Fullfillment Agreement").
- ----------------------
F. As a condition and inducement to Buyer's willingness to enter into
this Agreement, Bergen Brunswig and the Company have, on or before the
execution of this Agreement, executed and delivered a Service Mark License and
Access Agreement in the form attached as Exhibit F (the "Service Mark License
--------------------
and Access Agreement").
- --------------------
G. As a condition and inducement to Buyer's willingness to enter into
this Agreement, Bergen Brunswig or one of its subsidiaries or affiliates shall
have on or before the execution of this Agreement completed its purchase of
shares of Company Common Stock for an aggregate cash purchase price of $1.76
million, and Medi-Mail, Inc. ("Medi-Mail") shall have on or before the
execution of this Agreement completed its purchase of shares of Company
<PAGE>
Common Stock in accordance with the terms of the warrant held by Medi-Mail
Inc. dated August 4, 1999 (the "Medi-Mail Warrant").
-----------------
H. As a condition and inducement to Buyer's willingness to enter into
this Agreement, Bergen Brunswig, Medi-Mail, the Company and the Buyer shall
have executed and delivered the letter agreement in the form attached as
Exhibit H.
NOW, THEREFORE, in consideration of the covenants and representations set
forth herein, and for other good and valuable consideration, the parties agree
as follows:
ARTICLE I
THE MERGER
----------
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
----------
subject to and upon the terms and conditions of this Agreement, the
Certificate of Merger attached hereto as Exhibit 1.1 (the "Certificate of
----------- --------------
Merger") and the applicable provisions of the Delaware General Corporation Law
- ------
("Delaware Law"), Merger Sub shall be merged with and into Company, the
------------
separate corporate existence of Merger Sub shall cease and Company shall
continue as the surviving corporation. Company as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "Surviving
---------
Corporation."
- -----------
1.2 Closing; Effective Time. The closing of the transactions
-----------------------
contemplated hereby (the "Closing") shall take place as soon as practicable
-------
after the satisfaction or waiver of each of the conditions set forth in
Article VI hereof or at such other time as the parties hereto agree (the
"Closing Date"). The Closing shall take place at the offices of Venture Law
------------
Group, 2775 Sand Hill Road, Menlo Park, California, or at such other location
as the parties hereto agree. In connection with the Closing, the parties
hereto shall cause the Merger to be consummated by filing the Certificate of
Merger, together with the required officers' certificates, with the Secretary
of State of the State of Delaware, in accordance with the relevant provisions
of Delaware Law (the time of such filing being the "Effective Time").
--------------
1.3 Effect of the Merger. At the Effective Time, the effect of the
--------------------
Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of Delaware Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of Company and Merger Sub shall vest
in the Surviving Corporation, and all debts, liabilities and duties of Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Charter Documents; Bylaws.
-------------------------
(a) At the Effective Time, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall become
the Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by Delaware Law and such Certificate of Incorporation;
provided, however, that Article I of the Certificate of Incorporation
-2-
<PAGE>
of the Surviving Corporation shall be amended to read as follows: "The name of
the corporation is e-Pills Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall become the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. At the Effective Time, the directors of
----------------------
Merger Sub, as in effect immediately prior to the Effective Time, shall become
the directors of the Surviving Corporation, until their respective successors
are duly elected or appointed and qualified. The officers of the Merger Sub,
as in effect immediately prior to the Effective Time, shall become the
officers of the Surviving Corporation until their respective successors are
duly elected or appointed and qualified.
1.6 Effect on Capital Stock.
-----------------------
(a) Merger Share Number. The aggregate number of shares of Buyer
-------------------
Common Stock (i) to be issued in exchange for all outstanding shares of common
stock of the Company ("Company Common Stock") and (ii) reserved for issuance
--------------------
pursuant to options to acquire Company Common Stock ("Company Stock Options")
---------------------
assumed in the Merger shall be 1,269,231 shares, as appropriately adjusted to
reflect the effect of any stock split, reverse stock split, stock dividend or
the like with respect to the Buyer Common Stock occurring after the date
hereof and prior to the Effective Time (the "Merger Share Number").
-------------------
(b) Conversion of Company Common Stock. Subject to the terms and
----------------------------------
conditions of this Agreement and the Certificate of Merger as of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of Company Common Stock, at the Effective Time, each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares to be canceled pursuant to Section 1.6(d)) shall be
converted into the right to receive, subject to the provisions of Section
1.6(e) and Section 1.11 that number of shares of Buyer Common Stock determined
by dividing (i) the Merger Share Number less the Excess Expense Shares (as
defined in Section 5.7), if any (ii) by the Aggregate Company Shares (the
"Common Exchange Ratio"). The "Aggregate Company Shares" means the aggregate
--------------------- ------------------------
number of shares of Company Common Stock outstanding or issuable upon exercise
of outstanding Company Stock Options, whether or not exercisable, immediately
prior to the Effective Time. The aggregate number of shares of Buyer Common
Stock issued to the holders of Company Common Stock in the Merger are the
"Merger Shares."
-------------
(c) No Conversion of Warrants or Other Rights to Purchase Company
-------------------------------------------------------------
Common Stock. Subject to Section 1.6(f), at the Effective Time, each warrant
- ------------
and other right to purchase Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be exercised (to the extent such
warrant or right is exercisable at such time) or terminated.
(d) Cancellation of Company Common Stock Owned by Company. At the
-----------------------------------------------------
Effective Time, all shares of Company Common Stock that are owned by Company
as treasury
-3-
<PAGE>
stock immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(e) Fractional Shares. No fraction of a share of Buyer Common
-----------------
Stock will be issued, but in lieu thereof each holder of shares of Company
Common Stock who would otherwise be entitled to a fraction of a share of Buyer
Common Stock (after aggregating all fractional shares of Buyer Common Stock to
be received by such holder) shall receive from Buyer such whole number of
shares of Buyer Common Stock as is equal to the precise number of shares of
Buyer Common Stock to which such person would be entitled, rounded up or down
to the nearest whole number (with a fractional interest equal to .5 rounded to
the next greater number).
(f) Company Stock Options.
---------------------
(1) At the Effective Time, all Company Stock Options then
outstanding under the ePills Inc. 1999 Stock Option Plan (the "Option Plan"),
-----------
whether vested or unvested, shall be assumed by Buyer in accordance with this
Section 1.6(f). Each Company Stock Option so assumed by Buyer at the Effective
Time will continue to have, and be subject to, the same terms and conditions
set forth in the Option Plan immediately prior to the Effective Time
(including, without limitation, any repurchase rights), except that (i) each
Company Stock Option will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of Buyer Common
Stock equal to the product of the number of shares of Company Common Stock
that were underlying such Company Stock Option immediately prior to the
Effective Time multiplied by the Common Exchange Ratio, rounded up or down to
the nearest whole number of shares of Buyer Common Stock (in accordance with
Section 1.6(e)), and (ii) the per share exercise price for the shares of Buyer
Common Stock issuable upon exercise of such assumed Company Stock Option will
be equal to the quotient determined by dividing the exercise price per share
of Company Common Stock at which such Company Stock Option was exercisable
immediately prior to the Effective Time by the Common Exchange Ratio, rounded
up or down to the nearest whole cent (in accordance with Section 1.6(e),
provided however that in the case of any Company Stock Option to which Section
422 of the Internal Revenue Code of 1986, as amended (the "Code") applies, the
----
option price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in order
to comply with Section 424(a) of the Code. In connection with the assumption
by Buyer of the Company Stock Options pursuant to this Section 1.6(f), Company
shall be deemed to have assigned to Buyer, effective at the Effective Time,
Company's right, if any, to repurchase unvested shares of Company Common Stock
issuable upon the exercise of the Company Stock Options or previously issued
upon the exercise of options granted under the Option Plan, in accordance with
the terms of the Option Plan and the related stock option agreements and stock
purchase agreements entered into under the Option Plan.
(2) As soon as practicable after the Effective Time, Company
and Buyer shall deliver to the participants in the Option Plan appropriate
notice setting forth such participants' rights pursuant thereto, that Buyer
has assumed all obligations of the Company under the Option Plan and that the
grants pursuant to the Option Plan shall continue in effect on
-4-
<PAGE>
the same terms and conditions (subject to the adjustments required by this
Section 1.6 after giving effect to the Merger). Buyer shall comply with the
terms of the Option Plan and the parties intend that, to the extent required
by, and subject to the provisions of, such Option Plan and Sections 422 and
424(a) of the Code, that Options which qualified as incentive stock options
prior the Effective Time continue to qualify as incentive stock options after
the Effective Time, and this provision shall be interpreted consistent with
that intent. At or prior to the Effective Time, Buyer shall provide the
Company with evidence that it has taken all corporate action necessary to
reserve for issuance sufficient shares of Buyer Common Stock for delivery upon
exercise of Company Stock Options assumed by it in accordance with this
Section 1.6. As soon as practicable following the closing of an initial public
offering of the Company's Common Stock, Buyer shall file a registration
statement on Form S-8 (or any successor form) with respect to the assumed
Company Stock Options.
1.7 Surrender of Certificates.
-------------------------
(a) Buyer to Provide Merger Shares. Promptly after the Effective
------------------------------
Time, Buyer shall make available for exchange in accordance with this Article I,
through such reasonable procedures as Buyer may adopt, the shares of Buyer
Common Stock issuable pursuant to Section 1.6(b) in exchange for shares of
Company Common Stock outstanding immediately prior to the Effective Time, less
such number of shares of Buyer Common Stock as are to be deposited into an
escrow fund (the "Escrow Fund") pursuant to Section 1.11. The portion of the
-----------
Escrow Fund contributed on behalf of each holder of Company Common Stock
immediately prior to the Effective Time (a "Company Stockholder") shall be in
-------------------
proportion to the aggregate number of Merger Shares which such Company
Stockholder would otherwise be entitled to receive in the Merger by virtue of
such Company Stockholder's percentage ownership of outstanding shares of Company
Common Stock immediately prior to the Effective Time (the "Pro Rata Portion").
----------------
(b) Exchange Procedures. The Company will deliver to Buyer at
-------------------
closing all certificates (the "Certificates") which immediately prior to the
------------
Effective Time represented outstanding shares of Company Common Stock, whose
shares were converted into the right to receive Merger Shares pursuant to
Section 1.6, with duly and validly executed stock powers transferring such
Certificates to Merger Sub. Upon surrender of a Certificate for cancellation
to Buyer, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing the number of whole shares of
Buyer Common Stock which such holder has the right to receive pursuant to
Section 1.6 (less the number of shares of Buyer Common Stock to be deposited
in the Escrow Fund on such holder's behalf pursuant to Section 1.11 hereof)
and the Certificate so surrendered shall forthwith be canceled. Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Company Common Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than the payment of
dividends, to evidence the ownership of the number of full shares of Buyer
Common Stock into which such shares of Company Capital Stock shall have been
so converted in accordance with Section 1.6. Buyer shall be responsible for
the payment of all transfer or other taxes required by reason of the issuance
of certificates for shares of Buyer Common Stock to Company Stockholders who
are United States residents.
-5-
<PAGE>
(c) Transfers of Ownership. If any certificate for shares of Buyer
----------------------
Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Buyer any transfer or other
taxes required by reason of the issuance of a certificate for shares of Buyer
Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or established to the satisfaction of Buyer or any
agent designated by it that such tax has been paid or is not payable.
(d) No Liability. Notwithstanding anything to the contrary in this
------------
Section 1.7, none of the Buyer, the Surviving Corporation or any party hereto
shall be liable to any person for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
1.8 No Further Ownership Rights in Company Common Stock. The shares of
---------------------------------------------------
Buyer Common Stock issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof (together with the Escrow
Shares) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation
of shares of Company Common Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented
to the Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Article I.
1.9 No Change in Rights as a Result of Merger. The Company has no
-----------------------------------------
repurchase rights with regard to any shares of its capital stock outstanding.
1.10 Tax Consequences. It is intended by the parties hereto that the
----------------
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code and will be reported as such by the Company, the Buyer, the Surviving
Corporation and the Company Stockholders for all purposes.
1.11 Escrow Agreement. At the Effective Time or such later time as
----------------
determined in accordance with Section 1.12, Buyer will, on behalf of the Company
Stockholders deposit in escrow certificates representing ten percent (10%) of
the Merger Shares. Such shares shall be held in escrow on behalf of the Company
Stockholders in accordance with each holder's Pro Rata Portion. Such shares
(collectively, the "Escrow Shares") shall be held and applied pursuant to the
-------------
provisions of an escrow agreement (the "Escrow Agreement") to be executed
----------------
pursuant to Sections 6.2 and 6.3. The Escrow Agreement shall terminate six
months after the Closing, provided that if a notice of claim is given in
accordance with the Escrow Agreement before the expiration of such six month
period, an amount equal to any claimed amount which has not been resolved at
such termination date shall be retained in escrow until the resolution of such
claim. All calculations to determine the number of Escrow Shares to be
delivered by each Company Stockholder into escrow as aforesaid shall be rounded
down to the nearest whole share.
1.12 Dissenting Shares.
-----------------
-6-
<PAGE>
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Common Stock held by a holder who has
exercised such holder's appraisal rights in accordance with Section 262 of
Delaware Law, and who, as of the Effective Time, has not effectively withdrawn
or lost such appraisal rights ("Dissenting Shares"), shall not be converted
-----------------
into or represent a right to receive Buyer Common Stock pursuant to Section
1.6, but the holder of the Dissenting Shares shall only be entitled to such
rights as are granted by Delaware Law.
(b) Notwithstanding the provisions of Section 1.12(a), if any
Company Stockholder who demands his appraisal rights with respect to such
shares under Section 1.12(a) shall effectively withdraw or lose (through
failure to perfect or otherwise) his rights to receive payment for such shares
under Delaware Law, then, as of the later of the Effective Time or the
occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive Buyer Common Stock upon
surrender of the Certificate or Certificates representing such shares;
provided that if such holder effectively withdraws or loses his right to
- --------
receive payment for such shares after the Effective Time, then, at such time
Buyer will deposit in the escrow created pursuant to the Escrow Agreement
additional Certificates representing such holder's Pro Rata Portion of the
Escrow Shares.
(c) The Company shall give Buyer (i) prompt notice of any written
demands for payment with respect to any shares of capital stock of the Company
pursuant to the appraisal rights under Delaware Law, withdrawals of such
demands, and any other instruments served pursuant to Delaware Law and
received by the Company and (ii) the opportunity to participate at its own
expense in all negotiations and proceedings with respect to demands for
appraisal rights under Delaware Law. The Company shall not, except with the
prior written consent of Buyer, voluntarily make any payment with respect to
any demands for appraisal rights with respect to Company Common Stock or offer
to settle or compromise any such demands.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
-----------------------------------------
The Company represents and warrants to the Buyer that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule attached hereto (the "Company Disclosure Schedule"). The
---------------------------
Company Disclosure Schedule shall be arranged in paragraphs corresponding to
the numbered and lettered paragraphs contained in this Article II, and the
disclosures in any paragraph of the Company Disclosure Schedule shall qualify
any other paragraph in this Article II where such disclosure would be
appropriate to the extent that it is clear from such disclosure that it
relates to such other paragraph.
2.1 Organization, Qualification and Corporate Power. The Company is a
-----------------------------------------------
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the state of its incorporation. The Company is duly
qualified to conduct business and is in corporate and tax good standing under
the laws of each jurisdiction in which the failure to be so qualified would
have a Material Adverse Effect. The Company has all requisite corporate power
and
-7-
<PAGE>
authority to carry on the businesses in which it is engaged and to own and
use the properties owned and used by it. The Company has furnished to the
Buyer true and complete copies of its Certificate of Incorporation and By-
laws, each as amended and as in effect on the date hereof. The Company is not
in default under or in violation of any provision of its Certificate of
Incorporation or By-laws.
2.2 Capitalization. The authorized capital stock of the Company
--------------
consists of 1,250,000 shares of Company Common Stock, of which 893,868 shares
are issued and outstanding and no shares are held in the treasury of the
Company. The Company has reserved an aggregate of 240,000 shares of Company
Common Stock for issuance pursuant to the Option Plan, of which no shares have
been exercised, 131,000 shares are subject to outstanding options, and 109,000
shares are available for issuance. Section 2.2 of the Company Disclosure
Schedule sets forth a complete and accurate list of (i) all shareholders of
the Company, indicating the number of shares of Company Common Stock held by
each shareholder, and (ii) all holders of options and warrants, indicating the
number of shares of Company Common Stock subject to each option and warrant
and the vesting schedule and vesting commencement date for such option. All of
the issued and outstanding shares of Company Common Stock are, and all shares
of Company Common Stock that may be issued upon exercise of options and
warrants will be, when issued in accordance with their terms, duly authorized,
validly issued, fully paid, nonassessable and free of all preemptive rights.
There are no outstanding or authorized options, warrants, rights, agreements
or commitments to which the Company is a party or which are binding upon the
Company providing for the issuance, disposition or acquisition of any of its
capital stock, other than the options and warrants listed in Section 2.2 of
the Company Disclosure Schedule. Except as set forth in Section 2.2 of the
Company Disclosure Schedule, there are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Company.
There are no agreements, voting trusts, proxies, or understandings with
respect to the voting, or registration under the Securities Act of 1933, as
amended (the "Securities Act"), of any shares of Company Common Stock. All of
the issued and outstanding shares of Company Common Stock were issued in
compliance with applicable federal and state securities laws.
2.3 Authorization of Transaction. The Company has all requisite
----------------------------
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and under each of the other agreements and
instruments to be executed and delivered by some or all of the parties hereto
in connection with the consummation of the transactions contemplated hereby
(the "Transaction Documents") to which Company is a party. All corporate
---------------------
action on the part of the Company, its officers, directors and stockholders
necessary for the authorization, execution and delivery of this Agreement ,
the Transaction Documents and the performance of all obligations of the
Company hereunder and thereunder has been taken or will be taken prior to the
Closing, and this Agreement constitutes, and each of the Transaction Documents
to which Company will be a party, will constitute, a valid and legally binding
obligation of the Company, enforceable in accordance with its respective
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies.
-8-
<PAGE>
2.4 Compliance with Laws and Other Instruments. The Company is not in
------------------------------------------
violation or default of any provision of its Certificate of Incorporation or
Bylaws, or, to the best of its knowledge, of any instrument, judgment, order,
writ, decree, lease, license, permit, contract or other arrangement to which
it is a party or by which it is bound except as set forth in Section 2.4 of
the Company Disclosure Schedule,, or, to the best of its knowledge, of any
provision of any federal or state statute, rule or regulation applicable to
the Company. The execution, delivery and performance of this Agreement, and
the consummation of the transactions contemplated hereby, will not result in
any such violation or default, or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree, lease, license,
permit, contract or other arrangement or an event that results in the creation
of any lien, charge or encumbrance upon any assets of the Company or the
suspension, revocation, impairment, forfeiture, or nonrenewal of any permit,
license, authorization, or approval applicable to the Company, its business or
operations or any of its assets or properties, or result in the acceleration
of, or create in any party the right to accelerate, terminate, modify or
cancel, or require any notice, consent or waiver under, any contract, lease,
license, permit or other arrangement to which the Company is a party or by
which the Company is bound or to which its assets are subject. For purposes of
this Agreement, a "Material Adverse Effect" means, with respect to a party,
-----------------------
any material adverse effect on the assets, business, financial condition or
the results of operations of such party and its subsidiaries, if any, taken as
a whole.
2.5 Subsidiaries. The Company does not have and has never had any
------------
subsidiaries or entities which it controls (as defined under federal
securities laws) and does not otherwise own and has never otherwise owned any
shares of stock or any interest in, or control of, directly or indirectly, any
other corporation, partnership, association, joint venture or entity.
2.6 Company Financial Statements. The Company has attached hereto as
----------------------------
Section 2.6 to the Company Disclosure Schedule the unaudited balance sheet and
statements of income, changes in shareholders' equity and cash flows for the
period from the Company's incorporation through September 15, 1999 for the
Company (the "Company's Most Recent Balance Sheet Date"). Such financial
----------------------------------------
statements (collectively, the "Company Financial Statements") have been
----------------------------
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
----
covered thereby, fairly present the financial condition, results of operations
and cash flows of the Company as of the respective dates thereof and for the
periods referred to therein and are consistent with the books and records of
the Company; provided, however, that the Company Financial Statements are
subject to normal recurring year-end adjustments (which will not be material)
and do not include footnotes.
2.7 Absence of Certain Changes. Since the Company's Most Recent Balance
--------------------------
Sheet Date and except as set forth in Section 2.7 of the Company Disclosure
Schedule, there has not been any material adverse change in the assets,
business, financial condition or results of operations of the Company, nor has
there occurred any event or development which could reasonably be foreseen to
result in such a material adverse change in the future.
2.8 Undisclosed Liabilities. The Company has no liability (whether
-----------------------
known or unknown, whether absolute or contingent, whether liquidated or
unliquidated and whether due or
-9-
<PAGE>
to become due), and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such a
liability, except for (a) liabilities shown on the September 15, 1999 (the
"Company's Most Recent Balance Sheet Date") balance sheet (the "Company's Most
---------------------------------------- --------------
Recent Balance Sheet"), (b) liabilities which have arisen since the Company's
- --------------------
Most Recent Balance Sheet Date in the ordinary course of business consistent
with past custom and practice (including with respect to frequency and amount)
("Ordinary Course of Business") (c) contractual liabilities incurred in the
---------------------------
Ordinary Course of Business which are not required by GAAP to be reflected on
a balance sheet, (d) legal and investment banking fees and expenses incurred
by the Company since the Company's Most Recent Balance Sheet Date of
approximately $205,000 and (e) liabilities which arose prior to the Company's
Most Recent Balance Sheet Date in the Ordinary Course of Business, which have
not yet been invoiced or billed to the Company, which relate to engineering
contractors and which do not exceed $70,000 in the aggregate.
2.9 Tax Matters.
-----------
(a) Except as set forth in Section 2.9 of the Company Disclosure
Schedule, the Company has filed all Tax Returns (as defined below) that it was
required to file and all such Tax Returns were correct and complete in all
material respects. The Company has paid all Taxes (as defined below) owed in
respect of the periods covered by such Tax Returns. The unpaid Taxes of the
Company for tax periods through the date of the Company's Most Recent Balance
Sheet do not exceed the accruals and reserves for Taxes set forth on the
Company's Most Recent Balance Sheet. The Company has no actual or potential
liability for any Tax obligation of any taxpayer (including without limitation
any affiliated group of corporations or other entities that included the
Company during a prior period) other than the Company and its subsidiaries.
Except as set forth in Section 2.9 of the Company Disclosure Schedule, all
Taxes that the Company is or was required by law to withhold or collect have
been duly withheld or collected and, to the extent required, have been paid to
the proper Governmental Entity (as defined below). For purposes of this
Agreement, "Taxes" means all taxes, charges, fees, levies or other similar
-----
assessments or liabilities, including without limitation income, gross
receipts, ad valorem, premium, value-added, excise, real property, personal
property, sales, use, transfer, withholding, employment, payroll and franchise
taxes imposed by the United States of America or any state, local or foreign
government, or any agency thereof, or other political subdivision of the
United States or any such government, and any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or incurred in
connection with any tax or any contest or dispute thereof. For purposes of
this Agreement, "Tax Returns" means all reports, returns, declarations,
statements or other information required to be supplied to a taxing authority
in connection with Taxes. For purposes of this Agreement, "Governmental
Entity" means any government, municipality or political subdivision thereof,
whether federal, state, local or foreign, or any governmental or quasi-
governmental agency, authority, board, bureau, commission, department,
instrumentality or public body, or any court, arbitrator, administrative
tribunal or public utility.
(b) The Company has delivered to the Buyer correct and complete
copies of all federal income Tax Returns, examination reports and statements
of deficiencies assessed against or agreed to by the Company since the
Company's inception. No Tax Returns of the Company have been audited by any
Governmental Entity. No examination or audit of any Tax
-10-
<PAGE>
Returns of the Company by any Governmental Entity is currently in progress or,
to the knowledge of the Company, threatened or contemplated. The Company has
not waived any statute of limitations with respect to taxes or agreed to an
extension of time with respect to a tax assessment or deficiency.
(c) The Company is not a "consenting corporation" within the
meaning of Section 341(f) of the Code and none of the assets of the Company
are subject to an election under Section 341(f) of the Code. The Company has
not been a United States real property holding corporation within the meaning
of Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(l)(A)(ii) of the Code. The Company is not a party to any Tax
allocation or sharing agreement.
(d) The Company is not and has never been a member of an
"affiliated group" of corporations (within the meaning of Section 1504 of the
Code). The Company has not made an election under Treasury Reg. Section 1.1502-
20(g). The Company is not and has not been required to make a basis reduction
pursuant to Treasury Reg. Section 1.1502-20(b) or Treasury Reg. Section
1.337(d)-2T(b).
(e) As of the date of this Agreement, the Company has not taken any
action that could reasonably be expected to cause the Merger to fail to
qualify as a reorganization within the meaning of Section 368(a) of the Code.
2.10 Assets. Company has good and valid title to all properties,
------
interests in properties and assets, real and personal, necessary for the
conduct of its business as presently conducted and as presently proposed to be
conducted, all of which are reflected in the Company's Most Recent Balance
Sheet (except properties, interests in properties and assets sold or otherwise
disposed of since the Company's Most Recent Balance Sheet Date in the ordinary
course of business) or acquired after the Most Recent Balance Sheet Date, or
with respect to leased properties and assets, valid leasehold interests in,
free and clear of all mortgages, liens, pledges, charges or encumbrances of
any kind or character, except (i) as set forth in Section 2.10 of Company
Disclosure Schedule and (ii) the lien of current taxes not yet due and
payable. The plants, property and equipment of Company that are used in the
operations of its business are in good operating condition and repair subject
to ordinary wear and tear and to requirements for periodic maintenance. All
properties used in the operations of Company, except for those acquired after
the Most Recent Balance Sheet Date, are reflected in the Company's Most Recent
Balance Sheet to the extent required by GAAP. Section 2.10 of the Company
Disclosure Schedule identifies each parcel of real property leased by Company,
and lists each real property lease, and all personal property leases. Except
as set forth in Section 2.10 of the Company Disclosure Schedule, no asset of
the Company (tangible or intangible) is subject to any Security Interest. For
purposes of this Agreement, "Security Interest" means any mortgage, pledge,
-----------------
security interest, encumbrance, charge, or other lien (whether arising by
contract or by operation of law), other than (i) mechanic's, materialmen's,
and similar liens, (ii) liens arising under worker's compensation,
unemployment insurance, social security, retirement, and similar legislation,
(iii) liens on goods in transit incurred pursuant to documentary letters of
credit, and (iv) liens for Taxes not yet due and payable, in each case arising
in the Ordinary Course of Business of the Company and not material to the
Company. The Company does not own any real property.
-11-
<PAGE>
2.11 Intellectual Property.
---------------------
(a) Except as set forth in Section 2.11(a) of the Company
Disclosure Schedule, the Company owns, or is licensed or otherwise possesses
legally enforceable rights to use, all patents, trademarks, trade names,
service marks, Internet domain names, copyrights, and any applications for
such patents, trademarks, trade names, service marks, Internet domain names
and copyrights, schematics, technology, trade secrets, know-how, computer
software programs or applications, processes and other tangible or intangible
proprietary information or material that are used to conduct its business as
currently conducted, or currently planned to be conducted, including without
limitation the technology, information, databases, data lists, data
compilations, and all proprietary rights developed or discovered or used in
connection with or contained in all versions and implementations of any World
Wide Web sites, free and clear of all liens, claims and encumbrances
(including without limitation licensing and distribution rights) all of which
are "Intellectual Property." Section 2.11 of the Company Disclosure Schedule
---------------------
contains an accurate and complete (i) description of all patents and patent
applications and all trademarks (indicating registered and unregistered
trademarks) and applications therefor, registered copyrights, trade names,
service marks and Internet domain names owned or licensed by the Company,
including the jurisdictions in which each such Intellectual Property right has
been issued or registered or in which any such application for such issuance
or registration has been filed, (ii) list of all written licenses, sublicenses
and other agreements to which the Company is a party and pursuant to which any
person is authorized to use any Intellectual Property rights of the Company,
and (iii) list of all written licenses, sublicenses and other agreements as to
which the Company is a party and pursuant to which the Company is authorized
to use any third party Intellectual Property ("Company Third Party
-------------------
Intellectual Property Rights"). The Company is not a party to any oral
- ----------------------------
license, sublicense or agreement which, if reduced to written form, would be
required to be listed in Section 2.11 of the Company Disclosure Schedule under
the terms of this Section 2.11(a).
(b) All of the Company's patents, copyrights, trademarks, trade
names or Internet domain name registrations related to its current or
currently proposed business are valid and in full force and effect and will
not be altered or impaired by the consummation of the transactions
contemplated hereby. The Company is not, and will not be as a result of the
execution and delivery of this Agreement or the performance of the Company's
obligations under this Agreement, in breach of any license, sublicense or
other agreement relating to the Company's Intellectual Property or Company
Third Party Intellectual Property Rights.
(c) Except as set forth in Section 2.11(c) of the Company
Disclosure Schedule, neither the Company nor, to the Company's knowledge, any
of the Company's employees has received a claim, or is aware of a reasonable
basis for a claim, of infringement or violation of any Intellectual Property
right of any third party. The manufacturing, marketing, licensing or sale of
the products or performance of the service offerings of the Company do not
infringe or violate any Intellectual Property right of any third party; and,
to the knowledge of the Company, the Intellectual Property rights of the
Company are not being infringed or violated by activities, products or
services of any third party.
-12-
<PAGE>
2.12 Contracts. Section 2.12 of the Company Disclosure Schedule lists
---------
all material written agreements to which the Company is a party (other than
those referred to in Sections 2.11, 2.14 and 2.20 and other than those
referred to in Section 6.3 or otherwise executed in connection with this
Agreement), including but not limited to:
(a) any written arrangement for the provision of products or
services to customers or other third parties;
(b) any written arrangement for the purchase of raw materials,
commodities, supplies, products or other personal property or for the receipt
of consulting or other services;
(c) any written arrangement establishing a partnership, joint
venture development, marketing or distribution arrangement;
(d) any written arrangement under which it has created, incurred,
assumed, or guaranteed (or may create, incur, assume, or guarantee)
indebtedness (including capitalized lease obligations) or under which it has
imposed (or may impose) a Security Interest on any of its assets, tangible or
intangible;
(e) any written arrangement concerning confidentiality or
noncompetition (other than standard confidentiality agreements between the
Company and any of its employees in the Ordinary Course of Business);
(f) any agreement, contract or commitment that calls for fixed
and/or contingent payments or expenditures by or to the Company (including
without limitation any advertising or revenue sharing arrangement).
(g) any outstanding sales or advertising contract, commitment or
proposal (including, without limitation, insertion orders, slotting agreements
or other agreements under which Company has allowed third parties to advertise
on or otherwise be included in Company's World Wide Web sites)
(h) any agreements, contracts or commitments with officers,
employees, agents, consultants, advisors, salesmen, sales representatives,
distributors or dealers that are not cancelable by Company "at will" and
without liability, penalty or premium.
(i) any employment, independent contractor or similar agreement,
contract or commitment that is not terminable on thirty (30) days' notice or
less without penalty, liability or premium of any type, including, without
limitation, severance or termination pay.
(j) any written arrangement involving any of the Company
Stockholders or their affiliates ("Affiliates"), as defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Company is not a party to any oral contract, agreement or other
arrangement which, if reduced to written form, would be required to be listed
in Section 2.12 of the Company
-13-
<PAGE>
Disclosure Schedule. All of the agreements referenced in the Company
Disclosure Schedule to which the Company is a party are valid, binding, in
full force and effect and enforceable by the Company in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy and other similar laws affecting the enforcement of creditors'
rights generally and except that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefor
may be brought (whether at law or in equity). Except as disclosed in Schedule
2.12 or 2.11 of the Company Disclosure Schedule, no such contract contains any
liquidated damages, penalty or similar provision, To the Company's knowledge,
no party to any such contract intends to cancel, withdraw, modify or amend
such contract, agreement or arrangement. The Company is not in default under
or in breach or violation of, nor, to the Company's knowledge, is there any
valid basis for any claim of default by the Company under, or breach or
violation by the Company of, any material provision of any contract listed on
the Company Disclosure Schedule. To Company's knowledge, no other party is in
default under or in breach or violation of, nor is there any valid basis for
any claim of default by any other party under or any breach or violation by
any other party of, any such contract.
2.13 Accounts Receivable. As of the Company's Most Recent Balance Sheet
-------------------
Date, the Company had no accounts receivable. Since the Company's Most Recent
Balance Sheet Date, the Company has accounts receivable in the amount of not
more than $500.
2.14 Insurance. Section 2.14 of the Company Disclosure Schedule sets
---------
forth a true, correct and complete list of all insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
software errors and omissions, employees, officers and directors of the
Company and all claims made under any insurance policy since the date of the
Company's inception. There is no claim by the Company pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company is
otherwise in compliance in all material respects with the terms of such
policies and bonds. Such policies of insurance and bonds are of the type and
in amounts customarily carried by persons conducting businesses similar to
those of the Company. The Company has no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
2.15 Litigation. Section 2.15 of the Company Disclosure Schedule
----------
identifies, and contains a brief description of, (a) any unsatisfied judgment,
order, decree, stipulation or injunction, (b) any written claim, demand,
complaint, action, suit, proceeding, or hearing or, to the Company's knowledge
any investigation of or in, any Governmental Entity or before any arbitrator
to which the Company or is a party or, to the knowledge of the Company, is
threatened to be made a party, and (c) any written or oral claims by third
persons of which the Company is aware and any reasonable basis for any third
party claims. Except as set forth in Section 2.15 of the Company Disclosure
Schedule, none of the demands, claims, complaints, actions, suits,
proceedings, hearings, and investigations set forth in Section 2.15 of the
Company Disclosure Schedule could reasonably be expected to have a Material
Adverse Effect.
2.16 Employees and Consultants. Section 2.16 of the Company Disclosure
-------------------------
Schedule contains a list of all current and former employees and consultants
of the Company, along with
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<PAGE>
the position and the annual rate or other rate as specified of compensation of
each such person. Except as set forth on Section 2.16 of the Company
Disclosure Schedule, each current and former employee and consultant to the
Company has entered into a confidentiality and assignment of inventions
agreement with the Company, a copy of each of which has previously been
delivered to the Buyer. Except as set forth in Section 2.16 of the Company
Disclosure Schedule, and to the knowledge of the Company, no key employee or
consultant or group of employees or consultants has any plans to terminate
employment or the provision of consulting services with the Company. The
Company is not a party to or bound by any collective bargaining agreement, nor
has it experienced any strikes, grievances, claims of unfair labor practices
or other collective bargaining disputes. The Company has no knowledge of any
organizational effort made or threatened, either currently or since its
inception, by or on behalf of any labor union with respect to employees of the
Company. The Company has no oral agreements with any employees or consultants
other than as described in Section 2.16 of the Company Disclosure Schedule.
2.17 Employee Benefits.
-----------------
(a) Section 2.17 of the Company Disclosure Schedule contains a
complete and accurate list of all Company Employee Benefit Plans (as defined
below) maintained, or contributed to, by the Company, or any Company ERISA
Affiliate (as defined below). For purposes of this Agreement, "Company
Employee Benefit Plan" means any "employee pension benefit plan" (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), any "employee welfare benefit plan" (as defined in Section
-----
3(1) of ERISA), and any other written or oral plan, agreement or arrangement
involving direct or indirect compensation, including without limitation
insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation maintained, or contributed to, by the Company or any Company
ERISA Affiliate. For purposes of this Agreement, "Company ERISA Affiliate"
means any entity which is a member of (i) a controlled group of corporations
(as defined in Section 414(b) of the Code), (ii) a group of trades or
businesses under common control (as defined in Section 414(c) of the Code), or
(iii) an affiliated service group (as defined under Section 414(m) of the Code
or the regulations under Section 414(o) of the Code), any of which includes
the Company. Complete and accurate copies of (i) all Company Employee Benefit
Plans which have been reduced to writing, (ii) written summaries, if any, of
all unwritten Company Employee Benefit Plans, (iii) all related trust
agreements, insurance contracts and summary plan descriptions, if any, and
(iv) all annual reports filed, if any, on IRS Form 5500, 5500C or 5500R since
the Company's inception for each Company Employee Benefit Plan, have been
delivered to the Buyer. Each Company Employee Benefit Plan has been
administered in all material respects in accordance with its terms, and each
of the Company, and the Company ERISA Affiliates has in all material respects
met its obligations with respect to such Company Employee Benefit Plan and has
made all contributions thereto which are required to be made prior to the date
hereof. To the knowledge of the Company, the Company and all Company Employee
Benefit Plans are in compliance in all material respects with the currently
applicable provisions of ERISA and the Code and the regulations thereunder.
-15-
<PAGE>
(b) There are no termination proceedings or other claims (except
claims for benefits payable in the normal operation of the Company Employee
Benefit Plans and proceedings with respect to qualified domestic relations
orders) suits or proceedings and, to the Company's knowledge, there are no
investigations by any Governmental Entity, against or involving any Company
Employee Benefit Plan or asserting any rights or claims to benefits under any
Company Employee Benefit Plan that could give rise to any material liability.
(c) All the Company Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received determination letters
from the Internal Revenue Service to the effect that such Company Employee
Benefit Plans are qualified and the plans and the trusts related thereto are
exempt from federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, no such determination letter has been revoked and,
revocation has not been threatened, and no such Company Employee Benefit Plan
has been amended since the date of its most recent determination letter or
application therefor in any respect, and no act or omission has occurred, that
would adversely affect its qualification or materially increase its cost.
(d) Neither the Company nor any Company ERISA Affiliate has ever
maintained an Company Employee Benefit Plan subject to Section 412 of the Code
or Title IV of ERISA.
(e) At no time has the Company nor any Company ERISA Affiliate been
obligated to contribute to any "multi-employer plan" (as defined in Section
4001(a)(3) of ERISA).
(f) Except as set forth in Section 2.17 of the Company Disclosure
Schedule, there are no unfunded obligations under any Company Employee Benefit
Plan providing benefits after termination of employment to any employee of the
Company or any Company ERISA Affiliate (or to any beneficiary of any such
employee), including but not limited to retiree health coverage and deferred
compensation, but excluding continuation of health coverage required to be
continued under Section 4980B of the Code and insurance conversion privileges
under state law.
(g) To the knowledge of the Company, no act or omission has
occurred and no condition exists with respect to any Company Employee Benefit
Plan that would subject the Company, or any Company ERISA Affiliate to any
material fine, pena lty, tax or fiduciary liability imposed under ERISA or the
Code.
(h) No Company Employee Benefit Plan is funded by, associated with,
or related to a "voluntary employee's beneficiary association" within the
meaning of Section 501(c)(9) of the Code.
(i) Except as set forth in Section 2.17 of the Company Disclosure
Schedule, no Company Employee Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed generally
to employees by its terms prohibits the Company or any Company ERISA Affiliate
from amending or terminating any such Company Employee Benefit Plan.
-16-
<PAGE>
(j) Sections 2.17 or 2.12 of the Company Disclosure Schedule
discloses each: (i) written, and, to the Company's knowledge, oral, agreement
with any director, officer or other employee of the Company and affiliates (A)
the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company or its
affiliates of the nature of any of the transactions contemplated by this
Agreement, (B) providing any term of employment or compensation guarantee or
(C) providing severance benefits or other benefits after the termination of
employment of such director, officer or employee; (ii) agreement, plan or
arrangement under which any person may receive payments from the Company or
its affiliates that may be subject to the tax imposed by Section 4999 of the
Code or included in the determination of such person's "parachute payment"
under Section 280G of the Code; and (iii) agreement or plan binding the
Company or its affiliates, including without limitation any stock option plan,
stock appreciation right plan, restricted stock plan, stock purchase plan,
severance benefit plan, or any Company Employee Benefit Plan, any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
2.18 Environmental and OSHA.
----------------------
(a) Hazardous Material. No material amount of any substance that
------------------
is regulated by any Governmental Entity or that has been designated by any
Governmental Entity to be radioactive, toxic, hazardous or otherwise a danger
to health or the environment, including, without limitation, PCBs, asbestos,
urea-formaldehyde and all substances listed pursuant to the United States
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended from time to time, and the United States Resource Recovery and
Conservation Act of 1976, as amended from time to time, and the regulations
and publications promulgated pursuant to said laws (a "Hazardous Material"),
------------------
is, to the knowledge of the Company, present as a result of the actions of the
Company (or, to the knowledge of the Company, as a result of any actions of
any third party or otherwise) in violation of any law in effect on or before
the Closing Date, in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that the Company has at
any time owned, operated, occupied or leased (collectively, "Company
-------
Property").
- --------
(b) Hazardous Materials Activities. The Company has not
------------------------------
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect
on or before the Closing Date, nor has the Company disposed of, transferred,
sold or manufactured any product containing a Hazardous Material (collectively
"Hazardous Materials Activities") in violation of the Comprehensive
------------------------------
Environmental Response, Compensation and Liability Act of 1980, as amended,
the Resource Recovery and Conservation Act of 1976, the Toxic Substances
Control Act of 1976, and other applicable state or federal acts (including the
rules and regulations thereunder) (collectively, "Environmental Laws") as in
effect on or before the Closing Date.
(c) Permits. The Company currently holds no environmental
-------
approvals, permits, licenses, clearances and consents and none are necessary
for the conduct of the
-17-
<PAGE>
Company's Hazardous Material Activities, if any, and other business activities
of the Company as such activities are currently being conducted.
2.19 Permits. Section 2.19 of the Company Disclosure Schedule sets forth
-------
a list of all permits, licenses, registrations, certificates, orders or
approvals from any Governmental Entity (including without limitation those
issued or required under Environmental Laws and those relating to the
occupancy or use of owned or leased real property) ("Permits") issued to or
held by the Company that are material to the operation of its business. Such
listed Permits are the only Permits that are required for the Company to
conduct its business as presently conducted or as currently proposed to be
conducted, except for those the absence of which could not reasonably be
expected to have any Material Adverse Effect. Each such Permit is in full
force and effect.
2.20 Certain Business Relationships With Affiliates. Except as set forth
----------------------------------------------
in Section 2.20 of the Company Disclosure Schedule, no Affiliate of the
Company (a) owns any property or right, tangible or intangible, which is used
in the business of the Company, (b) has any claim or cause of action against
the Company, (c) owes any money to the Company, or (d) has loaned any money to
the Company. Section 2.20 of the Company Disclosure Schedule describes any
transactions or relationships between the Company and any Affiliate thereof.
2.21 Brokers' Fees. The Company has no liability or obligation to pay
-------------
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement other than Cruttenden Roth
Incorporated.
2.22 Minute Books. The minute books and other similar records of the
------------
Company contain true and complete records of all actions taken at any meetings
of the Company's shareholders, Board of Directors or any committee thereof and
of all written consents executed in lieu of the holding of any such meeting,
and all charter and bylaw documents and amendments thereto. All of these
documents have been delivered to counsel for the Buyer.
2.23 Customers and Suppliers. No material licensor to or supplier of the
-----------------------
Company has indicated to an officer of the Company since the Company's
inception that it will stop, or decrease the rate of, licensing intellectual
property or supplying materials, products or services to the Company (and no
officer of the Company is aware of any such indication) and no material
customer of the Company has indicated to an officer of the Company since the
Company's inception that it will stop, or decrease the rate of, buying,
leasing or licensing materials, products or services from the Company (and no
officer of the Company is aware of any such indication). Section 2.23 of the
Company Disclosure Schedule sets forth a list of each supplier that is the
sole supplier of any significant product, component or service to the Company.
2.24 Corporate Approvals. The Board of Directors of Company has (i)
-------------------
approved this Agreement and the Merger and (ii) determined that the Merger is
in the best interests of the shareholders of the Company and is on terms that
are fair to such stockholders. The written consent of the Company Stockholders
listed on Section 2.2 of the Company Disclosure Schedule, which is being
delivered to the Buyer concurrently with signing this Agreement, is the only
vote of the holders of any of the shares of Company Common Stock necessary to
approve this
-18-
<PAGE>
Agreement and the transactions contemplated hereby. Except as set forth in
Section 2.24 of the Company Disclosure Schedule, there will be no stockholders
or persons entitled to receive appraisal rights (as such term is defined in
the Delaware Law) related to the transactions contemplated hereby.
2.25 Third Party Consents. Except as set forth in Section 2.25 of the
--------------------
Company Disclosure Schedule, no consent or approval is needed from any third
party in order to effect the Merger, this Agreement or any of the transactions
contemplated hereby.
2.26 Disclosure. No representation or warranty by the Company contained
----------
in this Agreement, and no statement contained in the final Company Disclosure
Schedule or in the final form of any other Transaction Document delivered to
or to be delivered by the Company pursuant to this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary, in light of the circumstances under which it was
or will be made, in order to make the statements herein or therein not
misleading.
2.27 Disclosure With Respect to the ePills Description in the IPO Form S-1.
---------------------------------------------------------------------
The description of the business of the Company and the online pharmacy business
and the risks related thereto (the "ePills Description") contained under the
------------------
headings listed on Exhibit 2.27A hereto and contained in the S-1 Registration
-------------
Statement that is currently being drafted by Buyer (the "IPO Form S-1"), a
form of which is attached as Exhibit 2.27B, on the date it will be filed with
-------------
the Securities and Exchange Commission, will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.28 Year 2000 Compliance. Section 2.28 of the Company Disclosure Schedule
--------------------
summarizes the Company's reasonable judgment as to its exposure, if any, to
the Year 2000 problem, including (1) the Company's assessment of its exposure
to the Year 2000 problem and the steps heretofore conducted by the Company in
assessing such exposure; (2) the Company's state of readiness for the Year
2000 (including with respect to its information technology and non-information
technology systems); (3) a description of the Company's Year 2000 issues
relating to third parties with whom the Company has a material relationship;
(4) the Company's reasonable judgment as to the costs of fixing the Year 2000
issues faced by it (whether by modification or replacement); (5) the risks of
the Company's Year 2000 Issues, including a reasonable description of the
Company's most reasonably likely worst case Year 2000 scenarios; and (6) a
description of how the Company is preparing to handle the most reasonably
likely worst case scenarios.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND MERGER SUB
----------------------------------------------------------
The Buyer and Merger Sub, jointly and severally, represent and warrant to
the Company that the statements contained in this Article III are true and
correct, except as set forth in the disclosure schedule attached hereto (the
"Buyer Disclosure Schedule"). The Buyer Disclosure Schedule shall be arranged
-------------------------
in paragraphs corresponding to the numbered and lettered paragraphs contained
in this Article III, and the disclosures in any paragraph of the Buyer
Disclosure
-19-
<PAGE>
Schedule shall qualify any other paragraph in this Article III where such
disclosure would be appropriate to the extent that it is clear from such
disclosure that it relates to such other paragraph.
3.1 Organization, Qualification and Corporate Power. Each of Buyer and
-----------------------------------------------
Merger Sub is a corporation duly organized, validly existing and in corporate
and tax good standing under the laws of the state of its incorporation. Each
of Buyer and Merger Sub is duly qualified to conduct business and is in
corporate and tax good standing under the laws of each jurisdiction in which
the failure to be so qualified would have a Material Adverse Effect. Each of
Buyer and Merger Sub has all requisite corporate power and authority to carry
on the businesses in which it is engaged and to own and use the properties
owned and used by it. The Buyer has furnished to the Company true and complete
copies of the charter documents and By-laws of Buyer and Merger Sub, each as
amended and as in effect on the date hereof. Each of Buyer and Merger Sub is
not in default under or in violation of any provision of its charter documents
or By-laws.
3.2 Capitalization. The authorized capital stock of the Buyer consists
--------------
of : (i) 22,200,000 shares of Buyer Common Stock, of which 5,685,744 shares of
Buyer Common Stock are issued and outstanding and (ii) 4,700,000 shares of
Preferred Stock, of which (A) 1,208,600 shares have been designated Series A
Preferred Stock, of which 810,000 shares are issued and outstanding and
398,600 shares are issuable on exercise of warrants to purchase Series A
Preferred Stock outstanding, and (B) 3,400,000 shares have been designated
Series B Preferred Stock, of which 3,230,769 shares are issued and outstanding
and 62,051 shares are issuable on exercise of warrants to purchase Series B
Preferred Stock outstanding. Buyer has reserved an aggregate of 2,400,000
shares of Buyer Common Stock for issuance pursuant to the 1998 Stock Plan, of
which 269,113 shares have been issued directly or pursuant to option exercise
(and are included in the Common Stock outstanding number above), 1,522,127
shares are subject to outstanding options or reserved for issuance for
incoming employees (other than Company employees) and 608,760 shares are
available for issuance. Subject to the receipt of shareholder approval, the
Buyer has reserved for issuance an aggregate of 3,700,000 shares of Buyer
Common Stock for issuance pursuant to the 1999 Stock Plan, of which 200,000
shares are subject to outstanding options and 3,500,000 shares are available
for issuance. In addition, the Company has issued warrants to purchase 71,035
shares of Buyer Common Stock and commitments to issue warrants as described in
the Buyer Disclosure Schedule. Section 3.2 of the Buyer Disclosure Schedule
sets forth a complete and accurate list of (i) all shareholders of the Buyer,
indicating the number of shares of Buyer Common Stock, Series A Preferred
Stock and Series B Preferred Stock held by each shareholder, and (ii) all
holders of options and warrants, indicating the number of shares of Buyer
Common Stock or shares of Preferred Stock subject to each option and warrant
and the vesting schedule and vesting commencement date for such option. The
authorized capital stock of the Merger Sub consists of 1,000 shares of Common
Stock, of which 1,000 shares are issued and outstanding and held by Buyer as
of the date hereof. All of the issued and outstanding shares of Buyer Common
Stock and Preferred Stock and Merger Sub Common Stock are, and all shares of
Buyer Common Stock or Preferred Stock and Merger Sub Common Stock that may be
issued upon exercise of options and warrants will be, duly authorized, validly
issued, fully paid, nonassessable and free of all preemptive rights. There are
no outstanding or authorized options, warrants, rights, agreements or
commitments to which either the Buyer or Merger Sub is a party or which are
binding upon either the Buyer or Merger
-20-
<PAGE>
Sub providing for the issuance, disposition or acquisition of any of its
capital stock, other than the options and warrants listed in Section 3.2 of
the Disclosure Schedule. There are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Buyer or
Merger Sub. There are no agreements, voting trusts, proxies, or understandings
with respect to the voting, or registration under the Securities Act, of any
shares of Buyer Common Stock or Preferred Stock or Merger Sub Common Stock.
All of the issued and outstanding shares of Buyer Common Stock and Merger Sub
Common Stock were issued in compliance with applicable federal and state
securities laws.
3.3 Authorization of Transaction. Each of Buyer and Merger Sub has all
----------------------------
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and under each of the Transaction
Documents to which either of Buyer or Merger Sub is a party. All corporate
action on the part of the Buyer and Merger Sub, or either of their respective
officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the Transaction Documents and the
performance of all obligations of the Buyer and Merger Sub hereunder and
thereunder has been taken or will be taken prior to the Closing, and this
Agreement constitutes, and each of the Transaction Documents to which either
Buyer or Merger Sub will be a party, will constitute, a valid and legally
binding obligation of the Buyer and Merger Sub, enforceable in accordance with
its respective terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, and (ii) as limited by
laws relating to the availability of specific performance, injunctive relief,
or other equitable remedies.
3.4 Compliance with Laws and Other Instruments. Each of Buyer and
------------------------------------------
Merger Sub is not in violation or default of any provision of its charter
documents or Bylaws, or, to the best of its knowledge, of any instrument,
judgment, order, writ, decree, lease, license, permit, contract or other
arrangement to which it is a party or by which it is bound, or, to the best of
its knowledge, of any provision of any federal or state statute, rule or
regulation applicable to the Buyer or Merger Sub. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, will not result in any such violation or default, or be
in conflict with or constitute, with or without the passage of time and giving
of notice, either a default under any such provision, instrument, judgment,
order, writ, decree, lease, license, permit, contract or other arrangement or
an event that results in the creation of any lien, charge or encumbrance upon
any assets of the Buyer or Merger Sub or its subsidiaries or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any permit, license,
authorization, or approval applicable to the Buyer or Merger Sub or its
subsidiaries, its business or operations or any of its assets or properties,
or result in the acceleration of, or create in any party the right to
accelerate, terminate modify or cancel, or require any notice, consent or
waiver under, any contract, lease, license, permit or other arrangement to
which the Buyer or Merger Sub is a party or by which the Buyer or Merger Sub
is bound or to which its assets are subject.
3.5 Subsidiaries. Except as set forth in Section 3.5 of the Buyer
------------
Disclosure Schedule, the Buyer does not have and has never had any
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of stock or any interest in, or control of,
directly or indirectly, any other corporation, partnership, association, joint
venture or entity. Merger Sub was organized solely in contemplation of the
transactions set forth in this
-21-
<PAGE>
Agreement. Merger Sub is not currently, and has never been, engaged in any
business other than the transactions contemplated herein.
3.6 Buyer Financial Statements. The Buyer has attached hereto as
--------------------------
Section 3.6 to the Buyer Disclosure Schedule (a) the audited consolidated
balance sheets and statements of income, changes in shareholders' equity and
cash flows for each of 1997 and 1998 for the Buyer and its subsidiaries; and
(b) the unaudited consolidated balance sheet as of August 31, 1999 (the
"Buyer's Most Recent Balance Sheet") and statements of income, changes in
---------------------------------
shareholders' equity and cash flows for the eight month period ending August
31, 1999 (the "Buyer's Most Recent Balance Sheet Date") Such financial
--------------------------------------
statements (the "Buyer Financial Statements") have been prepared in accordance
--------------------------
with GAAP applied on a consistent basis throughout the periods covered
thereby, fairly present the financial condition, results of operations and
cash flows of the Buyer and its subsidiaries as of the respective dates
thereof and for the periods referred to therein and are consistent with the
books and records of the Buyer and its subsidiaries; provided, however, that
--------
the Buyer Financial Statements referred to in clause (b) above are subject to
normal recurring year-end adjustments (which will not be material) and do not
include footnotes.
3.7 Absence of Certain Changes. Since the Most Recent Balance Sheet,
--------------------------
there has not been any material adverse change in the assets, business,
financial condition or results of operations of the Buyer or any subsidiary,
nor has there occurred any event or development which could reasonably be
foreseen to result in such a material adverse change in the future.
3.8 Undisclosed Liabilities. None of the Buyer and its subsidiaries has
-----------------------
any liability (whether known or unknown, whether absolute or contingent,
whether liquidated or unliquidated and whether due or to become due), and
there is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability, except for (a)
liabilities shown on the Buyer's Most Recent Balance Sheet, (b) liabilities
which have arisen since the Buyer's Most Recent Balance Sheet Date in the
Ordinary Course of Business, (c) contractual liabilities incurred in the
Ordinary Course of Business which are not required by GAAP to be reflected on
a balance sheet and (d) liabilities for accounting, investment banking and
legal fees incurred in connection with the Merger and the transactions
contemplated thereby and the IPO Form S-1 and transaction contemplated
thereby.
3.9 Tax Matters.
-----------
(a) Each of the Buyer and its subsidiaries has filed all Tax
Returns that it was required to file and all such Tax Returns were correct and
complete in all material respects. Each of the Buyer and its subsidiaries has
paid all Taxes owed in respect of the periods covered by such Tax Returns. The
unpaid Taxes of the Buyer and its subsidiaries for tax periods through the
date of the Buyer's Most Recent Balance Sheet do not exceed the accruals and
reserves for Taxes set forth on the Buyer's Most Recent Balance Sheet. Neither
the Buyer nor any subsidiary has any actual or potential liability for any Tax
obligation of any taxpayer (including without limitation any affiliated group
of corporations or other entities that included the Buyer or any subsidiary
during a prior period) other than the Buyer and its subsidiaries. All Taxes
that the Buyer or any subsidiary is or was required by law to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Entity.
-22-
<PAGE>
(b) No Tax Returns of the Buyer nor any subsidiary has been audited
by the Internal Revenue Service. No examination or audit of any Tax Returns of
the Buyer or any subsidiary by any Governmental Entity is currently in
progress or, to the knowledge of the Buyer and its subsidiaries, threatened or
contemplated. Neither the Buyer nor any subsidiary has waived any statute of
limitations with respect to taxes or agreed to an extension of time with
respect to a tax assessment or deficiency.
(c) Neither the Buyer nor any subsidiary is a "consenting
corporation" within the meaning of Section 341(f) of the Code and none of the
assets of the Buyer or its subsidiaries are subject to an election under
Section 341(f) of the Code. Neither the Buyer nor any subsidiary has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(l)(A)(ii) of the Code. Neither the Buyer nor any subsidiary is a party
to any Tax allocation or sharing agreement.
(d) Neither the Buyer nor any subsidiary is or has ever been a
member of an "affiliated group" of corporations (within the meaning of Section
1504 of the Code), other than a group of which only the Buyer and the
subsidiaries are members. Neither the Buyer nor any subsidiary has made an
election under Treasury Reg. Section 1.1502-20(g). Neither the Buyer nor any
subsidiary is or has been required to make a basis reduction pursuant to
Treasury Reg. Section 1.1502-20(b) or Treasury Reg. Section 1.337(d)-2T(b).
(e) As of the date of this Agreement, neither Buyer or Merger Sub
has taken any action that could reasonably be expected to cause the Merger to
fail to qualify as a reorganization within the meaning of Section 368(a) of
the Code.
3.10 Title to Property. Each of Buyer and its subsidiaries has good and
-----------------
valid title to all properties, interests in properties and assets, real and
personal, necessary for the conduct of its business as presently conducted and
as presently proposed to be conducted, all of which are reflected in the
Buyer's Most Recent Balance Sheet (except properties, interests in properties
and assets sold or otherwise disposed of since the Buyer's Most Recent Balance
Sheet Date in the ordinary course of business) or acquired after the Buyer's
Most Recent Balance Sheet Date, or with respect to leased properties and
assets, valid leasehold interests in, free and clear of all mortgages, liens,
pledges, charges or encumbrances of any kind or character, except the lien of
current taxes not yet due and payable. The plants, property and equipment of
Buyer and its subsidiaries that are used in the operations of their businesses
are in good operating condition and repair subject to ordinary wear and tear
and to requirements for periodic maintenance. All properties used in the
operations of Buyer, except for those acquired after the Most Recent Balance
Sheet Date, are reflected in the Buyer's Most Recent Balance Sheet to the
extent required by GAAP. No asset of the Buyer (tangible or intangible) is
subject to any Security Interest. Neither the Buyer nor any of its
subsidiaries owns any real property.
-23-
<PAGE>
3.11 Intellectual Property.
---------------------
(a) Each of the Buyer and its subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use, all Intellectual
Property that is used to conduct its business as currently conducted or
currently planned to be conducted.
(b) All of the Buyer's patents, copyrights, trademarks, trade names
or Internet domain name registrations related to its current or currently
proposed business are valid and in full force and effect and will not be
altered or impaired by the consummation of the transactions contemplated
hereby. Neither the Buyer nor any of its subsidiaries is, nor will any of them
be as a result of the execution and delivery of this Agreement or the
performance of the Buyer's obligations under this Agreement, in breach of any
license, sublicense or other agreement relating to the Buyer's Intellectual
Property or any written licenses, sublicenses and other agreements to which
either Buyer or its subsidiary is a party and pursuant to which Buyer or its
subsidiary is authorized to use any third party Intellectual Property (the
"Buyer Third Party Intellectual Property Rights").
----------------------------------------------
(c) Neither the Buyer nor any of its subsidiaries (nor, to the
Buyer's knowledge, any of the Buyer's employees) has received a claim, or is
aware of a reasonable basis for a claim, of infringement or violation of any
Intellectual Property right of any third party. The manufacturing, marketing,
licensing or sale of the products or performance of the service offerings of
the Buyer and its subsidiaries do not infringe or violate any Intellectual
Property right of any third party; and, to the knowledge of the Buyer and its
subsidiaries, the Intellectual Property rights of the Buyer and its
subsidiaries are not being infringed or violated by activities, products or
services of any third party.
3.12 Contracts. All of the agreements that are material agreements to
---------
the Buyer and its subsidiaries, when taken as a whole, will be referenced in
the IPO Form S-1, as filed with the SEC approximately concurrently with the
signing of this Agreement, or have been provided to the Company or its
counsel. All such material agreements to which the Buyer or a subsidiary is a
party are valid, binding, in full force and effect and enforceable by either
Buyer or its subsidiaries in accordance with their respective terms, except as
such enforceability may be limited by applicable bankruptcy and other similar
laws affecting the enforcement of creditor's rights generally and except that
the availability of equitable remedies is subject to the discretion of the
court before which any proceeding therefor may be brought (whether at law or
in equity). To the knowledge of the Buyer and Merger Sub, no party to any such
contract intends to cancel, withdraw, modify or amend such contract, agreement
or arrangement. Neither Buyer nor any of its subsidiaries is in default under
or in breach or violation of, nor, to the knowledge of the Buyer and Merger
Sub, is there any valid basis for any claim of default by Buyer or any of its
subsidiaries under, or breach or violation by Buyer or any of its subsidiaries
of, any material provision of any contract referenced in the IPO Form S-1. To
the knowledge of the Buyer and Merger Sub, no other party is in default under
or in breach or violation of, nor is there any valid basis for any claim of
default by any other party under or any breach or violation by any other party
of, any such contract.
-24-
<PAGE>
3.13 Accounts Receivable. All accounts receivable of the Buyer and the
-------------------
subsidiaries reflected on the Buyer's Most Recent Balance Sheet are valid
receivables, and to the Buyer's knowledge are subject to no setoffs or
counterclaims and are current and collectible (within 90 days after the date
on which it first became due and payable), net of the applicable reserve for
bad debts on the Buyer's Most Recent Balance Sheet. All accounts receivable
reflected in the financial or accounting records of the Buyer that have arisen
since the Buyer's Most Recent Balance Sheet Date are valid receivables, and to
the Buyer's knowledge, subject to no setoffs or counterclaims and are
collectible, net of a reserve for bad debts in an amount proportionate to the
reserve shown on the Buyer's Most Recent Balance Sheet.
3.14 Insurance. Each of Buyer and its subsidiaries has in full force and
---------
effect all policies of insurance and bonds of the type and in amounts
customarily carried by persons conducting businesses similar to those of the
Buyer, including, but not limited to, fire and casualty insurance policies,
sufficient in amount (subject to reasonable deductibles) to allow it to
replace any of its or its subsidiaries properties that might be damaged or
destroyed. There is no claim by the Buyer or its subsidiaries pending under
any of such policies or bonds as to which coverage has been questioned, denied
or disputed by the underwriters of such policies or bonds. All premiums
payable under all such policies and bonds have been paid and the Buyer and its
subsidiaries are otherwise in compliance with the terms of such policies and
bonds. The Buyer and its subsidiaries have no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
3.15 Litigation. Section 3.15 of the Buyer Disclosure Schedule
----------
identifies, and contains a brief description of, (a) any unsatisfied judgment,
order, decree, stipulation or injunction, (b) any claim, demand, complaint,
action, suit, proceeding, hearing, or to the Buyer's knowledge any
investigation, of or in any Governmental Entity or before any arbitrator to
which the Buyer or any subsidiary is a party or, to the knowledge of the Buyer
and the subsidiaries, is threatened to be made a party, and (c) any written or
oral claims by third persons of which the Buyer is aware and any reasonable
basis for any third party claims. None of the demands, claims, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
3.15 of the Buyer Disclosure Schedule could reasonably be expected to have a
Material Adverse Effect.
3.16 Employees. Each officer, current and former employee and consultant
---------
of the Buyer and its subsidiaries has entered into a confidentiality/assignment
of inventions agreement with the Buyer or a subsidiary of the Buyer, without
material amendment to the Buyer's standard form, a copy of which has been
provided to the Company. To the knowledge of the Buyer and its subsidiaries,
no key employee or consultant or group of employees or consultants has any
plans to terminate employment or the provision of consulting services with the
Buyer or any subsidiary of the Buyer. Neither the Buyer nor any subsidiary of
the Buyer is a party to or bound by any collective bargaining agreement, nor
has any of them experienced any strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes. The Buyer and the
subsidiaries of the Buyer have no knowledge of any organizational effort made
or threatened, either currently or within the past two years, by or on behalf
of any labor union with respect to employees of the Buyer or any subsidiary of
the Buyer.
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3.17 Employee Benefits. Section 3.17 of the Buyer Disclosure Schedule
-----------------
contains a complete and accurate list of all Buyer Employee Benefit Plans (as
defined below) maintained, or contributed to, by the Buyer, or any Buyer ERISA
Affiliate (as defined below). For purposes of this Agreement, "Buyer Employee
Benefit Plan" means any "employee pension benefit plan" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), any "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA), and any other written or oral plan, agreement or arrangement involving
direct or indirect compensation, including without limitation insurance
coverage, severance benefits, disability benefits, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement compensation
maintained or contributed to, by the Buyer or any Buyer ERISA Affiliate. For
purposes of this Agreement, "Buyer ERISA Affiliate" means any entity which is
a member of (i) a controlled group of corporations (as defined in Section
414(b) of the Code), (ii) a group of trades or businesses under common control
(as defined in Section 414(c) of the Code), or (iii) an affiliated service
group (as defined under Section 414(m) of the Code or the regulations under
Section 414(o) of the Code), any of which includes Buyer. Complete and
accurate copies of (i) all Buyer Employee Benefit Plans which have been
reduced to writing, (ii) written summaries, if any, of all unwritten Buyer
Employee Benefit Plans, (iii) all related trust agreements, insurance
contracts and summary plan descriptions, if any, and (iv) all annual reports
filed, if any, on IRS Form 5500, 5500C or 5500R since the Buyer's inception
and the inception of any of its subsidiaries for each Buyer Employee Benefit
Plan, have been delivered to the Company. Each Buyer Employee Benefit Plan has
been administered in all material respects in accordance with its terms, and
each of the Buyer and the Buyer ERISA Affiliates has in all material respects
met its obligations with respect to such Buyer Employee Benefit Plan and has
made all contributions thereto which are required to be made prior to the date
hereof. To the knowledge of the Buyer and Merger Sub, Buyer and all Buyer
Employee Benefit Plans are in compliance in all material respects with the
currently applicable provisions of ERISA and the Code and the regulations
thereunder.
(a) There are no investigations by any Governmental Entity,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Buyer Employee Benefit Plans and proceedings with
respect to qualified domestic relations orders) suits or proceedings against
or involving any Buyer Employee Benefit Plan or asserting any rights or claims
to benefits under any Buyer Employee Benefit Plan that could give rise to any
material liability.
(b) All the Buyer Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received determination letters
from the Internal Revenue Service to the effect that such Buyer Employee
Benefit Plans are qualified and the plans and the trusts related thereto are
exempt from federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, no such determination letter has been revoked, and
revocation has not been threatened, and no such Buyer Employee Benefit Plan
has been amended since the date of its most recent determination letter or
application therefor in any respect, and no act or omission has occurred, that
would adversely affect its qualification or materially increase its cost.
(c) Neither Buyer nor any Buyer ERISA Affiliate has ever maintained
a Buyer Employee Benefit Plan subject to Section 412 of the Code or Title IV
of ERISA.
-26-
<PAGE>
(d) At no time has Buyer or any Buyer ERISA Affiliate been
obligated to contribute to any "multi-employer plan" (as defined in Section
4001(a)(3) of ERISA).
(e) Except as set forth in Section 3.17 of the Buyer Disclosure
Schedule, there are no unfunded obligations under any Buyer Employee Benefit
Plan providing benefits after termination of employment to any employee of
Buyer or any Buyer ERISA Affiliate (or to any beneficiary of any such
employee), including but not limited to retiree health coverage and deferred
compensation, but excluding continuation of health coverage required to be
continued under Section 4980B of the Code and insurance conversion privileges
under state law.
(f) To the knowledge of the Buyer and Merger Sub, no act or
omission has occurred and no condition exists with respect to any Buyer
Employee Benefit Plan that would subject Buyer or any Buyer ERISA Affiliate to
any material fine, penalty, tax or fiduciary liability imposed under ERISA or
the Code.
(g) No Buyer Employee Benefit Plan is funded by, associated with, or
related to a "voluntary employee's beneficiary association" within the meaning
of Section 501(c)(9) of the Code.
(h) No Buyer Employee Benefit Plan, plan documentation or
agreement, summary plan description or other written communication distributed
generally to employees by its terms prohibits Buyer or any Buyer ERISA
Affiliate from amending or terminating any such Buyer Employee Benefit Plan.
(i) Section 3.17 of the Buyer Disclosure Schedule discloses each:
(i) written and, to the Buyer's knowledge, oral agreement with any director,
officer or other employee of Buyer or any of its subsidiaries and affiliates
(A) the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Buyer or any of
its subsidiaries or its affiliates of the nature of any of the transactions
contemplated by this Agreement, (B) providing any term of employment or
compensation guarantee or (C) providing severance benefits or other benefits
after the termination of employment of such director, officer or employee;
(ii) agreement, plan or arrangement under which any person may receive
payments from the Buyer or any of its subsidiaries or its affiliates that may
be subject to the tax imposed by Section 4999 of the Code or included in the
determination of such person's "parachute payment" under Section 280G of the
Code; and (iii) agreement or plan binding the Buyer or any of its subsidiaries
or its affiliates, including without limitation any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan, severance
benefit plan, or any Buyer Employee Benefit Plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement.
3.18 Environmental and OSHA.
----------------------
(a) Hazardous Material. No Hazardous Material is, to the knowledge
------------------
of the Buyer and Merger Sub, present as a result of the actions of the Buyer
or any of its subsidiaries
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<PAGE>
(or, to the knowledge of the Buyer and Merger Sub, as a result of any actions
of any third party or otherwise) in violation of any law in effect on or
before the Closing Date, in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that the Buyer or
any of its subsidiaries has at any time owned, operated, occupied or leased
(collectively, "Buyer Property").
--------------
(b) Hazardous Materials Activities. Neither the Buyer nor any of its
------------------------------
subsidiaries has transported, stored, used, manufactured, disposed of,
released or exposed its employees or others to Hazardous Materials in
violation of any law in effect on or before the Closing Date, nor has the
Buyer nor any of its subsidiaries conducted any Hazardous Materials Activities
in violation of any Environmental Law as in effect on or before the Closing
Date.
(c) Permits. Neither the Buyer nor any of its subsidiaries
-------
currently holds any environmental approvals, permits, licenses, clearances and
consents and none are necessary for the conduct of the Buyer's or any of its
subsidiary's Hazardous Material Activities, if any, and other business
activities of the Buyer or any of its subsidiaries as such activities are
currently being conducted.
3.19 Permits. The Buyer or its subsidiaries hold all Permits that are
-------
required for the operation of its business as presently conducted or as
proposed to be conducted, except for those the absence of which could not
reasonably be expected to have any Material Adverse Effect. Each such Permit
is in full force and effect.
3.20 Certain Business Relationships With Affiliates. No Affiliate of the
----------------------------------------------
Buyer or of any subsidiary (a) owns any property or right, tangible or
intangible, which is used in the business of the Buyer or any subsidiary, (b)
has any claim or cause of action against the Buyer or any subsidiary, (c) owes
any money to the Buyer or any subsidiary, or (d) has loaned any money to the
Buyer or Merger Sub.
3.21 Brokers' Fees. Neither the Buyer nor any subsidiary has any
-------------
liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement.
3.22 Minute Books. The minute books and other similar records of the
------------
Buyer and each subsidiary contain true and complete records of all actions
taken at any meetings of the Buyer's or such subsidiary's shareholders, Board
of Directors or any committee thereof and of all written consents executed in
lieu of the holding of any such meeting.
3.23 Customers and Suppliers. No material licensor to or supplier of
-----------------------
the Buyer or any subsidiary has indicated to an officer of the Buyer within
the past year that it will stop, or decrease the rate of, licensing
intellectual property or supplying materials, products or services to them
(and no officer of the Buyer is aware of any such indication) and no material
customer of the Buyer or any Subsidiary has indicated to an officer of the
Buyer within the past year that it will stop, or decrease the rate of, buying,
leasing or licensing materials, products or services from them (and no officer
of the Buyer is aware of any such indication).
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<PAGE>
3.24 Corporate Approvals. The Board of Directors of each of Buyer and
-------------------
Merger Sub (and the sole shareholder of Merger Sub) have (i) approved this
Agreement and the Merger, and (ii) determined that the Merger is in the best
interests of the shareholders of Buyer and Merger Sub and is on terms that are
fair to such shareholders.
3.25 Third Party Consents. No consent or approval is needed from any
--------------------
third party in order to effect the Merger, this Agreement or any of the
transactions contemplated hereby.
3.26 Disclosure. No representation or warranty by the Buyer or Merger
----------
Sub contained in this Agreement, and no statement contained in the final Buyer
Disclosure Schedule or in the final form of any other Transaction Document
delivered to or to be delivered by the Buyer or Merger Sub pursuant to this
Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
3.27 Disclosure With Respect to IPO Form S-1. The IPO Form S-1 (except
---------------------------------------
for the ePills Description), on the date it will be filed with the Securities
and Exchange Commission, will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.28 Year 2000 Compliance. The IPO Form S-1 summarizes the Buyer's
--------------------
reasonable judgment as to its exposure to the Year 2000 problem, including (1)
the Buyer's assessment of its exposure to the Year 2000 problem and the steps
heretofore conducted by the Buyer in assessing such exposure; (2) the Buyer's
state of readiness for the Year 2000 (including with respect to its information
technology and non-information technology systems); (3) a description of the
Buyer's Year 2000 issues relating to third parties with whom the Buyer has a
material relationship; (4) the Buyer's reasonable judgment as to the costs of
fixing the Year 2000 issues faced by it (whether by modification or
replacement); (5) the risks of the Buyer's Year 2000 Issues, including a
reasonable description of the Buyer's most reasonably likely worst case Year
2000 scenarios; and (6) a description of how the Buyer is preparing to handle
the most reasonably likely worst case scenarios.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of Company and Buyer. During the period from
----------------------------------------
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, each of Company and Buyer agrees
(except to the extent expressly contemplated by this Agreement or as otherwise
consented to in writing by the other) to carry on its and its subsidiaries'
business in the usual, regular and ordinary course, to pay debts and perform
obligations when due, and to use all reasonable efforts consistent with past
practice and policies to preserve intact its and its subsidiaries' present
business organization, keep available the
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<PAGE>
services of its and its subsidiaries' key employees and preserve its and its
subsidiaries' relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it or its
subsidiaries, to the end that its and its subsidiaries' goodwill and ongoing
businesses shall be unimpaired at the Effective Time. Each of Company and
Buyer agrees not to take, and not to agree in writing or otherwise to take,
any action which would make any of its representations or warranties contained
in this Agreement untrue or incorrect or prevent it from performing or cause
it not to perform its covenants hereunder.
4.2 No Solicitation.
----------------
(a) Company and the officers, directors, employees, affiliates or
other agents of Company will not, directly or indirectly, (i) take any action
to solicit, initiate, entertain or encourage any Takeover Proposal (defined
below) or (ii) participate in any negotiations regarding, or furnish to any
person any nonpublic information relating to Company to further, or afford
access to the properties, books or records of Company to further, or otherwise
cooperate with, facilitate or encourage any person that has advised Company
that it may be considering making, or that has made, a Takeover Proposal.
Company will promptly notify Buyer after receipt of any Takeover Proposal or
any notice that any person is considering making a Takeover Proposal or any
request for nonpublic information relating to Company or for access to the
properties, books or records of Company by any person that has advised Company
that it may be considering making, or that has made, a Takeover Proposal. For
purposes of this Agreement, "Takeover Proposal" means any offer or proposal
-----------------
for, or any indication of interest in, a merger, consolidation, or other
business combination involving Company or the acquisition of any significant
equity interest in, or a significant portion of the assets of, Company other
than the transactions contemplated by this Agreement.
(b) Neither Buyer nor any of its subsidiaries, nor any of their
respective officers, directors, employees, affiliates or other agents will,
directly or indirectly, (i) take any action to solicit, initiate, entertain or
encourage any proposal regarding Buyer's or any of its subsidiary's possible
acquisition of a significant portion of the equity or assets of an online
drugstore/pharmacy company other than the Company or (ii) participate in any
negotiations regarding, or furnish to any person any non public information
relating to Buyer or any of its subsidiaries to further, or afford access to
the properties, books or recodrs of Buyer or any of its subsidiaries to
further, or otherwise cooperate with, facilitate or encourage any person that
has advised Buyer or any of its subsidiaries that it may be considering such a
transaction.
4.3 Reorganization Treatment. Neither party will take any action that
------------------------
could reasonably be expected to cause the Merger to fail to qualify as a
reorganization under Section 368(a).
4.4 Restrictions on Company's Actions. Without limiting the generality of
---------------------------------
Section 4.1, prior to the Closing, the Company shall not, without the written
consent of the Buyer:
(a) issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) or authorize the issuance, sale
or delivery of (except issuances pursuant to
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<PAGE>
the exercise of outstanding options), or redeem or repurchase (except
repurchases of Common Stock on the termination of services of employees or
consultants pursuant to Common Stock Purchase Agreements), any stock of any
class or any other securities or any rights, warrants or options to acquire
any such stock or other securities (except pursuant to the conversion or
exercise of convertible securities or options outstanding on the date hereof),
or amend any of the terms of any such convertible securities or options or
exercise any discretionary right in respect thereof;
(b) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) (except repurchases of Common
Stock on the termination of services of employees or consultants pursuant to
Common Stock Purchase Agreements) in respect of its capital stock;
(c) create, incur or assume any debt not currently outstanding
(including obligations in respect of capital leases); assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person or entity;
or make any loans, advances or capital contributions to, or investments in,
any other person or entity;
(d) enter into, adopt or amend any Employee Benefit Plan (except as
required under ERISA or the Code with respect to any Employee Benefit Plan
qualified under Code section 401(a)) or any employment or severance agreement
or arrangement of the type described in Section 2.17(j) or increase in any
manner the compensation or fringe benefits of, or materially modify the
employment terms of, its directors, officers or employees, generally or
individually, or pay any benefit not required by the terms in effect on the
date hereof of any existing Employee Benefit Plan;
(e) acquire, sell, lease, license, encumber or dispose of any
assets or property in excess of $15,000 for any single such transaction or
series of related transactions or in excess of $50,000 in the aggregate
(including without limitation any shares or other equity interests in or
securities of any subsidiary or any corporation, partnership, association or
other business organization or division thereof), other than purchases, sales
and licenses of assets in the Ordinary Course of Business;
(f) amend its charter or By-laws;
(g) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a generally
applicable change in GAAP;
(h) discharge or satisfy any Security Interest or pay any
obligation or liability other than in the Ordinary Course of Business;
(i) mortgage or pledge any of its property or assets or subject any
such assets to any Security Interest;
-31-
<PAGE>
(j) sell, assign, transfer or license any Intellectual Property,
other than in the Ordinary Course of Business;
(k) enter into, amend, terminate, take or omit to take any action
that would constitute a material violation of or default under, or waive any
material rights under, any material contract or agreement;
(l) make or commit to make any capital expenditure in excess of
$15,000 per item or $50,000 in the aggregate;
(m) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in (i) any of the representations and warranties of the Company set
forth in this Agreement becoming materially untrue or (ii) any of the
conditions to the Closing not being satisfied; or
(n) agree in writing or otherwise to take any of the foregoing
actions.
ARTICLE V
ADDITIONAL AGREEMENTS
---------------------
5.1 Access to Information.
---------------------
(a) Each party shall afford the other party and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time to (i) all of such party's
and its subsidiaries properties, books, contracts, commitments and records,
and (ii) all other information concerning the business, properties and
personnel of such party and its subsidiaries as the requesting party may
reasonably request. Each party agrees to provide to the other party and its
accountants, counsel and other representatives copies of internal financial
statements promptly upon request.
(b) No information or knowledge obtained in any investigation
pursuant to this Section 5.1 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.2 Confidentiality. The parties acknowledge that Buyer and Company
---------------
have executed a non-disclosure agreement dated August 12, 1999 (the
"Confidentiality Agreement"), which Confidentiality Agreement shall continue
-------------------------
in full force and effect in accordance with its terms.
5.3 Public Disclosure. Unless otherwise permitted by this Agreement,
Buyer and Company shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public
(or non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior approval of the other (which
approval shall not be unreasonably withheld),
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<PAGE>
except as may be required by law. The parties acknowledge and agree that this
agreement shall be filed as a material agreement to the IPO Form S-1 in
connection with Buyer's initial public offering, and the relationship between
the parties shall be described in the IPO Form S-1.
5.4 Consents; Cooperation.
---------------------
(a) Consents. Each of Buyer and Company shall promptly apply for
--------
or otherwise seek, and use its commercially reasonable efforts to obtain, all
consents, approvals, authorizations, and filings required to be obtained by it
from any Governmental Entity or other third person or entity for the
consummation of the Merger, and each party shall use its commercially
reasonable efforts and shall cooperate with the other party to obtain all
necessary consents, approvals, authorizations, and filings in connection with
the Merger, including as needed in connection with any material contracts of
Company or Buyer or otherwise.
(b) The IPO Form S-1. The Company and its officers, employees and
----------------
counsel shall use all reasonable, best efforts to cooperate with Buyer in the
drafting, reviewing and filing of the IPO Form S-1 and the exhibits thereto,
and the preparation of any amendments to the IPO Form S-1, with the intent
that the ePills Description contained in the IPO Form S-1 on and as of the
effective date of such initial public offering, will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
5.5 FIRPTA. Company shall, prior to the Closing Date, provide Buyer
------
with a properly executed Foreign Investment and Real Property Tax Act of 1980
("FIRPTA") Notification Letter, substantially in the form of Exhibit 5.5A
------ ------------
attached hereto, which states that shares of capital stock of Company do not
constitute "United States real property interests" under Section 897(c) of the
Code, for purposes of satisfying Buyer's obligations under Treasury Regulation
Section 1.1445 2(c)(3).). In addition, simultaneously with delivery of such
Notification Letter, Company shall have provided to Buyer, as agent for
Company, a form of notice to the Internal Revenue Service in accordance with
the requirements of Treasury Regulation Section 1.897-2(h)(2) and
substantially in the form of Exhibit 5.5B attached hereto along with written
authorization for Buyer to deliver such notice form to the Internal Revenue
Service on behalf of Company upon the Closing of the Merger.
5.6 Securities Laws. Buyer shall take such steps as may be necessary to
---------------
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Buyer Common Stock in connection with the
Merger. Company shall use its commercially reasonable efforts to assist Buyer
as may be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable in connection with the issuance of Buyer
Common Stock in connection with the Merger. The Merger Shares will be issued
under a Section 4(2) "private placement" exemption from the registration
requirements of federal securities laws.
5.7 Expenses. Whether or not the Merger is consummated, all costs and
--------
expenses incurred in connection with this Agreement, the Certificate of Merger
and the transactions contemplated hereby and thereby shall be paid by the
party incurring such expense; provided,
--------
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<PAGE>
however, that any transaction fees, including but not limited to legal,
- -------
accounting, banking and other advisory fees (the "Transaction Fees") in excess
----------------
of $100,000 in investment banking fees and $35,000 in legal fees (including
but not limited to all filing fees and other non-fee disbursements and
expenses (such as copy, fax and word processing charges) incurred in
connection with the consummation in this Agreement) on behalf of the Company
(other than those that are paid directly by the Company Stockholders or any of
their affiliates or are reimbursed to the Company by the Company Stockholders
or any of their affiliates) shall be reimbursed to the Buyer at the Closing
through a closing adjustment in the number of shares to be issued to the
Company Stockholders. The aggregate number of shares of Buyer Common Stock to
be issued to the Company Stockholders shall be reduced by the Excess Expense
Shares. The "Excess Expense Shares" means the quotient of: (i) the dollar
---------------------
amount of Transaction Fees incurred by the Company in connection with the
transactions contemplated hereby in excess of the stated maximums above,
divided by (ii) $19.50.
5.8 Good Faith Efforts and Further Assurances. Each of the parties to
-----------------------------------------
this Agreement shall use its good faith efforts to effectuate the transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement. Each party hereto, at the reasonable request of
another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby.
5.9 Registration of Merger Shares issued to Company Shareholders.
------------------------------------------------------------
(a) Filing and Effectiveness. If, at any time after the date that
------------------------
is 180 days after the closing of an initial public offering of Buyer, Buyer
shall receive from any Company Stockholder or Company Stockholders (including
any additional shareholder who may receive shares of Buyer Common Stock as a
result of the release of shares from the Escrow Fund) (for the purpose of this
Section 5.9 a "Holder") owning in the aggregate at least twenty five percent
------
(25%) of the Merger Shares less the Escrow Shares a written request or
requests (the "Demand Notice") that the Buyer effect a registration on Form S-
-------------
1 (the "Resale S1 Registration Statement") and any related qualification or
--------------------------------
compliance for the purpose of offering for resale the Merger Shares less the
Escrow Shares issued to the Company Shareholders in the Merger, the Buyer
will:
(1) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holder(s) and any
other Buyer stockholders who would have the right to sell shares in such an
offering; and
(2) as promptly as practicable, but in any event within thirty
(30) business days after the date that Buyer receives the Demand Notice, file
with the Securities and Exchange Commission (the "SEC") under the Securities
---
Act a Registration Statement on Form S-1 (the "Resale S-1 Registration
-----------------------
Statement") for the purpose of offering for resale (i) the Merger Shares less
- ---------
the Escrow Shares and (ii) any other shares of Buyer Common Stock held by
Buyer stockholders who have the right to and elect to sell shares in such an
offering (the "Registrable Securities"), provided, however, that the Buyer
---------------------- -------- -------
shall not be obligated to file any such
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<PAGE>
registration statement if Buyer shall furnish to the Stockholders' Agent a
certificate signed by the Chief Executive Officer of Buyer stating that, in
the good faith judgment of the Board of Directors or Chief Executive Officer
of Buyer, it would be seriously detrimental to Buyer and its stockholders for
the Resale S-1 Registration Statement to be filed on or before the date filing
would otherwise be required, and it is therefore in the best interests of
Buyer to defer the filing of the Resale S-1 Registration Statement, in which
case Buyer may delay the filing of the Resale S-1 Registration Statement not
in excess of forty-five (45) days after the original filing deadline.
(3) as soon as practicable, effect such registration and all
such qualifications and compliances as may be reasonably so requested and as
would permit and facilitate the sale and distribution of all or such portion
of such Holder's or Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of
any other Holder(s) and other Buyer stockholders joining in such request as
are specified in a written request given within ten (10) days after receipt of
such written notice from the Company; provided, however, that the Company
-------- -------
shall not be obligated to cause any such registration, qualification or
compliance, pursuant to this Section 5.9 to become effective:
(i) prior to the date six (6) months following the
effective date of the Buyer's initial public offering or later than the date
eleven (11) months after the Closing of the Merger.
(ii) if the Holder(s), together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities at an aggregate price to the public of
less than $1,500,000; or
(iii) if the Company has already effected one (1)
registration for the Holder(s) pursuant to this Section 5.9.
(b) Requirement to Keep Effective. The Buyer shall use its
-----------------------------
reasonable best efforts to cause the Resale S-1 Registration Statement to
remain effective until the first to occur of (i) the one year anniversary of
the Closing Date of the Merger or (ii) the date by which all Registrable
Securities are sold.
(c) Expenses of Registration. Buyer shall pay all Registration
------------------------
Expenses (as hereafter defined) in connection with any registration,
qualification or compliance pursuant to this Section 5.9, and each Holder
shall pay all Selling Expenses (as hereafter defined) and other expenses that
are not Registration Expenses relating to the Registrable Securities resold by
him or her. For purposes of this Section 5.9 "Registration Expenses" shall
---------------------
mean all expenses, except as otherwise stated below, incurred by Buyer in
complying with Sections 5.9(a), 5.9(b) and 5.9(d), including, without
limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for Buyer, blue sky
fees and expenses and the expense of any special audits incident to or
required by any such registration and the reasonable fees and expenses of one
counsel for all of the selling Holders up to a maximum of $25,000. For
purposes of this Section 5.9(c), "Selling Expenses" shall mean all selling
----------------
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<PAGE>
discounts, commissions and stock transfer or other Taxes applicable to the
Registrable Securities and all fees and disbursements of counsel for any
Holder.
(d) Registration Procedures. In the case of any registration
-----------------------
effected by Buyer pursuant to this Section 5.9, Buyer will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. Buyer will:
(1) Promptly prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in
connection with the Registration Statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by the Registration Statement;
(2) Furnish such number of prospectuses (including preliminary
prospectuses) and other documents incident thereto, including any amendment of
or supplement to the prospectus, as a Holder from time to time may reasonably
request;
(3) Subject to Section 5.9(h) hereof, notify each Holder of
Registrable Securities covered by the Registration Statement at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act of the happening of any event as a result of which the prospectus included
in the Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and at the request of any such
Holder, prepare and furnish to such Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such shares, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(4) Cause all such Registrable Securities registered pursuant
to the Registration Statement to be listed on each securities exchange or
quotation system on which similar securities issued by Buyer are then listed
or quoted, and in connection therewith, file with the Nasdaq National Market
an application for listing of additional shares with respect to the
Registrable Securities;
(5) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to the Registration Statement and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of the Registration Statement;
(6) Use its reasonable best efforts to register or qualify the
Registrable Securities covered by the Registration Statement under such other
securities or blue sky laws of such jurisdiction within the United States and
Puerto Rico as shall be reasonably appropriate for the distribution of the
Registrable Securities covered by the Registration Statement; provided,
--------
however, that Buyer shall not be required in connection therewith or as a
- -------
condition thereto to qualify to do business in or file a general consent to
service of process in any jurisdiction wherein it would not but for the
requirements of this paragraph be obligated to do so; and
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<PAGE>
(7) Otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering a period of at least twelve months, but not more than eighteen
months, beginning with the first month after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act.
(e) Information by Holder. Each Holder of Registrable Securities
---------------------
shall furnish to Buyer such information regarding such Holder and the
distribution proposed by such Holder as Buyer may reasonably request in
connection with any registration, qualification or compliance referred to in
this Section 5.9, but only to the extent that such information is required in
order for Buyer to comply with its obligations under all applicable securities
and other laws and to ensure that the Registration Statement relating to such
Registrable Securities conforms to the applicable requirements of the
Securities Act and the rules and regulations thereunder. Each Holder covenants
that it will promptly notify Buyer of any changes in the information set forth
in the Registration Statement or otherwise provided by such Holder to Buyer
regarding such Holder or such Holder's plan of distribution as a result of
which the Registration Statement or any prospectus relating to the Registrable
Securities contains or would contain an untrue statement of a material fact
regarding such Holder or its intended method of distribution of such
Registrable Securities or omits to state any material fact regarding such
Holder or its intended method of distribution of such Registrable Securities
required to be stated therein or necessary to make the statements therein, not
misleading.
(f) Indemnification and Contribution.
--------------------------------
(1) Buyer agrees to indemnify and hold harmless each Holder
from and against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) to which such Holder may become subject (under
the Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or
are based upon, any untrue statement, alleged untrue statement, omission or
alleged omission of a material fact in the Registration Statement, any
prospectus included in the Registration Statement, or any amendment or
supplement to the Registration Statement or any such prospectus, or any
violation or alleged violation by Buyer of the Securities Act, the Exchange
Act, any state law, rule or regulation promulgated thereunder, and Buyer will,
as incurred, reimburse such Holder for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that the indemnity contained in this
Section 5.9(f)(1) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected
without the consent of Buyer (which consent shall not be unreasonably
withheld), nor shall Buyer shall not be liable in any such case to the extent
that such loss, claim, damage or liability arises out of, or is based upon (A)
an untrue statement or alleged untrue statement made in such Registration
Statement in reliance upon and in conformity with written information
furnished to Buyer by such Holder in an instrument executed by such Holder and
specifically stated to be for use in the preparation of the Registration
Statement, (B) the failure of such Holder to comply with any of the covenants
and agreements contained in Sections 5.9(h) or 5.9(j) hereof, or (C)
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<PAGE>
any untrue statement in any prospectus that is corrected in any subsequent
prospectus that was delivered to the Holder prior to the pertinent sale or
sales by the Holder.
(2) Each Holder, severally and not jointly, agrees to
indemnify and hold harmless Buyer from and against any losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) to which Buyer
may become subject (under the Securities Act or otherwise) insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon (A) an untrue statement, alleged
untrue statement, omission or alleged omission of a material fact in the
Registration Statement, any prospectus included in the Registration Statement,
or any amendment or supplement to the Registration Statement or any such
prospectus in reliance upon and in conformity with written information
furnished to Buyer by such Holder in an instrument executed by such Holder and
specifically stated to be for use in preparation of the Registration
Statement, or any violation or alleged violation by Holder of the Securities
Act, the Exchange Act, any state law, rule or regulation promulgated
thereunder, provided, however, the indemnity contained in this Section
5.9(f)(2) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without the
consent of Holder (which consent shall not be unreasonably withheld), and
provided that no Holder shall be liable in any such case for any untrue
statement included in any Prospectus which statement has been corrected in a
writing delivered to Buyer at least two business days before the sale from
which such loss arose, (B) the failure of such Holder to comply with any of
the covenants and agreements contained in Sections 5.9(h) or 5.9(j) hereof, or
(C) any untrue statement in any Prospectus that is corrected in any subsequent
Prospectus that was delivered to the Holder prior to the pertinent sale or
sales by the Holder; and each Holder, severally and not jointly, will, as
incurred, reimburse Buyer for any legal or other expenses reasonably incurred
in investigating, defending or preparing to defend any such action, proceeding
or claim. In no event shall the amount payable by any Holder to Buyer pursuant
to this Section 5.9(f) by reason of a sale of Buyer Common Stock by such
Holder exceed the amount of the net proceeds to such Holder from the sale of
Buyer Common Stock from which such liability arose.
(3) Promptly after receipt by any indemnified person under
subsections (1) or (2) above of a notice of a claim or the beginning of any
action in respect of which indemnity is to be sought against an indemnifying
person pursuant to this Section 5.9(f), such indemnified person shall notify
the indemnifying person in writing of such claim or of the commencement of
such action (provided, however, that no failure to provide such notice shall
relieve any indemnifying person of any liability hereunder except to the
extent that such indemnifying person is prejudiced thereby), and, subject to
the provisions hereinafter stated, in case any such action shall be brought
against an indemnified person and the indemnifying person shall have been
notified thereof, the indemnifying person shall be entitled to participate
therein, and, to the extent that it shall wish, to assume the defense thereof,
with counsel reasonably satisfactory to the indemnified person. After notice
from the indemnifying person to such indemnified person of the indemnifying
person's election to assume the defense thereof, the indemnifying person shall
not be liable to such indemnified person for any legal expenses subsequently
incurred by such indemnified person in connection with the defense thereof;
provided, however, that, if the indemnifying person shall propose that the
same counsel represent it and the indemnified person, and if counsel for the
indemnified person shall reasonably have
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<PAGE>
concluded that there is an actual conflict of interest posed by the
representation proposed by the indemnifying person, the indemnified person
shall be entitled to retain its own counsel reasonably satisfactory to the
indemnifying person at the expense of such indemnifying person; provided,
however that if more than one indemnified person makes a claim against an
indemnifying person based on substantially similar facts, the indemnifying
person shall not be responsible for the fees of more than one counsel for all
indemnified persons whose claims are based on substantially similar facts.
(4) If the indemnification provided for in this Section 5.9(f)
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (1) or (2) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof), in such proportion as is
appropriate to reflect the relative fault of each such party, as well as any
other relevant equitable considerations, provided, however, that any
contribution by a Holder shall not exceed the net proceeds to such Holder for
the sale of Buyer Common Stock from which such liability arose, except in the
case of willful fraud by such Holder. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by Buyer on the one hand or a
Holder on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Buyer and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 5.9(f) were determined by any method of
allocation which does not take account of the equitable considerations
referred to above in this Section 5.9(f)(4). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, or liabilities
(or actions in respect thereof) referred to above in this Section 5.9(f)(4)
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action, proceeding or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(5) The obligations of the Buyer and the Holders under this
Section 5.9(f) shall be in addition to any liability which Buyer and the
respective Holders may otherwise have and shall extend, upon the same terms
and conditions, to each director and officer of Buyer or any Holder, and to
each person, if any, who controls Buyer or any Holder within the meaning of
the Securities Act or the Exchange Act.
(g) Restrictive Legend. Each certificate representing Merger
------------------
Shares shall bear substantially the following legends (in addition to any
legends required under applicable securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE
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<PAGE>
SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM.
ADDITIONALLY, THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, HC2 ACQUISITION CORP., AND EPILLS INC.
DATED ___________________, 1999 (THE "AGREEMENT"), WHICH INCLUDES AN
OBLIGATION TO NOTIFY THE ISSUER PRIOR TO ANY SALE OR OTHER TRANSACTION,
AND NO TRANSFER OF SHARES SHALL BE VALID OR EFFECTIVE ABSENT COMPLIANCE
WITH SUCH RESTRICTIONS. ALL SUBSEQUENT HOLDERS OF THIS CERTIFICATE WILL
HAVE AGREED TO BE BOUND BY CERTAIN OF THE TERMS OF THE AGREEMENT,
INCLUDING SECTION 5.9 OF THE AGREEMENT. COPIES OF THE AGREEMENT MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE REGISTERED HOLDER OF
THIS CERTIFICATE TO THE SECRETARY OF THE ISSUER.
The legend contained in this Section 5.9(g) shall be removed from a certificate
in connection with any sale in compliance with the terms of this Agreement and
pursuant to the Resale S-1 Registration Statement, or pursuant to Rule 144 (if
accompanied by any legal opinion reasonably required by the Buyer), but shall
not be removed in any other circumstance without Buyer's prior written consent
(which consent shall not be unreasonably withheld or delayed and shall be
granted if such legend is no longer appropriate).
(h) Transfer of Shares After Registration.
-------------------------------------
(1) Restriction. No Holder may make any sale of any Merger
-----------
Shares except (A) in accordance with the Resale S-1 Registration Statement, in
which case Holder must comply with the requirement of delivering a current
prospectus, (B) in accordance with Rule 144, or (C) pursuant to an exemption
from the registration requirements of the Securities Act, if accompanied by an
opinion of counsel that registration is not necessary, which opinion and
counsel shall be reasonably satisfactory to Buyer.
(2) Notice to Buyer of Proposed Sale and Right of Buyer to
------------------------------------------------------
Suspend Use of Registration Statement. If, at any time during the period after
- -------------------------------------
the Registration Statement has been declared effective and on or before the
date that is one year after the Closing of the Merger, any Holder shall
propose to sell any Registrable Securities pursuant to the Resale S1
Registration Statement, it shall submit written notice to the Buyer (a "Notice
------
of Sale") by facsimile transmission of such intention which shall include the
- -------
name of the Holder, the number of shares of Registrable Securities that such
holder intends to sell and the Holder's telephone and facsimile numbers. (If
the Notice of Sale is actually received on a day other than a business day, it
will be deemed received on the next business day; the date on which the Notice
of Sale is received is referred to as the "Notice Date;" the time on which the
-----------
Notice of Sale is received is
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<PAGE>
referred to as the "Notice Time".) Upon receiving a Notice of Sale from a
-----------
Holder, the Buyer will notify the Holder as soon as reasonably practicable
(but in no event later than the same time as the Notice Time on the next
business day following the Notice Date) whether (i) the Buyer believes that
the prospectus contained in the Registration Statement, as then amended or
supplemented, is available for immediate use, whereupon the Buyer shall so
notify the Holder(s) and the Holder(s) will have a period of five (5) trading
days following such notification in which to sell its Registrable Securities
or (ii) the Buyer believes that it is necessary or appropriate to file a
supplement or file a post-effective amendment to the registration statement or
the prospectus or any document incorporated therein by reference or file any
other report or document so that, as thereafter delivered to the purchasers of
the Registrable Securities, the prospectus will not contain an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading (a "Prospectus Update"). If the
-----------------
Buyer notifies the Holder(s) that it believes it may be necessary or
appropriate to effectuate a Prospectus Update and the Buyer is not exercising
any right it may have under Section 5.9(i) to postpone the Prospectus Update,
the Buyer will thereupon use all reasonable efforts to effectuate such
Prospectus Update as soon as reasonably possible, and not later than three (3)
business days after the Notice of Sale is received by the Buyer, except that
the Buyer will have up to an additional two (2) business days to effectuate
such Prospectus Update if, because of the particular circumstances involved,
the Buyer could not effectuate the Prospectus Update earlier, despite all
reasonable diligence. As soon as the Prospectus Update has been effectuated,
the Buyer will notify each Holder who has submitted a Notice of Sale that the
prospectus is available for use, whereupon each such Holder will have a period
of five (5) trading days in which to sell its Registrable Securities.
(i) The Buyer will be entitled to postpone, for the minimum period
provided below, the filing of any Prospectus Update otherwise required to be
prepared and filed by it pursuant hereto if, at the time it receives a Notice
of Sale, the Buyer determines in its reasonable judgment, after consultation
with counsel, that (i) the Buyer would be required to prepare and file any
financial statements (other than those it customarily prepares or before it
customarily files such financial statements), (ii) the Buyer would be required
to file an amendment to the registration statement to describe facts or events
which individually or in the aggregate represent a fundamental change in the
information contained in the registration statement within the meaning of Item
512 of Regulation S-K promulgated under the Securities Act, or (iii) the
filing would require the premature announcement of any financing, acquisition,
corporate reorganization, contract or other material corporate transaction or
development involving the Buyer such as the Buyer reasonably determines would
be materially detrimental to the interests of the Buyer and its shareholders.
The postponement will be for the minimum period reasonably required for the
Buyer to prepare and file the necessary documents, in the case of a
postponement pursuant to (i) or (ii) above, or the minimum period reasonably
required to avoid such premature disclosure, in the case of (iii) above, and
which period will not be in excess of thirty (30) days unless, because of the
unusual nature of the particular circumstances, it is necessary that the
period extend beyond thirty (30) days. The Buyer will promptly give each
Holder who has submitted a Notice of
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<PAGE>
Sale notice of any postponement exercised pursuant to this Section 5.9(i). As
soon as the Prospectus Update has been effectuated following a postponement
effected pursuant to this Section 5.9(i), the Buyer will notify each Holder
who has submitted a Notice of Sale that the prospectus is available for use,
whereupon each such Holder will have a period of five (5) trading days in
which to sell its Registrable Securities.
(j) The Holder(s) may not sell shares of Registrable Securities
under this Section 5.9 without first (i) complying with the Notice of Sale
requirements of Section 5.9(h)(2) and (ii) allowing the Buyer to prepare
Prospectus Updates (including any permitted postponements thereof) as set
forth in Sections 5.9(h)(2) and 5.9(i). A Holder will submit a Notice of Sale
only if in good faith it actually intends to sell the Registrable Securities
within such five (5) trading day period and with the understanding that a
Notice of Sale is to be made only on the occasion that the sale of Registrable
Securities is actually contemplated and not on a continual basis. A Holder
will notify the Buyer by facsimile transmission promptly after it has
completed or otherwise ceased sales following submission of a Notice of Sale.
The Holder(s) will provide to the Buyer all information in the Holder(s)'
possession or control, and will take all actions, as may be required in order
to permit the Buyer to comply with all applicable requirements of the
Securities Act and any applicable state securities laws.
(k) Notwithstanding anything herein to the contrary, Buyer shall
keep a registration statement effective and available pursuant to this Section
5.9 for a minimum of thirty (30) days (after taking into account any periods
of delay permitted under Sections 5.9(h) and (i) above), shall permit the
Holders to sell the Merger Shares covered by such registration statement for a
minimum of thirty (30) days, and under no circumstances shall the Buyer be
required to keep a registration statement effective and available pursuant to
this Section 5.9 for greater than thirty (30) days (after taking into account
any periods of delay permitted under Sections 5.9(h) and (i) above).
(l) Rule 144 Reporting. With a view to making available the
------------------
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Registrable Securities to the public without
registration, Buyer agrees to use its reasonable best efforts to:
(1) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the Merger;
(2) File with the SEC in a timely manner all reports and other
documents required of Buyer under the Securities Act and the Exchange Act; and
(3) So long as a Holder owns any Registrable Securities, to
furnish to that Holder forthwith upon request a written statement by Buyer as
to its compliance with the reporting requirements of said Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of Buyer, and such other reports and documents of Buyer as
such Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing such Holder to sell any such Registrable
Securities without registration.
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<PAGE>
ARTICLE VI
CONDITIONS TO THE MERGER
------------------------
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each party to this Agreement to consummate and
effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, by agreement of
all the parties hereto:
(a) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order or
prohibition issued by any Governmental Entity preventing the consummation of
the Merger shall be in effect. In the event an injunction or other order shall
have been issued, each party agrees to use its reasonable diligent efforts to
have such injunction or other order lifted.
(b) Governmental Approval. Buyer, Company and Merger Sub and their
---------------------
respective subsidiaries shall have timely obtained from each Governmental
Entity all approvals, waivers and consents necessary for consummation of or in
connection with the Merger and the several transactions contemplated hereby,
including such approvals, waivers and consents as may be required under the
Securities Act under state blue sky laws and Delaware Law.
6.2 Additional Conditions to Obligations of Company. The obligations of
-----------------------------------------------
Company to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be
waived, in writing, by Company:
(a) Representations, Warranties and Covenants. (i) The
-----------------------------------------
representations and warranties of Buyer and Merger Sub in this Agreement shall
be true and correct in all material respects (except for such representations
and warranties that are qualified by their terms by a reference to materiality
which representations and warranties as so qualified shall be true in all
respects) on and as of the Effective Time as though such representations and
warranties were made on and as of such time and (ii) Buyer and Merger Sub
shall have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by them as of the Effective Time, and Company shall have
received a certificate signed on behalf of Buyer and the Merger Sub by the
Chief Executive Officer or the President and the Chief Financial Officer to
such effect.
(b) Legal Opinion. Company shall have received a legal opinion
-------------
from Buyer's legal counsel substantially in the form of Exhibit 6.2(b)
--------------
hereto.
(c) No Material Adverse Changes. There shall not have occurred any
---------------------------
material adverse change in the condition (financial or otherwise), properties,
assets (including intangible assets), liabilities, business, operations,
results of operations or prospects of Buyer and its subsidiaries, taken as a
whole.
-43-
<PAGE>
(d) Third Party Consents. Company shall have been furnished with
--------------------
evidence reasonably satisfactory to it of the consent or approval of those
persons and entities whose consent or approval shall be required in order for
Buyer and Merger Sub to consummate the Merger.
(e) Intentionally omitted.
(f) Employment and Non-Competition Agreements. The Buyer shall
-----------------------------------------
have executed the Employment and Non-Competition Agreements substantially in
the form attached as Exhibit 6.2(f) (each an "Employment and Non-Competition
-------------- ------------------------------
Agreement") with Christopher Kolb, Howard Vinik and Timothy Seng.
- ---------
(g) Escrow Agreement. The Buyer and Escrow Agent shall have
----------------
executed the Escrow Agreement substantially in the form attached Exhibit
6.2(g).
(h) Matus Advisory Agreement. The Buyer and Geoffrey Matus shall
------------------------
have entered into an Advisory Agreement substantially in the form attached as
Exhibit 6.2(h) (the "Matus Advisory Agreement").
(i) Assumption of Notes. Buyer will execute an Assumption Agreement
-------------------
substantially in the form attached as Exhibit 6.2(i), pursuant to which it will
assume the obligations of the Company under those certain promissory notes dated
as of January 25, 1999, as amended by letter agreement dated September __, 1999,
payable to each of Rhemai 3, B.V., Hawk Hill Investment Limited and CCG Canada
Inc.
6.3 Additional Conditions to the Obligations of Buyer and Merger Sub.
----------------------------------------------------------------
The obligations of Buyer and Merger Sub to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by Buyer:
(a) Representations, Warranties and Covenants. (i) The
-----------------------------------------
representations and warranties of Company in this Agreement shall be true and
correct in all material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality
which representations and warranties as so qualified shall be true in all
respects) on and as of the Effective Time as though such representations and
warranties were made on and as of such time and (ii) Company shall have
performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by it as of the Effective Time, and Buyer shall have received a
certificate signed on behalf of Company by the President and Chief Financial
Officer to such effect.
(b) Legal Opinion. Buyer shall have received a legal opinion from
-------------
Company's legal counsel, in substantially the form of Exhibit 6.3(b).
(c) No Material Adverse Changes. There shall not have occurred any
---------------------------
material adverse change in the condition (financial or otherwise), properties,
assets (including intangible assets), liabilities, business, operations,
results of operations or prospects of Company other than the good faith use of
cash reasonably consistent with projections previously provided to Buyer.
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<PAGE>
(d) FIRPTA Certificate. Company shall have provided Buyer with the
------------------
FIRPTA Notification Letter.
(e) Third Party Consents. Buyer shall have been furnished with
--------------------
evidence reasonably satisfactory to it of the consent or approval of those
persons and entities whose consent or approval shall be required in order for
Company to consummate the Merger or ensure the continuation of all contracts
of Company, including but not limited to AOL's consent to the Merger pursuant
to the AOL Advertising Insertion Order dated August 20, 1999.
(f) Resignation of Directors. The directors of Company in office
------------------------
immediately prior to the Effective Time shall have resigned as directors of
the Surviving Corporation effective as of the Effective Time.
(g) Employment and Non-Competition Agreements. Each of Christopher
-----------------------------------------
Kolb, Howard Vinik, and Timothy Seng shall have executed the Employment and
Non-Competition Agreement.
(h) Confidentiality Agreements. The employees and consultants of
--------------------------
Company listed on Exhibit 6.3(h), who constitute all of Buyer's employees and
consultants, shall have entered into Confidential Information and Invention
Assignment Agreements in the Buyer's standard form, to be effective upon the
Closing.
(i) Dissenting Stockholders. Holders of no more than 10% of
-----------------------
Company's issued and outstanding capital stock as of the Closing shall have
elected to, or continue to have contingent rights to, exercise appraisal
rights under Delaware Law as to such shares.
(j) Escrow Agreement. The Escrow Agent and Stockholders' Agent
----------------
shall have executed and delivered to Buyer the Escrow Agreement.
(k) Intentionally omitted.
(l) Bergen Brunswig Fulfillment Agreement. The Bergen Fulfillment
-------------------------------------
Agreement executed and delivered concurrently with the execution of this
Agreement, and as amended by the Bergen Letter Agreement, shall remain in full
force and effect.
(m) IPO Lockup Agreement. Each of the Company Stockholders and
--------------------
Company option holders shall have executed Buyer's underwriters' standard form
of 180 day lockup agreement in connection with Buyer's proposed initial public
offering in the form attached as Exhibit 6.3(m).
(n) Service Mark License and Access Agreement. The Service Mark
-----------------------------------------
License and Access Agreement executed and delivered concurrently with the
execution of this Agreement shall remain in full force and effect.
(o) Stockholder Agreement. Each Company Stockholder shall have
---------------------
executed and delivered to Buyer the Stockholder Agreement in the form attached
as Exhibit 6.3(o).
--------------
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(p) Purchasers' Representative. Each of the Company Stockholders
--------------------------
who is not an accredited investor as defined in Rule 501 of the Securities Act
has appointed Geoffrey Matus to act as a "purchaser representative" as defined
in Rule 501 of the Securities Act.
(q) Intentionally omitted.
(r) Matus Advisory Agreement. Geoffrey Matus shall have executed and
------------------------
delivered the Matus Advisory Agreement.
(s) Certificates. Each of the Company Stockholders shall have
------------
executed and delivered to the Buyer the Certificates representing all of the
shares of Company Common Stock outstanding, together with duly executed stock
powers transferring such Certificates to Merger Sub.
(t) Assignment of URLs. Geoffrey Matus shall have executed and
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delivered an application for the assignment of the URLs "ePills.com,"
"ePills.net" and "Medicinas.com" to the Company.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
7.1 Termination. At any time prior to the Effective Time, whether
-----------
before or after approval of the matters presented in connection with the
Merger by the shareholders of Company, this Agreement may be terminated:
(a) by mutual consent of Buyer and Company;
(b) by Company or Buyer, by giving written notice to the other
party, if the other party is in material breach of any representation,
warranty, or covenant of such other party contained in this Agreement, which
breach shall not have been cured, if subject to cure, within 15 days following
receipt by the breaching party of written notice of such breach by the other
party;
(c) by Buyer, by giving written notice to the Company, if the
Closing shall not have occurred on or before October 15, 1999 by reason of the
failure of any condition precedent under Section 6.1 or 6.3 (unless the
failure results primarily from a breach by Buyer or Merger Sub of any
representation, warranty, or covenant of Buyer or Merger Sub contained in this
Agreement or Buyer's failure to fulfill a condition precedent to closing or
other default);
(d) by Company, by giving written notice to Buyer, if the Closing
shall not have occurred on or before October 15, 1999 by reason of the failure
of any condition precedent under Section 6.1 or 6.2 (unless the failure
results primarily from a breach by the Company of any representation,
warranty, or covenant of Company contained in this Agreement or the Company's
failure to fulfill a condition precedent to closing or other default);
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7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement as provided in Section 7.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Buyer,
Merger Sub or Company or their respective officers, directors, shareholders or
affiliates, except to the extent that such termination results from the
material breach by a party hereto of any of its representations, warranties or
covenants set forth in this Agreement; provided that, the provisions of
Section 5.2 (Confidentiality) and this Section 7.2 shall remain in full force
and effect and survive any termination of this Agreement.
7.3 Amendment; Waiver. The boards of directors of the parties hereto
-----------------
may cause this Agreement to be amended at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto. At any
time prior to the Effective Time any party hereto may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of
such party.
ARTICLE VIII
INDEMNIFICATION
---------------
8.1 Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
Notwithstanding any investigation conducted before or after the Closing Date,
Buyer and the Company will be entitled to rely upon the other party's
representations, warranties and covenants set forth in this Agreement. The
obligations of the Buyer and the Company with respect to its representations,
warranties, agreements and covenants will survive the Closing and continue in
full force and effect for a period of six months after the Closing, provided
that if a notice is given in accordance with the Escrow Agreement before the
expiration of such six month period, then (notwithstanding the expiration of
such time period) the representation, warranty or covenant applicable to such
claim shall survive until, but only for the purpose of, the resolution of such
claim.
8.2 Indemnity by Company Shareholders. From and after the Closing Date,
---------------------------------
and subject to the other provisions of this Article 8, each Company
Stockholder shall jointly and severally indemnify and hold harmless Buyer and
Surviving Corporation (an "Indemnified Person") against, and reimburse Buyer
------------------
and/or Surviving Corporation for, any liability, damage, loss, obligation,
demand, judgment, fine, penalty, cost or expense, including reasonable
attorneys' fees and expenses, and the costs of investigation incurred in
defending against or settling such liability, damage, loss, cost or expense or
claim therefor and any amounts paid in settlement thereof (collectively
"Damages") imposed on or reasonably incurred by Buyer as a result of: (i) any
-------
breach of any representation or warranty or failure to perform any covenant on
the part of Company under this Agreement, (ii) resulting from any claim by a
Company Stockholder or former Company stockholder based upon an ownership
right or alleged ownership right of any shares of stock of the Company, the
form of consideration payable in the Merger or any actions of the board of
directors of the Company in connection with the transactions
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<PAGE>
contemplated by this Agreement or (iii) or arising out of any facts relating
to the disclosure described in Section 2.15 in the Company Disclosure Schedule
(the "Lipkin Claims") regarding any relationship among Efram Lipkin, CoDesign
-------------
and/or any other principals of CoDesign (the "Lipkin Group") and the Company.
------------
8.3 Method of Asserting Claims. All claims for indemnification by an
--------------------------
Indemnified Person pursuant to this Article VIII shall be made in accordance
with the provisions of the Escrow Agreement.
8.4 Limitations. Notwithstanding anything to the contrary herein,
-----------
(a) the aggregate liability of the Company Stockholders for Damages
under this Article VIII shall be limited to the Escrow Fund (or a portion
thereof, as set forth in the Escrow Agreement). Except with respect to claims
based on fraud, in the event the Merger occurs, the rights of an Indemnified
Person under this Article VIII shall be limited exclusively to the right to
receive the Escrow Shares (or a portion thereof, as set forth in the Escrow
Agreement) and such indemnification shall be the exclusive remedy of the
Indemnified Persons with respect to claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement of the Company contained in this Agreement. No Company Stockholder
shall have any right of contribution against the Company with respect to any
breach by the Company of any of its representations, warranties, covenants or
agreements.
(b) Subject to Section 12(a) of the Escrow Agreement, the Company
Stockholders shall have no obligation to indemnify the Indemnified Person
pursuant to Section 8.2 hereof unless and until all Damages thereunder shall
exceed $50,000 in the aggregate, at which point the Company Stockholders shall
be responsible for all Damages (including the first $50,000 of such Damages)
imposed on or incurred by the Indemnified Person. As used in this Agreement,
"Damages" shall be determined after giving effect to the receipt by the
Indemnified Person of any insurance proceeds relating to such Damages.
8.5 Stockholders' Agent. Geoffrey Matus shall be constituted and
-------------------
appointed as agent ("Stockholders' Agent") for and on behalf of the Company
-------------------
Stockholders to give and receive notices and communications, to authorize
delivery to Buyer of the Buyer Common Stock in satisfaction of claims by
Buyer, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders
of courts and awards of arbitrators with respect to such claims, and to take
all actions necessary or appropriate in the judgment of the Stockholders'
Agent for the accomplishment of the foregoing. Notices or communications to or
from the Stockholders' Agent shall constitute notice to or from each of the
Company Shareholders. A decision, act, consent or instruction of the
Stockholders' Agent shall constitute a decision of all Company Stockholders
with respect to this Section 8 and shall be final, binding and conclusive upon
each such Company Stockholder, and the Buyer may rely upon any decision, act,
consent or instruction of the Stockholders' Agent as being the decision, act,
consent or instruction of each and every such Company Stockholder.
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ARTICLE IX
GENERAL PROVISIONS
------------------
9.1 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as shall be
specified by like notice):
(a) if to Buyer or Merger Sub, to:
HealthCentral.com
6001 Shellmound Street, Suite 800
Emeryville, CA 94608
Attn: Chief Executive Officer
Facsimile No.:
Telephone No.: 510-250-2500
with a copy to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Attention: Mark A. Medearis
Facsimile No.: (415) 233-8386
Telephone No.: (415) 854-4488
(b) if to Company, to:
ePills Inc.
5900 Hollis Street
Suite O
Emeryville, CA 94608
Attn: President
Fax: (510) 594-8285
Tel: (510) 250-3110
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<PAGE>
with a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attn: Steven S. Pretsfelder, Esq.
Facsimile No.: (212) 702-5941
Telephone No.: (212) 702-5730
and to:
Goldman, Spring, Schwartz & Kichler
40 Sheppard Avenue West
Suite 700
North York, Ontario M2N 6K9
Canada
Attn: Samuel Schwartz, Esq.
Facsimile No.: (416) 225-4805
Telephone No.: (416) 225-9400
(c) Each such notice or other communication shall be in writing and
shall be effective (i) if given by telecopier, when such telecopy is
transmitted to the telecopier number specified in Section 9.1 (with
confirmation of transmission); or (ii) if given by any other means, when
delivered at the address specified in Section 9.1. Any party by notice given
in accordance with this Section 9.1 to the other party may designate another
address (or telecopier number) or person for receipt of notices hereunder.
Notices by a party may be given by counsel to such party.
9.2 Interpretation. The table of contents and headings contained in
--------------
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. In this Agreement, any
reference to a party's "knowledge" or "to the best of its knowledge" means
such party's actual knowledge after due and diligent inquiry of officers,
directors and other employees of such party reasonably believed to have
knowledge of such matters.
9.3 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
9.4 Entire Agreement; Nonassignability; Parties in Interest. This
-------------------------------------------------------
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Company Disclosure Schedule and the Buyer Disclosure
Schedule (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof,
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except for the Confidentiality Agreement, which shall continue in full force
and effect, and shall survive any termination of this Agreement or the
Closing, in accordance with its terms; and (b) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided.
9.5 Severability. In the event that any provision of this Agreement, or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
9.6 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California. Each of the parties
hereto irrevocably consents to the exclusive jurisdiction of any court located
within the State of California, in connection with any matter based upon or
arising out of this Agreement or the matters contemplated herein, agrees that
process may be served upon them in any manner authorized by the laws of the
State of California for such persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction and
such process.
9.7 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
9.8 Resolution of Conflicts; Arbitration. Any dispute arising out of or
------------------------------------
related to this agreement, which cannot be resolved by negotiation, shall be
settled by binding arbitration conducted by a single arbitrator, selected by
mutual agreement of the Stockholder Agent and Buyer, conducted in the San
Francisco Bay Area in accordance with the rules then in effect of the American
Arbitration Association. Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. The non-prevailing party to
an arbitration shall pay its own expenses, the fees of each arbitrator, the
administrative fee of the American Arbitration Association, and the expenses,
including without limitation, attorneys' fees and costs, reasonably incurred
by the other party to the arbitration.
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<PAGE>
IN WITNESS WHEREOF, Buyer, Company, Merger Sub and Stockholder Agent have
caused this Agreement to be executed and delivered by their respective
officers thereunto duly authorized, all as of the date first written above.
HEALTHCENTRAL.COM
By:__________________________________
Name:___________________________
Title:__________________________
E-PILLS INC.
By:__________________________________
Name:___________________________
Title:__________________________
HC2 ACQUISITION CORPORATION
By:__________________________________
Name:___________________________
Title:__________________________
STOCKHOLDER AGENT
_________________________________________
GEOFFREY MATUS
SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION
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