AGREEMENT AND PLAN OF MERGER
BY AND AMONG
GOAMERICA, INC.,
GOAMERICA ACQUISITION II CORP.
AND
HOTPAPER.COM, INC.
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TABLE OF CONTENTS
ARTICLE I....................................................................1
THE MERGER...................................................................1
1.1 Merger; Effective Time of the Merger.................................1
1.2 Closing; Closing Date................................................1
1.3 Effects of the Merger................................................1
1.4 Merger Consideration.................................................2
ARTICLE II...................................................................3
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES.....................................................3
2.1 Effect on Capital Stock..............................................3
2.2 Exchange of Certificates.............................................4
2.3 Escrow of Shares.....................................................5
2.4 Hotpaper Stock Options...............................................6
2.5 Taking of Necessary Action; Further Action...........................7
ARTICLE III..................................................................7
REPRESENTATIONS AND WARRANTIES...............................................7
3.1 Representations and Warranties of Hotpaper...........................7
3.2 Representations and Warranties of GOAM and Sub......................13
ARTICLE IV..................................................................16
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS....16
4.1 Conduct of Business.................................................16
4.2 Access to Information...............................................18
4.3 Hotpaper Stockholders' Consent......................................18
4.4 Preparation of Proxy Statement or Information Statement.............18
4.5 Tax Matters.........................................................19
4.6 Breach of Representations and Warranties............................19
4.7 Consents............................................................19
4.8 Commercially Reasonable Efforts.....................................19
4.9 Performance by Sub..................................................19
4.10 FIRPTA..............................................................20
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4.11 Legal Conditions to the Merger......................................20
4.12 Employee Matters....................................................20
4.13 Expenses and Transfer Taxes.........................................21
4.14 Issuance of Share Certificates......................................21
4.15 Public Announcements................................................21
4.16 Confidentiality.....................................................21
4.17 Invention Assignment Agreement......................................22
4.18 Non-Solicitation Agreement..........................................22
4.19 Lock-Up Agreement...................................................22
ARTICLE V...................................................................23
CONDITIONS PRECEDENT........................................................23
5.1 Conditions to Each Party's Obligation to Effect the Merger..........23
5.2 Conditions of Obligations of GOAM and Sub...........................24
5.3 Conditions of Obligations of Hotpaper...............................25
ARTICLE VI..................................................................26
INDEMNIFICATION.............................................................26
6.1 Indemnification by the Stockholders.................................26
6.2 Procedures Relating to Indemnification..............................27
6.3 Limitation on Indemnification.......................................29
6.4 Exclusive Remedy....................................................29
6.5 Event of Fraud......................................................29
6.6 Stockholder Representative..........................................29
ARTICLE VII.................................................................30
TERMINATION.................................................................30
7.1 Termination.........................................................30
ARTICLE VIII................................................................31
GENERAL PROVISIONS..........................................................31
8.1 Non-solicitation....................................................31
8.2 Survival of Representations, Warranties and Agreements..............31
8.3 Amendment...........................................................31
8.4 Extension; Waiver...................................................31
8.5 Notices.............................................................32
8.6 Interpretation......................................................33
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8.7 Counterparts........................................................33
8.8 Entire Agreement....................................................33
8.9 No Transfer.........................................................33
8.10 Severability........................................................33
8.11 Other Remedies......................................................34
8.12 Further Assurances..................................................34
8.13 Absence of Third Party Beneficiary Rights...........................34
8.14 Mutual Drafting.....................................................34
8.15 Governing Law.......................................................34
8.16 Knowledge...........................................................34
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AGREEMENT AND PLAN OF MERGER, dated as of August 11, 2000, by and among
GOAMERICA, INC., a Delaware corporation ("GOAM"), GOAMERICA ACQUISITION II
CORP., a Delaware corporation and a wholly-owned subsidiary of GOAM ("Sub") and
HOTPAPER.COM, INC., a Delaware corporation ("Hotpaper").
WHEREAS, the directors, or a majority of them, of each of the above
corporations, respectively, deem it advisable for the welfare and best interests
of said corporations and for the best interests of the respective stockholders
of said corporations that Sub be merged with and into Hotpaper on the terms and
conditions hereinafter set forth and in accordance with the provisions of the
Delaware General Corporation Law (the "DGCL").
NOW, THEREFORE, in consideration of the foregoing premises, the provisions
and the respective agreements hereinafter set forth, and in order to set forth
the terms and conditions of the merger of Sub with and into Hotpaper and the
mode of carrying the same into effect, the parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 Merger; Effective Time of the Merger.
------------------------------------
Subject to the terms and conditions of this Agreement, Sub will be merged
with and into Hotpaper (the "Merger") in accordance with the DGCL. In accordance
with the provisions of this Agreement, a Certificate of Merger shall be filed in
accordance with the DGCL on the Closing Date (as defined in Section 1.2 below)
and, except as otherwise set forth herein, each issued and outstanding share of
capital stock of Hotpaper (on an as converted to Common Stock basis) shall be
converted into shares of Common Stock, par value $.01 per share, of GOAM ("GOAM
Common Stock"). The Merger shall become effective upon confirmation of the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware (the date of confirmation of such filing being hereinafter referred to
as the "Effective Date of the Merger" and the time of confirmation of such
filing being hereinafter referred to as the "Effective Time of the Merger").
1.2 Closing; Closing Date.
---------------------
The closing of the Merger (the "Closing") will take place as soon as
practicable on the later of (a) the date on which Hotpaper stockholder approval
is obtained, as contemplated by Section 4.3 below or (b) the first business day
after satisfaction or waiver of the latest to occur of the conditions set forth
in Article V (the "Closing Date"), at the offices of Buchanan Ingersoll
Professional Corporation, 650 College Road East, Princeton, New Jersey 08540,
unless a different date is agreed to by the parties hereto.
1.3 Effects of the Merger.
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At the Effective Time of the Merger, (a) the separate existence of Sub
shall cease and Sub shall be merged with and into Hotpaper (Sub and Hotpaper are
sometimes referred to collectively herein as the "Constituent Corporations" and
Hotpaper after the Merger is sometimes
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referred to herein as the "Surviving Corporation"), (b) Hotpaper shall be a
wholly-owned subsidiary of GOAM; (c) the Amended and Restated Certificate of
Incorporation of Hotpaper shall be the Certificate of Incorporation of the
Surviving Corporation, (d) the Bylaws of Hotpaper shall be the Bylaws of the
Surviving Corporation, (e) Aaron Dobrinsky, Joseph Korb, Francis Elenio and
Kevin Warnock shall be the directors of the Surviving Corporation (it being a
condition to the Closing that all directors of Hotpaper other than Mr. Warnock
shall have resigned on or prior to the Effective Time of the Merger), (f) Aaron
Dobrinsky (Chairman), Joseph Korb (Executive Vice President), Francis Elenio
(Chief Financial Officer, Treasurer and Secretary) and Kevin Warnock (President
and Chief Executive Officer) shall be the officers of the Surviving Corporation
and (g) the Merger shall, from and after the Effective Time of the Merger, have
all the effects provided by applicable law. GOAM agrees that it will not amend
the Hotpaper Certificate of Incorporation or Bylaws to adversely affect the
rights of the current Hotpaper officers or directors to indemnification by
Hotpaper.
1.4 Merger Consideration.
--------------------
The aggregate consideration to be paid in the Merger (the "Merger
Consideration") shall consist of (a) a cash payment to Kevin Warnock, as a
stockholder of Hotpaper, in an amount equal to Seven Hundred Fifty Thousand
Dollars ($750,000) (the "Cash Payment") and (b) an issuance to the Hotpaper
stockholders of the number of shares of GOAM Common Stock which when multiplied
by the average closing price of such GOAM Common Stock on the Nasdaq National
Market for the ten (10) trading days immediately preceding the third day prior
to the Closing Date (the "Average Closing Price") shall have a market value
equal to $9,250,000 minus that number of shares that would have been allocated
pursuant to this Section 1.4 to the Dissenting Stockholders (as defined in
Section 2.1(d) below) had they not exercised their dissenter's rights under the
DGCL or the CGCL (as defined in Section 2.1(d)) (the "Merger Shares"). Subject
to prior delivery to GOAM from Kevin Warnock of the certificate or certificates
which immediately prior to the Effective Time of the Merger represent all of the
issued and outstanding shares of capital stock of Hotpaper held in his name, the
Cash Payment shall be delivered on the Closing Date via wire transfer to an
account designated in writing by Kevin Warnock. Except as set forth in Section
2.1(d) and subject to Section 2.3, each holder of capital stock of Hotpaper
shall receive that number of Merger Shares as constitutes such stockholder's pro
rata portion thereof. Each Hotpaper stockholder's pro rata portion of the Merger
Shares shall be calculated by multiplying the number of shares of capital stock
of Hotpaper held of record by that stockholder (on an as converted to Common
Stock basis and, with respect to Kevin Warnock, after deducting the portion of
such shares of capital stock for which he received the Cash Payment) (the
"Warnock Shares") by the quotient obtained by dividing the aggregate number of
Merger Shares by the number of shares of capital stock of Hotpaper (on an as
converted to Common Stock basis and after deducting the Warnock Shares)
outstanding immediately prior to the Effective Time of the Merger (the
"Conversion Ratio").
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock.
-----------------------
As of the Effective Time of the Merger, by virtue of the Merger and
without any action on the part of the holders of any shares of capital stock of
GOAM, Sub or Hotpaper:
(a) CAPITAL STOCK OF SUB. All issued and outstanding shares of capital
stock of Sub shall continue to be issued and shall be converted into 1,000
shares of Common Stock of the Surviving Corporation. Each stock certificate
of Sub evidencing ownership of any such shares shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK OF HOTPAPER. All shares of capital
stock of Hotpaper held as treasury stock, if any, shall be canceled and no
capital stock of GOAM or other consideration shall be delivered in exchange
therefor.
(c) CONVERSION OF CAPITAL STOCK OF HOTPAPER. All issued and
outstanding shares of capital stock of Hotpaper (on an as converted to
Common Stock basis) shall be converted into and become the right to receive
the Merger Consideration in accordance with Section 1.4 hereof. All shares
of capital stock of Hotpaper converted in accordance with this Section
2.1(c) shall no longer be deemed to be outstanding and shall automatically
be canceled and retired and shall cease to exist. Each holder of record of
any such shares, at the Effective Time of the Merger shall cease to have
any rights with respect thereto, except the right to receive a portion of
the Merger Consideration into which such shares of capital stock of
Hotpaper are converted.
(d) DISSENTERS' RIGHTS. If holders of Hotpaper Common Stock or
Hotpaper Preferred Stock (each as defined in Section 3.1(d)) are entitled
to dissenters' rights at the Effective Time of the Merger under Section 262
of the DGCL or under Section 13 of the California General Corporation Law
("CGCL"), the shares as to which dissenters' rights are available
("Dissenting Shares") shall not be converted into GOAM Common Stock on or
after the Effective Time of the Merger, but shall instead be converted into
the right to receive from the Surviving Corporation such consideration as
may be determined to be due with respect to such Dissenting Shares pursuant
to the DGCL or the CGCL, as the case may be. The Surviving Corporation
shall give GOAM prompt notice of any demand received by the Surviving
Corporation for appraisal of Hotpaper Common Stock or Hotpaper Preferred
Stock, and GOAM shall have the right to participate in all negotiations
proceedings with respect to such demand. The Surviving Corporation agrees
that, except with the prior written consent of GOAM, or as required under
the DGCL or the CGCL, as the case may be, it will not voluntarily make any
payment with respect to, or settle or offer to settle, any such demand for
appraisal. Each holder of Dissenting Shares (a "Dissenting Stockholder")
who, pursuant to the provisions of Section 262 of the DGCL or Chapter 13 of
the CGCL, becomes entitled to payment of the value of shares of Hotpaper
Common Stock or Hotpaper Preferred
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Stock shall receive payment therefor (but only after the value therefor
shall have been agreed upon or finally determined pursuant to such
provisions). In the event of the legal obligation, after the Effective Time
of the Merger, to deliver shares of GOAM Common Stock to any Dissenting
Stockholder who shall have failed to make an effective demand for appraisal
or shall have lost his or its status as a Dissenting Stockholder, GOAM
shall issue and deliver, upon surrender by such Dissenting Stockholder of
his or its certificate or certificates representing shares of Hotpaper
Common Stock or Hotpaper Preferred Stock, the shares of GOAM Common Stock
to which such Dissenting Stockholder is then entitled under this Section
2.1 and Section 262 of the DGCL or Chapter 13 of the CGCL. GOAM will pay on
behalf of the Surviving Corporation all sums due to holders of Dissenting
Shares on account of such shares.
(e) FRACTIONAL SHARES. Fractional shares of GOAM Common Stock shall
not be issued in the Merger. In the event that fractional shares would
otherwise be issuable upon the calculations set forth in Section 1.4, GOAM
shall pay to the holders of Hotpaper Common Stock or Preferred Stock the
cash value of any fractional share interest resulting therefrom. The
foregoing shall not apply to fractional shares resulting from the
conversion of unexercised Hotpaper stock options as provided in Section 2.4
hereof.
2.2 Exchange of Certificates.
------------------------
(a) EXCHANGE AGENT. Prior to the Closing Date, GOAM shall appoint
Buchanan Ingersoll Professional Corporation to act as exchange agent (the
"Exchange Agent") in the Merger.
(b) GOAM TO PROVIDE COMMON STOCK. Promptly after the Effective Time of
the Merger (but in no event later than five (5) business days thereafter),
GOAM shall make available for exchange in accordance with this Article II,
through such reasonable procedures as GOAM may adopt, the shares of GOAM
Common Stock issuable pursuant to Sections 1.4 and 2.1 above in exchange
for all of the outstanding shares of capital stock of Hotpaper (excluding
the Warnock Shares) for which dissenter's rights were not exercised.
(c) EXCHANGE PROCEDURES. Within ten (10) days after the Effective Time
of the Merger, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
of the Merger represented outstanding shares of Hotpaper Common Stock or
Hotpaper Preferred Stock (the "Certificates") whose shares are being
converted into GOAM Common Stock (on an as converted to Hotpaper Common
Stock basis) pursuant to Sections 1.4 and 2.1 hereof, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and which shall be in such form and have
such other provisions as GOAM may reasonably specify), and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for GOAM Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by GOAM, together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor the number of shares of GOAM Common Stock to which the
holder of Hotpaper Common Stock or Hotpaper Preferred Stock is entitled
pursuant to Sections 1.4 and 2.1 hereof. The
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Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Hotpaper Common Stock or Hotpaper Preferred Stock
which is not registered on the transfer records of Hotpaper, the
appropriate number of shares of GOAM Common Stock may be delivered to a
transferee if the Certificate representing such Hotpaper Common Stock or
Hotpaper Preferred Stock is presented to the Exchange Agent and accompanied
by all documents required to evidence and effect such transfer and to
evidence that any applicable stock transfer taxes have been paid. From and
after the Effective Time of the Merger, until surrendered as contemplated
by this Section 2.2, subject to the provisions of Section 2.1(d), each
Certificate shall be deemed for all corporate purposes to evidence the
number of shares of GOAM Common Stock into which the shares of Hotpaper
capital stock (on an as converted to Common Stock basis) represented by
such Certificate have been converted.
(d) NO FURTHER OWNERSHIP RIGHTS IN CAPITAL STOCK OF HOTPAPER. All GOAM
Common Stock delivered upon the surrender for exchange of shares of
Hotpaper Common Stock or Hotpaper Preferred Stock in accordance with the
terms hereof shall be deemed to have been delivered in full satisfaction of
all rights pertaining to such shares of Hotpaper Common Stock or Hotpaper
Preferred Stock. There shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Hotpaper
Common Stock or Hotpaper Preferred Stock which were outstanding immediately
prior to the Effective Time of the Merger. If, after the Effective Time of
the Merger, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article
II, provided that (i) the presenting holder is listed on the Hotpaper
Stockholder List (as provided in Section 5.2(h) below) as a holder of
outstanding Hotpaper Common Stock or Hotpaper Preferred Stock (or can
document, to the reasonable satisfaction of the Surviving Corporation, the
transfer to such presenting holder by a holder listed on the Hotpaper
Stockholder List as a holder of outstanding Hotpaper Common Stock or
Hotpaper Preferred Stock) and (ii) neither the Surviving Corporation nor
GOAM shall be obligated to issue, in the aggregate, more than the number of
shares of GOAM Common Stock determined pursuant to the calculation set
forth in Section 1.4 above.
2.3 Escrow of Shares.
----------------
At the Effective Time of the Merger, GOAM shall deposit ten percent (10%)
of the Merger Shares plus ten percent (10%) of that number of shares that would
have been issued to Kevin Warnock had he received shares of GOAM Common Stock in
lieu of the Cash Payment (the "Escrow Shares") with an escrow agent reasonably
satisfactory to Hotpaper and GOAM to be held and disbursed by that escrow agent
in accordance with the form of escrow agreement attached hereto as Exhibit 2.3
(the "Escrow Agreement"). The Escrow Shares will be deducted pro rata from the
Merger Shares allocable to each former holder of Hotpaper capital stock in
accordance with Section 1.4, except that the portion of the Escrow Shares which
represents ten percent (10%) of the shares that would have been issued to Kevin
Warnock shall be deducted solely from the actual Merger Shares issued to
Warnock. To the extent GOAM is entitled to make a claim against the Escrow
Shares pursuant to this Agreement, GOAM shall set off and apply against
Indemnifiable Losses (as defined in Section 6.1 below) the Escrow Shares in
accordance with the terms hereof and of the Escrow Agreement. Pursuant to the
terms of the Escrow Agreement, the Escrow Shares shall be valued at any time,
for purposes of set off against any Indemnifiable Losses, at the then current
market value of GOAM Common Stock.
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2.4 Hotpaper Stock Options.
----------------------
(a) At the Effective Time of the Merger, each outstanding and
unexercised option for shares of Hotpaper Common Stock (each such option, a
"Hotpaper Option") will cease to represent a right to acquire shares of
Hotpaper Common Stock and will be converted in accordance with the
agreements executed pursuant to the terms of the Hotpaper 1999 Equity
Incentive Plan automatically into an option to purchase shares of GOAM
Common Stock under GOAM's 1999 Stock Plan (each such option, a "New GOAM
Option") in an amount and at an exercise price determined as provided
below:
(i) the number of shares of GOAM Common Stock subject to each New
GOAM Option will be equal to the product of the number of shares of
Hotpaper Common Stock subject to the corresponding Hotpaper Option and
the Conversion Ratio, except that any fractional shares of GOAM Common
Stock resulting from that multiplication must be rounded down to the
nearest whole share; and
(ii) the exercise price per share of GOAM Common Stock under each
New GOAM Option will be equal to the quotient obtained by dividing the
exercise price per share of Hotpaper Common Stock under each Hotpaper
Option by the Conversion Ratio, except that the exercise price under
each New GOAM Option must be rounded up to the nearest cent.
The number of shares of GOAM Common Stock subject to, and the exercise
price per share under, each New GOAM Option will be appropriately
adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of
securities convertible into shares of GOAM Common Stock),
reorganization, recapitalization, split up, combination or exchange of
shares, or other like event with respect to shares of GOAM Common
Stock occurring after the date of this Agreement and prior to the
Effective Time of the Merger.
(b) To the extent that the adjustment provided in this Section 2.4 with
respect to any New GOAM Options that are "incentive stock options" (as defined
in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")) is
inconsistent with Section 424(a) of the Code, the parties shall cause that
adjustment to be effected in a manner consistent with Section 424(a) of the
Code. Subject to the provisions set forth in Section 4.1(a), the duration,
vesting, acceleration, and all other terms of each New GOAM Option will be the
same as those of the corresponding Hotpaper Option (including such terms thereof
as may be set out in the Hotpaper 1999 Equity Incentive Plan) except that in
each case all references to Hotpaper will be deemed references to GOAM.
(c) If any portion of any New GOAM Option is treated as an option other
than an Incentive Stock Option (as defined in Section 422 of the Code) by reason
of Section 422(d) of the Code, then such New GOAM Option shall be treated as two
options, one of which is an Incentive Stock Option with respect to the maximum
number of shares permitted to be treated as an Incentive Stock Option and the
other of which is not an Incentive Stock Option with respect to the balance of
the shares (a "Nonqualified Option"), and any exercise of such New GOAM Option
shall, to the extent permitted by law, be treated first as the exercise of the
portion treated as an Incentive Stock Option to the full extent thereof and
second as the exercise of the portion
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treated as a Nonqualified Option, unless otherwise agreed to the contrary by
GOAM and the holder of such New GOAM Option.
(d) GOAM shall include the shares of GOAM Common Stock issued upon exercise
of the New GOAM Options in the initial registration statement on Form S-8 filed
with the Securities and Exchange Commission (the "Commission") with respect to
the 1999 Stock Plan.
2.5 Taking of Necessary Action; Further Action.
------------------------------------------
GOAM, Sub and Hotpaper, respectively, shall take all such action as may be
necessary or appropriate in order to effect the Merger as promptly as possible.
If, at any time after the Effective Date of the Merger, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of either of the Constituent
Corporations, the officers and directors of such corporation are fully
authorized in the name of the corporation or otherwise to take, and shall take,
all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Hotpaper.
------------------------------------------
Except as disclosed in a schedule referring specifically to this Agreement
which is delivered by Hotpaper to GOAM upon the execution of this Agreement (the
"Hotpaper Disclosure Schedule"), Hotpaper represents and warrants to GOAM and
Sub as set forth below, which representations and warranties are true and
correct as of the date of this Agreement and will be true and correct as of the
Closing Date (except as otherwise specifically permitted under this Agreement).
As used in this Agreement, "Business Condition" with respect to any corporate
entity shall mean the current business, financial condition, results of
operations and assets of such corporate entity.
(a) ORGANIZATION AND GOOD STANDING; CERTIFICATE AND BYLAWS. Hotpaper
is a corporation duly organized and existing under, and by virtue of, the
laws of the State of Delaware and is in good standing under such laws.
Hotpaper has the requisite corporate power and authority to own and operate
its properties and assets, and to carry on its business as presently
conducted. Hotpaper is qualified to do business as a foreign corporation in
each jurisdiction in which the failure to be so qualified would have a
material adverse effect on Hotpaper's Business Condition. Hotpaper has
furnished GOAM or its counsel with copies of its Amended and Restated
Certificate of Incorporation and Bylaws. Said copies are true, correct and
complete and contain all amendments through the date hereof.
(b) CORPORATE POWER. Hotpaper has all requisite legal and corporate
power and authority to execute and deliver this Agreement and, subject to
approval of this Agreement by the stockholders of Hotpaper, to carry out
and perform its obligations under the terms of this Agreement, and to
consummate the transactions contemplated hereby and thereby.
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(c) SUBSIDIARIES. Hotpaper has no subsidiaries or affiliated companies
and does not otherwise own or control, directly or indirectly, any equity
interest in any corporation, association or business entity, other than
investments in marketable securities in the ordinary course of business.
(d) CAPITALIZATION. The authorized capital stock of Hotpaper consists
of 38,000,000 shares of Common Stock, of which 8,047,417 shares are issued
and outstanding ("Hotpaper Common Stock") and 19,000,000 shares of
Preferred Stock, all shares of which have been designated "Series A
Preferred Stock," 14,101,728 of which are issued and outstanding ("Hotpaper
Preferred Stock"). The outstanding shares of Hotpaper Common Stock and
Hotpaper Preferred Stock have been duly authorized and validly issued, and
are fully paid and nonassessable. Hotpaper has reserved 14,101,728 shares
of Common Stock for issuance upon conversion of the outstanding Hotpaper
Preferred Stock. Hotpaper has reserved 8,000,000 shares of Common Stock for
issuance pursuant to its 1999 Equity Incentive Plan, of which options to
purchase 1,701,667, shares of Common Stock are outstanding. Hotpaper has
reserved 981,309 shares of Series A Preferred Stock for issuance upon
exercise of outstanding warrants, which such warrants shall be exercised
prior to the Closing. The Hotpaper Disclosure Schedule sets forth a
complete and accurate list of, and the number of shares owned of record by,
the holders of outstanding Hotpaper Common Stock and Hotpaper Preferred
Stock as of the date hereof. The Hotpaper Disclosure Schedule sets forth a
complete and accurate list of the holders of options or warrants to
purchase shares of Hotpaper Common Stock as of the date hereof, setting
forth the number of shares subject to each such option or warrant and the
exercise price and term of each such option or warrant. Except as set forth
above or on the Hotpaper Disclosure Schedule, there is no outstanding
option, warrant or other right (including but not limited to any
convertible debt) to purchase any of Hotpaper's authorized and unissued
capital stock.
(e) EXECUTION AND DELIVERY. This Agreement has been duly executed and
delivered by Hotpaper. This Agreement and the other agreements contemplated
hereby, when duly executed and delivered by Hotpaper, shall constitute
valid and binding obligations of Hotpaper, enforceable in accordance with
their respective terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
(f) FINANCIAL STATEMENTS. Hotpaper has delivered to GOAM its audited
financial statements (balance sheet, statement of operations, stockholders'
equity and cash flows) for the years ended December 31, 1998 and 1999 (the
"Hotpaper Audited Financial Statements"), and its reviewed financial
statements (balance sheet, statement of operations and cash flows) for the
period ended March 31, 2000 and June 30, 2000 (the "Hotpaper Reviewed
Financial Statements" and, collectively with the Hotpaper Audited Financial
Statements, the "Hotpaper Financial Statements"). The Hotpaper Financial
Statements are complete and correct in all material respects and have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated provided
that the Hotpaper Reviewed Financial Statements do not include complete
notes and are subject to year-end adjustments. The balance sheets included
in the Hotpaper Financial Statements fairly present the financial condition
of Hotpaper as at the dates thereof and reflect all material liabilities,
contingent or otherwise, of Hotpaper required by generally accepted
accounting principles to be reflected thereon as at such dates, and the
statements of operations included in the Hotpaper
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Financial Statements accurately present the operating results of Hotpaper
during the periods indicated therein. Since June 30, 2000, there has not
been any change in the assets, liabilities, financial condition or
operations of Hotpaper from that reflected in the Hotpaper Financial
Statements, except those changes set forth in the Hotpaper Disclosure
Schedule or those changes made in the ordinary course of business which
have not been, either individually or in the aggregate, materially adverse.
All material liabilities required by generally accepted accounting
principles to be disclosed in a balance sheet which are not disclosed in
the Hotpaper Financial Statements in an amount in excess of $20,000 are set
forth on the Hotpaper Disclosure Schedule. The accounting records of
Hotpaper which pertain to its business are in all material respects
complete and correct, have been maintained in accordance with good business
practices and accurately reflect the basis for the financial position and
results of operations of Hotpaper's business.
(g) Taxes.
(i) All returns and reports relating to "Taxes" (as hereinafter
defined) which are required to be filed with respect to Hotpaper on or
before the Closing Date have been, or will be, duly and timely filed
and all such returns and reports are, or will be, complete and correct
in all material respects. All Taxes, assessments, fees and other
governmental charges imposed on or with respect to Hotpaper which have
become due and payable on or before the Closing Date have been, or
will be prior to the Closing Date, paid in a timely manner by Hotpaper
or shall be accrued for in the balance sheet and there is no liability
(and no basis for any liability) for Taxes with respect to Hotpaper
which has not been (in the case of Taxes which are not yet due and
payable) accrued on the books of Hotpaper. Except as set forth on the
Hotpaper Disclosure Schedule, there are no actions or proceedings
which are currently pending of which Hotpaper has received notice, or
to the best knowledge of Hotpaper, which have been threatened against
Hotpaper by any governmental authority for the assessment or
collection of Taxes, no claim for the assessment or collection of
Taxes has been asserted or, to the best knowledge of Hotpaper,
threatened against Hotpaper and there are no matters under discussion
by Hotpaper with any governmental authority regarding claims for the
assessment or collection of Taxes against Hotpaper. There are no
agreements, waivers or applications by Hotpaper for an extension of
time for the assessment or payment of any Taxes. There are no Tax
liens on any of the assets of Hotpaper (other than any lien for
current Taxes not yet due and payable). True and complete copies of
all Tax returns, reports and other Tax filings of Hotpaper, or any
predecessor entity thereof, which have been filed for any periods
since January 1, 1994 have been provided to GOAM and Sub.
(ii) For purposes of this Agreement, the term "Tax" shall mean
and include any and all foreign, national, federal, state, local or
other taxes, assessments, social security obligations, deficiencies,
fees, export or import duties, or other governmental charges,
including, without limitation, any installment payment for taxes and
contributions or other amounts determined to be payable in the nature
of a Tax with respect to compensation paid to directors, officers,
employees or independent contractors (including any Tax that may apply
to the exercise of options or receipt of shares of Hotpaper), from
time to time imposed on Hotpaper by, or required to be paid by
Hotpaper to, any governmental authority (including penalties and
additions to tax
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thereon, penalties for failure to file a return or report, and
interest on any of the foregoing) and any amount payable by Hotpaper
pursuant to any tax-sharing agreement or similar agreement with
respect to any of the foregoing. For the avoidance of doubt, the term
"Taxes" shall include, without limitation, any Taxes duly determined
to be payable or assessed under applicable Delaware state law in
connection with the Merger.
(iii) Hotpaper has not, with regard to any assets or property
held, acquired or to be acquired thereby, filed a consent to the
application of Section 341(f) of the Code.
(iv) Hotpaper has not conducted any operations or sales which
have been or are required to be reported to the Internal Revenue
Service under the provisions of Section 999 of the Code.
(v) Hotpaper has not made, is not obligated to make, or is not a
party to any agreement that under any circumstances could obligate it
to make payments, the deductibility of which would be prohibited under
Section 280G of the Code.
(h) NO BREACH OF STATUTE, DECREE, ORDER OR CONTRACT. The execution,
delivery and performance of and compliance with this Agreement, (i) have
not resulted and will not result in any material violation of, or conflict
with, or constitute a material default under, (A) Hotpaper's Amended and
Restated Certificate of Incorporation or Bylaws, (B) any judgment, decree
or order to which Hotpaper is a party or by which it is bound, (C) any
statute, rule or governmental regulation applicable to Hotpaper, or (D) any
if its material agreements or (ii) have not resulted and will not result in
the creation of any material (whether individually or in the aggregate)
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of Hotpaper.
(i) LITIGATION OR OTHER PROCEEDINGS, ETC. There is no action, suit,
proceeding or investigation pending against Hotpaper or its properties
before any court or governmental agency (nor, to Hotpaper's knowledge, is
there any reasonable basis therefor or threat thereof).
(j) EMPLOYEES. To Hotpaper's knowledge, no employee of Hotpaper is in
violation of any term of any employment contract, patent disclosure
agreement or any other contract or agreement relating to the relationship
of such employee with Hotpaper or any other party because of the nature of
the business conducted by Hotpaper. Hotpaper is not aware that any employee
of Hotpaper is obligated under any contract (including any license,
covenant or commitment of any nature), or subject to any judgment, decree
or order of any court or administrative agency, that would interfere with
the use of such employee's best efforts to promote the interests of
Hotpaper or would conflict with Hotpaper's business as presently conducted.
(k) PATENTS AND TRADEMARKS. Set forth on the Hotpaper Disclosure
Schedule is a true and complete list of all domain names, patents, patent
applications, trademarks, service marks, trademark and service mark
applications, trade names, copyrights and licenses presently owned or held
by Hotpaper. Hotpaper owns or possesses, or can obtain by payment of
royalties in amounts which, in the aggregate, do not materially adversely
affect Hotpaper's business as presently conducted, all of the domain names,
patents, trademarks, service marks, trade names, copyrights, proprietary
rights, trade secrets, and licenses or rights to the foregoing, necessary
for
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the conduct of Hotpaper's business as presently conducted or contemplated.
There is no pending claim or, to Hotpaper's knowledge, threatened claim
against Hotpaper alleging that the operation of Hotpaper's business as
presently conducted infringes or conflicts with the rights of others under
patents, trademarks, service marks, copyrights or trade secrets. To
Hotpaper's knowledge, Hotpaper's business as presently conducted will not
cause Hotpaper to infringe or violate any of the patents, trademarks,
service marks, trade names, copyrights, licenses, trade secrets or other
proprietary rights of any other person or entity. To Hotpaper's knowledge,
no prior employer of any employee of Hotpaper has any right to or interest
in any invention, improvement, discovery or other information assigned to
Hotpaper by such employee pursuant to the Invention Assignment,
Confidentiality and Non-Solicitation Agreement in substantially the form
attached hereto as Exhibit 3.1(k) (the "Invention Assignment Agreement"),
or any prior document executed by such employee, or otherwise so assigned.
(l) GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on
the part of Hotpaper is required in connection with the valid execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby or thereby, except (i) filing of the Certificate of
Merger with the office of the Delaware Secretary of State and appropriate
documents with the relevant authorities of other states in which Hotpaper
is qualified to do business, (ii) such consents, approvals, authorizations,
designations, declarations and filings which, if not obtained or made,
would not have a material adverse affect on the Business Condition of
Hotpaper, and (iii) filings with federal or state authorities in order to
effect compliance with federal or state securities or "blue sky" laws.
(m) BROKERS OR FINDERS; OTHER OFFERS. Hotpaper has not incurred, and
will not incur, directly or indirectly, as a result of any action taken by
Hotpaper, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or the
transactions contemplated hereby.
(n) INSURANCE. Hotpaper maintains valid policies of workers'
compensation insurance and of insurance with respect to its properties and
business of the kinds (including product liability insurance) and in the
amounts not less than is customarily obtained by corporations engaged in
the same or similar business and similarly situated, including, without
limitation, insurance against loss, damage, fire, theft, public liability
and other risks. Hotpaper does not maintain a policy of directors and
officers liability insurance.
(o) MATERIAL CONTRACTS AND OBLIGATIONS. The Hotpaper Disclosure
Schedule sets forth a list of all material agreements (oral or written) of
any nature to which Hotpaper is a party or by which it is bound, including
without limitation (i) each agreement which requires future expenditures by
Hotpaper, in excess of $50,000, (ii) all employment and consulting
agreements, employee benefit, bonus, pension, profit-sharing, stock option,
stock purchase and similar plans and arrangements and (iii) any
arrangement, relationship, transaction or agreement to which any
stockholder, officer or director of Hotpaper, or any "affiliate" or
"associate" of such persons (as such terms are defined in the rules and
regulations promulgated under the Securities Act of 1933, as amended), is
presently a party, including without limitation, any agreement or other
arrangement providing for the furnishing of services by, rental of real or
personal property from, or otherwise requiring payments to, any such person
or entity, other than any material agreement
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entered into by Hotpaper in compliance with the terms of Section 4.1 hereof
after the date of this Agreement. Hotpaper has delivered or made available
to GOAM copies of such agreements. To Hotpaper's knowledge, all of such
agreements and contracts are valid, binding and in full force and effect.
Hotpaper is not, nor, to Hotpaper's knowledge, is any other party thereto,
in breach of any material provision of, or is in default in any material
respect under the terms of, any such agreement or contract.
(p) TITLE TO PROPERTIES AND ASSETS. Hotpaper has good and marketable
title to all of its properties and assets, in each case subject to no
mortgage, pledge, lien, lease, security interest, encumbrance or charge,
other than (i) the liens of current taxes not yet due and payable and (ii)
possible minor liens and encumbrances which do not in any case materially
detract from the value of the property subject thereto or materially impair
the operations of Hotpaper, and which have not arisen otherwise than in the
ordinary course of business.
(q) REGULATORY APPROVALS. Hotpaper has all necessary authorizations,
approvals, orders, licenses, certificates, permits and clearances from all
governmental regulatory officials and bodies, including the Federal
Communications Commission, to own, lease or sell its properties and
products and to conduct its business as presently conducted, where the
failure to have would have a material adverse effect on Hotpaper's Business
Condition.
(r) RESTRICTIONS ON THE CONDUCT OF THE BUSINESS. Hotpaper is not
restricted from conducting business in any location by agreement or court
decree where such restriction would have a material adverse effect on
Hotpaper's Business Condition.
(s) POWERS OF ATTORNEY. Hotpaper has not granted any power of attorney
(revocable or irrevocable) to any person, firm or corporation for any
purpose whatsoever related to its business.
(t) NO SECURITIES LAWS VIOLATIONS. (i) To Hotpaper's knowledge, none
of the officers or directors of Hotpaper or any corporation in which any of
them is an officer or director has ever been the subject of any order,
judgment or decree of any governmental authority or administrator, or of
any court of competent jurisdiction, revoking or suspending for cause any
license, permit or other authority to engage in the securities business or
in the sale of a particular security or temporarily or permanently
restraining or joining any such person or any corporation of which he is an
officer or director from engaging in and/or continuing any conduct,
practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor
involving any security or any aspect of the securities business, or of
theft or any felony.
(ii) All outstanding securities of Hotpaper, including, but not
limited to, capital stock, options, warrants and notes, have been
issued in compliance with all relevant federal and state securities
laws and regulations. All prior redemptions, if any, by Hotpaper of
its outstanding capital stock or other securities were in compliance
with applicable law.
(u) BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of Hotpaper, all of which have been made
available to GOAM, have been properly kept and contain no inaccuracies
except for inaccuracies that would not, individually or
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in the aggregate, reasonably be expected to have a material adverse effect
on the Business Condition of Hotpaper. At the Closing, all of Hotpaper's
records will be in the possession of Hotpaper.
(v) ERISA. Hotpaper does not maintain (nor has it ever maintained) or
does not have (nor has it ever had) any obligation under (including,
without limitation, any obligation to contribute to) an employee benefit
plan as described in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended.
(w) ENVIRONMENTAL MATTERS. To the best knowledge of Hotpaper, the
business, assets and properties of Hotpaper are and have been operated and
maintained in compliance with all applicable federal, state, city, county
and local environmental protection laws and regulations (collectively, the
"Environmental Laws") while under the control of Hotpaper. To the best
knowledge of Hotpaper, no event has occurred since the original formation
of Hotpaper, which, with or without the passage of time or the giving of
notice, or both, would constitute non-compliance by Hotpaper with, or a
violation by Hotpaper of, the Environmental Laws, which non-compliance or
violation would have a material adverse effect on the Business Condition of
Hotpaper. Hotpaper has not caused or permitted to exist, as a result of an
intentional or unintentional act or omission, a disposal, discharge or
release of solid wastes, pollutants or hazardous substances, on or from any
site which currently is or formerly was owned, leased, occupied or used by
it, except where such disposal, discharge or release was in compliance with
the Environmental Laws.
3.2 Representations and Warranties of GOAM and Sub.
----------------------------------------------
Except as disclosed in a schedule referring specifically to this Agreement
which is delivered by GOAM to Hotpaper upon the execution of this Agreement (the
"GOAM Disclosure Schedule"), GOAM and Sub represent and warrant to Hotpaper and
the Stockholders executing this Agreement as set forth below, which
representations and warranties are true and correct as of the date of this
Agreement and will be true and correct as of the Closing Date (except as
otherwise specifically permitted under this Agreement):
(a) ORGANIZATION AND GOOD STANDING CERTIFICATE AND BYLAWS. GOAM is a
corporation duly organized and existing under, and by virtue of, the laws
of the State of Delaware and is in good standing under such laws. Sub is a
corporation duly organized and existing under, and by virtue of, the laws
of the State of Delaware and is in good standing under such laws. Each of
GOAM and Sub has the requisite corporate power and authority to own and
operate its properties and assets, and to carry on its business as
presently conducted. Each of GOAM and Sub is qualified to do business as a
foreign corporation in each jurisdiction in which the failure to be so
qualified would have a material adverse affect on GOAM. GOAM has furnished
Hotpaper or its counsel with copies of the Certificate of Incorporation and
Bylaws of GOAM and Sub, as amended. Said copies are true, correct and
complete and contain all amendments through the date hereof.
(b) CORPORATE POWER. Each of GOAM and Sub has all requisite legal and
corporate power and authority to execute and deliver this Agreement, the
Escrow Agreement and the Registration Agreement in substantially the form
attached hereto as Exhibit 3.2(b) (the
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"Registration Agreement") and to carry out and perform its obligations
under the terms of this Agreement, the Escrow Agreement and the
Registration Agreement and to consummate the transactions contemplated
hereby and thereby.
(c) SEC REPORTS. GOAM has timely filed all required reports,
statements and documents with the Commission, all of which have complied in
all material respects with all applicable requirements of the Securities
Act of 1933, as amended and the Securities Exchange Act of 1934, as
amended. GOAM has delivered or made available to Hotpaper true and complete
copies of all forms, reports, statements and documents filed with the
Commission and all reports, statements and other information provided by
GOAM to its stockholders (collectively, the "GOAM Reports"). As of their
respective dates, the GOAM Reports did 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 the light of the
circumstances under which they were made, not misleading.
(d) CAPITALIZATION.
(i) GOAM. The authorized capital stock of GOAM consists of
200,000,000 shares of Common Stock, of which 51,378,758 shares are
issued and outstanding and 4,351,943 shares of undesignated Preferred
Stock, none of which is issued or outstanding. The outstanding shares
of Common Stock of GOAM have been duly authorized and validly issued,
and are fully paid and nonassessable. GOAM has reserved 10,716,000
shares of Common Stock for issuance pursuant to its stock option
plans, of which options to purchase 4,835,280 shares of Common Stock
are outstanding. GOAM has reserved 888,752 shares of Common Stock for
issuance upon exercise of outstanding warrants. The GOAM Disclosure
Schedule sets forth a complete and accurate list of the holders of
options or warrants to purchase shares of GOAM Common Stock as of the
date hereof, setting forth the number of shares subject to each such
option or warrant and the exercise price and term of each such option
or warrant. The Merger Shares are duly authorized and reserved for
issuance and, when issued in accordance with the terms of this
Agreement, will be validly issued, fully paid, and nonassessable, and
free of any preemptive rights and listed on the Nasdaq National
Market. Except as set forth above or on the GOAM Disclosure Schedule,
there is no outstanding option, warrant or other right to purchase any
of GOAM's authorized and unissued capital stock.
(ii) Sub. The authorized capital stock of Sub consists of 1,000
shares of Common Stock, all of which are issued and outstanding. The
outstanding shares of Common Stock of Sub have been duly authorized
and validly issued, and are fully paid and nonassessable. Except as
set forth above, there is no outstanding option, warrant or other
right to purchase any of Sub's authorized and unissued capital stock.
(e) EXECUTION AND DELIVERY. This Agreement has been duly executed and
delivered by GOAM and Sub. This Agreement, the Escrow Agreement and the
Registration Agreement and other agreements between the parties
contemplated hereby, when duly executed and delivered by GOAM and Sub,
shall constitute valid and binding obligations of GOAM and Sub, enforceable
in accordance with their respective terms, subject to laws of general
application
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relating to bankruptcy, insolvency and the relief of debtors and rules of
law governing specific performance, injunctive relief or other equitable
remedies.
(f) TAXES. Each of GOAM and Sub has accurately prepared and timely
filed all income tax returns and other tax returns which are required to be
filed, except where the time to file has been extended, and has paid, or
made provision for the payment of, all taxes which have or may have become
due pursuant to said returns or pursuant to any assessment which has been
received by it.
(g) NO BREACH OF STATUTE, DECREE, ORDER OR CONTRACT. The execution,
delivery and performance of and compliance with this Agreement and the
Registration Agreement, (i) have not resulted and will not result in
material violation of, or conflict with, or constitute a material default
under, (A) the Certificate of Incorporation or Bylaws of GOAM or Sub, as
amended, (B) any judgement, decree or order to which GOAM or Sub is a party
or by which either is bound, (C) any statute, rule or governmental
regulation applicable to GOAM or Sub, or (D) any of its material agreements
or (ii) have not resulted and will not result in the creation of any
material (whether individually or in the aggregate) mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of GOAM or Sub.
(h) LITIGATION, ETC. There is no action, suit, proceeding or
investigation pending against GOAM or Sub or their respective properties
before any court or governmental agency (nor, to GOAM's knowledge is there
any reasonable basis therefor or threat thereof).
(i) GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on
the part of GOAM or Sub is required in conjunction with the valid execution
and delivery of this Agreement, the consummation of the transactions
contemplated hereby or thereby or the issuance of the Merger Shares, except
(i) filing of Certificate of Merger with the office of the Delaware
Secretary of State and appropriate documents with the relevant authorities
of other states in which GOAM and Sub are qualified to do business, (ii)
such consents, approvals, authorizations, designations, declarations and
filings which, if not obtained or made, would not have a material adverse
effect on the Business Condition of GOAM, and (iii) filings with federal or
state authorities in order to effect compliance with federal or state
securities or "blue sky" laws.
(j) BROKERS OR FINDERS; OTHER OFFERS. Neither GOAM nor Sub has
incurred, or will incur, directly or indirectly, as a result of any action
taken by GOAM or Sub, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this
Agreement or the transactions contemplated hereby or thereby.
(k) TITLE TO PROPERTIES AND ASSETS. Each of GOAM and Sub has good and
marketable title to all of its respective properties and assets, in each
case subject to no mortgage, pledge, lien, lease, security interest,
encumbrance or charge, other than (i) the lien of current taxes not yet due
and payable and (ii) possible minor liens and encumbrances which do not in
any case materially detract from the value of the property subject thereto
or materially impair the operations of GOAM or Sub, and which have not
arisen otherwise than in the ordinary course of business.
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(l) REGULATORY APPROVALS. GOAM and Sub each has all necessary
authorizations, approvals, orders, licenses, certificates, permits and
clearances from all governmental regulatory officials and bodies, including
the Federal Communications Commission, to own, lease or sell its respective
properties and products and to conduct its respective business as presently
conducted, where the failure to have would have a material adverse effect
on the Business Condition of GOAM or Sub.
(m) RESTRICTIONS ON THE CONDUCT OF THE BUSINESS. Neither GOAM nor Sub
is restricted from conducting business in any location by Agreement or
court decree where such restriction would have a material adverse effect on
the Business Condition of GOAM or Sub.
ARTICLE IV
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME;
ADDITIONAL AGREEMENTS
4.1 Conduct of Business.
-------------------
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time of the
Merger, Hotpaper and GOAM shall each carry on its business in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted
and, to the extent consistent with such business, use all reasonable efforts
consistent with past practice and policies to preserve intact its present
business organizations, keep available the services of its officers and key
employees and preserve its relationship with customers, suppliers, distributors,
licensors, licensees and others having business dealings with them, to the end
that its goodwill and business shall be unimpaired at the Effective Time of the
Merger. Each party hereto shall promptly notify the other parties hereto of any
event or occurrence or emergency not in the ordinary course of business, and any
event which would be reasonably likely to have a material and adverse effect on
such party. Except as expressly contemplated by this Agreement (including
borrowings by Hotpaper from GOAM under the Convertible Promissory Note dated
July 3, 2000 in the principal amount of $1,500,000) or the Hotpaper Disclosure
Schedule, Hotpaper shall not without the prior written consent of GOAM:
(a) Except as may be required by any plans or options currently in
effect, accelerate, amend or change the period of exercisability of
options, restricted stock or warrants, or authorize payments in exchange
for any outstanding options;
(b) Enter into any commitment or transaction not in the ordinary
course of business (i) to be performed over a period longer than six (6)
months in duration, or (ii) to purchase fixed assets for a purchase price
in excess of $25,000;
(c) Grant any severance or termination pay (i) to any director or (ii)
to any employee except (A) payments made pursuant to standard written
agreements outstanding on the date hereof and disclosed in the Hotpaper
Disclosure Schedule or (B) in the case of employees who are not officers,
grants which are made in the ordinary course of business;
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(d) Declare or pay any dividends on or make any other contributions
(whether in cash, stock or property) in respect of any its capital stock,
or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or repurchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except
from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service;
(e) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of
its capital stock or securities convertible into, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities, other than (i) the issuance of shares of Common Stock upon the
exercise of options or warrants outstanding on the date hereof, (ii) the
conversion into Common Stock of outstanding shares of Preferred Stock and
(iii) with the prior written consent of GOAM, the grant to employees of
options with standard terms typically granted to employees generally to
purchase shares of Common Stock from the date hereof to the Effective Time
of the Merger;
(f) Cause or permit any amendments to its charter or Bylaws;
(g) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to
the Business Condition of Hotpaper;
(h) Sell, lease, license or otherwise dispose of any of its properties
or assets which are material, individually or in the aggregate, to the
Business Condition of Hotpaper except in the ordinary course of business;
(i) Except for the issuance of a convertible bridge note by Hotpaper
to GOAM in the aggregate principal amount of $1,500,000 incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue
or sell any debt securities or guarantee any debt securities of others,
except in the ordinary course of business;
(j) Increase the salaries or wage rates of its employees other than
pursuant to regularly scheduled employee reviews, or in connection with the
hiring of employees other than officers in the ordinary course of business,
in all cases consistent with such party's past practices;
(k) Pay, discharge or satisfy in an amount in excess of $25,000 in any
one case any claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise), except discharge or satisfaction of
any judgment or settlement amount with respect to the currently pending
lawsuit filed against Hotpaper and disclosed on the Hotpaper Disclosure
Schedule, other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in the
Hotpaper Financial Statements;
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(l) Hire any new employees or consultants without providing notice to
GOAM within ten (10) days thereof of the name of such employee or
consultant and the terms of his or her employment or engagement; or
(m) Take, or agree in writing or otherwise to take, any of the actions
described in Section 4.1(a) through 4.1(l) above, or any action which would
make any of the representations or warranties or covenants of Hotpaper
contained in this Agreement materially untrue or incorrect.
4.2 Access to Information.
---------------------
Subject to Section 4.16, each party shall afford the other and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time of the Merger to
(a) all of its properties, books, contracts, commitments and records, and (b)
all other information concerning its business, properties and personnel as the
other may reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section 4.2 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.
4.3 Hotpaper Stockholders' Consent.
------------------------------
Hotpaper shall either (a) call a meeting of its stockholders (the
"Stockholders' Meeting") to be held as promptly as practicable (the date on
which such meeting is scheduled is referred to as the "Stockholders' Meeting
Date") or (b) solicit stockholder approval by written consent in accordance with
applicable law, for the purpose of obtaining the stockholder approval required
in connection with the transactions contemplated hereby and shall use its best
efforts to obtain such approval.
4.4 Preparation of Proxy Statement or Information Statement.
-------------------------------------------------------
As soon as practicable after the execution of this Agreement, Hotpaper
shall prepare, with the cooperation of GOAM, the Proxy Statement (or Information
Statement, in the case of written consent) for purposes of soliciting the
approval of the stockholders of Hotpaper of this Agreement and the transactions
contemplated hereby and thereby. Hotpaper shall use its best efforts to cause
the Proxy Statement (or Information Statement, as the case may be) to comply
with applicable federal and state securities laws requirements. Each of GOAM and
Hotpaper agrees to provide promptly to the other such information concerning its
business and financial statements and affairs as, in the reasonable judgement of
the providing party or its counsel, may be required or appropriate for including
in the Proxy Statement (or Information Statement,
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as the case may be), or any amendments or supplements thereto, and to cause its
counsel and auditors to cooperate with the other's counsel and auditors in the
preparation of the Proxy Statement (or Information Statement, as the case may
be). Hotpaper will promptly advise GOAM, and GOAM will promptly advise Hotpaper,
in writing if at any time prior to the Effective Time of the Merger either
Hotpaper or GOAM shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the Proxy Statement (or
Information Statement, as the case may be) in order to make the statements
contained or incorporated by reference therein not misleading or to comply with
applicable law. The Proxy Statement (or Information Statement, as the case may
be) shall contain the unanimous recommendation of the Board of Directors of
Hotpaper that the Hotpaper stockholders approve the Merger, this Agreement and
the conclusion of the Board of Directors that the terms and conditions of the
Merger are fair and reasonable to the stockholders of Hotpaper. Anything to the
contrary contained herein notwithstanding, Hotpaper shall not include in the
Proxy Statement (or Information Statement, as the case may be) any information
with respect to GOAM or its affiliates or associates, the form and content of
which information shall not have been approved by GOAM prior to such inclusion.
4.5 Tax Matters.
-----------
GOAM, Sub and Hotpaper acknowledge that each intends the Merger to be a
tax-free reorganization under Section 368(a) of the Code and that each has
consulted with and relied upon its own professional tax advisors. None of GOAM,
Sub or Hotpaper has taken any action, or will take any action or fail to take
any action that will jeopardize the status of the Merger as a reorganization
under Section 368 of the Code. None of GOAM, Sub or Hotpaper will adopt any
position on any tax return, information statement or other disclosure document
that is inconsistent with the treatment of the Merger as a reorganization under
Section 368 of the Code.
4.6 Breach of Representations and Warranties.
----------------------------------------
Each of GOAM and Hotpaper shall not take any action which would cause or
constitute a breach of any of their respective representations and warranties
set forth in this Agreement or which would cause any of such representations and
warranties to be materially inaccurate. In the event of, and promptly after
becoming aware of, the occurrence of or the pending or threatened occurrence of
any event which would cause or constitute such a breach or inaccuracy, each
party shall give detailed notice thereof to the other and shall use commercially
reasonable efforts to prevent or promptly remedy such breach or inaccuracy.
4.7 Consents.
--------
GOAM and Hotpaper shall each promptly apply for or otherwise seek, and use
commercially reasonable efforts to obtain, all consents and approvals required
to be obtained by it for the consummation of the Merger.
4.8 Commercially Reasonable Efforts.
-------------------------------
GOAM and Hotpaper shall each use commercially reasonable efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement.
4.9 Performance by Sub.
------------------
GOAM, as sole stockholder of Sub, will take, and will cause Sub to take,
all action necessary or advisable for the consummation of the Merger by Sub and
the carrying out by Sub of the transactions contemplated hereby.
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4.10 FIRPTA.
------
Hotpaper shall deliver to the Internal Revenue Service a notice regarding
the statement described in Section 5.2(e) hereof, in accordance with the
requirements of Treasury Regulation Section 1.897-2 (h) (2).
4.11 Legal Conditions to the Merger.
------------------------------
(a) Hotpaper shall take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on Hotpaper with
respect to the Merger and will promptly cooperate with and furnish
information to GOAM in connection with any such requirements imposed upon
GOAM or Sub in connection with the Merger. Hotpaper shall take all
reasonable actions to obtain (and to cooperate with GOAM in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
governmental entity, required to be obtained or made by Hotpaper (or by
GOAM or Sub) in connection with the Merger or the taking of any action
contemplated thereby, by this Agreement and to defend all lawsuits or other
legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby or thereby, to lift or rescind any
injunction or restraining order or other order adversely affecting the
ability of the parties to consummate the transactions contemplated hereby,
and to effect all necessary registrations and filings and submissions of
information requested by any governmental entity, and to fulfill all
conditions to this Agreement.
(b) Each of GOAM and Sub shall take all reasonable actions necessary
to comply promptly with all legal requirements which may be imposed on them
with respect to the Merger and will promptly cooperate with and furnish
information to Hotpaper in connection with any such requirements imposed
upon Hotpaper in connection with the Merger. GOAM and Sub shall take all
reasonable actions to obtain (and to cooperate with Hotpaper in obtaining)
any consent, authorization, order or approval of, or exemption by, any
governmental entity required to be obtained or made by GOAM or Sub (or by
Hotpaper) in connection with the Merger or the taking of any action
contemplated thereby, by this Agreement, and to defend all lawsuits or
other legal proceedings challenging this Agreement or the consummation of
the transactions contemplated hereby or thereby, to lift or rescind any
injunction or restraining order or other order adversely affecting the
ability of parties to consummate the transactions contemplated hereby, and
to effect all necessary registrations and filings and submissions of
information requested by any governmental entity, and to fulfill all
conditions to this Agreement.
4.12 Employee Matters.
----------------
Immediately following the Effective Date of the Merger, GOAM will offer to
employees of Hotpaper health insurance and long-term disability insurance by
either continuing Hotpaper's current plans or substituting in lieu thereof
comparable plans; provided that such benefits under such comparable plans shall
be no less favorable to Hotpaper employees than that provided to similarly
situated employees of GOAM. For purposes of participation in any employee
benefit plans existing as of the Effective Date of the Merger, the tenure of any
employee of Hotpaper shall be deemed to have commenced on the first day of such
employee's last continuous employment with Hotpaper. GOAM shall use its best
efforts to retain substantially all of the employees of Hotpaper on the
Effective Date of the Merger provided, however, that nothing in
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this Agreement shall create an employment agreement between GOAM and any
Hotpaper employee or otherwise create any obligation for GOAM or Hotpaper to
continually employ any Hotpaper employee who shall be otherwise "terminable at
will", and provided further that any such terminated employee shall be provided
a severance package, the form and substance of which shall be mutually agreed
upon by GOAM and Hotpaper prior to the Closing Date.
4.13 Expenses and Transfer Taxes.
---------------------------
All losses and expenses incurred in connection with this Agreement and the
transactions contemplated hereby and thereby shall be paid by the party
incurring such expense (including fees and disbursements of counsel and
accountants). Hotpaper shall pay all excise, sales, use, transfer (including
real property transfer or gains), stamp, documentary, filing, recordation and
other similar taxes (but excluding taxes based on income) resulting directly or
indirectly from the Merger together with any interest, additions or penalties
with respect thereto and any interest in respect of such additions or penalties
("Transfer Taxes"). Notwithstanding the foregoing, provided that the Merger is
consummated, GOAM shall pay all expenses of Hotpaper (including reasonable fees
and disbursements of counsel and accountants) incurred in connection with the
consummation of the Merger; provided further, that, on the Closing Date, GOAM
shall pay such reasonable fees and disbursements of counsel to Hotpaper in an
amount not to exceed $125,000, provided that, three days prior to the Closing
Date, such counsel furnishes a detailed invoice to GOAM which includes a
reasonable estimate of fees to be incurred through the Closing Date; and
provided further, that if this Agreement is terminated, GOAM shall pay
reasonable accounting fees of Hotpaper incurred in connection with the proposed
Merger in an amount not to exceed $25,000.
4.14 Issuance of Share Certificates.
------------------------------
GOAM shall, as and when required under this Agreement, issue and deliver
certificates representing the shares of GOAM Common Stock into which the
Hotpaper Common Stock and Hotpaper Preferred Stock (on an as converted to Common
Stock basis) outstanding at the Effective Time of the Merger will be converted
in accordance with Section 1.4.
4.15 Public Announcements.
--------------------
GOAM and Hotpaper shall cooperate with each other prior to releasing
information concerning this Agreement or the transactions contemplated hereby or
thereby, shall furnish to the other drafts of all press releases or other public
announcements related to the foregoing prior to publication and shall obtain the
consent of the other prior to the issuance of press releases or the release of
other public announcements.
4.16 Confidentiality.
---------------
No party hereto shall release, publish, reveal or disclose, directly or
indirectly, any business or technical information of any other party hereto,
designated orally or in writing as "confidential" or "proprietary" (or in like
words), including, but not limited to, systems, processes, formulae, data,
functional specifications, know-how, improvements, discoveries, developments,
designs, inventions, techniques, new products, marketing and advertising
methods, supplier agreements, customer lists, pricing policies, financial
information, projections,
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forecasts, strategies, budgets or other information related to its business or
its customers (hereinafter referred to as "Evaluation Material"), except to a
party's directors, officers, employees, financial advisors, legal counsel,
independent public accountants or other agents, advisors or representatives as
shall require access thereto on a need-to-know basis for the purposes of the
transactions contemplated by this Agreement and who shall agree to be bound by
the terms of this Section 4.16. Each party agrees to take all reasonable
precautions to safeguard the confidentiality of the other party's Evaluation
Material and to exercise the same degree of care with respect to such Evaluation
Material that such party exercises with respect to its own confidential
information. No party shall make, or permit to be made, except in furtherance of
the transactions contemplated by this Agreement, any copies, abstracts or
summaries of the Evaluation Material. In addition, all such Evaluation Material
shall be used solely for the purpose of the investigation contemplated by this
Section 4.16 and shall not be used for any other purpose, including use which
would be to the detriment of any other party, nor shall such information be used
in competition with any other party. The restrictions on disclosure of
information contained in this Section 4.16 do not extend to any item of
information that (a) is already known to the receiving party; (b) was or is
independently developed by the receiving party; (c) is now or hereafter becomes
available to the public other than as a consequence of a breach of obligations
under this Section 4.16; or (d) is disclosed to third parties outside of the
receiving party in accordance with terms approved by the disclosing party. Upon
written request, the parties shall return all writings, documents and materials
containing Evaluation Material with a letter confirming that all copies,
abstracts and summaries of the Evaluation Material have been destroyed. In the
event that any party hereto becomes legally required to disclose another party's
Evaluation Material, it shall provide such other party with prompt prior written
notice of such requirement prior to such disclosure. In the event that a
protective order or other remedy is not obtained, or such other party waives
compliance with the provisions of this Section 4.16 with respect to the
Evaluation Material subject to such requirement, such party agrees to furnish
only that portion of the Evaluation Material which it is legally required to
furnish and, where appropriate, to use its best efforts to obtain assurances
that such Evaluation Material will be accorded confidential treatment.
4.17 Invention Assignment Agreement.
------------------------------
Hotpaper shall cause all current and future employees and consultants to
execute the Invention Assignment Agreement.
4.18 Non-Solicitation Agreement.
--------------------------
Hotpaper shall cause the employees listed on Schedule 4.18 hereto to
execute a two-year Non-Solicitation Agreement in substantially the form attached
hereto as Exhibit 4.18 (the "Non-Solicitation Agreement").
4.19 Lock-Up Agreement.
-----------------
Hotpaper shall cause its option holders to execute a Lock-Up Agreement in
the form attached hereto as Exhibit 4.19 (the "Lock-up Agreement").
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ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligation of each party to effect the Merger shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby and thereby shall been approved and adopted by the
affirmative vote of the holders of a majority of the outstanding shares of
Hotpaper Common Stock and a majority of the outstanding shares of Hotpaper
Preferred Stock.
(b) APPROVALS. All authorizations, consents, orders or approvals of,
or declarations or filings with, any governmental entity necessary for the
consummation of the transactions contemplated by this Agreement shall have
been filed, occurred or been obtained, other than filings and approvals
relating to the Merger or affecting GOAM's ownership of Hotpaper or any of
its properties if failure to make such filing or obtain such approval would
not be materially adverse to GOAM or Hotpaper.
(c) LEGAL ACTION. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the
consummation of the Merger shall have been issued by any governmental
entity and remain in effect, and no litigation or proceeding (other than
with respect to the rights of appraisal pursuant to DGCL Section 262)
seeking the issuance of such an order or injunction, or seeking the
imposition against Hotpaper, the Surviving Corporation, GOAM or Sub of
substantial damages if the Merger is consummated, shall be pending. In the
event that any such order or injunction shall have been issued, each party
agrees to use its reasonable efforts to have any such injunction lifted.
(d) STATUTES. No action shall have been taken, and no statute, rule,
regulation or order shall have been enacted, promulgated or issued or
deemed applicable to the Merger by any governmental entity which would (i)
make the consummation of the Merger illegal, (ii) prohibit GOAM's or
Hotpaper's ownership or operation of all or a material portion of the
business or assets of Hotpaper or GOAM, or compel GOAM or Hotpaper to
dispose of or hold separate all or a material portion of the business or
assets of Hotpaper or GOAM, as a result of the Merger or (iii) render GOAM,
Sub or Hotpaper unable to consummate the Merger.
(e) SECURITIES LAWS. The issuance of GOAM Common Stock pursuant to the
Merger shall be exempt from registration under the Securities Act of 1933,
as amended (the "Securities Act"), and shall have been qualified or
registered (or shall be exempt from such qualification or registration)
with the appropriate authorities of all states in which qualification or
registration is required under state securities or blue sky laws.
(f) EMPLOYMENT AGREEMENT. GOAM and Kevin Warnock shall have executed
and delivered an employment agreement to be mutually agreed upon by the
parties and shall contain a post-employment restrictive covenant in
consideration for the Merger Shares and Cash Payment delivered to Kevin
Warnock hereunder.
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<PAGE>
(g) ESCROW AGREEMENT. The Escrow Agreement shall have been executed
and delivered by each of the parties thereto and be in full force and
effect.
5.2 Conditions of Obligations of GOAM and Sub.
-----------------------------------------
The obligations of GOAM and Sub to effect the Merger are subject to the
satisfaction of the following conditions, unless waived by GOAM and Sub:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Hotpaper set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing
Date, as though made on and as of each such date, except as otherwise
contemplated by this Agreement, and GOAM shall have received a certificate
signed by the President of Hotpaper to such effect on the Closing Date.
(b) PERFORMANCE OF OBLIGATIONS OF HOTPAPER. Hotpaper shall have
performed in all material respects all obligations and covenants required
to be performed by it under this Agreement prior to the Closing Date, and
GOAM shall have received a certificate signed by the President of Hotpaper
to such effect.
(c) OPINION OF HOTPAPER'S COUNSEL. GOAM shall have received an opinion
dated the Closing Date of Cooley Godward LLP, counsel to Hotpaper, in form
and substance reasonably satisfactory to GOAM and its counsel.
(d) FIRPTA. GOAM, as agent for the stockholders of Hotpaper, shall
have received a properly executed Foreign Investment Real Property Tax Act
of 1980 ("FIRPTA") Notification Letter, in substance satisfactory to GOAM,
which states that shares of capital stock of Hotpaper do not constitute
"United States real property interests" under Section 897(c) of the Code,
for purposes of satisfying GOAM's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
(e) CONSENTS. GOAM shall have received duly executed copies of all
material third-party consents and approvals contemplated by this Agreement
or the Hotpaper Disclosure Schedule in form and substance reasonably
satisfactory to GOAM, except for such consents and approvals as GOAM and
Hotpaper shall have agreed shall not be obtained, as contemplated by the
Hotpaper Disclosure Schedule.
(f) HOTPAPER STOCKHOLDER LISTS. Hotpaper shall have delivered to GOAM
a complete and accurate list of, and the number of shares owned of record
by, the holders of outstanding Hotpaper Common Stock and Hotpaper Preferred
Stock as of the Closing Date which list shall include all parties that
become stockholders in accordance with subsection (j) hereof.
(g) INVENTION ASSIGNMENT AGREEMENTS. Hotpaper shall have delivered to
GOAM Invention Assignment Agreements executed by all current Hotpaper
employees.
(h) NON-SOLICITATION AGREEMENTS. Hotpaper shall have delivered to GOAM
the Non-solicitation Agreements executed by its employees.
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(i) LOCK-UP AGREEMENTS. Hotpaper shall have delivered to GOAM the
Lock-Up Agreements executed by its option holders.
(j) CONVERSION AND EXERCISE OF OUTSTANDING SECURITIES. Immediately
prior to the Closing Date, (i) all outstanding warrants currently issued to
and all promissory notes currently payable to Nokia Ventures, L.P. shall
have been exercised for or converted into shares of Hotpaper Preferred
Stock, and (ii) all shares of Hotpaper Preferred Stock shall be converted
into shares of Hotpaper Common Stock.
(k) SECRETARY'S CERTIFICATE. Hotpaper shall have delivered a
certificate of the Secretary or an Assistant Secretary of Hotpaper dated as
of the Closing Date and certifying: (i) that attached thereto is a true and
complete copy of all resolutions adopted by the Board of Directors and
stockholders of Hotpaper relating to the transactions contemplated hereby,
and that all such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated
hereby; (ii) that attached thereto are true and complete copies of the
Amended and Restated Certificate of Incorporation and Bylaws of Hotpaper
and that all such documents have not been amended since the date of the
last amendment; (iii) to the incumbency and specimen signature of each
officer of the Company executing this Agreement and any documents or
certificates executed in furtherance hereof; and a certification by another
officer of Hotpaper as to the incumbency and signature of the officer
signing the certificate referred to in this clause; and (iv) such other
matters as GOAM shall reasonably request.
5.3 Conditions of Obligations of Hotpaper.
-------------------------------------
The obligation of Hotpaper to effect the Merger is subject to the
satisfaction of the following conditions unless waived by Hotpaper:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of GOAM and Sub set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the
Closing Date as though made on and as of each such date, except as
otherwise contemplated by this Agreement, and Hotpaper shall have received
a certificate signed by the President of GOAM to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF GOAM AND SUB. GOAM and Sub shall
have performed in all material respects all obligations and covenants
required to be performed by them under this Agreement prior to the Closing
Date, and Hotpaper shall have received a certificate signed by the
President of GOAM to such effect.
(c) OPINION OF GOAM'S COUNSEL. Hotpaper shall have received an opinion
dated the Closing Date of Buchanan Ingersoll Professional Corporation,
counsel to GOAM, in form and substance reasonably satisfactory to Hotpaper
and its counsel.
(d) CONSENTS. Hotpaper shall have received duly executed copies of all
material third-party consents and approvals contemplated by this Agreement
or the GOAM Disclosure Schedule in form and substance reasonably
satisfactory to Hotpaper, except for such consents and approvals as
Hotpaper and GOAM shall have agreed shall not be obtained, as contemplated
by the GOAM Disclosure Schedule.
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(e) SECRETARY'S CERTIFICATE. GOAM and Sub shall have delivered a
certificate of the Secretary or an Assistant Secretary of GOAM and Sub
dated as of the Closing Date and certifying: (i) that attached thereto is a
true and complete copy of all resolutions adopted by the Board of Directors
and stockholders of GOAM and Sub relating to the transactions contemplated
hereby, and that all such resolutions are in full force and effect and are
all the resolutions adopted in connection with the transactions
contemplated hereby; (ii) that attached thereto are true and complete
copies of the Amended and Restated Certificate of Incorporation and Bylaws
of GOAM and the Certificate of Incorporation and Bylaws of Sub and that all
such documents have not been amended since the date of the last amendment;
and (iii) to the incumbency and specimen signature of each officer of GOAM
and Sub executing this Agreement and any documents or certificates executed
in furtherance hereof; and a certification by another officer of GOAM and
Sub as to the incumbency and signature of the officer signing the
certificate referred to in this clause.
(f) REGISTRATION AGREEMENT. GOAM and each Stockholder of Hotpaper
listed in the Registration Agreement shall have executed and delivered such
agreement. In the event that all of the stockholders of Hotpaper have not
executed and delivered the Registration Agreement prior to the Closing
Date, GOAM shall provide a period not to exceed thirty (30) days for any
remaining Stockholders to execute and deliver the Registration Agreement,
it being expressly understood that if any such Stockholder fails to execute
and deliver in the thirty (30) day period such stockholder shall not be
entitled to any rights thereunder.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Stockholders.
-----------------------------------
Subject to the limitations set forth in Sections 6.3 and 8.2 and elsewhere
in this Agreement, following the Effective Time of the Merger, each of the
stockholders of Hotpaper who receives a portion of the Merger Shares (the
"Stockholders"), by acceptance of its portion of the Merger Shares, agrees, to
the extent of such Stockholders' pro rata portion of the Escrow Shares to
indemnify, defend and hold harmless GOAM, each affiliate of GOAM, including any
of its direct or indirect subsidiaries (including, after the Effective Time of
the Merger, Hotpaper), and each of its respective officers, directors and
representatives and each of the heirs, executors, successors and assigns of any
of the foregoing (the "GOAM Indemnitees") from and against, and pay or reimburse
the GOAM Indemnitees for, the following losses, liabilities, taxes, damages,
deficiencies, obligations, fines, expenses, claims, demands, actions, suits,
proceedings, judgments or settlements, whether or not resulting from Third Party
Claims, (as hereinafter defined) incurred or suffered by any GOAM Indemnitee,
including interest and penalties with respect thereto and out-of-pocket expenses
and reasonable attorneys' and accountants' fees and expenses incurred in the
investigation or defense of any of the same or in asserting, preserving or
enforcing any of the GOAM Indemnitee's rights hereunder, (net of any amounts
recovered or recoverable under any insurance policy and any tax benefit realized
by any GOAM Indemnitee as a result of incurring or paying any of the foregoing
losses or expenses) ("Indemnifiable Losses") to the extent:
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(a) arising out of or resulting from the breach by Hotpaper, prior to
the Effective Time of the Merger, of any agreement or covenant contained in
this Agreement; and
(b) arising out of or resulting from any breach of or inaccuracy in
any representation or warranty of Hotpaper contained in this Agreement.
6.2 Procedures Relating to Indemnification.
--------------------------------------
(a) In order for the GOAM Indemnitees to be entitled to any
indemnification provided for under this Agreement in respect of, arising
out of or involving a claim made by any individual, corporation,
partnership, limited liability company, joint venture, estate, trust,
association, organization governmental body or other entity who is not a
GOAM Indemnitee against a GOAM Indemnitee (a "Third Party Claim"), such
GOAM Indemnitee must notify the Stockholder Representative (as defined in
Section 6.6) on behalf of the Stockholders (the "Indemnifying Party") in
writing, and in reasonable detail, of the Third Party Claim promptly but in
any event within ten (10) business days after receipt of notice of such
claim; provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
Stockholder Representative shall have been prejudiced as a result of such
failure. After any required notification (if applicable), the GOAM
Indemnitee shall deliver to the Stockholders Representative, promptly but
in any event within five (5) business days, after the GOAM Indemnitee's
receipt thereof, copies of all notices and documents (including court
papers) received by the GOAM Indemnitee relating to the Third Party Claim.
(b) If a Third Party Claim is made against a GOAM Indemnitee, the
Stockholder Representative on behalf of the Indemnifying Party will be
entitled to participate in the defense thereof and, if it so chooses, to
assume the defense thereof (at the expense of the Indemnifying Party) with
counsel selected by the Stockholder Representative on behalf of the
Indemnifying Party and reasonably satisfactory to the GOAM Indemnitee.
Should the Stockholder Representative on behalf of the Indemnifying Party
so elect to assume the defense of a Third Party Claim, the Indemnifying
Party will not be liable to the GOAM Indemnitee for any legal expenses
subsequently incurred by the GOAM Indemnitee in connection with the defense
thereof; provided that if, under applicable standards of professional
conduct (as advised in writing by counsel to the Indemnifying Party), a
conflict on any significant issue between the GOAM Indemnitee and the
Indemnifying Party exists in respect of such Third Party Claim, the
Indemnifying Party shall pay the reasonable fees and expenses of one such
additional counsel to act with respect to such issue as may be required to
be retained in order to resolve such conflict. If the Stockholder
Representative on behalf of the Indemnifying Party assumes such defense,
the GOAM Indemnitee shall have the right to participate in the defense
thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Stockholder Representative on behalf of the
Indemnifying Party, it being understood that the Stockholder Representative
on behalf of the Indemnifying Party shall control such defense. The
Indemnifying Party shall be liable for the fees and expenses of counsel
employed by the GOAM Indemnitee for any period during which the
Indemnifying Party has not assumed the defense thereof (other than during
any period in which the GOAM Indemnitee shall have failed to give notice of
the Third Party Claim as provided above and a reasonable period after such
notice). If the Stockholder Representative on behalf of the Indemnifying
Party chooses to defend or prosecute a Third Party Claim, all the parties
hereto shall cooperate in the defense or prosecution thereof, which
27
<PAGE>
cooperation shall include the retention and the provision to the
Stockholder Representative on behalf of the Indemnifying Party of records
and information which are reasonably relevant to such Third Party Claim,
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
If the Indemnifying Party chooses to defend or prosecute any Third Party
Claim, the GOAM Indemnitee will agree to any settlement, compromise or
discharge of such Third Party Claim which the Indemnifying Party may
recommend and which by its terms obligates the Indemnifying Party to pay
the full amount of liability in connection with such Third Party Claim;
provided, however, that, without the GOAM Indemnitee's consent (which
consent shall not be unreasonably withheld or delayed), the Indemnifying
Party shall not consent to entry of any judgment or enter into any
settlement (i) that provides for injunctive or other nonmonetary relief
affecting the GOAM Indemnitee or (ii) that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to such
GOAM Indemnitee of a release from all liability with respect to such claim.
Whether or not the Indemnifying Party shall have assumed the defense of a
Third Party Claim, the GOAM Indemnitee shall not admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim
without the Indemnifying Party's prior written consent.
(c) In order for a GOAM Indemnitee to be entitled to any
indemnification provided for under this Agreement in respect of a claim
that does not involve a Third Party Claim, the GOAM Indemnitee shall
deliver written notice of such claim, in reasonable detail, with reasonable
promptness to the Stockholder Representative on behalf of the Indemnifying
Party. The failure by any GOAM Indemnitee to so notify the Stockholder
Representative on behalf of the Indemnifying Party shall not relieve the
Indemnifying Party from any liability which it may have to such GOAM
Indemnitee under this Agreement, except to the extent that the Indemnifying
Party shall have been actually prejudiced by such failure. Any notice
pursuant to this Section 6.2(c) shall contain a statement, in prominent and
conspicuous type, that if the Stockholder Representative's (on behalf of
the Indemnifying Party) does not dispute its liability to the GOAM
Indemnitee with respect to the claim made in such notice (the "Claim") by
notice to the GOAM Indemnitee prior to the expiration of a 30-calendar-day
period following the Stockholder Representative on behalf of the
Indemnifying Party's receipt of the second notice of the Claim, the Claim
shall be conclusively deemed a liability of the Indemnifying Party. If the
GOAM Indemnitee has provided the Stockholder Representative on behalf of
the Indemnifying Party two such notices not less than 30 days apart and the
Indemnifying Party does not notify the GOAM Indemnitee prior to the
expiration of a 30-calendar-day period following its receipt of the second
such notice that the Indemnifying Party disputes its liability to the GOAM
Indemnitee under this Agreement, the Claim shall be conclusively deemed a
liability of the Indemnifying Party under this Agreement and the
Indemnifying Party shall pay the amount of such liability to the GOAM
Indemnitee on demand or, in the case of any notice in which the amount of
the Claim (or any portion thereof) is estimated, on such later date when
the amount of the Claim (or any portion thereof) becomes finally
determined. If the Stockholder Representative on behalf of the Indemnifying
Party has timely disputed its liability with respect to the Claim, as
provided above, the Stockholder Representative on behalf of the
Indemnifying Party and the GOAM Indemnitee shall proceed in good faith to
negotiate a resolution of the Claim and, if the Claim is not resolved
through negotiations, such GOAM Indemnitee shall be free to pursue such
remedies as may be available to enforce the rights of such indemnitees
hereunder.
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6.3 Limitation on Indemnification.
-----------------------------
Notwithstanding any provision hereof to the contrary, the Stockholders'
liability for Indemnifiable Losses arising under Section 6.1 hereof shall be
limited (a) in the aggregate to the value of the Escrow Shares and other related
property on deposit under the Escrow Agreement, and (b) to only those
Indemnifiable Losses for which the Stockholder Representative shall have
received written notice in accordance with the provisions of the Escrow
Agreement. No claim, demand, suit or cause of action shall be brought against
the Stockholders under this Article VI unless and until the aggregate amount of
Indemnifiable Losses under this Article VI exceeds $175,000, in which event the
GOAM Indemnitees shall be entitled to indemnification from the Stockholders for
all Indemnifiable Losses in excess of $50,000 (subject to the other limitations
on liability set forth herein).
6.4 Exclusive Remedy.
----------------
Absent actual fraud or intentional wrongdoing in connection with this
Agreement and the transactions contemplated herein, GOAM hereby acknowledges and
agrees, on its own behalf and on behalf of all GOAM Indemnitees, that the sole
and exclusive remedy with respect to any and all claims (including for any
Indemnifiable Losses) relating to this Agreement, the transactions contemplated
hereby, and Hotpaper and its assets, liabilities and business, shall be pursuant
to the indemnification provisions of this Article VI. Absent actual fraud or
intentional wrongdoing in connection with this Agreement and the transactions
contemplated herein, in furtherance of the foregoing, GOAM hereby waives, from
and after the Closing Date, to the fullest extent permitted under applicable
law, any and all rights, claims and causes of action it or any other GOAM
Indemnitee may have against any of the Stockholders, except for such as may be
covered by the indemnification provisions of this Article VI.
6.5 Event of Fraud.
--------------
Notwithstanding any provision hereof, nothing in this Article VI shall
limit, in any manner, any remedy at law or equity, to which any GOAM Indemnitee
may be entitled as a result of any fraudulent misrepresentation made by Hotpaper
in this Agreement except that, in any event, the liability of any Stockholder
shall not exceed the higher of the value of the Merger Shares received by him
(i) on the date of issuance or (ii) actually realized by such Stockholder
subsequent to issuance.
6.6 Stockholder Representative.
--------------------------
Each Stockholder by acceptance of its portion of the Merger Shares shall
be deemed to have designated and appointed Kevin Warnock (and David Henderson as
the alternate in the event that Mr. Warnock is unable to serve) with full power
of substitution (the "Stockholder Representative") as the representative of any
such Stockholder to perform all such acts as are required, authorized or
contemplated by this Agreement to be performed by the Stockholders and hereby
acknowledges that the Stockholder Representative shall be the only person
authorized to take any action so required, authorized or contemplated by this
Agreement by any Stockholder including the execution of all agreements and
certificates referenced herein. Each Stockholder is thereby deemed to have
further acknowledged that the foregoing appointment and designation
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shall be deemed to be coupled with an interest and shall survive the death or
incapacity of such Stockholder. Each Stockholder is thereby deemed to have
authorized the other parties hereto to disregard any notice or other action
taken by each Stockholder pursuant to this Agreement except for the Stockholder
Representative. The other parties hereto are and will be entitled to rely on any
action so taken or any notice given by the Stockholder Representative and are
and will be entitled and authorized to give notices only to the Stockholder
Representative for any notice contemplated by this Agreement to be given to any
such Stockholder. By the acceptance of its portion of the Merger Shares, each
Stockholder shall be deemed to have waived any and all claims that they may have
or assert, including those that may arise in the future, against the Stockholder
Representative for any action or inaction taken or not taken by the Stockholder
Representative in connection with his service as the Stockholder Representative,
except in the case of the Stockholder Representative's own bad faith or willful
misconduct. In consideration of his agreement to serve as the Stockholder
Representative, the Stockholder Representative shall be released from any
liability for any action or inaction taken or not taken in his capacity as the
Stockholder Representative, except in the case of the Stockholder
Representative's own bad faith or willful misconduct. By the acceptance of its
portion of the Merger Shares, each Stockholder shall be deemed to have agreed
that the reasonable and customary fees and expenses incurred by the Stockholder
Representative in the exercise of his right or the performance of his duties
hereunder (including reasonable attorneys' fees and expenses and the fees and
expenses of accountants and other experts) shall be borne by the Stockholders
based on their pro rata portion of the Escrow Shares, and each Stockholder
agrees to promptly reimburse the Stockholder Representative with respect to such
amounts.
ARTICLE VII
TERMINATION
7.1 Termination.
-----------
This Agreement may be terminated at any time prior to the Effective Time
of the Merger, whether before or after approval of the Merger by the
stockholders of Hotpaper:
(a) by mutual agreement of GOAM, Sub and Hotpaper;
(b) by GOAM, if there has been a breach by Hotpaper of any
representation, warranty, covenant or agreement set forth in this Agreement
on the part of Hotpaper which is material and which Hotpaper fails to cure
within five (5) business days after notice thereof is given by GOAM (except
that no cure period shall be provided for a breach by Hotpaper which by its
nature cannot be cured);
(c) by Hotpaper, if there has been a breach by GOAM or Sub of any
representation, warranty, covenant or agreement set forth in this Agreement
on the part of GOAM or Sub which is material and which GOAM or Sub, as the
case may be, fails to cure within five (5) days after notice thereof is
given by Hotpaper (except that no cure period shall be provided for a
breach by GOAM or Sub which by its nature cannot be cured);
(d) by GOAM or Hotpaper, if the Merger shall not have been consummated
on or before August 31, 2000;
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(e) by GOAM or Hotpaper if the required approval of the stockholders
of Hotpaper contemplated by this Agreement shall not have been obtained by
reason of the failure to obtain the required (i) written consent or (ii)
vote upon a vote taken at the Stockholders' Meeting or at any adjournment
thereof; or
(f) by GOAM or Hotpaper if any permanent injunction or other order of
a court or other competent authority preventing the Merger shall have
become final and nonappealable.
(g) Where action is taken to terminate this Agreement pursuant to this
Section 7.1, it shall be sufficient for such action to be authorized by the
Board of Directors of the party taking such action. In the event of the
termination of this Agreement, all further obligations of the parties under
this Agreement (other than the provisions of this Section 7.1, Section 4.13
and Section 4.16) shall forthwith be terminated without further liability
of any party to the other, provided that nothing herein shall relieve any
party from liability for any breach of this Agreement.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-solicitation.
----------------
From the date hereof until the Closing Date, Hotpaper, its stockholders
and their respective agents shall not directly or indirectly solicit or
negotiate with any person or accept any proposal relating to the sale of the
capital stock of Hotpaper representing fifty percent (50%) or more of the
outstanding voting securities, assets or business of Hotpaper.
8.2 Survival of Representations, Warranties and Agreements.
------------------------------------------------------
All representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to be conditions
to the Merger and shall survive the consummation of the Merger for a period of
twelve (12) months, except for representations and warranties relating to tax
matters which such representations and warranties shall survive for the duration
of the applicable statute of limitations.
8.3 Amendment.
---------
This Agreement may be amended by the parties hereto at any time before or
after approval of the Merger by the stockholders of Hotpaper; provided that
following approval of the Merger by the stockholders of Hotpaper, no amendment
shall be made which by law requires the further approval of such stockholders
without obtaining such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
8.4 Extension; Waiver.
-----------------
At any time prior to the Effective Time of the Merger, each of Hotpaper
and GOAM may, to the extent legally allowed, (a) extend the time for the
performance of any of the
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obligations or other acts of the other, (b) waive any inaccuracies in the
representations and warranties made to it contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the agreements or
conditions for the benefit of it 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.
8.5 Notices.
-------
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or mailed by registered or
certified mail (return receipt requested) or sent by telecopy, confirmation
received, to the parties at the following addresses and telecopy numbers (or at
such other address or number for a party as shall be specified by like notice):
(a) if to GOAM or Sub, to:
GoAmerica, Inc.
401 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: Mr. Aaron Dobrinsky
Telecopy No.: (201) 996-1772
Telephone No.: (201) 996-1717
with a copy to:
Buchanan Ingersoll Professional Corporation
650 College Road East
Princeton, New Jersey 08540
Attention: David J. Sorin, Esq.
Telecopy No.: (609) 520-0360
Telephone No.: (609) 987-6800
(b) if to Hotpaper, to:
Hotpaper.com, Inc.
33 New Montgomery Street
Suite 1040
San Francisco, California 94105
Attention: Mr. Kevin Warnock
Telecopy No.: (415) 677-0705
Telephone No.:(415) 677-9990
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with a copy to:
Cooley Godward LLP
5 Palo Alto Square
3000 El Camino Road
Palo Alto, California 94306
Attention: Eric C. Jensen, Esq.
Telecopy No.: (650) 849-7400
Telephone No.: (650) 843-5000
(c) if to any Stockholder or the Stockholder Representative at the
address therefor set forth on the signature page hereto.
8.6 Interpretation.
--------------
When a reference is made in this Agreement to Sections, Schedules or
Exhibits, such reference shall be to a Section, Schedule or Exhibit to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." 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.
8.7 Counterparts.
------------
This Agreement may be executed in any number of 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 party.
8.8 Entire Agreement.
----------------
This Agreement and the documents and instruments and other agreements
among the parties delivered pursuant hereto 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 and are not intended to confer upon
any other person any rights or remedies hereunder except as otherwise expressly
provided herein.
8.9 No Transfer.
-----------
This Agreement and the rights and obligations set forth herein may not be
transferred or assigned by operation of law or otherwise without the consent of
each party hereto. This Agreement is binding upon and will inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
8.10 Severability.
------------
If any provision of this Agreement, or the application thereof, will for
any reason and to any extent be invalid or unenforceable, the remainder of this
Agreement and application of such
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provision to other persons or circumstances will be interpreted so as to
reasonably 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 the void or unenforceable provision.
8.11 Other Remedies.
--------------
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby or by law or equity on such party, and the
exercise of any one remedy will not preclude the exercise of any other.
8.12 Further Assurances.
------------------
Each party agrees to cooperate fully with the other parties and to execute
such further instruments, documents and agreements and to give such further
written assurances as may be reasonably requested by any other party to evidence
and reflect the transactions described herein and contemplated hereby and to
carry into effect the intents and purposes of this Agreement.
8.13 Absence of Third Party Beneficiary Rights.
-----------------------------------------
No provision of this Agreement or the schedules or exhibits hereto is
intended, nor will be interpreted, to provide or to create any third party
beneficiary rights or any other rights of any kind in any client, customer,
affiliate, employee (except for agreements to provide severance to employees
pursuant to Section 4.12 hereof), partner or any party hereto or any other
person or entity unless specifically provided otherwise herein or in the
Exhibits hereto, and, except as so provided, all provisions hereof will be
personal solely between the parties to this Agreement.
8.14 Mutual Drafting.
---------------
This Agreement is the joint product of GOAM and Hotpaper, and each
provision hereof has been subject to the mutual consultation, negotiation and
agreement of GOAM and Hotpaper, and shall not be construed for or against any
party hereto.
8.15 Governing Law.
-------------
This Agreement shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Delaware (without giving
effect to its choice of law principles).
8.16 Knowledge.
---------
As used in this Agreement, the expression "to Hotpaper's knowledge" means
that the officers, directors and those employees listed on Exhibit 8.16 of
Hotpaper, after due inquiry, have actual awareness or knowledge of such matter.
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IN WITNESS WHEREOF, GOAM, Sub and Hotpaper have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
GOAMERICA, INC.
By: /s/ Joseph Korb
------------------------------
Name: Joseph Korb
Title: Executive Vice President
GOAMERICA ACQUISITION II CORP.
By: /s/ Aaron Dobrinsky
------------------------------
Name: Aaron Dobrinsky
Title: President
HOTPAPER.COM, INC.
By: /s/ Kevin L. Warnock
------------------------------
Name: Kevin L. Warnock
Title: Founder, President and
Chief Executive Officer
35
