SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): June 5, 1998
AMERICA ONLINE, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-19836 54-1322110
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
22000 AOL Way, Dulles, Virginia 20166
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (703) 448-8700
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On June 5, 1998, America Online, Inc. ("AOL"), AOL Acquisition Corp.,
R.G.A.O. Holdings Ltd., and Mirabilis Ltd, an Israeli provate limited company
("Mirabilis"), and the Principal Stockholders of Mirabilis entered into an
Agreement of Purchase and Sale ("Agreement") pursuant to which AOL acquired the
assets of Mirabilis, including its ICQ instant communications and chat
technology, and assumed certain liabilities and obligations for a purchase price
of $287 million in cash and contingent purchase payments starting in AOL's
fiscal year 2001 of up to $120 million over three years, subject to the
satisfaction of certain specified growth performance standards in each year (the
"Acquisition"). The Company used internally-generated funds and working capital
to pay the purchase price, which was determined through negotiation among the
parties. The business will continue to be based largely in Tel Aviv and operated
as a free Web-based service with its own brand identity. Launched in November
1996, ICQ's instant communications and chat technology informs users when
family, friends and business colleagues are online and enables them to exchange
messages in real time.
The description of the Acquisition contained herein is qualified in its
entirety by reference to the Agreement, a copy of which is attached hereto as
Exhibit 2 and incorporated herein by reference. AOL issued a press release dated
June 8, 1998, announcing the completion of the Acquisition, a copy of which is
attached hereto as Exhibit 99 and incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired
and
(b) Pro Forma Financial Information:
It is impracticable to provide any of the required financial
statements or pro forma financial information, which are not yet available. The
Registrant intends to file such financial statements and pro forma financial
information as an amendment hereto on or about, but in no event later than, 60
days after the date that this Form 8-K is required to be filed.
(c) Exhibits:
2 Agreement of Purchase and Sale dated as of June 5, 1998 by and
among America Online, Inc., AOL Acquisition Corp., R.G.A.O.
Holdings Ltd., and Mirabilis Ltd and the Principal
Stockholders (Confidential treatment has been requested with
respect to certain portions of the Agreement).
99 Press Release Dated June 8, 1998 Announcing America Online, Inc.
Acquires Mirabilis Ltd and its ICQ Instant Communications and Chat
Technology
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICA ONLINE, INC.
Date: June 11, 1998 By: /s/Lennert J. Leader
--------------------
Lennert J. Leader
Senior Vice President, Chief Financial
Officer, Chief Accounting Officer,
Treasurer and Assistant Secretary
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
2 Agreement of Purchase and Sale dated as of June 5, 1998 by and
among America Online, Inc., AOL Acquisition Corp., R.G.A.O.
Holdings Ltd., and Mirabilis Ltd and the Principal
Stockholders (Confidential treatment has been requested with
respect to certain portions of the Agreement).
99 Press Release Dated June 8, 1998 Announcing America Online, Inc.
Acquires Mirabilis Ltd and its ICQ Instant Communications and Chat
Technology
Confidential treatment has been requested for portions of this document. Such
portions have been omitted by the following: xxxx.
EXECUTION COPY
AGREEMENT OF PURCHASE AND SALE
By and Among
AMERICA ONLINE, INC.,
AOL ACQUISITION CORP.,
R.G.A.O. HOLDINGS LTD.,
and
MIRABILIS LTD. and
THE PRINCIPAL STOCKHOLDERS
Dated as of
June 5, 1998
<PAGE>
TABLE OF CONTENTS
Page
PURCHASE AND SALE OF ASSETS...................................................1
1.1 Purchase and Sale of Business and Assets.........................1
1.2 Delivery of the Transferred Assets to AAC and AAL................4
1.3 Consideration for the Transferred Assets.........................4
1.4 The Closing......................................................9
1.5 Assumption of Liabilities.......................................11
1.6 Further Assurances..............................................12
1.7 Closing Date Balance Sheet......................................12
ARTICLE II REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY..............13
2.1 Organization, Existence and Good Standing.......................13
2.2 Company Capital Stock; Ownership of Subsidiary's Capital Stock;
Investments.....................................................13
2.3 Power and Authority; Non-Contravention; Filing and Consents.....14
2.4 Financial Information; Absence of Undisclosed Liabilities;
Negative Cash Flow..............................................14
2.5 Subsequent Events...............................................15
2.6 Legal Proceedings...............................................15
2.7 Title to Assets; Leases.........................................15
2.8 Contracts; Subscribers..........................................15
2.9 Taxes; Government Incentives....................................16
2.10 Employee Benefit Plans; Employment Matters.....................16
2.11 Compliance with Laws; Permits; Absence of Questionable
Payments.......................................................17
2.12 Intellectual Property..........................................17
2.13 Bank Accounts, Etc.............................................18
2.14 No Government Support.........................................19
2.15 Truthfulness, Completeness and Limitation of Representations...19
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING AAC.....................19
3.1 Organization, Existence, Good Standing and Capital Stock........19
3.2 Power and Authority.............................................19
3.3 Legal Proceedings...............................................20
3.4 Truthfulness, Completeness and Limitation of Representations....20
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING AAL......................20
4.1 Organization, Existence, Good Standing and Capital Stock........20
4.2 Power and Authority.............................................20
4.3 Legal Proceedings...............................................21
4.4 Truthfulness, Completeness and Limitation of Representations....21
ARTICLE V REPRESENTATIONS AND WARRANTIES REGARDING AOL.......................21
5.1 Organization, Existence and Good Standing.......................21
5.2 Power and Authority; Non-Contravention; Filing and Consents.....21
5.3 AOL SEC Documents...............................................22
5.4 Legal Proceedings...............................................22
5.5 Truthfulness, Completeness and Limitation of Representations....22
5.6 Guaranty of Obligations of AAC and AAL..........................22
<PAGE>
ARTICLE VI COVENANTS 22
6.1 Access to Information...........................................22
6.2 Confidentiality.................................................23
6.3 Public Disclosures..............................................23
6.4 Cooperation.....................................................23
6.5 Company Employees...............................................24
ARTICLE VII CONDITIONS TO CLOSING............................................24
7.1 Mutual Conditions...............................................24
7.2 Conditions to Obligations of AOL, AAC and AAL...................25
7.3 Conditions to Obligations of the Company........................25
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER...............................26
8.1 Termination.....................................................26
8.2 Effect of Termination...........................................26
8.3 Amendment.......................................................26
8.4 Waiver..........................................................26
8.5 Fees and Expenses...............................................26
ARTICLE IX INDEMNIFICATION...................................................27
9.1 Survival........................................................27
9.2 Indemnification.................................................27
9.3 Claims for Indemnification......................................28
9.4 Credit Against Indemnification; Threshold for Indemnification...28
9.5 Indemnification Limits..........................................28
ARTICLE X REPRESENTATIONS, WARRANTIES AND COVENANTS OF
PRINCIPAL STOCKHOLDERS.......................................................29
10.1 Other Agreements...............................................29
10.2 Stock Ownership................................................29
10.3 Restrictions on Transfer.......................................29
ARTICLE XI MISCELLANEOUS.....................................................29
11.1 Notices........................................................29
11.2 Governing Law and Dispute Resolution...........................30
11.3 Specific Performance...........................................30
11.4 Severability...................................................31
11.5 Entire Agreement; Counterparts.................................31
11.6 Binding Effect; Benefit, Assignability.........................31
11.7 No Rule of Construction; Captions..............................31
11.8 No Third Party Rights..........................................31
ARTICLE XII DEFINITIONS......................................................31
<PAGE>
Schedules of the Company
Schedule 2.2 Company Capital Stock
Schedule 2.2(b) Ownership of Capital Stock or Other Securities of Subsidiary
Schedule 2.4 Scheduled Liabilities and Obligations; Negative Cash Flow
Schedule 2.5 Subsequent Events
Schedule 2.6 Legal Proceedings
Schedule 2.7 Liens, Encumbrances
Schedule 2.8(a) Contracts, General
Schedule 2.8(b) Contracts, Special
Schedule 2.8(c) Consents, Waivers and Approvals
Schedule 2.8(d) Subscriber Information
Schedule 2.9 Taxes and Government Incentives
Schedule 2.10(a) Employees, Benefit Plans, Employment Matters
(employee benefit plans)
Schedule 2.10(b) Employees, Benefit Plans, Employment Matters (unions;
employment agreements or plans
affected by the Agreement)
Schedule 2.10(c) Employment and Other Agreements and List of Employees
Schedule 2.11 Compliance with Laws; Permits
Schedule 2.12 Software; Patents, Trademarks, Copyrights, Service Marks
and other Company Rights
Schedule 2.13 Bank Accounts
Schedule 6.5(a) Employment and Severance Agreements
Schedule 6.5(c) Employee Bonuses
Schedules of AAC
Schedule 3.3 Legal Proceedings
Schedules of AAL
Schedule 4.3 Legal Proceedings
Schedules of AOL
Schedule 5.2 Conflicts
Schedule 5.4 Legal Proceedings
<PAGE>
Exhibits
Exhibit A Form of Bill of Sale - To AAC
Exhibit B Form of Bill of Sale - To AAL
Exhibit C.1 Form of Assignment and Assumption Agreement - AAC
Exhibit C.2 Form of Assignment and Assumption Agreement - AAL
Exhibit D Non-Disclosure Agreement
Exhibit E Form of Company Counsel Legal Opinion
Exhibit F Form of Confidentiality, Non-Competition and Proprietary
Rights Agreement
Exhibit G Form of Employment Agreements
Exhibit H Form of AOL Counsel Legal Opinion
<PAGE>
This AGREEMENT (this "Agreement") is made and entered into as of the
5th day of June, 1998, by and among AMERICA ONLINE, INC., a Delaware corporation
("AOL"), AOL ACQUISITION CORP., a Delaware corporation and a wholly-owned
indirect subsidiary of AOL ("AAC"), R.G.A.O. HOLDINGS LTD., an Israeli private
limited company and a wholly-owned subsidiary of AAC ("AAL") on the one hand,
and MIRABILIS LTD., an Israeli private limited company (the "Company" or
"Mirabilis") and the stockholders of the Company who are signatories hereto (the
"Principal Stockholders") on the other hand. All capitalized terms used in this
Agreement and not defined in the text hereof have the meanings set forth in
Article XII.
W I T N E S S E T H:
WHEREAS, the Boards of Directors of AOL, AAC, AAL and the Company each
have determined that it is in the best interests of their respective
stockholders that they enter into this Agreement, which provides for the
acquisition by AAC of substantially all of the assets of the Company and the
assumption by AAC and AAL of substantially all liabilities of the Company, upon
the terms and subject to the conditions set forth in this Agreement (the
"Transaction");
WHEREAS, the stockholders of AAC, AAL and the Company have adopted
resolutions approving this Agreement;
WHEREAS, AOL, AAC, AAL and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Transaction and also to prescribe various conditions to the consummation
thereof;
NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto do hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Business and Assets. (a) Subject to and upon
the terms and conditions set forth in this Agreement, Mirabilis shall sell,
transfer, convey, assign and deliver to AAC (except for all tangible assets
which shall be sold, transferred, conveyed, assigned and delivered to AAL), and
AAC and AAL shall purchase, at the Closing (as hereafter defined), all of the
business, assets, properties, goodwill and rights of Mirabilis, of every nature,
kind and description, tangible and intangible, wheresoever located and whether
or not carried or reflected on the books and records of Mirabilis (the
above-referenced assets being transferred to AAC and AAL are hereafter referred
to as the "Transferred Assets").
The following assets shall be delivered to AAC pursuant to a Bill of
Sale in the form attached hereto as Exhibit A:
(i) The cash on hand in banks where Mirabilis or its
Subsidiary has deposits, its commercial papers, checks and
drafts not yet collected, treasury bills, banks deposits,
certificates of deposit, accrued interest and any and all
other cash items, of whatever nature and kind, outside of
Israel;
(ii) All of the right, title and interest of
Mirabilis in and to all United States and foreign patents,
trademarks, copyrights and domain names, application for any
of the foregoing, email, chat and other software, know-how,
technology, inventions and trade secrets, and in and to the
names "Mirabilis" and "ICQ" and any and all variations or
derivations thereof and in and to all logos, insignias and
advertising materials bearing the names "Mirabilis", "ICQ" and
all trade names and marks currently used by or useful to
Mirabilis' business;
(iii) All of the right, title and interest in and to
all leases of real and personal property located in the United
States to which Mirabilis is a party;
(iv) All of the shares of capital stock or other
securities or interests evidencing Mirabilis' ownership of the
Subsidiary;
(v) All of the right, title and interest of Mirabilis
in and to all agreements, contracts and orders, license
agreements, franchise and all other agreements and contracts
(other than those relating to tangible assets in Israel);
(vi) The lists of suppliers and clients of Mirabilis
and subscribers and users of the ICQ service (the "Service")
which exist as of the Closing Date;
(vii) Mirabilis' client records, client files and
other client property;
(viii) All of Mirabilis' right, title and interest in
and to all deposits, credits and prepaid items of Mirabilis
located or accruing to it outside of Israel;
(ix) All financial records of Mirabilis;
(x) The goodwill of Mirabilis;
(x) With respect to all assets other than tangible
assets, all assets reflected on the Company Balance Sheet
referred to herein, with only such dispositions of such assets
reflected on the Company Balance Sheet as shall have occurred
in the ordinary course of Mirabilis' business between the date
thereof and the Closing and which are permitted by the terms
hereof; and
(xi) With respect to all assets other than tangible
assets, all other assets, properties, rights and businesses of
every kind and nature owned or held by Mirabilis, including
deferred or prepaid taxes, or rights to tax refunds (but not
tax losses or the fiscal benefit thereof), or in which
Mirabilis has an interest, on the date hereof, known or
unknown, fixed or unfixed, choate or inchoate, accrued,
absolute, contingent or otherwise, whether or not specifically
referred to in this Agreement.
The following tangible assets shall be delivered to AAL
pursuant to a Bill of Sale in the form attached hereto as Exhibit B:
(i) The cash on hand and in banks where Mirabilis has
deposits, its commercial paper, checks and drafts not yet
collected, treasury bills, bank deposits, certificates of
deposit, accrued interest and any and all other cash items, of
whatever nature and kind, in Israel;
(ii) All merchandise, inventories, materials and
supplies used in the business of Mirabilis including items in
transit from vendors (hereafter collectively referred to as
"Inventory");
(iii) All accounts receivable, notes receivable and
all accrued or unaccrued payments or obligations which have
inured or shall inure to the benefit of Mirabilis as of the
Closing Date;
(iv) All machinery, equipment, office equipment,
leasehold improvements, motor vehicles, fixtures, and supplies
of Mirabilis existing as of the Closing Date, including any
replacements thereof;
(v) All of the right, title and interest in and to
all leases of real and personal property located in Israel to
which Mirabilis is a party;
(vi) All of the right, title and interest of
Mirabilis in and to all agreements, contracts and orders,
license agreements, franchise and all other agreements and
contracts relating to tangible assets in Israel;
(vii) All insurance policies of Mirabilis (excluding
policies for director and officer liability insurance);
(viii) All employee lists, files, papers, books,
records, sales and advertising materials and records, sales
and purchase correspondence, affecting or pertaining to
Mirabilis' ownership and/or use of the Transferred Assets;
(ix) All of Mirabilis' right, title and interest in
and to all deposits, credits and prepaid items of Mirabilis
located or accruing to it inside Israel.
(x) With respect to tangible assets only, all assets
reflected on the Company Balance Sheet referred to herein,
with only such dispositions of such assets reflected on the
Company Balance Sheet as shall have occurred in the ordinary
course of Mirabilis' business between the date thereof and the
Closing and which are permitted by the terms hereof; and
(xi) With respect to tangible assets only, all other
assets, properties, rights and businesses of every kind and
nature owned or held by Mirabilis, including deferred or
prepaid taxes, or rights to tax refunds, or in which Mirabilis
has an interest, on the date hereof, known or unknown, fixed
or unfixed, choate or inchoate, accrued, absolute, contingent
or otherwise, whether or not specifically referred to in this
Agreement.
(b) The Transferred Assets shall be conveyed free and clear of all
liabilities, obligations, liens and encumbrances excepting only those
liabilities and obligations which are expressly assumed by AOL, AAC, or AAL
hereunder.
(c) To the extent that the Company has not obtained any necessary
consents or waivers for the transfer hereunder of any of the Transferred Assets,
such contract or other instrument or asset (a "Delayed Asset") shall not be
transferred hereunder if such transfer would result in a violation of the terms
of any such Delayed Asset, and any liability or obligation relating thereto
shall not be assumed by AOL or any AOL Entity. Mirabilis will, at its expense,
use its best efforts to provide AOL, AAC and AAL with the benefits of such
Delayed Assets and to obtain any required consent or waiver with respect
thereto. To the extent Mirabilis acquires any such consents or waivers and
thereafter transfers to AAC or AAL the related Delayed Asset, such asset shall
thereafter be deemed a Transferred Asset. In addition, if Mirabilis shall
provide to AOL, AAC or AAL the full benefits of any Delayed Asset, then AOL, AAC
or AAL, as the case be, hereby assumes, effective as of the date of the
provision of such benefits, the liabilities and obligations relating to such
Delayed Asset; provided however, that any liability arising out of the improper
or alleged improper provision of benefits by Mirabilis in respect of a Delayed
Asset shall be an Excluded Liability. Prior to obtaining any such required
consent or waiver, Mirabilis shall use its best efforts to preserve the value of
such Delayed Assets.
(d) The minute books, stock record books and the corporate seal of Mirabilis
shall be excluded from the Transferred Assets but shall be available for
inspection by AOL after the Closing, at reasonable times and upon reasonable
notice for a purpose reasonably related to the Transaction or the ownership of
the Transferred Assets. In addition, the consideration paid to Mirabilis hereto,
all loan agreements, line of credit agreements, other agreements for borrowed
money, financing documents, indentures and mortgages, all employee benefit
plans, pension plans, stock option or other benefit or compensation arrangements
of every type and nature, whether written or oral, and the Company's director
and officer liability insurance policies shall be excluded from the Transferred
Assets. All of the foregoing assets are hereafter referred to as the "Excluded
Assets."
1.2 Delivery of the Transferred Assets to AAC and AAL. Mirabilis will
deliver to AAC, at the time and place provided in Section 1.4(a), all of the
Transferred Assets of Mirabilis (except as set forth in the following sentence),
including but not limited to, all Company Rights as defined in Section 2.12, all
of its technology as assigned or otherwise conveyed pursuant to this Agreement
and the Acquisition Documents, including, without limitation, source codes of
all ICQ client, server and upgrade versions, a version of the collaborative
groupware server, web tools and templates, a version of the active-list server,
a version of the WWW server, a version of the home page factory server under
development, the source code of the web navigation software, a version of the
web groups server, a version of the white pages directory server, all
proprietary graphic art and designs, a copy of the most recent version of the
Company's Web Site content, a copy of the most recent version of the client
under development and all electronic and "word" versions of printed manuals and
guides, fixed in a media chosen by AAC such as disk, CDs or magnetic tape, and
goodwill of Mirabilis. Mirabilis will deliver to AAL, at the time and place
provided in Section 1.4(a), all of the tangible assets of Mirabilis, including
but not limited to, furniture, fixtures and equipment.
1.3 Consideration for the Transferred Assets.
(a) Purchase Price Consideration for Transferred Assets. Subject to the
adjustments set forth below, in consideration of the sale, transfer, conveyance,
assignment and delivery of the Transferred Assets by Mirabilis to AAC and AAL,
and in reliance upon the representations and warranties made herein by Mirabilis
and the Principal Stockholders, AAC and AAL shall, in full payment for the
Transferred Assets, pay to Mirabilis as of the Closing Date, or thereafter as
specified in (ii) and (iii) below, an aggregate purchase price which consists
of:
(i) $287,000,000 in cash (the "Cash Purchase Payment"); and
(ii)$120,000,000 in cash payable at the rate of $40,000,000 in cash on
August 15 of each of the three years commencing 2000(each, a "Payment Date"),
provided that no payment shall be made on a Payment Date unless at least xxxx of
the xxxx thresholds set forth below (each, a "Test") for the month of July
preceding such Payment Date has or have been met, and provided further that if a
payment is not made during one or two of the first two Payment Dates due to
failure to meet at least xxxx of the xxxx Tests, then the amount of that payment
will be added to the payment amount for the next Payment Date subject to
satisfaction of the Test for such later Period (each such payment is hereafter
referred to as a "Contingent Purchase Payment").
[Confidential Information Omitted - Request for Confidential Treatment Submitted
to the Secretary of the SEC]
In connection with the foregoing, the parties agree as follows:
(A) ICQ will be maintained as separate, distinct products or services,
provided that the parties hereby acknowledge that such products or services may
be improved or enhanced or otherwise modified or developed from time to time or
that derivative products or services may be produced.
(B) AOL agrees to actively maintain and enhance the ICQ product and/or
its derivatives.
(C) AOL also agrees to use reasonable marketing efforts to increase the
number of ICQ Active users. Such marketing efforts during the 12 months
preceding each of Payment Dates xxxx and xxxx shall be at least equal to the
product of (1) the average amount expended by AOL during the 24-month period
prior to the date of this Agreement for the marketing and acquisition of each
net new AOL subscriber which was obtained during such 24-month period prior to
the date of this Agreement, times the amount by which (x) xxxxxxxxxxxxxxxxx.
(D) It is expressly understood that reasonable marketing efforts may
require expenditures in addition to such minimum amount in light of competitive
and other market conditions. AOL shall promptly advise Mirabilis in writing if
it has failed to satisfy any of its obligations under this Section 1.3(a)(ii).
xxxxxxxxxxx The obligations under this Section shall apply whether or not
market conditions, force majeure or other factors make the satisfaction
of such obligations commercially imprudent or unreasonable or impossible.
(E) xxxxxxxxxxxxxxxxx
(F) Any failure of AOL to satisfy obligations under Section 1.3(a)(ii)
which failure continues for sufficient duration to affect adversely the
likelihood of achieving any of the Tests shall be deemed a discontinuance for
the purposes of this Section.
(G) xxxxxxxxxxxxxxxxx
(H) In the event that AOL does not make a Contingent Purchase Payment
on any Payment Date as a result of its conclusion that none of the applicable
Tests has been met, then Mirabilis shall have the right without limiting its
other remedies:
1. By notice to AOL to cause the Tests for such Payment
Date to be applied by substituting "xxxx" for such
references to "xxxx" which appear in such Tests and
which are designated by Mirabilis in such notice,
and, at Mirabilis' further and separate option, to
require AOL to use publicly reported results for such
xxxx as the dispositive results in determining
whether the Tests have been met after giving effect
to such substitutions; and
2. Through its representatives to conduct a reasonable
audit of the data underlying the calculation of each
Test amount of the applicable period in question.
(I) All disputes under this Section 1.3(a)(ii) shall be resolved
exclusively by arbitration in New York City by the American Arbitration
Association in accordance with the procedures (including the requirement that
interest be paid on arbitration awards from the date on which a Contingent
Payment was required be made hereunder). Any arbitration conducted pursuant to
this provision shall be conducted by a recognized independent and impartial
arbitrator mutually agreed to by the Principal Stockholders and AOL or, if they
cannot agree, by three arbitrators, one chosen by the Principal Stockholders,
one chosen by AOL and the third (who shall be a recognized independent and
impartial arbitrator and who shall act as chairperson and will be compensated at
a rate generally equivalent to his or her normal billing rate or compensation)
selected by the two so chosen; provided that if either the Principal
Stockholders or AOL fail to appoint an arbitrator within 20 days of written
notice (in accordance with Section 11.1 of this Agreement) by the party or
parties seeking arbitration to the other(s) that it has appointed an arbitrator,
then the arbitration shall be conducted by an arbitrator selected by the
American Arbitration Association. If the arbitrators selected by the Principal
Stockholders and AOL fail to agree on the third arbitrator, the third arbitrator
shall be selected by the American Arbitration Association. Any determination
reached or award granted pursuant to arbitration shall be final and binding on
the parties and payment shall be made as so determined within 10 business days
of the date of such award. The judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction. There shall be
added to the amount of any arbitration award interest at the rate of 6.5% per
annum on the amount required to be paid, from the date payment would have been
due if not disputed, to the date paid, and the arbitrator(s) shall include
provision therefor in any award.
AOL agrees that any ambiguities or uncertainties in the interpretation
or application of this Section 1.3(a)(ii) will be resolved in favor of
Mirabilis.
(iii) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
(b) Offsets and Hold Backs. Except as expressly set forth in this
Agreement, including in Article IX, the payments due to Mirabilis hereunder
shall be payable regardless of any claim, defense, offset or counterclaim
whatsoever, whether or not arising under this Agreement, to the end that AAC and
AOL shall make all payments due under this Agreement notwithstanding any such
actual or purported claim, defense, offset or counterclaim; provided, however,
that the foregoing shall in no way be deemed to, and shall not, prevent or
inhibit AOL or any AOL Entity from bringing any claims or otherwise seeking
relief against Mirabilis, the Principal Stockholders or otherwise; and provided,
further, that this paragraph 1.3(b) shall not be deemed to, and shall not,
prevent AOL, AAC or AAL from offsetting and holding back Contingent Purchase
Payments in connection with claims for Damages for breach of the Non-Competition
Agreement by any party or parties referenced in the next sentence. Such offsets
relating to claims for Damages for breach of the Non-Competition Agreement may
be made only through August 15, 2002 and shall be subject to a maximum limit of
$10 million with respect to breaches by each of Arik Vardi, Sefi Vigiser and
Yair Goldfinger and $1.25 million with respect to Eran Etam (for a maximum total
offset of $31.25 million, if all four parties commit such breaches). Such
offsets shall be made in full at the time of the claim for Damages and shall be
held back to the full amount of each such stockholder's pro rata interest
(measured by his or their ownership in Mirabilis on the date hereof) in the next
Contingent Purchase Payment due hereunder. If the amount of any claim for
Damages should exceed such stockholder's pro rata interest in the next
Contingent Purchase Payment due hereunder, then the remainder of such claim
shall be offset and held back to the fullest extent possible against the next
succeeding Contingent Purchase Payment, based on such stockholder's pro rata
interest in such payment. For example, if AOL, AAC or AAL shall assert a claim
for Damages for breach as aforesaid in the amount of $10,000,000 against a
stockholder whose maximum holdback is $10 million, and such stockholders' pro
rata interest in the next Contingent Purchase Payment is $8,800,000, then AOL,
AAC or AAL, as the case may be, shall offset and holdback $8,800,000 against the
next Contingent Purchase Payment due hereunder, and the remaining $1,200,000 of
the claim shall be offset and held back against the succeeding Contingent
Purchase Payment made thereafter. Any amounts offset and held back in connection
with any breach of the Non-Competition Agreement to the extent disputed shall be
paid into escrow on the applicable Payment Date and disbursed in accordance with
the provisions of Section 9.5 hereof. The provisions of this Section 1.3(b) are
in addition to and shall in no way limit AOL's, AAC's or AAL's rights under the
Non-Competition Agreement, including the right to bring claims and recover for
Damages in excess of the offset amounts set forth above.
1.4 The Closing. (a) The closing of the Transaction (the "Closing")
shall take place at 4:00 P.M., Washington, D.C. local time, on a date which
shall be no later than the third Business Day after satisfaction or waiver of
the conditions set forth in Section 7.1 (the "Closing Date"), at the offices of
AOL's counsel in Washington, D.C.
(b) At the Closing, Mirabilis and/or the Principal Stockholders shall
deliver or cause to be delivered to AAC or AAL, as applicable:
(i)The Bills of Sale duly executed by Mirabilis in the forms
of Exhibit A and Exhibit B to this Agreement;
(ii)Such other good and sufficient instruments of
conveyance, assignment and transfer, in form and substance
satisfactory to AAC's and AAL's counsel, as shall be effective
to vest in AAC and AAL good and marketable title to the
Transferred Assets, including but not limited to, the
technology;
(iii)all contracts, files and other data and
documents, including but not limited to, the delivery of the
user lists in the media chosen by AAC, pertaining to the
Transferred Assets, except Mirabilis' minute books and stock
ledger records, (which may be delivered at the offices of
Mirabilis);
(iv)all documents required to be delivered to AAC and AAL under
the provisions of this Agreement;
(v)copies of the Memorandum of Association of
Mirabilis certified as of a date within ten days before the
Closing Date by an appropriate government official of its
jurisdiction of incorporation and certified by its Secretary
as to the absence of any amendments between the dates of
certification by the official and the Closing Date;
(vi)a certificate from the Company's Chief Financial
Officer as to the payment of Taxes by Mirabilis as of the
Closing Date;
(vii)copies of the Articles of Association of
Mirabilis, certified by its Secretary as a true and correct
copy thereof as of the Closing Date;
(viii)all consents from third parties, if any, as
are required to consummate the sale of the Transferred Assets;
(ix)the certificates referred to in Section 7.2(c);
(x)the opinion of Mirabilis' counsel referred to in Section
7.2(d); and
(xi)such other documents as may be required pursuant
to this Agreement or as may reasonably by requested by AAC and
AAL and their counsel.
(c) On the Closing Date, AAC and AAL shall deliver or cause to be
delivered to Mirabilis the following:
(i)$287,000,000 in cash by wire transfer of immediately available
funds;
(ii)a copy of the resolutions of the Board of
Directors of AOL, AAC and AAL, together with any and all
required resolutions or consents of the stockholders thereof,
approving the execution and delivery of this Agreement and the
consummation of all of the transactions contemplated hereby,
duly certified by an officer of AAC;
(iii)the certificates referred to in Section 7.3(c);
(iv)the opinion of AOL's counsel referred to in Section 7.3(d);
and
(v)such other documents as may be required pursuant
to this Agreement or as may reasonably be requested by
Mirabilis and its counsel.
(d) Immediately after the Closing, Mirabilis and the Principal
Stockholders shall grant to AAC and AAL such authorizations as are required to
submit an official request to the Israeli Registrar of Companies to permit AAC
and AAL to use the corporate name of Mirabilis, and at AAC's and AAL's request
(but at Mirabilis' expense), Mirabilis will make a request to the Israeli
Registrar of Companies for such permission (which permission the parties
acknowledge may not be assured). Irrespective of the ruling of the Israeli
Registrar or Companies, ownership of the name "Mirabilis" shall be transferred
to AAC hereunder. In addition, at the request of AOL, AAC or AAL, Mirabilis and
the Principal Stockholders shall cause ICQ Ltd., an Israeli private limited
company, to be transferred to AAL or AAC or its designee.
(e) After the Closing, at reasonable times and on reasonable notice,
Mirabilis shall have access to the books and records pertaining to its
operations and business prior to the Closing, and AAC and AAL shall have access
to the minute books and stock ledger records of Mirabilis, and AAL shall retain
such books and records in Israel, and Mirabilis shall retain such minute books
and stock ledger records, for a period of seven years after the Closing and
thereafter so long as AAL has not disposed or destroyed such records. After
seven years, AAL agrees to make such books and records available to Mirabilis
should AAL choose at any time to dispose or destroy such books and records.
(f) Mirabilis agrees that AAL (or, if applicable, AAC or AOL) shall
have the right and authority to collect for AAL's (or that of AAC or AOL) own
account all receivables and other items which shall be transferred to AAL (or
AAC, if applicable) as provided herein and to endorse with the name of Mirabilis
any checks received on account of any such receivables or other items. Mirabilis
agrees that it will promptly transfer and deliver to AAL any cash or other
property which Mirabilis may receive in respect of such receivables or other
items. Mirabilis agrees to enter into powers of attorney in favor of AAL (or AAC
or AOL) in order to effectuate the provisions of this Agreement.
1.5 Assumption of Liabilities; Excluded Liabilities. (a) AAC, AAL and
AOL jointly and severally hereby assume all of Mirabilis' debts, liabilities and
obligations, including all known and unknown contingent liabilities or
obligations (including liabilities to users or other parties arising from or in
connection with the Company's business, products or services through the
Closing), liabilities to users arising from or in connection with the Company's
business (whether under executory contracts or not) that accrue after the
Closing (including liabilities under any agreements with users or others,
whether or not binding), liabilities under user contracts that accrue through or
after the Closing, liabilities for severance pay to persons who are employed by
AAL or AAC at or after the Closing relating to periods after the Closing, 100%
of any liability for Refundable VAT (as hereinafter defined) and 50% of any
liability for Non-Refundable VAT (as hereinafter defined) and 50% of stamp taxes
payable in respect of this Transaction. The liabilities so assumed are referred
to herein as the "Assumed Liabilities." Notwithstanding anything else in this
Agreement to the contrary, AOL, AAC and AAL are not assuming and shall not
assume or be liable for any Excluded Liabilities. The term "Excluded
Liabilities" means indebtedness for money borrowed by Mirabilis, all payables of
Mirabilis, all liabilities and obligations under executory contracts (other than
user contracts) accruing through the Closing, all liabilities and obligations
relating to or arising out of the Excluded Assets, all liabilities and
obligations relating to or arising out of the Delayed Assets (except those
assumed pursuant to Section 1.1(c)), all liabilities and obligations with
respect to severance pay, vacation pay and recreation pay referenced in Schedule
2.10(a) of the Disclosure Schedule, all liabilities and obligations, if any, of
Mirabilis to persons referred to in the Collateral List under Schedule 2.10(c)
of the Disclosure Schedule, any other liability or obligation which was known by
the Company or the Principal Shareholders prior to the Closing and which appears
or should appear on the face of the Company Balance Sheet (as hereafter defined)
or the face of the Closing Date Balance Sheet (as hereafter defined), any
liabilities or obligations for severance payments to persons who are not
employed by AOL or AAC or severance payments arising in any way out of the
Transaction, any and all liabilities or obligations for Taxes of Mirabilis
(other than 100% of any liability for Refundable VAT, and 50% of any liability
for Non-Refundable VAT and 50% of stamp taxes payable in respect of this
Transaction), all liabilities and obligations of Mirabilis or its successor to
its stockholders in their capacity as stockholders, all liabilities and
obligations for any claims by the stockholders of Mirabilis and all liabilities
and obligations of Mirabilis or its successor relating to or arising out of the
conduct of its business (which shall not include the ICQ-related business
transferred hereunder) after the Closing.
(b) In the event of a breach by the Company or the Principal
Stockholders of this Agreement, the assumption of the Assumed Liabilities
hereunder shall nevertheless remain in effect but shall not affect AOL's, AAC's
or AAL's or any of their affiliates' rights to make claims and recover for
Damages (as hereafter defined).
(c) The Company and AAC and AAL shall execute at the Closing Assignment
and Assumption Agreement in the forms attached hereto as Exhibit C.1 and C.2.
(d) For purposes of this Section, "Refundable VAT" means any liability
of Mirabilis for VAT in connection with the Transaction which, and only to the
extent of which, if funded by AAC or AAL by payment to Mirabilis, AAC or AAL, as
the case may be, shall be refunded from the VAT authorities (both parties to
cooperate in executing the procedures necessary to ensure such refund).
"Non-Refundable VAT" means any liability of Mirabilis for VAT, in connection
with the Transaction other than in respect of Refundable VAT. Cash payments
relating to Assumed Liabilities shall be made in non-Israeli currency.
1.6 Further Assurances. At any time and from time to time after the
Closing, at AAC's request and without further consideration, Mirabilis and the
Principal Stockholders shall execute and deliver such other instruments of sale,
transfer, conveyance, assignment and confirmation and take such action as AAC
may reasonably deem necessary or desirable in order to more effectively
transfer, convey and assign to AAC, and to confirm AAC's title to, all of
Mirabilis' assets, to put AAC in actual possession and operating control thereof
and to assist AAC in exercising all rights with respect thereto.
1.7 Closing Date Balance Sheet. (a) Not more than 60 days following the
Closing Date, the Company shall deliver to AOL an audited balance sheet of the
Company as of the Closing Date (the "Closing Date Balance Sheet") that has been
prepared in accordance with Israeli GAAP and on a basis consistent with the
Company Balance Sheet which shall set forth the assets and liabilities of the
Company as of the Closing Date. The reasonable costs for preparation of the
Closing Date Balance Sheet shall be born equally by Mirabilis and AOL. Upon
receipt of the Closing Date Balance Sheet, AOL, and, if so desired by AOL and at
AOL's expense, AOL's independent accountants, shall be permitted during the
succeeding 30-day period to examine, and the Company shall make available the
Company's books and records and any work papers and reconciliations prepared by
the Company in the preparation of the Closing Date Balance Sheet. As promptly as
practicable and in no event later than the last day of such 30-day period, AOL
shall either inform the Company in writing that the Closing Date Balance Sheet
is acceptable, or object to the Closing Date Balance Sheet by delivering to the
Company a written statement setting forth a specific description of AOL's
objections to the Closing Date Balance Sheet (the "Statement of Objections").
<PAGE>
If AOL fails to deliver a Statement of Objections within such 30-day
period, the Closing Date Balance Sheet shall be deemed to have been accepted by
AOL. In the event that AOL provides the Company with a Statement of Objections,
the Company shall review the issues raised in the Statement of Objections and
determine whether an adjustment as provided in paragraph 1.7(b) below is
appropriate as a result of the Closing Date Balance Sheet and shall so notify
AOL within 15 days of the receipt of the Statement of Objections. If the Company
does not notify AOL within such 15-day period, it shall be deemed to have
determined that the Statement of Objections is correct and that the adjustments
set forth therein are appropriate. If AOL and the Company cannot resolve the
matter within such 15-day period, either party may, within 15 days thereafter,
request arbitration of the unresolved matters on the Statement of Objections by
any of the four largest, internationally recognized, accounting firms not
currently representing AOL or the Company (the "Arbitration Accountants"),
provided that the party not requesting the arbitration shall be entitled to
disqualify the first choice of the party so requesting the Arbitration
Accountants if such party reasonably believes that the chosen Arbitration
Accountants might be prejudiced in any way thereby. Copies of such request for
arbitration shall be sent concurrently to the other party in accordance with
Section 11.1. If no request for arbitration is made within the 30-day period
after AOL's delivery of the Statement of Objections, the Company shall be
conclusively deemed to have accepted AOL's determinations set forth in the
Statement of Objections and shall be bound by AOL's calculations of the Closing
Date Balance Sheet. If arbitration is requested, AOL and the Company shall
cooperate with the Arbitration Accountants in furnishing information and shall
have the right to present to the Arbitration Accountants their views on the
issues in dispute. The review of the Arbitration Accountants and its calculation
of the Closing Date Balance Sheet shall be governed by the terms of this Section
1.7 and its decision rendered with respect to the disputed issues shall be
final. The fees and expenses of the Arbitration Accountants shall be paid by the
party whose calculation of the Closing Date Balance Sheet deviates the most from
the calculation of the Closing Date Balance Sheet by the Arbitration
Accountants. This Section 1.7 shall be the sole and exclusive procedure of the
parties with respect to any disagreements, discrepancies or challenges regarding
this Section 1.7.
(b) Purpose of Closing Date Balance Sheet. The parties shall refer to
the Closing Date Balance Sheet only and exclusively for the purpose of
determining which liabilities constitute Assumed Liabilities and which
liabilities constitute Excluded Liabilities for purposes of this Agreement,
including the indemnification provisions hereunder. Reference is made to Article
IX for remedies of the parties relating to the failure to pay or discharge
Assumed Liabilities or Excluded Liabilities, as the case may be.
ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
The Company and the Principal Stockholders, severally but not jointly,
hereby represent and warrant to AOL, AAC and AAL as follows, except as modified
by the Mirabilis Disclosure Schedules:
2.1 Organization, Existence and Good Standing. The Company is a private
limited company duly organized, validly existing and in good standing under the
laws of the State of Israel. The Company has all necessary corporate power and
authority to own, lease and operate its properties and to conduct its business
as currently conducted. Each of the Company and its Subsidiary is duly qualified
to do business and, to the extent such concept is applicable in such
jurisdictions, is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so duly
qualified and in good standing would not have a Material Adverse Effect. The
Company has made available to AOL complete and correct copies of its Memorandum
of Association and Articles of Association and the comparable charter and
organizational documents of its Subsidiary, in each case as amended to the date
of this Agreement. The minute books of the Company, which have been made
available to AOL, accurately reflect in summary form the proceedings at all
meetings (and written action in lieu thereof) of the Board of Directors of the
Company and all committees thereof, if any, and of the Company's stockholders.
Except for the Subsidiary, the Company has no other subsidiaries.
2.2 Company Capital Stock; Ownership of Subsidiary's Capital Stock;
Investments. (a) The authorized capital stock of the Company consists of
12,130,000 ordinary shares, .01 NIS par value per share, of which, as of the
date hereof, 11,706,703 shares were issued and outstanding and no shares were
issued and held as treasury shares. A complete and accurate list of all holders
of Mirabilis Ordinary Shares, including holders of record and holders of
Beneficial Ownership thereof, is set forth on Schedule 2.2. Except as provided
in the preceding sentences of this Section 2.2 or otherwise set forth on
Schedule 2.2, there are no options, preemptive rights, warrants, or similar
rights, or securities convertible into or exchangeable for equity securities of
the Company, granted or issued by the Company in respect of shares of the
Company's capital stock or any other plans, arrangements or agreements to which
the Company is a party providing for the issuance or sale by the Company of any
additional securities. There is no liability for or obligations with respect to
any dividends, distributions or similar participation interests declared or
accumulated but unpaid with respect to any shares of the Company's capital
stock.
(b) The Company owns, beneficially and of record, the issued and
outstanding shares of capital stock or other securities of or interests in the
Subsidiary as set forth on Schedule 2.2(b), all of which shares or other
securities or interests are duly authorized, validly issued and outstanding,
fully paid and non-assessable, and free and clear of all liens, charges,
pledges, security interests, purchase options and other encumbrances or rights
of third parties.
(c) Except for the Subsidiary or as set forth on Schedule 2.2(c), the
Company does not own, beneficially or otherwise, any shares of capital stock or
other securities or interests of, or any direct or indirect interest of any
nature in, any other corporation, partnership, limited liability company, joint
venture or other entity.
2.3 Power and Authority; Non-Contravention; Filing and Consents;
Stockholder Approval. (a) The Company has full corporate power and authority to
execute, deliver and perform its obligations under this Agreement and all
agreements and other documents executed and delivered, or to be executed and
delivered, by it pursuant to this Agreement and has taken all action required by
its Memorandum of Association and Articles of Association, the CO and any other
applicable law, instrument or document by which either the Company or its
Subsidiary is bound, to authorize the execution, delivery and performance of
this Agreement and such related documents and the consummation of the
transactions contemplated hereby and thereby; provided, that no representation
is made regarding the applicability of antitrust laws of any country, or as to
any matters which also constitutes a breach of a representation by AAC, AAL or
AOL. The execution and delivery of this Agreement by the Company does not and,
the consummation of the Transaction by the Company will not (i) conflict with or
violate any provisions of its Memorandum of Association or Articles of
Association, or (ii) constitute a breach of or default under or result in the
creation of any lien, charge or other encumbrance or Tax on or against, any
assets, rights or property of the Company or its Subsidiary or give rise, with
or without notice or lapse of time, to any third-party right of termination,
cancellation, modification or acceleration under any note, bond, mortgage,
pledge, lien, lease, agreement, license, commitment or instrument, applicable to
the Company or its Subsidiary, or to which the Company or its Subsidiary is a
party or by which the Company or its Subsidiary is bound, or conflict with or
violate any restrictions of any kind to which they are subject, or (iii) subject
to the filing of any appropriate documents with the relevant authorities of
other jurisdictions in which the Company and its Subsidiary are qualified to do
business, require any consent, approval, authorization or permit of, or other
filing with or notification to any governmental or regulatory authority which
has not been obtained, or (iv) violate any law, order, writ, judgment, award,
statute, rule, regulation or decree of any Governmental Entity or arbitrator
which, if violated, would have, individually or in the aggregate, a Material
Adverse Effect or which would prevent or cause a material delay in the
consummation of the Transaction or otherwise prevent the Company or its
Subsidiary from performing their obligations hereunder in any material respect.
The execution and delivery of this Agreement have been approved by the Board of
Directors of the Company in accordance with the CO, the Company's Memorandum of
Association and Articles of Association and any contract for such approval to be
effective. This Agreement has been duly executed and delivered by the Company
and the Principal Stockholders and, assuming this Agreement constitutes a valid
and binding obligation of AOL, AAC and AAL enforceable against AOL, AAC and AAL
in accordance with its terms, constitutes a valid and binding obligation of the
Company and the Principal Stockholders, enforceable against the Company and the
Principal Stockholders in accordance with its terms.
(b) The Company has taken all steps necessary, in accordance with the
requirements of its Memorandum of Association and Articles of Association and
the CO, to call, give notice of, convene and hold an extraordinary general
meeting of its stockholders for the purpose of approving this Agreement and for
such other purposes as were necessary for the consummation of the transactions
contemplated hereby, and the stockholders of the Company have approved the
entering into of this Agreement, the other Transaction Documents, all other
instruments and documents contemplated hereby and thereby and all of the
transactions contemplated hereby and thereby.
2.4 Financial Information; Absence of Undisclosed Liabilities; Negative
Cash Flow. The Company has furnished AOL with the audited consolidated financial
statements of the Company and its Subsidiary as of December 31, 1997, and for
the period since incorporation date (July 29, 1996) to December 31, 1997 (the
"Company Financial Statements"), including but not limited to the Company's
audited balance sheet as of December 31, 1997 (the "Company Balance Sheet"). The
Company Balance Sheet has been prepared in accordance with Israeli GAAP, and
fairly presents in all material respects the consolidated financial position of
the Company and its Subsidiary as of December 31, 1997 and their consolidated
results of operations for the period then ended. As of the date hereof, to the
knowledge of the Company and the Principal Stockholders, neither the Company nor
its Subsidiary has incurred any liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise, except for (i) liabilities
and obligations reflected or reserved against in the Company Balance Sheet, (ii)
liabilities or obligations which have been fully paid or otherwise satisfied or
released, (iii) liabilities and obligations incurred but not yet paid since the
date of the Company Balance Sheet in the ordinary course of business and which
do not exceed $1,500,000 in the aggregate (exclusive of unknown contingent
liabilities and known contingent liabilities set forth on Schedule 2.4 and
special costs of Mirabilis associated with the sale of the business). Since the
date of the Company Balance Sheet, neither the Company nor its Subsidiary has
changed any principle or practice with respect to the recordation of accounts
receivable or the calculation of reserves therefor, or any collection, discount
or write-off policy or procedure unless required by Israeli GAAP or statutory
accounting principles. Schedule 2.4 fairly presents an unaudited statement of
the Company's negative cash flow on a monthly basis from the date of the Company
Balance Sheet through April 30, 1998.
2.5 Subsequent Events. Except as set forth on Schedule 2.5, since the
date of the Company Balance Sheet, the Company and its Subsidiary have conducted
their business only in the ordinary and usual course and to the knowledge of the
Company and the Principal Stockholders there have not occurred any events or
changes (including the incurrence of any liabilities of any nature, whether or
not accrued, contingent or otherwise) having or reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the Company or
its Subsidiary.
2.6 Legal Proceedings. Except as listed on Schedule 2.6, there is no
suit, claim, proceeding or investigation pending or, to the knowledge of the
Company and the Principal Stockholders, threatened against or affecting the
Company, its Subsidiary or the consummation of the Transaction. To the knowledge
of the Company and the Principal Stockholders there has been no occurrence which
could form a valid basis for a suit, claim, proceeding or investigation against
the Company, its Subsidiary or the Company's business and which would have a
Material Adverse Effect on the Company. There are no material judgments,
decrees, injunctions or orders of any Governmental Entity or arbitrator against
the Company or its Subsidiary.
2.7 Title to Assets; Leases. The Company and its Subsidiary have good
and marketable title to all of the assets, including but not limited to, the
Transferred Assets, owned by the Company or its Subsidiary, free and clear of
any material liens, mortgages, pledges or other encumbrances, which assets,
together with assets leased by the Company and its Subsidiary are all the
material assets used by the Company and its Subsidiary to conduct their business
as currently conducted. Except as set forth on Schedule 2.7, all assets leased
by the Company and its Subsidiary are leased under binding lease agreements and
neither the Company nor, to the knowledge of the Company, its Subsidiary and the
Principal Stockholders, any other party to any such lease is in breach of any
material term of any such lease, except where such breach would not have a
Material Adverse Effect.
<PAGE>
2.8 Contracts; Subscribers. (a) Except as otherwise disclosed on
Schedule 2.8(a), all material contracts, leases, intellectual property licenses,
agreements and arrangements to which the Company or its Subsidiary is a party
are valid, binding and enforceable in accordance with their terms (assuming the
other parties thereto are bound) and in full force and effect. Except as
otherwise indicated on Schedule 2.8(a), the Company and its Subsidiary are not,
and to the knowledge of the Company, its Subsidiary and the Principal
Stockholders, no other party to such contracts, leases, agreements and
arrangements is, in default thereunder, and, to such knowledge, no event has
occurred or is threatened to occur, which, with or without the lapse of time or
the giving of notice or both, would constitute a default thereunder, except
where such default would not have a Material Adverse Effect.
(b) Except as set forth on Schedule 2.8(b) and except for contracts
which may be canceled by the Company or its Subsidiary within 30 days without
penalty, there are no contracts, written or oral, to which the Company or its
Subsidiary is a party or by which the Company or its Subsidiary is bound which:
(i) provide for ongoing obligations of the Company or its Subsidiary of $10,000
or more in amount or are performable after December 31, 1998, (ii) contain
change of control or anti-assignment provisions granting to another party or
other parties thereto the right to terminate such agreements or take other
action adverse to the Company or its Subsidiary upon or following a transaction
of the type contemplated by this Agreement; (iii) purport to limit the Company,
its Subsidiary or, after the Closing, AOL from providing any service in any
jurisdiction, whether under the Company name or AOL name or otherwise, or grant
any exclusive geographic, segment or other rights to any third-party; (iv) are
in the nature of offset or barter agreements; or (v) are with any Related Party,
or any entity in which any Related Party has any interest.
(c) Except as set forth on Schedule 2.8(c), no consent, waiver or
approval is required from any party to material contracts, intellectual property
licenses, leases, agreements and arrangements to which the Company and its
Subsidiary are a party in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
(d) The Coopers & Lybrand report and review of statistical measurements
regarding ICQ subscriptions, user and usage data, user demographics and usage
patterns compiled by Coopers & Lybrand (the "Report") was prepared in the manner
set forth in such Report and in the Disclosure Schedule. Taking into account the
information set forth in Schedule 2.8(d), the information in the Report taken as
a whole is true and correct in all material respects. Such Schedule sets forth
the Company's Terms of Service governing the Company's relationships with its
subscribers, distributors and other users of the Service, and also sets forth
the form currently being used.
2.9 Taxes; Government Incentives. Except as set forth on Schedule 2.9:
(a) All Israeli and non-Israeli Tax returns and reports required to be filed by
or on behalf of the Company or its Subsidiary have been timely filed or requests
for extension have been timely filed and any such extension has been granted and
has not expired, all such filed Tax returns are accurate and complete in all
material respects and there is no outstanding Tax audit, inquiry or assessment
(and no written notice of any such audit or inquiry has been received) with
respect to the Company or its Subsidiary and no claim has been made by any
taxing authority where the Company does not pay Tax or file Tax returns that the
Company or its Subsidiary is or may be subject to Tax liability of any kind; (b)
all Taxes required to be paid, if any, by the Company or its Subsidiary have
been paid in full or adequately reserved for in accordance with Israeli GAAP on
the consolidated financial statements of the Company and there are no waivers of
the statute of limitations for the assessment or payment of any Tax by the
Company or its Subsidiary; (c) all Taxes required to be withheld, if any, by the
Company or its Subsidiary have been withheld and such Taxes required to be
withheld have been delivered to the applicable Tax Authorities; and (d) no tax
incentives, other than incentives generally available by operation of law
without application or material governmental action, have been given to the
Company under the laws of the State of Israel.
2.10 Employee Benefit Plans; Employment Matters. (a) Except as set
forth on Schedule 2.10(a), neither the Company nor its Subsidiary has
established or maintained or is obligated to make contributions to or under or
otherwise participates in, with respect to any current or former employee,
director or independent contractor of the Company or its Subsidiary: (i) any
stock option, restricted stock, stock appreciation rights, bonus or other type
of incentive compensation plan, program, agreement or arrangement; (ii) any
severance, pension, profit-sharing, thrift or savings, retirement, deferred
compensation, employee stock ownership, employee stock purchase or supplemental
executive retirement plan, agreement or arrangement; or (iii) any life
insurance, death benefit, health and hospitalization, disability, employee
assistance, education or tuition assistance, vacations benefit or fringe benefit
plan, or other employee benefit plan, program, agreement or arrangement. Except
as disclosed on Schedule 2.10(a), all such plans listed on Schedule 2.10(a) in
which any of the Company's or its Subsidiary's employees participate
(collectively, the "Company Benefit Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations and are fully funded. Neither the Company not its Subsidiary has any
obligation or commitment (formal or informal) to create any new benefit plan or
program, or to amend any existing Company Benefit Plan to increase the benefits
thereunder.
(b) Except as set forth on Schedule 2.10(b), neither the Company nor
its Subsidiary is a party to any oral or written (i) union, guild or collective
bargaining agreement which covers any of the Company's or its Subsidiary's
employees (nor is the Company aware of any union organizing activity currently
being conducted in respect to any of the Company's or its Subsidiary's
employees), (ii) agreement with any officer or employee the material benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction of the nature contemplated by this Agreement or
which provides for any payment or payments (including, without limitation,
severance, unemployment compensation, bonus or otherwise) of more than an
aggregate of $10,000 to such officer or employee upon such occurrence, or (iii)
agreement or plan, including any stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan, any of the benefits of which
will be increased, or with respect to vesting, will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement.
(c) Schedule 2.10(c) sets forth a complete and accurate description of
all engagement, employment, assignment of inventions, confidentiality and
non-competition agreements to which the Company or its Subsidiary, on the one
hand, and any independent contractor (including but not limited to any
consultant) or employee, on the other hand, are parties. Schedule 2.10(c) also
sets forth a complete and accurate list of the names, date of commencement of
employment, titles and current base salaries and any bonus, commission, loan or
material perquisite terms of all directors, officers and employees of the
Company or its Subsidiary. As of the date hereof, other than merit increases or
other increases consistent with past practice, neither the Company nor its
Subsidiary has granted any general or uniform increase in the rates of pay to
employees or any increase in compensation payable to or to become payable to any
officer or employee, consultant or agent.
2.11 Compliance with Laws; Permits; Absence of Questionable Payments.
(a) Except as disclosed on Schedule 2.11, and except where a violation would not
have a Material Adverse Effect on the Company, neither the Company nor its
Subsidiary has violated, failed to comply with or acted or failed to act so as
to incur liability under any Israeli or United States (federal or state) or, to
the knowledge of the Company, its Subsidiary or the Principal Stockholders,
non-Israeli law or non-United States law, regulation or ordinance, judgment,
decree or order relating to its business, operations, properties or assets, and
no notice of any pending investigation or violation of, non-compliance with or
alleged liability under, any such law, regulation, ordinance, judgment, decree
or order has been received by the Company or its Subsidiary. All material
licenses, permits and approvals required under such laws, rules and regulations
are in full force and effect except where the failure to be in full and force
effect would not have a Material Adverse Effect on the Company. Except as set
forth on Schedule 2.11, neither the Company nor its Subsidiary has received any
written notices from any Governmental Entity or any other written civil
inquiries from regulatory authorities regarding the possible violation of law or
third party rights by any subscriber, and the Company and Principal Stockholders
make no other representations whatsoever on the possible violation of law or
third party rights by any subscriber, whether for spamming, harassment, invasion
of privacy, exposure to objectionable material, spoofing, sniffing, hacking,
password "fishing" or otherwise, whether or not the Company shall have
derivative or other liability therefor.
(b) Neither the Company, its Subsidiary, nor any director, officer,
employee or agent on behalf of the Company or its Subsidiary, has (i) used any
corporate or other funds or other property for unlawful contributions, payments,
gifts or entertainment, or made any unlawful expenditure related to political
activity to governmental officials or others or established or maintained any
funds in violation of Section 30A of the United States Securities Exchange Act
of 1934, as amended, or any other law, (ii) accepted or received any unlawful
contributions, payments, expenditures or gifts, (iii) made any false or
fictitious entries in the books and records of the Company or its Subsidiary, or
(iv) made any other unlawful payments.
2.12 Intellectual Property. (a) Except as disclosed on Schedule 2.12
hereto, the Company and its Subsidiary own, free and clear of all liens,
pledges, security interests or other encumbrances, and have the valid and
exclusive right to use, sell, license or dispose of such patents, copyrights,
trademarks, service marks, and applications and registrations therefor, and URLs
and Internet domain names and applications therefor (and all interests therein),
computer programs and other computer software, user interfaces, trade names,
trade secrets, customer lists, proprietary technology processes and formulae,
source code, object code, know-how, inventions, other confidential and
proprietary information, and other intellectual property rights as are necessary
to enable the Company and its Subsidiary to conduct its and their business as
currently conducted (all of such rights which the Company and its Subsidiary
have whether or not necessary for the conduct of its and their business, being
referred to herein as the "Company Rights"). Schedule 2.12 sets forth certain of
the material features and functionality of the Company's software, but does not
purport to disclose all known "bugs," errors, limitations, defects and
performance flaws. Schedule 2.12 also sets forth a list of all registered
patents, copyrights, trademarks and service marks of the Company and its
Subsidiary and all applications for any of the foregoing included in the Company
Rights, all of which are in full force and effect and are not subject to any
Taxes or maintenance fees, except as set forth on Schedule 2.12. Except as set
forth on Schedule 2.12, neither the Company nor its Subsidiary (i) has licensed
or granted to anyone rights of any nature to use any Company Rights that would
limit the exercise of such Company Rights by the Company or its Subsidiary, or,
after the Closing, AOL or AAC against such licensee or grantee, or (ii) is
obligated to pay royalties, fees or other payments to anyone for ownership, sale
or other disposition, or use of any of the Company Rights. All works that were
created, prepared or delivered by employees, consultants, independent
contractors or other third parties for or on behalf of the Company or its
Subsidiary (including graphics, text and any materials and elements created,
prepared or delivered by such parties in connection therewith) shall constitute
"works made for hire" specially ordered or commissioned by the Company or its
Subsidiary within the meaning of Israeli statute and United States copyright
law, and all right, title and interest therein (including any materials and
elements created, prepared or delivered by such parties in connection therewith)
have been assigned to the Company. Neither the holding or use by the Company or
its Subsidiary of any of the Company Rights nor the offering or sale or other
provision of any services or products marketed or sold or otherwise provided by
the Company or its Subsidiary violates or is alleged to violate any license,
sublicense or other agreement with, or infringes any common-law or statutory
right of, a third party; provided that, in the case of patents and patent
applications, such representations and warranties are made to the knowledge of
the Company, its Subsidiary and the Principal Stockholders. To the knowledge of
the Company, its Subsidiary and the Principal Stockholders, there exists no
infringement by any third party of any of the Company Rights and there is no
pending or, to the knowledge of the Company, its Subsidiary and the Principal
Stockholders, threatened claim or litigation against the Company or its
Subsidiary contesting its holding or use of any of the Company Rights, asserting
the misuse of any of the Company Rights, or asserting the infringement or other
violation of any rights of a third party, nor, to the knowledge of the Company,
its Subsidiary and the Principal Stockholders, is there any basis for any such
claim.
(b) Except as set forth on Schedule 2.12, the Company and its
Subsidiary have taken reasonable security measures to protect the secrecy,
confidentiality, and value of the Company Rights. Without limiting the
generality of the foregoing, (i) the Company and its Subsidiary have obtained
valid and binding written assignments from all independent contractors
(including but not limited to consultants) and employees who contributed to the
creation or development of intellectual property during the course of their
engagement or employment by the Company or its Subsidiary of the rights to such
contributions that the Company or its Subsidiary does not already own by
operation of law, and (ii) all use, disclosure or appropriation of confidential
intellectual property or other information used by the Company or its Subsidiary
and created or developed by or on behalf of it, licensed or confidentially
disclosed to it, or assigned to it is subject to confidentiality agreements
entered into by all current and former independent contractors (including but
not limited to consultants) and current or former employees.
<PAGE>
(c) Except as set forth on Schedule 2.12, the consummation of the
transactions contemplated by this Agreement will not alter, impair or extinguish
any of the Company Rights or violate or conflict with any agreement governing
any Company Rights. Except as set forth on Schedule 2.12, following the
consummation of the transactions contemplated hereby, AAC will own, free and
clear of all material liens, pledges, security interests or other encumbrances,
and have the exclusive right to use, sell, license, export or dispose of or
otherwise will have sufficient rights to use, the Company Rights so as to enable
AAC as a successor of the Company to conduct its business as currently
conducted.
(d) None of the intellectual property contained in the Company Rights
(i) was developed, in whole or in part, while any Principal Stockholder or Amnon
Amir was employed by, or otherwise providing services to, any other company,
business , person or other entity, or (ii) includes or is derived from
proprietary or confidential information of any such company, business, person or
other entity.
2.13 Bank Accounts, Etc. Except as set forth on Schedule 2.13, neither
the Company nor its Subsidiary maintains any account or safe deposit box or
similar arrangement with any bank or other financial institution or
intermediary, and Schedule 2.13 completely and accurately lists all such
accounts and safe deposit boxes or similar arrangements, with the names and
positions with the Company or its Subsidiary of all persons having signing
authority over any thereof and all persons authorized to incur indebtedness on
behalf of, or execute and deliver instruments reflecting indebtedness incurred
by, the Company or its Subsidiary.
2.14 No Government Support. The Company has not received any Israeli
governmental funding or other assistance which, under Israeli law or the terms
of such funding or other assistance, require any consent to the Agreement or any
other action by the Company in connections therewith or the operation of the
Service currently or following consummation of the Transaction or regarding the
transfer of the technology to any entity inside or outside Israel.
2.15 Truthfulness, Completeness and Limitation of Representations. To
the knowledge of the Company, its Subsidiary and the Principal Stockholders, no
representation or warranty by the Company, its Subsidiary or the Principal
Stockholders in this Agreement, or any certificate furnished to AOL pursuant
hereto, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements made by the Company, its
Subsidiary or the Principal Stockholders therein, in the light of the
circumstances in which they were made, not misleading. This Agreement sets forth
all representations and warranties made by the Company, its Subsidiary and the
Principal Stockholders, and no information furnished or set forth or obtained
elsewhere, whether orally or in writing, or pursuant to due diligence
examinations contemplated hereby or otherwise, shall constitute a representation
or warranty hereunder, and the Company, its Subsidiary or any of the Principal
Stockholders shall not have any responsibility or liability therefor. The
foregoing sentence shall is no way limit the representations and warranties of
the parties under the Non-Competition, Non-Disclosure or Employment Agreements
in connection with such agreements.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING AAC
AOL and AAC, jointly and severally, hereby represent and warrant to the
Company as follows:
3.1 Organization, Existence, Good Standing and Capital Stock. AAC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all necessary corporate power to own its
properties and assets and to carry on its business as contemplated to be
conducted. AAC's authorized capital stock consists of 100 shares of AAC Common
Stock, all of which have been duly authorized and validly issued, are owned by
and registered in the name of AOL Holding, Inc., a Delaware corporation and a
wholly-owned subsidiary of AOL ("AHI"), and are fully paid and non-assessable.
Other than the rights created pursuant to this Agreement, there are no options,
warrants or debt securities or other instruments or securities outstanding which
are convertible into, or which grant the holder thereof the right to acquire any
securities of AAC. AAC has conducted no business activities prior to the Closing
Date, other than in connection with its organization and the Transaction.
3.2 Power and Authority. (a) AAC has full corporate power and authority
to execute, deliver and perform its obligations under this Agreement and all
agreements and other documents executed and delivered, or to be executed and
delivered, by it pursuant to this Agreement, and, except for the consent of AHI,
as the sole stockholder of AAC, to the Transaction, has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise, to
duly and validly authorize the execution and delivery of, and the performance of
its obligations under, this Agreement and such related documents and the
consummation of the transactions contemplated hereby and thereby. The execution
and delivery of, and the performance of its obligations under, this Agreement do
not and, subject to the consent of its sole stockholder as aforesaid, the
consummation of the Transaction contemplated hereby will not (i) conflict with
or violate any provisions of the Certificate of Incorporation or Bylaws of AAC
or, (ii) subject to obtaining the consents, approvals, orders, authorizations
and registrations, and making the filings described in Section 3.2(b) below,
violate any law, order, writ, judgment, award, statute, rule, regulation or
decree of any judicial, arbitral, public or Governmental Entity or arbitrator,
which would prevent or cause a material delay in the consummation of the
Transaction or otherwise prevent AAC from performing its obligations hereunder
in any material respect. The execution, delivery and performance of this
Agreement have been approved by the Board of Directors of AAC and by AHI as the
sole stockholder of AAC. This Agreement has been duly and validly executed and
delivered by AAC and, assuming this Agreement constitutes a valid and binding
obligation of the Company enforceable against it in accordance with its terms,
constitutes a legal, valid and binding obligation of AAC, enforceable against
AAC in accordance with its terms.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required to be obtained,
made or filed by AAC in connection with the execution and delivery of this
Agreement by AAC or the consummation by AAC of the Transaction, except for such
consents, approvals, orders, authorizations, registrations, declarations, or
filings the failure of which to be obtained, made or filed would not,
individually or in the aggregate, prevent or cause a material delay in the
consummation of the Transaction or otherwise prevent AAC from performing its
obligations hereunder in any material respect.
3.3 Legal Proceedings. Except as set forth on Schedule 3.3, there is no
suit, claim, proceeding or investigation pending or, to the knowledge of AOL or
AAC, threatened against or relating to or affecting AAC or the Transaction
which, if resolved adversely to AAC, would prevent or cause a material delay in
the consummation of the Transaction or otherwise prevent AAC from performing its
obligations hereunder in any material respect.
3.4 Truthfulness, Completeness and Limitation of Representations. To
the knowledge of AOL and AAC, no representation or warranty by AOL or AAC
relating to AAC in this Agreement, any Exhibit or Schedule hereto, or any
certificate furnished to the Company pursuant hereto, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements made by AAC therein, in the light of the circumstances in which
they were made, not misleading. This Agreement sets forth all representations
and warranties made by AOL or AAC, an no information furnished or set forth or
obtained elsewhere, whether orally or in writing, or pursuant to the due
diligence examinations contemplated hereby or otherwise, shall constitute a
representation or warranty hereunder, and neither AOL nor AAC shall have any
responsibility or liability therefor.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING AAL
AOL and AAL, jointly and severally, hereby represent and warrant to the
Company as follows:
4.1 Organization, Existence, Good Standing and Capital Stock. AAL is a
private limited company duly organized, validly existing and in good standing
under the laws of the State of Israel and has all necessary corporate power to
own its properties and assets and to carry on its business as contemplated to be
conducted. AAL's authorized capital stock consists of 100 shares of AAL Ordinary
Shares, all of which have been duly authorized and validly issued, are owned by
and registered in the name of AAC, and are fully paid and non-assessable. Other
than the rights created pursuant to this Agreement, there are no options,
warrants or debt securities or other instruments or securities outstanding which
are convertible into, or which grant the holder thereof the right to acquire any
securities of AAL. AAL has conducted no business activities prior to the Closing
Date, other than in connection with its organization and the Transaction.
4.2 Power and Authority. (a) AAL has full corporate power and authority
to execute, deliver and perform its obligations under this Agreement and all
agreements and other documents executed and delivered, or to be executed and
delivered, by it pursuant to this Agreement, and, except for the consent of AAC,
as the sole stockholder of AAL, to the Transaction, has taken all actions
required by law, its Memorandum of Association, its Articles of Association or
otherwise, to duly and validly authorize the execution and delivery of, and the
performance of its obligations under, this Agreement and such related documents
and the consummation of the transactions contemplated hereby and thereby. The
execution and delivery of, and the performance of its obligations under, this
Agreement do not and, subject to the consent of its sole stockholder as
aforesaid, the consummation of the Transaction contemplated hereby will not (i)
conflict with or violate any provisions of the Memorandum of Association or
Articles of Association of AAL or, (ii) subject to obtaining the consents,
approvals, orders, authorizations and registrations, and making the filings
described in Section 4.2(b) below, violate any law, order, writ, judgment,
award, statute, rule, regulation or decree of any judicial, arbitral, public or
Governmental Entity or arbitrator, which would prevent or cause a material delay
in the consummation of the Transaction or otherwise prevent AAL from performing
its obligations hereunder in any material respect. The execution, delivery and
performance of this Agreement have been approved by the Board of Directors of
AAL and by AAC as the sole stockholder of AAL. This Agreement has been duly and
validly executed and delivered by AAL and, assuming this Agreement constitutes a
valid and binding obligation of the Company enforceable against it in accordance
with its terms, constitutes a legal, valid and binding obligation of AAL,
enforceable against AAL in accordance with its terms.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required to be obtained,
made or filed by AAL in connection with the execution and delivery of this
Agreement by AAL or the consummation by AAL of the Transaction, except for such
consents, approvals, orders, authorizations, registrations, declarations, or
filings the failure of which to be obtained, made or filed would not,
individually or in the aggregate, prevent or cause a material delay in the
consummation of the Transaction or otherwise prevent AAL from performing its
obligations hereunder in any material respect.
4.3 Legal Proceedings. Except as set forth on Schedule 4.3, there is no
suit, claim, proceeding or investigation pending or, to the knowledge of AOL or
AAL, threatened against or relating to or affecting AAL or the Transaction
which, if resolved adversely to AAL, would prevent or cause a material delay in
the consummation of the Transaction or otherwise prevent AAL from performing its
obligations hereunder in any material respect.
4.4 Truthfulness, Completeness and Limitation of Representations. To
the knowledge of AOL and AAL, no representation or warranty by AOL or AAC
relating to AAL in this Agreement, any Exhibit or Schedule hereto, or any
certificate furnished to the Company pursuant hereto, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements made by AAL therein, in the light of the circumstances in which
they were made, not misleading. This Agreement sets forth all representations
and warranties made by AOL, AAC or AAL, and no information furnished or set
forth or obtained elsewhere, whether orally or in writing, or pursuant to the
due diligence examinations contemplated hereby or otherwise, shall constitute a
representation or warranty hereunder, and neither AOL, AAC nor AAL shall have
any responsibility or liability therefor.
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING AOL
AOL hereby represents and warrants to the Company as follows:
5.1 Organization, Existence and Good Standing. AOL is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. AOL has made available to the Company complete and correct
copies of its Certificate of Incorporation and Bylaws as amended to the date of
this Agreement.
5.2 Power and Authority; Non-Contravention; Filing and Consents. (a)
AOL has full corporate power and authority to execute, deliver and perform its
obligations under this Agreement and all agreements and other documents executed
and delivered, or to be executed and delivered, by it pursuant to this Agreement
and has taken all action required by law, its Certificate of Incorporation and
Bylaws or otherwise, to duly and validly authorize the execution and delivery
of, and the performance of its obligations under this Agreement and such related
documents and the consummation of the transactions contemplated hereby and
thereby. Except as set forth on Schedule 5.2, the execution and delivery of, and
the performance of its obligations under, this Agreement do not and the
consummation of the Transaction contemplated hereby will not (i) conflict with
or violate any provisions of the Certificate of Incorporation or Bylaws of AOL,
(ii) constitute a breach of or default under any note, bond, mortgage, pledge,
lien, lease, agreement, license, commitment or instrument, applicable to AOL or
any AOL Entity, or to which AOL or any AOL Entity is a party or by which AOL or
any AOL Entity is bound, which breach or default would prevent or cause a
material delay in the consummation of the Transaction or otherwise prevent AOL
from performing its obligations hereunder in any material respect or, (iii)
subject to obtaining the consents, approvals, orders, authorizations and
registrations, and making the filings described in Section 4.2(b) below, violate
any law, order, writ, judgment, award, statute, rule, regulation or decree of
any Governmental Entity or arbitrator, which, if violated or accelerated, would
prevent or cause a material delay in the consummation of the Transaction or
otherwise prevent AOL from performing its obligations hereunder in any material
respect. The execution and delivery of this Agreement have been approved by the
Board of Directors of AOL. No approval by the holders of any voting securities
of AOL is required for AOL to enter into this Agreement or to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
AOL and, assuming this Agreement constitutes a valid and binding obligation of
the Company enforceable against it in accordance with its terms, constitutes a
valid and binding obligation of AOL, enforceable against AOL in accordance with
its terms.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required to be obtained,
made or filed by AOL or any AOL Entity in connection with the execution and
delivery of this Agreement by AOL or the consummation by AOL of the Transaction,
except for (i) filings with the SEC of such reports under the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated by this Agreement and (ii) such consents, approvals, orders,
authorizations, registrations, declarations, or filings the failure of which to
be obtained, made or filed would not, individually or in the aggregate, prevent
or impede, in any material respect, or cause a material delay in the
consummation of the Transaction or otherwise prevent AOL from performing its
obligations hereunder in any material respect.
5.3 AOL SEC Documents. AOL has filed by the applicable deadline with
the SEC all reports, proxy statements, forms and other documents required to be
filed therewith since July 1, 1997 and through the date of this Agreement (the
"AOL SEC Documents"). As of their respective dates, (i) the AOL SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such AOL SEC Documents, and (ii) none of
the AOL SEC Documents contained any untrue statement of a material fact and none
of the AOL SEC Documents omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
5.4 Legal Proceedings. Except as set forth on Schedule 5.4, there is no
suit, claim, proceeding or investigation pending or, to the knowledge of AOL,
threatened against or relating to or affecting AOL or any AOL Entity or the
Transaction which, if resolved adversely to AOL, would prevent or cause a
material delay in the consummation of the Transaction or otherwise prevent AOL
from performing its obligations hereunder in any material respect.
5.5 Truthfulness, Completeness and Limitation of Representations. To
the knowledge of AOL, no representation or warranty by AOL in this Agreement,
any Exhibit or Schedule hereto, or any certificate furnished to the Company
pursuant hereto, contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements made by AOL therein, in
the light of the circumstances in which they were made, not misleading. This
Agreement sets forth all representations and warranties made by AOL, and no
information furnished or set forth or obtained elsewhere, whether orally or in
writing, or pursuant to due diligence examinations contemplated hereby or
otherwise, shall constitute a representation or warranty hereunder, and AOL
shall not have any responsibility or liability therefor.
5.6 Guaranty of Obligations of AAC and AAL. AOL hereby unconditionally
guarantees the performance of AAC and AAL of all obligations and agreements
pursuant to this Agreement and the transactions contemplated hereunder and AOL
acknowledges that it is primarily liable with AAC and AAL, jointly and severally
for AAC's and AAL's obligations under this Agreement.
ARTICLE VI
COVENANTS
6.1 Access to Information. Subject to the provisions of the
Non-Disclosure Agreement, a copy of which is attached hereto as Exhibit D (the
"NDA"), the Company and its Subsidiary shall (i) give to AOL and its counsel,
accountants and other representatives full and prompt access to all of the
properties, documents, source code, software and technical documentation, web
logs of users, contracts, personnel files (subject to applicable law) and other
records and the employees of the Company and its Subsidiary, including but not
limited to, such technical personnel as AOL may need to make inquiries of in the
course of its evaluation of the Company's software and intellectual property;
(ii) furnish AOL with copies of such documents and with such information with
respect to the affairs of the Company and its Subsidiary as AOL may from time to
time request; and (iii) disclose and make available to AOL and its
representatives all books, contracts, accounts, personnel records, letters of
intent, papers, records, communications with regulatory authorities and other
documents relating to the business and operations of the Company and its
Subsidiary. Nothing contained in this Section 6.1 shall be deemed to create any
duty or responsibility on the part of AOL to investigate or evaluate the value,
validity or enforceability of any contract, lease or other asset included in the
assets of the Company or its Subsidiary.
6.2 Confidentiality. The parties hereto acknowledge and confirm that
AOL and the Company have entered into the NDA attached as Exhibit D hereto and
that the NDA is, and continues to be, in full force and effect, notwithstanding
the execution and delivery of this Agreement and/or the consummation of the
Transaction. Further, from and after the time of execution and delivery of this
Agreement and until the end of the confidentiality period provided for in
Section 4 of the NDA, any Information (as defined in the NDA) shall be subject
to the same terms and conditions as provided for in the NDA in the case of
Information disclosed prior to the time of the execution and delivery of this
Agreement, all of which terms and conditions are incorporated herein by
reference and made a part hereof; provided however, that after the Closing, AOL
and the other AOL-related parties bound by the terms of the NDA shall no longer
be bound by the terms of the NDA. Notwithstanding any provision herein to the
contrary, except for the immediately preceding proviso set forth in the
penultimate sentence hereof, in the event of a conflict between this provision
and the NDA, the parties hereto agree that the language in the NDA will control.
<PAGE>
6.3 Public Disclosures. Without limiting the generality of Section 6.3,
the parties hereto shall keep strictly confidential and shall not disclose,
publicly or privately, the fact or content of any discussions or negotiations
regarding the Transaction, this Agreement (including any Schedule or Exhibit
hereto) or any other documents entered into or delivered in connection herewith
provided, however, that each party hereto may disclose such information on a
need-to-know basis to its directors, officers, employees, consultants acting
with respect to the Transaction, counsel, accountants, financial advisors,
investors, lenders and other advisors, all of whom shall be informed by such
party of such party's undertaking of confidentiality, provided, that neither
party shall have any liability for inadvertent leaks. The Company and AOL shall
consult with each other before issuing the initial press release or otherwise
making any initial public statement with respect to the transactions
contemplated by this Agreement, and shall not issue any such press release or
make any such public statement prior to such consultation except as may be
required by applicable law or requirements of the Exchange Act or any national
securities exchange as advised by counsel, in which case the parties shall use
their reasonable efforts to consult with each other prior to issuing such a
release or making such a statement. In the event of a required disclosure which
may be required of AOL pursuant to requirements of the Exchange Act or any
national securities exchange, AOL agrees to give notice of such disclosure to
the Company as soon as practicable. As the initial public announcement of the
transaction contemplated hereby, AOL and the Company shall issue a joint press
release, mutually acceptable to them promptly upon execution and delivery of
this Agreement. Thereafter, notwithstanding anything herein to the contrary, AOL
may make such statements, public or private, as AOL determines will be in the
best interests of AOL.
6.4 Cooperation. (a) Each of the Company and AOL shall use commercially
reasonable efforts (i) to cooperate with each other in determining whether any
filings are required to be made or consents are required to be obtained in any
jurisdiction prior to the Closing, in connection with the consummation of the
transactions contemplated hereby and cooperate in making any such filings
promptly and in seeking to obtain any such consents timely, (ii) to take, or
cause to be taken, all actions necessary to comply promptly with all legal
requirements which may be imposed on such party (or any subsidiaries or
affiliates of such party) with respect to this Agreement and to consummate the
transactions contemplated hereby, (iii) to obtain (and to cooperate with the
other party to obtain) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity and/or any other public or private
third-party which is required to be obtained or made by such party or any of its
subsidiaries or affiliates in connection with this Agreement and the
transactions contemplated hereby, and (iv) to cooperate with each other
post-Closing in connection with any consent, authorization, order or approval
of, or any exemption by, any Governmental Entity and/or any other public or
private third party which may be required. In addition, promptly after the
Closing, AOL shall deliver, at its cost, three sets of the Transaction Documents
to Mirabilis.
(b) In addition, from and after the Closing for a period of up to one
year, AAL will make each of Avi Shechter and Ariel Yarnitsky available to
Mirabilis after working hours, at Mirabilis' expense, to assist Mirabilis in its
legal liquidation, provided that the time spent by each of Messrs. Shechter and
Yarnitsky shall not exceed 20 hours in the first month after the Closing and
shall not exceed 5 hours in any month thereafter. Mirabilis may maintain a
reasonable amount of liquidation and related documents on the premises of AAL,
it being understood that AOL, AAC and AAL shall bear no responsibility
whatsoever for such documents. Mirabilis may remove the documents at any time
during normal business hours.
6.5 Company Employees. (a) Except as noted on Schedule 6.5, all current
employees of the Company and its Subsidiary as of the Closing shall be offered
employment, immediately after the Closing, by AAC, AAL or an affiliate thereof
Schedule 6.5 is a complete list of all employment and severance agreements and
plans existing as of the date hereof (the "Schedule 6.5 Agreements").
Notwithstanding the foregoing, at any time after the Closing, the employment of
any employee of the Company or its Subsidiary may be terminated and any Schedule
6.5 Agreement may be amended or terminated in accordance with its terms.
(b) Except as otherwise provided in the Schedule 6.5 Agreements, AOL,
following the Closing Date, shall, or shall cause AAC or AAL to, use all
reasonable efforts to provide to Company employees hired by AAC or AAL at least
the level of benefits that they were receiving from the Company immediately
prior to the Closing.
(c) AAL and AAC agree to pay the bonus payments set forth in Schedule
6.5(c) hereof in accordance with the vesting provisions contained therein,
provided that each such employee signs an appropriate release in favor of
Mirabilis and, at AOL's option, in favor of AOL, AAC or AAL prior to payment of
the bonus. If any employee listed on Schedule 6.5(c), other than Avner Parnes ,
Timothy Sixtus or Alon Golan shall be terminated for cause by AAL or AAC or any
successor entity or terminates his or her own employment, then neither AAL nor
AAC shall be required to make any further payment set forth on Schedule 6.5(c)
to such employee, and it shall instead reallocate, in its sole discretion, the
unpaid portion of the bonus payments set forth in Schedule 6.5(c) with respect
to such employee to any other employee of AAL or AAC set forth in such Schedule.
To the extent that any employee listed on Schedule 6.5(c) shall refuse to sign
an appropriate release in favor of Mirabilis, and, at AOL's option, in favor or
AOL, AAC or AAL, then AAC or AAL, as the case may be, shall not make such bonus
payment to such employee, and the bonus payment otherwise attributable to such
employee shall be remitted to Mirabilis in consideration of Mirabilis' agreement
to indemnify AOL, AAC and AAL in respect of such employee as provided in Section
9.2(c)(v)(ii) hereunder. In the event that any such employee shall within 120
days sign such release, then Mirabilis will remit the bonus payment relating to
such employee to AOL, AAC or AAL for payment to such employee in accordance with
the terms hereof of this Section 6.5(c).
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Mutual Conditions. The respective obligations of each party to
consummate the Transaction, shall be subject to the satisfaction, at or prior to
the Closing Date, of the following conditions:
(a) No Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, injunction or other order
whether temporary, preliminary or permanent which is in effect and which has the
effect of making the transactions contemplated by this Agreement illegal or
restraining or prohibiting consummation of such transactions; and
(b) There shall not have occurred and be continuing any general banking
moratorium in the United States or any general suspension of trading of
securities on the NYSE lasting for a full trading day or longer.
7.2 Conditions to Obligations of AOL, AAC and AAL. The obligations of
AOL, AAC and AAL to consummate the Transaction shall be subject to the
satisfaction of the following conditions (any of which may be waived by AOL on
its own behalf and on behalf of AAC and AAL):
(a) The representations and warranties of the Company and the Principal
Stockholders set forth in this Agreement that are qualified by Material Adverse
Effect or otherwise as to materiality shall be true and correct, and those that
are not so qualified shall be true and correct in all material respects, as of
the Closing Date as though made on and as of the Closing Date, except to the
extent that such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties that are qualified by a
Material Adverse Effect or otherwise as to materiality shall be true and
correct, and those that are not so qualified shall be true and correct in all
material respects, as of such earlier date).
(b) Each of the covenants and agreements of the Company or the
Principal Shareholders to be performed or observed at or prior to the Closing
Date pursuant to the terms hereof shall have been duly performed or observed.
(c) AOL shall have been furnished with certificates, executed by duly
authorized officers of the Company dated the Closing Date, certifying as to the
fulfillment of the conditions set forth in the immediately preceding clauses (a)
and (b).
(d) AOL shall have received an opinion from the Company's legal counsel
substantially in the form attached hereto as Exhibit E.
(e) Each of the Company, the Principal Stockholders and Eran Etam shall
have executed and delivered to AOL a Confidentiality, Non-Competition and
Intellectual Property Rights Agreement substantially in the form attached hereto
as Exhibit F.
(f) AOL, AAC, and AAL and their counsel shall have received such
certificates as to the good standing of the Company and certificates of officers
of the Company as counsel to AOL, AAC and AAL may reasonably request.
(g) All authorizations, consents and approvals of Governmental Entities
set forth herein and in the Disclosure Schedules shall have been received.
(h) All third party consents material to the operation of the business,
approvals or authorizations set forth herein or in the Mirabilis Disclosure
Schedules shall have been received.
(i) Each of the Principal Stockholders and Eran Etam shall have entered
into Employment Agreements substantially in the form attached hereto as Exhibit
G.
(j) The stockholders of Mirabilis shall have approved this Agreement
and the Transaction in accordance with the Company's Memorandum of Association
and Articles of Association and the CO.
7.3 Conditions to Obligations of the Company. The obligations of the
Company to consummate the Transaction shall be subject to the satisfaction, at
or prior to the Closing Date of the following conditions (any of which may be
waived by the Company on or prior to the Closing Date):
(a) The representations and warranties of AOL, AAC and AAL set forth in
this Agreement that are qualified as to materiality shall be true and correct,
and those that are not so qualified shall be true and correct in all material
respects as of the Closing Date as though made on and as of the Closing Date,
except to the extent that such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties that are
qualified as to materiality shall be true and correct, and those that are not so
qualified shall be true and correct in all material respects, as of such earlier
date).
(b) Each of the covenants and agreements of AOL to be performed or
observed at or prior to the Closing Date pursuant to the terms hereof shall have
been duly performed or observed.
(c) The Company shall have been furnished with a certificate, executed
by duly authorized officers of AOL, dated the Closing Date, certifying as to the
fulfillment of the conditions set forth in the immediately preceding clauses (a)
and (b).
(d) The Company shall have received an opinion from AOL's legal
counsel, substantially in the form attached hereto as Exhibit H.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to
the Closing, whether before or after approval of the Transaction by the holders
of Mirabilis Ordinary Shares:
(a) By mutual written consent of AOL and the Company; or
<PAGE>
(b) By either of AOL or the Company, if (i) any Governmental Entity
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, injunction or other order, whether temporary, preliminary or
permanent, which is in effect and which has the effect of making the
transactions contemplated by this Agreement illegal or restraining or
prohibiting consummation of such transactions, or (ii) the Transaction has not
been consummated by June 12, 1998, with time being of the essence and such date
not being subject to extension by any course of conduct or other waiver, for any
reason other than a material breach by the party seeking to terminate this
Agreement.
8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and be of no further legal effect, without any liability or obligation on the
part of any party, other than the provisions of this Section 8.2, and Sections
6.3, 6.4, 8.3, 8.4, 8.5 and Articles IX, XI and XII, except that nothing herein
shall relieve any party from liability for any willful and material breach by a
party of any of its covenants or agreements set forth in this Agreement, it
being understood that the parties shall be relieved for liability for all
representations and warranties herein. In the event of any termination of this
Agreement, the NDA shall also remain in full force and effect.
8.3 Amendment. This Agreement may be amended by the parties at any
time, notwithstanding the adoption and approval of the Transaction or this
Agreement by the holders of Mirabilis Ordinary Shares; provided, however, that
any such amendment shall be consistent with the CO. This Agreement may not be
amended except by an instrument in writing signed on behalf of the Company and
AOL by their respective duly authorized officers.
8.4 Waiver. Subject to the applicable provisions of the CO, the parties
hereto may waive any provision of this Agreement by a writing signed by a duly
authorized officer of the party against whom the waiver is to be effective. No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights herein provided shall be
cumulative.
8.5 Fees and Expenses. Each party hereto shall be responsible for the
payment of its own costs and expenses, including attorneys' fees and expenses,
in connection with the negotiation and execution of this Agreement and
consummation of the transactions contemplated hereby and thereby; provided that,
if this Agreement is terminated by a party hereto as a result of a willful and
material breach by the other party of any of its obligations hereunder, the
breaching party shall reimburse the non-breaching party for all of such actual
costs and expenses incurred by the non-breaching party. The Company warrants
that there are no valid claims for brokerage commissions, investment bankers'
fees or finder's or similar fees in connection with the Transaction or any of
the other transactions contemplated by this Agreement.
ARTICLE IX
INDEMNIFICATION
9.1 Survival. All representations and warranties of the parties in this
Agreement shall survive the Closing and, subject to the last sentence of this
Section 9.1, any due diligence investigation or other inquiry or review and
shall expire on July 15, 1999, except that claims, if any, asserted in writing
prior to such expiration and identified as a claim for indemnification pursuant
to this Article IX shall survive until finally resolved and satisfied in full if
asserted on or prior to such date if the party entitled to indemnification
prevails in establishing its right to indemnification. Except with respect to
Section 2.7 regarding title to the Transferred Assets, neither AOL nor AAC nor
AAL shall be entitled to rely upon representations and warranties in this
Agreement in making indemnification claims under this Article 9 if AOL becomes
aware in the course of its due diligence investigation or other inquiry or
review that any such representation or warranty is not true, and the Closing
occurs as contemplated hereunder.
<PAGE>
9.2 Indemnification. (a) The Company and, subject to Section 8.5, the
Principal Stockholders, severally but not jointly, shall (but only out of and to
the maximum extent of an aggregate amount of $100,000,000 from the Contingent
Purchase Payments, and only out of the Contingent Purchase Payments, applied and
deducted on a pro rata basis against each Contingent Purchase Payment which may
thereafter be payable, so that, for example, a $30,000,000 claim made on July
30, 1999 shall be applied and deducted on the basis of $10,000,000 against each
of the three Contingent Purchase Payments due on August 15, 2000, 2001 and 2002,
and a $40,000,000 claim made on July 30, 2000 shall be applied and deducted on
the basis of $20,000,000 against each of the two remaining Contingent Purchase
Payments due on August 15, 2001 and 2002, etc.) indemnify, hold harmless and
defend AOL and the AOL Entities (including but not limited to AAC and AAL, after
the Closing) and their respective officers, directors, employees and
stockholders (other than the Principal Stockholders and their successors in
interest) and their successors and assigns, and (b) AOL shall indemnify, hold
harmless and defend the Company and the Mirabilis stockholders, in each case
from, against and with respect to any claim, liability, obligation, loss,
damage, assessment, judgment, cost and expense (including, without limitation,
reasonable attorneys' and accountants' fees and costs and expenses reasonably
incurred in investigating, preparing, defending against or prosecuting any
litigation or claim, action, suit, proceeding or demand) of any kind or
character ("Damages") arising out of or in any manner incident, relating or
attributable to:
(c) (i) any inaccuracy in any representation or
breach of warranty by an Indemnifying Party (as defined below)
contained in this Agreement;
(ii) any failure by such Indemnifying Party (as
hereafter defined) to perform or observe, or to have performed
or observed, in full, any covenant, agreement or condition to
be performed or observed by it under this Agreement or under
any certificates or other documents or agreements executed in
connection with this Agreement; and
(iii) in the case of clause (b) above, the operation
of the business of AAC, AAL or the Then Mirabilis Entity after
the Closing Date, and the Assumed Liabilities;
(iv) in the case of clause (b) above, any challenge
or assertion of wrongdoing by any person or entity (including
any Governmental Entity) against the Transaction or against
any party for entering into the Transaction, based on
antitrust or similar causes of action (except to the extent
that such challenge constitutes a breach of a representation
or warranty by the party seeking to be indemnified); provided
that AOL shall be entitled to control the defense of any such
claims in connection with any such claim; and provided,
further, that if AOL shall not be permitted to control the
defense of any such claims for any reason, then AOL shall be
required to indemnify the Company for only 50% of its legal
fees and expenses; and
(v) in the case of clause (a) above, (i) the Excluded
Liabilities and (ii) any and all liabilities relating to or
arising out of (A) the alleged failure by Mirabilis to issue
stock options to any employee listed on Schedule 6.6(c) hereto
or to any other former employee of Mirabilis or (B) the
withholding of bonus payments in accordance with the terms of
Section 6.5(c).
9.3 Claims for Indemnification. (a) In the event that any party asserts it is
entitled to indemnification pursuant to this Article IX, the party claiming
indemnification (the "Indemnified Party") shall make a claim by written notice
thereof to the party required to provide indemnification (the "Indemnifying
Party"), specifying the nature of the claim and amount claimed, and, in
reasonable detail, the facts and circumstances with respect to such claim, a
detailed calculation of the amount of such claim, and the basis for which
indemnification is available hereunder. If such event involves the claim of any
third party the Indemnifying Party shall have the right to control the defense
or settlement of such claim; provided, however, that (i) the Indemnified Party
shall be entitled to participate in the defense of such claim at its own
expense, (ii) the Indemnifying Party shall obtain the prior written approval of
the Indemnified Party (which approval shall not be unreasonably withheld or
delayed) before entering into any settlement of such claim if, pursuant to or as
a result of such settlement, injunctive or other non-monetary relief would be
imposed against the Indemnified Party.
(b) In the event that the Indemnifying Party shall be obligated to
indemnify the Indemnified Party pursuant to this Article IX, the Indemnifying
Party shall, upon payment of such indemnity in full, be subrogated to all rights
of the Indemnified Party with respect to the claim to which such indemnification
relates.
(c) Except in the case of fraud and except for claims for Damages
related to or arising out of the Non-Competition Agreement, Non-Disclosure
Agreement or Employment Agreements, the remedies set forth in this Article IX
are the exclusive remedies of the parties in respect of all matters arising
under this Agreement and the transactions contemplated hereby. Without limiting
the generality of the foregoing, AOL and AAC and AAL expressly waive the remedy
of rescission.
9.4 Credit Against Indemnification; Threshold for Indemnification. (a)
No claim by AOL or any AOL Entity against the Company, the stockholders
generally or the Principal Stockholders for indemnification pursuant to this
Article IX with respect to any claim for Damages arising out of, relating or
attributable to any inaccuracy in any representation or breach of warranty by
the Company shall be made unless and only to the extent that any such claims for
Damages in the aggregate shall exceed xxxxxxxxxxx (the "Threshold"), in which
event AOL or any AOL Entity, as the case may be, shall be entitled, subject to
the provisions of this Article IX, to make a claim for indemnification
hereunder, but only to the extent such Damages exceed xxxxxxxxxx (the
"Cushion"). It is further agreed by the parties hereto that only claims for
indemnification exceeding xxxxxxx in each instance shall be made by AOL or the
AOL Entities.
(b) Notwithstanding the foregoing, any claim by AOL or any AOL Entity
relating to or arising out of any Excluded Liability or other matters set forth
in Section 9.2(c)(v) or the Non-Competition Agreement, Non-Disclosure Agreement
or Employment Agreements or fraud shall not be subject to the Threshold or the
Cushion or the $1,000 per claim minimum and may be brought on a "first dollar"
basis. Claims for Damages relating to any breach of the Non-Competition
Agreement or Employment Agreements may be made only against the breaching party.
9.5 Indemnification Limits. Anything herein to the contrary
notwithstanding, claims by AOL or any AOL Entity for indemnification of Damages
under this Article IX shall be made exclusively out of the Contingent Purchase
Payments and without recourse to any other assets of Mirabilis or the Principal
Stockholders, none of whom shall have any personal liability therefor, except
with respect to claims relating to or arising out of any Excluded Liability or
the Non-Competition Agreement, Non-Disclosure Agreement or Employment Agreements
for which no such limitations shall apply, and except in the case of fraudulent
misrepresentations relating to any part of the business or financial condition
of Mirabilis, 80% of the liability for which is joint and several among the
Principal Stockholders. A misrepresentation shall be deemed "fraudulent" if it
is a serious, knowing and willfully misleading misrepresentation by Mirabilis
which was a material inducement to AOL, AAC or AAL to execute and deliver this
Agreement. If AOL or any AOL Entity maintains by notice to the Principal
Stockholders that indemnification is required hereunder and if such claim within
ten days is disputed by any one or more of the Principal Stockholders, then AOL
on the Payment Date for a Contingent Purchase Payment shall pay any undisputed
portion of the Contingent Purchase Payment to Mirabilis and shall place the
disputed portion of the Contingent Purchase Payment into an interest-bearing
account at a New York City bank reasonably acceptable to the parties, such funds
to be released only upon (i) written instructions to the bank, signed by the
parties hereto, or (ii) final resolution or adjudication by a court relating to
the applicable claim or claims for Damages made by AOL or any AOL Entity
hereunder.
ARTICLE X
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PRINCIPAL STOCKHOLDERS
10.1 Other Agreements. Each of the Principal Stockholders represents
for himself that he is not: (i) a party to any other agreement or other
arrangement that will materially interfere with his full, due, timely, and
complete performance of this Agreement and the transactions contemplated hereby;
or (ii) in violation, and in the future will not be in violation, of any
applicable law by entering into and undertaking performance of this Agreement
and the transactions contemplated hereby.
10.2 Stock Ownership. Each of the Principal Stockholders represents
that he is the sole and exclusive owner or and holds the shares referred to in
Schedule 2.2 as owned by him.
10.3 Restrictions on Transfer. The Principal Stockholders hereby agree
not to transfer or convey any shares of Company capital stock except after the
Closing upon liquidation of the Company or unless the transferee of such capital
stock shall have agreed to be bound by the terms of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand delivery,
facsimile transmission and overnight courier, registered or certified mail,
return receipt requested, postage prepaid, to the parties hereto at the
following addresses, or at such other address as such party may advise the
others in writing from time to time:
If to AOL, AAC or AAL:
America Online, Inc.
22000 AOL Way
Dulles, VA 20166
Attention: Miles Gilburne, Senior Vice President,
Corporate Development
Telephone: (703) 265-1258
Telecopier: (703) 265-3004
with a copy to:
America Online, Inc.
22000 AOL Way
Dulles, VA 20166
Attention: George Vradenburg III,
Senior Vice President and General Counsel
Telephone: (703) 265-3999
Telecopier: (703) 265-3995
If to Mirabilis:
Mirabilis Ltd.
12 Shamir Street
Tel-Aviv 69693
Israel
Attention: Yossi Vardi
Telephone: 011 972 3 641 7831
Telecopier: 011 972 3 641 8565
<PAGE>
with a copy to:
Dr. Joshua Rosensweig
30 Kalisher Street
Tel-Aviv Israel
Telephone: 011 972 3 510 7188
Telecopier: 011 972 3 510 6196
If to a Principal Stockholder:
c/o Dr. Joshua Rosensweig
30 Kalisher Street
Tel-Aviv Israel
Telephone: 011 972 3 510 7188
Telecopier: 011 972 3 510 6196
All such communications shall be deemed to have been duly given on the
date of hand delivery or telecopy or facsimile, if receipt is confirmed, or on
the next Business Day following timely deposit of such communications with
overnight courier or on the third Business Day following the date of mailing, if
delivered by registered or certified mail.
11.2 Governing Law and Dispute Resolution. This Agreement shall be
interpreted, construed and enforced in accordance with the domestic laws of the
United States of America and the State of New York, applied without giving
effect to any conflict of law provision that would cause the application of the
laws of any jurisdiction other than the State of New York, except with respect
to the mechanics and procedures of the actions of the Company, AAC and AAL
necessary to give effect to the transactions contemplated herein, which shall be
governed and construed in accordance with the domestic laws of the State of
Israel. Except where this Agreement expressly provides for arbitration, any
dispute relating to this Agreement or the Transaction shall be resolved in the
state courts of the State of New York or in the United States District Court for
the Southern District of New York; provided, however, that if any such state or
federal court declines to accept jurisdiction with respect to any such dispute,
such dispute shall be resolved in the state courts of the Commonwealth of
Virginia or in the United States District Court for the Eastern District of
Virginia. Each party irrevocably submits to such courts' exclusive jurisdiction
and acknowledges that such courts are a convenient forum and consents to service
of process at the address for such party set forth in Section 11.1.
11.3 Specific Performance. Each party acknowledges and agrees that, in
the event of an actual or threatened breach of any of the provisions of this
Agreement by such party, the harm to the others will be immediate, substantial
and irreparable and that monetary damages will be inadequate. Accordingly, each
party agrees that, in such an event, the others will be entitled to equitable
relief, including an injunction and an order of specific performance, in
addition to any and all other remedies at law or in equity.
11.4 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
<PAGE>
11.5 Entire Agreement; Counterparts. This Agreement, including all
exhibits and schedules attached hereto contain the entire agreement of the
parties and supersede any and all prior or contemporaneous agreements between
the parties except the Confidentiality Agreements, written or oral, with respect
to the subject matter hereof. This Agreement may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
11.6 Binding Effect; Benefit, Assignability. This Agreement shall be
binding on, and shall inure to the benefit of, the parties hereto, and their
respective successors and assigns, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any person any right, benefit or
remedy of nature whatsoever under or by virtue of this Agreement. Nothing in
this Agreement shall be construed to create any rights or obligations except
among the parties hereto, and no person or entity shall be regarded as a
third-party beneficiary of this Agreement. No party may assign or delegate any
right or obligation hereunder without the prior written consent of the other
parties. Any assignment of rights or delegation of obligations not in compliance
herewith shall be null and void.
11.7 No Rule of Construction; Captions. The parties acknowledge that
this Agreement was initially prepared by AOL, and that all parties have read and
negotiated the language used in this Agreement. The parties agree that, because
all parties participated in negotiating and drafting this Agreement, no rule of
construction shall apply to this Agreement which construes ambiguous language in
favor of or against any party by reason of that party's role in drafting this
Agreement. The captions or headings in this Agreement are made for convenience
and general reference only and shall not be construed to describe, define or
limit the scope or intent of the provisions of this Agreement.
11.8 No Third Party Rights. No provision of this Agreement shall create
any third-party beneficiary rights in any person , including without limitation,
employees or former employees (including any beneficiary or dependent thereof)
of the Company or its Subsidiary, and no provision of this Agreement shall
create such third-party beneficiary rights in any person in respect of any
benefits that may be provided, directly or indirectly, under any Company Benefit
Plan, bonus plan or other arrangement.
ARTICLE XII
DEFINITIONS
Terms defined in the various Sections of this Agreement shall have the
meanings indicated therein. When used in this Agreement, the following terms
shall have the meanings indicated below:
"AAC Common Shares" means the shares of AAC Common Stock.
"AAC Common Stock" means the common stock, $.01 par value per share, of
AAC.
"Mirabilis Ordinary Shares" means the ordinary shares, par value NIS
.01 per share, of the Company.
"AOL Shares" means the shares of AOL Common Stock.
"AOL Common Stock" means the common stock, $.01 par value per share, of
AOL.
"AOL Entity" or "AOL Entities" means any corporation, limited liability
company, partnership, limited partnership or other organization whether
incorporated or unincorporated (i) of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect at least a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by AOL and/or by any one or more of the AOL
Entities, (ii) of which AOL or any one or more of the AOL Entities is the
general partner or managing member or (iii) which AOL or any one or more of the
AOL Entities otherwise controls.
"beneficial ownership"(including any similar terms herein) has the
meaning set forth in Rule 13d-3 promulgated under the Exchange Act.
"Business Day" means a day other than a Saturday, Sunday or a day on
which the banks in New York City are obligated or authorized by law or executive
order to close.
"Companies Ordinance" or "CO" means the Companies Ordinance (New
Version) 1983, as amended, of the State of Israel, or any successor ordinance or
other provision of Israeli law of the same or similar effect, and all
authoritative interpretations and implementations thereof.
"Employment Agreements" mean those certain employment agreements
entered into between AAL and certain stockholders of the Company of even date
herewith, the forms of which are attached hereto as Exhibit G.
"Exchange Act" means the United States Securities and Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
"GAAP" means generally accepted accounting principles in the applicable
jurisdiction.
"Governmental Authorization" means any (a) permit, license,
certificate, franchise, permission, clearance, registration, qualification or
authorization issued, granted, given or otherwise made available by or under the
authority of any Governmental Entity or pursuant to any legal requirement; or
(b) right under any contract with any Governmental Entity.
"Governmental Entity" means any federal, state or local government or
any court, administrative or regulatory agency or commission or other government
authority or agency, domestic or foreign.
"including" means, when following any general statement, term or
matter, "including but not limited to," "including, without limitation," or
words of similar import and shall not be construed to limit such statement, term
or matter to the specific terms or matters as provided immediately following the
word "including" or to similar items or matters, whether or not non-limiting
language is used with reference to the word "including" or similar items or
matters, but rather shall be deemed to refer to all other items or matters that
could reasonably fall within the broadest possible scope of the general
statement, term or matter.
"knowledge" means the actual knowledge of any director or executive
officer of the Company, AOL or AAC, as the case may be, and, in the case of the
Company also the Principal Stockholders.
"Material Adverse Change" means, in connection with the Company, any
change which is, individually or in the aggregate, materially adverse to the
business, operations, properties, assets, liabilities or financial condition of
the Company, with the exception of conditions generally affecting the Internet
business.
"Material Adverse Effect" means, in connection with the Company, any
effect which materially and adversely affects the business, operations,
properties, assets, liabilities or financial condition of the Company, with the
exception of conditions generally affecting the Internet business.
"material delay" means with respect to the consummation of any of the
transactions contemplated hereby, a delay for more than 30 days or a delay
beyond June 12, 1998, whichever is earlier.
"NIS" means New Israeli Shekels, the lawful currency of the State of
Israel.
"Non-Competition Agreement" means that certain Confidentiality,
Non-Competition and Intellectual Property Rights Agreement by and among AOL, the
Company and certain stockholders of the Company of even date herewith, the form
of which is attached hereto as Exhibit F.
"Non-Disclosure Agreement" means that certain non-disclosure agreement
entered into between the Company and AOL dated as of May 18, 1998, attached
hereto as Exhibit D.
"NYSE" means the New York Stock Exchange, Inc.
"Principal Stockholders" mean Arik Vardi, Sefi Vigiser, Yair Goldfinger
and Yossi Vardi.
"Related Party" means, with respect to the Company, any current or
former director, officer, stockholder, employee or, except with respect to the
Company's fully disclosed consultancy or agency relationship, a consultant or
agent.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the United States Securities Act of 1933, as
amended and the rules and regulations promulgated thereunder.
"Stockholders" means all holders of Mirabilis Ordinary Shares.
"Subsidiary" means ICQ Networks, Inc., a New York Corporation.
"Tax" and "Taxes" means all federal, state or local taxes, whether
domestic or foreign, including income, gross receipts, capital gains, windfall
profits, ad valorem value added, surtax severance, payroll production, sales,
use, transfer, duty, license, excise, franchise, stamp, employment, business
withholding or similar taxes or charges, together with any interest, additions
or penalties with respect thereto and any interest in respect of such additions
or penalties imposed, assessed or collected by or under the authority of any
Governmental Entity, levy, assessment, tariff, duty (including any customs
duty), deficiency or fee.
"Transaction" means the transactions contemplated by the Transaction
Documents.
"Transaction Documents" means this Agreement together with the
Schedules and Exhibits hereto, the Bills of Sale, the Assignment and Assumption
Agreement, the Non-Disclosure Agreement, the Confidentiality, Non-Competition
and Intellectual Property Rights Agreement, the Employment Agreements, and any
other agreements entered into on or as of he date hereof which are related to,
or in furtherance of the Transaction.
"User" means, except as used in Section 1.3(a)(ii), any person or
entity who operates or benefits from his or its operation, or use of, any
product or service of the Company.
"VAT" means the ad valorem or value added tax of any country.
<PAGE>
IN WITNESS WHEREOF, AOL, AAC, AAL, the Company and the Principal
Stockholders have caused this Agreement to be executed by their respective duly
authorized officers, and have caused their respective corporate seals to be
hereunto affixed, all as of the day and year first above written.
AMERICA ONLINE, INC.
By:/s/Scott Pearson
Name:Scott Pearson
Title:Vice President, Corporate Development
AOL ACQUISITION CORP.
By:/s/Scott Pearson
Name:Scott Pearson
Title:
R.G.A.O. HOLDINGS LTD.
By:
Name:
Title:
MIRABILIS LTD.
By:/s/Yossi Vardi
Name:Yossi Vardi
Title:Vice President
<PAGE>
/s/Yossi Vardi
Yossi Vardi
/s/Arik Vardi
Arik Vardi
/s/Yair Goldfinger
Yair Goldfinger
/s/Sefi Vigiser
Sefi Vigiser
AMERICA ONLINE, INC. ACQUIRES MIRABILIS LTD AND
ITS ICQ INSTANT COMMUNICATIONS AND CHAT TECHNOLOGY
Fast-Growing Web Community with 12 Million Registered Users Worldwide
Will Significantly Advance America Online's Multiple-Brand Strategy
AOL to Accelerate ICQ's Development as
Major Web Portal with New Features and Functionality
Dulles, VA, June 8, 1998 - Significantly advancing its multiple-brand strategy,
America Online, Inc. [NYSE: AOL] today announced that it has acquired Mirabilis
Ltd, an Israel-based company which has used its ICQ instant communications and
chat technology to rapidly build a Web-based community of more than 12 million
registered users worldwide.
Under the terms of the acquisition completed June 5, 1998, America Online paid
$287 million in cash to purchase 100% of Mirabilis's assets. Starting in its
fiscal year 2001, AOL also will make contingent payments of up to $120 million
over three years based on growth performance levels. A substantial portion of
the $287 million purchase price is expected to be accounted for as in-process
R&D in the Company's fourth quarter ending June 30, 1998. The Company said it
does not expect the purchase of Mirabilis to have any negative effect on
expected operating earnings.
Mirabilis will continue to be based in Tel Aviv and operated by its founding
team as a free Web-based service with its own brand identity. It will report to
Ted Leonsis, President of AOL Studios. AOL will continue to develop the ICQ
in-process technology to improve the service and establish its revenue-providing
capabilities.
"The acquisition of ICQ technology dramatically increases our presence on the
Web," America Online Chairman and Chief Executive Officer Steve Case said.
"Strategically, this is one of our most important initiatives for three reasons.
First, the ICQ software dashboard stays on a user's screen all the time --
making it a natural starting point for content, context and community, and
providing us with an unparalleled launch pad for a broader Web portal strategy.
Second, ICQ has attracted one of the fastest growing and most loyal communities
in cyberspace. And third, ICQ has a strong international reach, further
accelerating our global expansion."
America Online President and Chief Operating Officer Bob Pittman said:
"Acquiring ICQ fits perfectly into our multiple-brand strategy. Like CompuServe,
ICQ substantially broadens our reach in important markets not served by
AOL-branded products. In addition to its international reach, ICQ has tremendous
appeal among young, technically sophisticated Web users and there is remarkably
little overlap with AOL."
Mr. Pittman added: "The ICQ technology is unique among Web portals in that it,
like AOL, supports a strong sense of community and persistent communications. We
will help ICQ continue its phenomenal growth and achieve its full potential by
leveraging our efficient infrastructure and creative resources. Working with
ICQ's founding team, we will ensure the service retains its edge with the
special attitude, imagery and Internet community focus that have attracted so
many users."
Arik Vardi, Chief Executive Officer of Mirabilis, said: "We're delighted that
ICQ is joining the world leader in interactive services and brands. With America
Online's resources and expertise behind ICQ, we will be better able to enhance
our service to the Internet community."
Sefi Vigiser, President of Mirabilis, said: "Combining forces with AOL will help
accelerate the introduction of our next-generation client - the biggest
technological leap that we've made to date - as well as speed future
enhancements of the service. With our founding team continuing to guide the
development of the service, ICQ will retain its pioneering spirit and dedication
to our loyal users."
Launched in November 1996, ICQ's instant communication and chat technology
informs users when family, friends and business colleagues are online and
enables them to exchange messages in real-time to help its users build their own
communities. ICQ also gives its users the ability to play games and exchange
files and URLs. More than 12 million people have registered to use the
technology, compared to 11 million just one month ago.
The ICQ acquisition further builds AOL's international momentum, especially in
Europe where the AOL and Bertelsmann AG joint venture is the leading provider of
pan-European Internet online services. Approximately 60% of ICQ's users are
based outside the US and nearly 40% are European.
In addition to this acquisition, AOL continues to pursue its Web strategy with
AOL- and CompuServe-branded Internet products as well as AOL's Digital City, the
#1 local content and community guide on the Internet. Among the Company's wide
range of Web products is AOL.COM, the world's number one Web site from home with
30% of its traffic coming from outside AOL, and AOL Instant Messenger(TM), AOL's
instant messaging service that allows Internet users to communicate instantly
via real-time, private, text messages. AOL Instant Messenger is part of the AOL
Buddy List network with over 30 million registered users worldwide.
ICQ is available - free of charge - to all Internet users through its Web site,
www.icq.com.
America Online, Inc., based in Dulles, Virginia, is the world's leader in
branded interactive services and content. America Online operates two worldwide
Internet online services: AOL Interactive Services, with more than 12 million
members; and CompuServe, with approximately 2 million members. America Online
also operates AOL Studios, the world's leading creator of original interactive
content. Other branded Internet services operated by America Online include
AOL.COM, the world's most accessed Web site from home; AOL NetFind, AOL's
comprehensive guide to the Internet; and AOL Instant Messenger.
