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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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) April 13, 2000
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Transmedia Asia Pacific, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 0-26368 13-3760219
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(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
11 St. James's Square, London, England SW1Y 4LB
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (011) 44-171-930-0706
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 13, 2000 (the "Effective Time"), Transmedia Asia Pacific, Inc.
(the "Company"), Asia Merger Sub II, Inc., a wholly owned subsidiary of the
Company ("Merger Sub"), and MonsterBook.com, Inc. ("MonsterBook") consummated
the merger (the "Merger") of Merger Sub with and into MonsterBook pursuant to
which MonsterBook became a wholly owned subsidiary of the Company. The Merger
was consummated in accordance with the terms of the Agreement and Plan of Merger
(the "Merger Agreement"), dated as of March 8, 2000, by and among the Company,
Merger Sub, MonsterBook and William H. McKee, III and Frank T. Vega.
Pursuant to the terms of the Merger Agreement, as of the Effective
Time, each of the outstanding shares of common stock of MonsterBook, par value
$0.0001 per share, was converted into the right to receive either (a)
$0.27105114 in cash, without interest (the "Cash Consideration") or (b)
0.0735054 of a share of common stock of the Company, par value $0.00001 per
share (the "Stock Consideration" and, together with the Cash Consideration, the
"Merger Consideration"). The Merger Consideration was negotiated by the parties
at the time they entered into the Merger Agreement. The Stock Consideration to
be issued by the Company will consist of approximately 2,962,773 shares of its
common stock, and the Cash Consideration to be paid by the Company will consist
of approximately $138,000. Based on the closing price of the Company's common
stock on April 13, 2000 of $5.3125 per share, the Stock Consideration has a
value of approximately $15,739,732, and the Merger Consideration has a value of
approximately $15,877,732. The funds to be used by the Company to pay the Cash
Consideration will be supplied by the Company's working capital. In addition,
the Company converted existing MonsterBook options into options to acquire
approximately 362,749 shares of the Company's common stock.
It is intended that the Merger will qualify as a reorganization under
the provisions of Section 368(a) of the Internal Revenue Code of 1986, as
amended, and it is expected that the Merger will be a tax-free event to the
MonsterBook stockholders electing the Stock Consideration for federal income
tax purposes.
MonsterBook produces and distributes a printed e-business directory for
the Internet. MonsterBook's headquarters are located in San Francisco,
California. The Company presently intends to operate MonsterBook as a subsidiary
under the name MonsterBook.com.
The descriptions contained herein of the Merger are qualified in their
entirety by reference to the Merger Agreement attached hereto as Exhibit 2.1.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements of Business Acquired.
The financial statements of MonsterBook for the periods
specified in Rule 3-05(b) of Regulation S-X will be filed by
amendment to this Current Report on Form 8-K not later than
sixty days after the date on which this Current Report on Form
8-K is required to be filed.
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(b) Pro Forma Financial Information.
The Pro Forma financial statements of MonsterBook required
pursuant to Article 11 of Regulation S-X will be filed by
amendment to this Current Report on Form 8-K not later than
sixty days after the date on which this Current Report on Form
8-K is required to be filed.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated as of March 8, 2000, by
and among Transmedia Asia Pacific, Inc., Asia Merger Sub II,
Inc., MonsterBook.com, Inc. and William H. McKee, III and
Frank T. Vega.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
TRANSMEDIA ASIA PACIFIC, INC.
Dated: April 28, 2000
By: /s/ James Fyfe
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Name: James Fyfe
Title: Vice President and Assistant
Secretary
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EXHIBIT INDEX
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Exhibit
No.
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2.1 Agreement and Plan of Merger, dated as of March 8, 2000, by
and among Transmedia Asia Pacific, Inc., Asia Merger Sub II,
Inc., MonsterBook.com, Inc. and William H. McKee, III and
Frank T. Vega.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
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This Agreement and Plan of Merger, dated as of March 8, 2000
(this "Agreement"), is made by and among Transmedia Asia Pacific, Inc., a
Delaware corporation ("Parent"), Asia Merger Sub II, Inc., a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"), MonsterBook.com,
Inc., a Delaware corporation (the "Company") and William H. McKee, III and Frank
T. Vega ("Majority Stockholders").
RECITALS:
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A. The Board of Directors of Parent, the Board of Directors of
the Company, and the Board of Directors of Sub have each approved and deem it
advisable and in the best interests of their respective stockholders to
consummate the merger of Sub with and into the Company (the "Merger"), upon the
terms and subject to the conditions set forth in this Agreement;
B. The Majority Stockholders, who together own approximately
92 percent of the outstanding capital stock of the Company, have each approved
the Merger, upon the terms and subject to the conditions set forth in this
Agreement;
C. Pursuant to the Merger, each issued and outstanding share
of common stock, par value $0.0001 per share, of the Company ("Company Common
Stock"), other than Dissenting Shares (as defined herein), will be converted
into the right to receive the Merger Consideration (as defined herein);
D. The Majority Stockholders, the Company, Parent and Sub
desire to make certain representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe various conditions to the
Merger; and
E. For federal income tax purposes, it is intended that the
Merger will qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements set forth in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement agree as follows:
SECTION 1. DEFINITIONS
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The following terms when used in this Agreement have the
following respective meanings:
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"ACTIONS" means any pending litigation, action, suit,
investigation, proceeding, hearing, complaint, assessment, inquiry or judgment,
administrative or judicial, at law or in equity.
"ADJUSTED OPTIONS" has the meaning set forth in Section
11.1(a).
"AFFILIATE" means any Person that directly or indirectly
controls, is controlled by, or is under common control with such Person. A
Person is deemed to control another Person if such Person owns fifty-one percent
(51%) or more of any class of stock of the "controlled" Person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the controlled Person, whether through ownership of
stock or partnership interests, by contract, or otherwise.
"AGREEMENT" means this Agreement.
"BASKET" has the meaning set forth in Section 10.5(a).
"BYLAWS" means, as applicable (a) the Bylaws of Parent, (b)
the Bylaws of the Company, or (c) the Bylaws of Sub.
"CAP" has the meaning set forth in Section 10.5(a).
"CASH CONSIDERATION" has the meaning set forth in Section
3.1(a)(i).
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended.
"CERTIFICATE OF INCORPORATION" means, as applicable (a) the
Certificate of Incorporation, as amended, of Parent, (b) the Certificate of
Incorporation, as amended, of the Company, (c) the Certificate of Incorporation,
as amended, of Sub.
"CERTIFICATE OF MERGER" has the meaning set forth in Section
2.3.
"CERTIFICATES" means Certificates representing Company Common
Stock as set forth in Section 3.2(b).
"CLAIMANT" has the meaning set forth in Section 10.3.
"CLOSING" has the meaning set forth in Section 2.2.
"CLOSING DATE" has the meaning set forth in Section 2.2.
"CODE" has the meaning set forth in the Recitals hereto.
"COMPANY" has the meaning set forth in the preamble hereto.
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"COMPANY COMMON STOCK" has the meaning set forth in the
Recitals hereto.
"COMPANY DISCLOSURE SCHEDULES" means the exceptions to the
representations and warranties of the Majority Stockholders and the Company
contained in Section 5 of this Agreement, which are incorporated into this
Agreement by reference.
"COMPANY OPTIONS" has the meaning set forth in Section
11.1(a).
"COMPANY PREFERRED STOCK" has the meaning set forth in Section
5.3.
"COMPANY STOCK PLAN" means the 1999 Stock Option Plan of
MonsterBook.com, Inc.
"CONSENT" means any consent, approval, authorization, waiver
or notification of a Governmental Authority or any other Person.
"CONTAMINANTS" means any contaminant, pollutant or hazardous
substance, as defined by CERCLA, as well as any waste materials, petroleum and
petroleum products.
"CONTRACTS" has the meaning set forth in Section 5.2.
"CURRENT PERIOD" means (i) any taxable year or other period
ending on or before the date of this Agreement for which a Tax Return is not
required to be filed on or before the date of this Agreement, and (ii) in the
case of a taxable year or other period beginning before and ending after the
date of this Agreement, that portion of such taxable year or other period that
ends on and includes the date of this Agreement.
"CURRENT PERIOD TAX" means the total tax due for a Current
Period.
"DEBT" of any Person means either (a) any liability of such
Person (i) for borrowed money (including the current portion thereof), or (ii)
under any reimbursement obligation relating to a letter of credit, bankers'
acceptance or note purchase facility, or (iii) evidenced by a bond, note,
debenture or similar instrument (including a purchase money obligation), or (iv)
for the payment of money relating to a lease that is required to be classified
as a capitalized lease obligation in accordance with GAAP, or (v) for all or any
part of the deferred purchase price of property or services (other than trade
payables), or (b) any liability of others described in the preceding clause (a)
that such Person has guaranteed, that is recourse to such Person or any of its
assets or that is otherwise its legal liability or that is secured in whole or
in part by the assets of such Person. For purposes of this Agreement, (i) Debt
includes (a) all "cut" but uncashed checks issued by the Company that are
outstanding on the date of this Agreement and (b) any and all accrued interest,
success fees, prepayment premiums, make-whole premiums or penalties, and fees or
expenses (including reasonable attorney's fees) associated with the prepayment
of any Debt.
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"DGCL" means the Delaware General Corporation Law, as set
forth in Section 2.1.
"DISSENTING SHARES" has the meaning set forth in Section
3.1(a).
"DISSENTING STOCKHOLDERS" has the meaning set forth in Section
3.1(a).
"EFFECTIVE TIME" has the meaning set forth in Section 2.3.
"ELECTION DEADLINE" has the meaning set forth in Section
3.1(c).
"ELECTION FORM" has the meaning set forth in Section 3.1(b).
"EMPLOYEE BENEFIT PLAN" has the meaning set forth in Section
3(3) of ERISA.
"EMPLOYEE PLANS" has the meaning set forth in Section 5.27(a).
"EMPLOYMENT AGREEMENTS" means each Executive Employment and
Noncompetition Agreement and each Standard Employment and Noncompetition
Agreement, in each case only as applicable to the relevant parties to such
Employment Agreement, as indicated by the context in which such term is used.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGE AGENT" has the meaning set forth in Section 3.2(a).
"EXCHANGE RATIO" has the meaning set forth in Section
3.1(a)(ii).
"EXECUTIVE EMPLOYMENT AND NONCOMPETITION AGREEMENT" means each
agreement to be delivered on the date of this Agreement as set forth in Section
4.1(f).
"FINANCIAL STATEMENTS" has the meaning set forth in Section
5.7(a).
"GAAP" means United States generally accepted accounting
principles.
"GOVERNMENTAL AUTHORITY" means any government or political
subdivision, whether federal, state, local or foreign, or any agency or
instrumentality of any such government or political subdivision, or any federal
state, local or foreign court or arbitrator.
"INDEMNITOR" has the meaning set forth in Section 10.3.
"INTELLECTUAL PROPERTY" has the meaning set forth in Section
5.13(a).
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in
Section 5.13(b).
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"INVESTMENT" means any equity interest, directly or
indirectly, in any Person in excess of five percent (5%) of the total equity
ownership of such Person.
"LAWS" means any law, statute, code, ordinance, rule,
regulation or other requirement of any Governmental Authority.
"LIENS" means any mortgage, lien, pledge, encumbrance,
security interest, claim, charge, defect in title or other restriction.
"LOSSES" has the meaning set forth in Section 10.1.
"MAJORITY STOCKHOLDERS" has the meaning set forth in the
preamble hereto.
"MATERIAL CUSTOMERS" has the meaning set forth in Section
5.23.
"MERGER" has the meaning set forth in the Recitals hereto.
"MERGER CONSIDERATION" has the meaning set forth in Section
3.1(a).
"NO-ELECTION SHARES" has the meaning set forth in Section
3.1(b).
"OPTIONS" means any option, warrant, call, convertible or
exchangeable security, right of conversion or exchange, subscription,
unsatisfied preemptive right, other agreement or right of similar nature,
whether oral or written.
"ORDERS" means any order, judgment, injunction, award, decree,
ruling, charge or writ of any Governmental Authority.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"PARENT" has the meaning set forth in the preamble hereto.
"PARENT COMMON STOCK" has the meaning set forth in Section
3.1(a)(ii).
"PARENT DISCLOSURE SCHEDULES" means the exceptions to the
representations and warranties of Parent contained in Section 6 of this
Agreement, which are incorporated into this Agreement by reference.
"PARENT PREFERRED STOCK" has the meaning set forth in Section
6.6.
"PARENT STOCK PLAN" means the 1994 Stock Option Plan of
Transmedia Asia Pacific, Inc.
"PERMITS" means any license, permit, authorization, grant,
approval, franchise, waiver, Consent, qualification or similar document or
authority issued or granted by any
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Governmental Authority the non-existence of which would have a material adverse
effect on the party required to obtain such.
"PERSON" means any individual, sole proprietorship,
partnership, corporation, limited liability company, unincorporated society or
association, trust, or other entity.
"RESTRAINTS" has the meaning set forth in Section 8.1(b).
"STANDARD EMPLOYMENT AND NONCOMPETITION AGREEMENT" means each
agreement to be delivered on the date of this Agreement as set forth in Section
4.1(g).
"STOCK CONSIDERATION" has the meaning set forth in Section
3.1(a)(ii).
"SUB" has the meaning set forth in the preamble hereto.
"SUBSIDIARY" means any corporation or entity other than the
Company of which more than fifty percent (50%) of the outstanding capital stock
or voting interests or rights have ordinary voting power to elect a majority of
the board of directors or other managers of such entity (irrespective of whether
or not at the time capital stock or voting interests or rights of any other
class or classes of such Person shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned by
the Company or by the Company and/or one or more Subsidiaries or the management
of which corporation or entity is under control of the Company and/or any other
Subsidiary, directly or indirectly through one or more Persons and any other
Person that, under GAAP, should at any time for financial reporting purposes be
consolidated or combined with the Company and/or any other Subsidiary.
"SURVIVING CORPORATION" has the meaning set forth in Section
2.1.
"TAX RETURNS" means returns (including informational returns),
reports, statements, certificates, schedules, forms and other documents relating
to Taxes.
"TAXES" means any domestic or foreign federal, state or local
income, franchise, business, occupation, sales/use, manufacturer's excise,
payroll, withholding, Federal Insurance Contributions Act and employment and
unemployment taxes, personal and real property taxes and all other taxes or
charges (including all interest and penalties) levied or imposed by any
Governmental Authority.
"THIRD PARTY" has the meaning set forth in Section 10.4.
SECTION 2. THE MERGER
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2.1 THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), Sub will be merged with and into the Company at
the Effective Time (as defined herein) and the separate corporate existence of
Sub will thereupon cease. Following the Effective Time, the
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Company will be the surviving corporation (the "Surviving Corporation"), and
will be a wholly owned subsidiary of Parent.
2.2 CLOSING. The closing of the Merger (the "Closing") will
take place at 10:00 a.m. on a date to be specified by the parties, which will be
no later than the second business day after satisfaction or waiver (subject to
applicable law) of the conditions (excluding conditions that, by their terms,
cannot be satisfied until the Closing Date) set forth in Section 8, unless
another time or date is agreed to by the parties hereto. The Closing will be
held at the offices of the Company, 1329 Columbus Avenue, Suite B, San
Francisco, California 94133, or such other location as the parties hereto shall
agree to. The date on which the Closing occurs is hereinafter referred to as the
"Closing Date."
2.3 EFFECTIVE TIME. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date, the parties
shall (i) file a Certificate of Merger (the "Certificate of Merger") in such
form as is required by and executed in accordance with the relevant provisions
of the DGCL and (ii) make all other filings or recordings required under the
DGCL. The Merger will become effective at such time as the Certificate of Merger
is duly filed with the Secretary of State of the State of Delaware, or at such
subsequent date or time as the Company and Parent shall agree and specify in the
Certificate of Merger (the date and time the Merger becomes effective being the
"Effective Time").
2.4 EFFECTS OF THE MERGER. The Merger will have the effects
set forth in the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time all the property, rights, privileges,
powers and franchises of the Company and Sub will be vested in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Sub will
become the debts, liabilities and duties of the Surviving Corporation.
2.5 ARTICLES OF INCORPORATION AND BYLAWS. The certificate of
incorporation and bylaws of Sub will be the certificate of incorporation and
bylaws, respectively, of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
2.6 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors of Sub immediately prior to the Effective Time will be the directors
of the Surviving Corporation and the officers of Sub immediately prior to the
Effective Time will be the officers of the Surviving Corporation until the
earlier of their death, resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
SECTION 3. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
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CORPORATIONS; EXCHANGE OF CERTIFICATES
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3.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of capital stock of the Company or Sub:
(a) CONVERSION OF COMMON STOCK. Subject to the terms of this
Section 3, each issued and outstanding share of Company Common Stock (other than
shares ("Dissenting Shares")
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that are owned by stockholders ("Dissenting Stockholders") that properly
exercise appraisal rights pursuant to Section 262 of the DGCL) will be converted
into the right to receive:
(i) $0.27105114 in cash (the "Cash Consideration");
or
(ii) 0.0735054 (the "Exchange Ratio") of a fully paid
and nonassessable share of common stock, par value $0.00001
per share ("Parent Common Stock"), of Parent (the "Stock
Consideration" and, together with the Cash Consideration, the
"Merger Consideration").
As of the Effective Time, all such shares of Company Common Stock will no longer
be outstanding and will automatically be canceled and retired and will cease to
exist, and each holder of a certificate representing any such shares of Company
Common Stock will cease to have any rights with respect thereto, except the
right to receive the Merger Consideration to be issued or paid in consideration
therefor upon surrender of such certificate in accordance with Section 3.2,
without interest.
(b) ELECTION OF STOCK CONSIDERATION AND CASH CONSIDERATION.
The Surviving Corporation will cause to be sent to each record holder of Company
Common Stock immediately prior to the Effective Time an election form (the
"Election Form") and other appropriate materials providing for those holders,
subject to the provisions of this Section 3.1:
(i) to elect to receive Stock Consideration with
respect to all of their shares of Company Common Stock; or
(ii) to elect to receive Cash Consideration with
respect to all of their shares of Company Common Stock.
As of the Election Deadline (as defined in Section 3.1(c)), any shares of
Company Common Stock with respect to which there shall not have been an election
submission to the Exchange Agent (as defined in Section 3.2(a)) of an effective
and properly completed Election Form (with the proper Certificates (as defined
in Section 3.2(b))) shall be deemed to be No-Election Shares ("No-Election
Shares").
(c) PROCEDURE FOR ELECTION. Any election to receive Stock
Consideration or Cash Consideration shall have been validly made only if the
Exchange Agent shall have received by 5:00 P.M. Cleveland, Ohio time on a day
(which must be a business day) selected by the Surviving Corporation, but not
less than 20 days after the initial mailing of the Election Forms (the "Election
Deadline"), a properly completed Election Form. An election by a holder of
shares of Company Common Stock shall be validly made only if the Exchange Agent
shall have received an Election Form properly completed and executed (with the
signature or signatures thereon guaranteed as required by the Election Form) by
that stockholder accompanied either by the Certificate or Certificates
representing all of the shares of Company Common Stock owned by that
stockholder, duly endorsed in blank or otherwise in form acceptable for transfer
on the books of the Company. The Surviving Corporation shall have the right to
make reasonable determinations and to establish reasonable procedures (not
inconsistent with the terms of this
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Agreement) in guiding the Exchange Agent in its determination as to the validity
of Election Forms.
(d) CASH CAP AND CASH ELECTION SHARES CAP. The aggregate
maximum amount of cash to be paid as Cash Consideration in the Merger shall be
equal to that number of dollars and cents which is equal to ten percent of the
total value of the Merger Consideration on the date of this Agreement.
(e) CONDITION TO RECEIVE STOCK CONSIDERATION. As a condition
to being offered or receiving Stock Consideration, a holder of shares of Company
Common Stock must submit to the Exchange Agent with its Election Form a properly
executed investor letter in substantially the form attached hereto as EXHIBIT A.
(f) TREATMENT OF NO-ELECTION SHARES. No-Election Shares shall
be converted into the right to receive Cash Consideration.
(g) FRACTIONAL SHARES. No fractional shares of Parent Common
Stock will be issued in the Merger, but in lieu thereof each holder of Company
Common Stock otherwise entitled to a fractional shares of Parent Common Stock
will be entitled to receive, from the Exchange Agent in accordance with the
provisions of this Section 3.1(g) a cash payment in lieu of such fractional
shares of Parent Common Stock representing the product of (i) the number of
fractional shares of Parent Common Stock such holder would otherwise be entitled
to receive multiplied by (ii) (A) the Cash Consideration divided by (B) the
Exchange Ratio.
(h) CAPITAL STOCK OF SUB. At the Effective Time, each share of
common stock, par value $0.01 per share, of Sub issued and outstanding
immediately prior to the Effective Time will be converted into one share of
common stock of the Surviving Corporation.
3.2 EXCHANGE OF CERTIFICATES.
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(a) EXCHANGE AGENT. The Surviving Corporation or any Person as
shall be designated by Parent prior to the Effective Time (the "Exchange
Agent"), shall act as agent of the Surviving Corporation for purposes of, among
other things, mailing and receiving Election Forms and transmittal letters and
distributing certificates for Parent Common Stock to Company stockholders.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable
after the Effective Time, the Exchange Agent shall mail to each holder of record
of a certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates")
whose shares were converted into the right to receive the Merger Consideration
pursuant to Section 3.1(a), (i) a letter of transmittal (which will specify that
delivery will be effected, and risk of loss and title to the Certificates will
pass, only upon delivery of the Certificates to the Exchange Agent and will be
in such form and have such other provisions as Parent may reasonably specify),
(ii) instructions for use in surrendering the Certificates in exchange for the
Merger Consideration and (iii) an Election Form. Upon surrender of a Certificate
for cancellation to the Exchange Agent, together with such letter of transmittal
and Election Form, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate will be entitled
to receive in
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exchange therefor the Cash Consideration or the Stock Consideration which such
holder has the right to receive pursuant to the provisions of this Section 3,
and the Certificate so surrendered will forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, a certificate representing the proper number of
shares of Company Common Stock may be issued to a person other than the person
in whose name the Certificate so surrendered is registered if such Certificate
is properly endorsed or otherwise in proper form for transfer and the person
requesting such issuance pays any transfer or other taxes required by reason of
the issuance of shares of Parent Common Stock to a person other than the
registered holder of such Certificate or establishes to the satisfaction of
Parent that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 3.2, each Certificate will be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration, which the holder thereof has the right to
receive in respect of such Certificate pursuant to the provisions of this
Section 3. No interest will be paid or will accrue on any cash payable to
holders of Certificates pursuant to the provisions of this Section 3.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Section 3 (including any cash
paid pursuant to this Section 3) will be deemed to have been issued (and paid)
in full satisfaction of all rights pertaining to the shares of Company Common
Stock, theretofore represented by such Certificates, and there will be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this Section
3, except as otherwise provided by law.
(d) NO LIABILITY. None of Parent, the Surviving Corporation or
the Exchange Agent will be liable to any Person in respect of any shares of
Parent Common Stock and any dividends or distributions with respect thereto or
any Cash Consideration, in each case, delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(e) LOST CERTIFICATES. If any Certificate has been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration and, if applicable, any unpaid dividends
and distributions on shares of Parent Common Stock deliverable in respect
thereof, in each case, due to such person pursuant to this Agreement.
3.3 DISSENTERS' RIGHTS. No Dissenting Stockholder will be
entitled to any portion of the Merger Consideration thereof or any dividends or
other distributions pursuant to this Section 3 unless and until the holder
thereof fails to perfect or effectively withdraws or loses such holder's right
to dissent from the Merger under the DGCL. Any Dissenting Stockholder will be
entitled to receive only the payment provided by Section 262 of the DGCL with
respect to Company Common Stock owned by such Dissenting Stockholder. If any
Person who otherwise
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would be deemed a Dissenting Stockholder fails to properly perfect or
effectively withdraws or loses the right to dissent with respect to any Company
Common Stock, such shares of Company Common Stock will thereupon be treated as
though such Company Common Stock had been converted into the right to receive
the Merger Consideration with respect to such Company Common Stock as provided
in this Section 3. The Company or the Surviving Corporation, as the case may be,
shall give Parent (i) prompt notice of any written demands for appraisal,
attempted withdrawals of such demands and any other instruments served pursuant
to applicable law received by the Company relating to stockholders' rights of
appraisal and (ii) the opportunity to direct all negotiations and proceedings
with respect to demand for appraisal under the DGCL. The Company shall not,
except with the prior written consent of Parent, voluntarily make any payment
with respect to any demands for appraisals of Dissenting Shares, offer to settle
or settle any such demands or approve any withdrawal of any such demands.
3.4 FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Sub, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of the Company or Sub, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
SECTION 4. EXECUTION AND DELIVERIES
------------------------
4.1 DELIVERIES BY THE COMPANY AND THE MAJORITY STOCKHOLDERS.
At the Closing, the Company and the Majority Stockholders shall deliver or cause
to be delivered to Parent the following:
(a) the minute books, stock ledgers and transfer books of the
Company, all fully updated to the reasonable satisfaction of the Parent;
(b) a certificate of the Secretary of State of the State of
Delaware as to the good standing of the Company in Delaware and a good standing
certificate from the Secretary of State (or other appropriate official) of each
state or other jurisdiction where the Company is duly qualified to do business;
(c) a certificate of the Secretary of the Company certifying
that attached thereto are true and correct copies of (i) the Bylaws of the
Company and (ii) the Certificate of Incorporation of the Company;
(d) a certificate of each Majority Stockholder certifying that
all agreements, undertakings and obligations to be performed or complied with by
such Majority Stockholder in connection with this Agreement, unless waived in
writing, have been duly performed or complied with by such Majority Stockholder
in accordance with the terms of this Agreement;
(e) a resignation of all officers and directors of the
Company, except as otherwise directed by the Parent;
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(f) Executive Employment and Noncompetition Agreements in
substantially the form attached as EXHIBIT B duly executed by each of the
Persons listed on SCHEDULE 4.1(F) (the "Executive Employment and Noncompetition
Agreements");
(g) Standard Employment and Noncompetition Agreements in
substantially the form attached as EXHIBIT C duly executed by each of the
Persons listed on SCHEDULE 4.1(G) (the "Standard Employment and Noncompetition
Agreements" and together with the Executive Employment and Noncompetition
Agreements, referred to as the "Employment Agreements");
(h) a certificate of an officer of the Company certifying that
the representations and warranties of the Company set forth herein are true and
correct as of the Closing Date, except where the failure of such representations
and warranties to be true and correct would not have, individually, a material
adverse effect on the Company.
(i) the legal opinion of Heller Ehrman White & McAuliffe,
counsel to the Company and the Majority Stockholders, in a form reasonably
acceptable to Parent.
4.2 DELIVERIES BY PARENT AND SUB. Concurrently with the
execution of this Agreement, Parent shall deliver or cause to be delivered to
the Company and the Majority Stockholders the following:
(a) the Executive Employment and Noncompetition Agreements
with each of the persons listed on SCHEDULE 4.1(f), duly executed on behalf of
the Parent;
(b) the Standard Employment and Noncompetition Agreements with
each of the persons listed on SCHEDULE 4.1(g), duly executed on behalf of
Parent;
(c) a certificate of the Secretary of each of Parent and Sub
certifying that attached thereto is a true and correct copy of Resolutions duly
and validly adopted by the Boards of Directors of Parent and Sub authorizing, as
applicable, this Agreement, the Employment Agreements, the issuance of the
shares of Parent Common Stock in connection with this Agreement and the
transactions contemplated by this Agreement;
(d) a certificate of an officer of each of Parent and Sub
certifying that the representations and warranties, as applicable, of Parent and
Sub set forth herein are true and correct as of the Closing Date, except where
the failure of such representations and warranties to be true and correct would
not have, individually, a material adverse effect on the Company or the Majority
Stockholders; and
(e) the legal opinion of Jones, Day, Reavis & Pogue, counsel
to Parent, in a form reasonably acceptable to the Company and the Majority
Stockholders.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE MAJORITY STOCKHOLDERS
-----------------------------------------------------------
AND THE COMPANY
---------------
Except as set forth in the Company Disclosure Schedules, each
of the Majority Stockholders and the Company hereby represents and warrants to
Parent and Sub, as of the date hereof and as of the Closing Date, that:
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5.1 ORGANIZATION AND GOOD STANDING; CORPORATE AUTHORITY. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the corporate power and
authority to own, operate and lease its properties and to carry on its business
as presently being conducted. The Company is duly qualified to do business and
is in good standing in each state where failure to qualify would have a material
adverse affect on the business, operations or financial condition of the Company
taken as a whole.
5.2 VALIDITY AND NON-CONTRAVENTION. This Agreement and the
Employment Agreements constitute the legal, valid and binding obligations of the
Majority Stockholders, enforceable against each Majority Stockholder (to the
extent such Majority Stockholder is a party) in accordance with their terms.
Each Majority Stockholder has full capacity, authority and right to execute and
deliver this Agreement and the Employment Agreements (to the extent such
Majority Stockholder is a party). Except as set forth in SCHEDULE 5.2, neither
the execution and delivery of this Agreement or the Employment Agreements by any
Majority Stockholder nor the performance of his obligations hereunder or
thereunder will (a) violate, conflict with or result in a breach of any Laws or
Orders or the Certificate of Incorporation or Bylaws of the Company, (b)
violate, conflict with or result in a breach or termination of, or otherwise
give any contracting party additional rights or compensation under, or the right
to terminate or accelerate, or constitute (with notice or lapse of time, or
both) a default under the terms of, any note, deed, lease, instrument, security
agreement, mortgage, commitment, contract, agreement, license or other
instrument, whether written or oral, express or implied (collectively,
"Contracts") to which the Company or any Majority Stockholder is a party or by
which any of the assets or properties of the Company are bound, or (c) result in
the creation or imposition of any Liens with respect to the Shares or any of the
properties or assets of the Company.
5.3 CAPITALIZATION. The authorized capital stock of the
Company consists of 125,000,000 shares of Company Common Stock and 25,000,000
shares of preferred stock ("Company Preferred Stock"), $0.0001 par value. As of
the date hereof, 40,813,332 shares of Company Common Stock are issued and
outstanding, all of which were duly issued and are fully paid and nonassessable
and 0 shares of Company Preferred Stock are issued and outstanding. The Majority
Stockholders are the record and beneficial owners of 37,400,000 outstanding
shares of Company Common Stock. Set forth on SCHEDULE 5.3 is a list of all
holders of Company Common Stock, including the number of shares held by each
such holder.
5.4 SUBSIDIARIES. The Company has no Subsidiaries and no
Investments.
5.5 AFFILIATES. Except as set forth in SCHEDULE 5.5,
(a) the Company does not own, directly or indirectly, any of
the outstanding shares or securities convertible into capital shares of any
corporation or any participating interest in any partnership, joint venture or
other business enterprise.
(b) no Majority Stockholder has any direct or indirect
interest (i) in, or is a director, officer or employee of, any entity that is a
client, customer, supplier, lessor, lessee, debtor, creditor or competitor or
potential competitor of the Company, (ii) in any property, asset
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or right that is owned or used by the Company in the conduct of its business, or
(iii) in any contractual relationship with the Company other than the employment
of such Majority Stockholder as an employee of the Company or as provided in
this Agreement.
5.6 CONSENTS. Except as set forth in SCHEDULE 5.6, no Consents
are required in connection with the execution and delivery by the Majority
Stockholders or the Company of this Agreement or the Employment Agreements or
the consummation of the transactions contemplated hereby or thereby.
5.7 FINANCIAL STATEMENTS.
(a) Set forth on SCHEDULE 5.7(a) are correct and complete
copies of the unaudited balance sheets of the Company as of December 31, 1999
and the related statements of operations and cash flows for 1999, together with
the notes thereto, and the other financial information included therewith
(collectively, the "Financial Statements").
(b) Except as set forth in SCHEDULE 5.7(b), the Financial
Statements (i) are consistent with the books and records of the Company (which
are accurate and complete in all material respects), (ii) have been prepared in
accordance with GAAP, consistently applied throughout the periods indicated and
(iii) fairly present the financial position, results of operations and cash
flows of the Company at the respective dates thereof and for the periods therein
indicated.
5.8 NO MATERIAL ADVERSE CHANGES. Except as set forth in
SCHEDULE 5.8, since December 31, 1999 there has not been any (a) material
adverse change in the financial condition of the Company or in the assets,
liabilities, business, prospects, or results of operations of the Company taken
as a whole, (b) declaration, setting aside or payment of any dividend or other
distribution with respect to, or any direct or indirect redemption or
acquisition of, any of the capital stock of the Company, (c) cancellation of any
Debt or claim held by the Company, (d) loss, destruction or damage to any
property that might have a material adverse effect on operations of the Company,
whether or not insured, (e) acquisition or disposition of any assets or other
transaction by the Company, (f) transaction or agreement involving the Company
and any officer, director, employee or Majority Stockholder of the Company, (g)
increase, direct or indirect, in the compensation paid or payable to any
officer, director, employee or agent of the Company or any establishment or
creation of any employee benefit plan, (h) any organized labor trouble involving
the Company, (i) arrangements relating to any royalty, dividend or similar
payment based on the sales volume of the Company, whether as part of the terms
of the Company's capital stock or by any separate agreement, (j) customer that
has terminated an engagement of the Company prior to completion, or customer
that has provided notice to the Company or any Majority Stockholder that such
customer intends to do so, (k) incurrence of indebtedness or any Lien other than
in the Ordinary Course of Business, but in no event greater than $25,000 in the
aggregate, or (l) any agreement with respect to any of the foregoing actions.
5.9 ORDINARY COURSE. Except as set forth in the Schedules
attached hereto and except for actions taken with Parent's knowledge in order to
facilitate or in contemplation of the transactions contemplated by this
Agreement, since December 31, 1999, the Company has conducted its business in
all material respects only in the Ordinary Course of Business.
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5.10 AGREEMENTS, ETC. Except as set forth in SCHEDULE 5.10,
the Company is not a party to or bound by (a) any Contracts (other than oral
agreements for at will employment) relating to the employment of any Person by
the Company, or any bonus, deferred compensation, pension, profit sharing, stock
option, employee stock purchase, retirement insurance, health, welfare or other
employee benefit plan, (b) any loan or advance to, or Investment in, any other
Person or any Contracts relating to the making of any such loan, advance or
Investment, (c) any indemnity, or any guarantee or other contingent liability,
whether written or oral, in respect of any indebtedness or obligation of any
other Person (other than the endorsement of negotiable instruments for
collection in the Ordinary Course of Business), (d) any Contracts limiting the
freedom of the Company to engage in any line of business or to compete with any
other Person, (e) Contracts requiring future payments in excess of $10,000
annually, (f) any Contracts for the sale, lease, license or disposition of
products or services in excess of $25,000 annually or (g) any other material
Contract. All of such Contracts and instruments set forth in SCHEDULE 5.10 (or
required to be set forth in SCHEDULE 5.10) are in full force and effect, there
exists no default or breach thereunder by the Company, or to the best knowledge
of the Majority Stockholders, by any other party thereto, and the Company has
not received any written notice claiming that the Company has committed any such
material default or breach or indicating the desire or intention of any party
thereto to amend, modify, rescind or terminate the same. Except as set forth on
SCHEDULE 5.10, no Majority Stockholder is a party to or bound by any Contract
limiting the freedom to engage in any line of business or compete with any
Person. To the best knowledge of each Majority Stockholder, no employee is bound
by or is a party to any contract limiting the freedom of such employee to
perform such employee's current duties on behalf of the Company.
5.11 LABOR RELATIONS AND PRACTICES. SCHEDULE 5.11(a) lists all
persons currently employed by the Company, including such employees'
compensation and effective date of employment with the Company. Except as set
forth on SCHEDULE 5.11(b), there are no disputes pending, or to the best
knowledge of each Majority Stockholder, threatened between the Company and its
employees. The Company has no Contracts with any labor union or other labor
organization or employee bargaining group relating to its employees. No Majority
Stockholder has knowledge of any efforts being made on the part of any labor
union or other labor organization or employee bargaining group or any employee
with respect to representation or organization of any of the Company's
employees. The Company is not delinquent in payments to any of its employees for
any wages, salaries, commissions, bonuses or other direct compensation for any
services performed for it as of the date hereof or amounts required to be
reimbursed to such employees. The Company is in compliance in all material
respects with all applicable Laws respecting labor, employment, fair employment
practices, terms and conditions of employment, and wages and hours. No claims of
employment discrimination, sexual harassment or unfair labor practices or
strikes, slowdowns, stoppages of work or any other concerted interference with
normal operations are pending against the Company or, to the best knowledge of
any Majority Stockholder, threatened against the Company.
5.12 LICENSES AND PERMITS. SCHEDULE 5.12 sets forth a complete
and accurate list and description of all Permits of any Governmental Authority
held by the Company. The Company is in substantial compliance with the terms of
such Permits and there is no pending or, to the best knowledge of any Majority
Stockholder, threatened termination, expiration (other than Permits issued for a
specified terms that expire and require renewal according to their terms), or
revocation thereof. Except for the Permits and authorizations set forth and
described in SCHEDULE
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5.12, neither the Company's conduct of its business nor its ownership or use of
any of its properties or assets is dependent on any Permit.
5.13 INTELLECTUAL PROPERTY.
(a) SCHEDULE 5.13 sets forth an accurate and complete list of
all letters patents, patents, patent applications, patent licenses, software
licenses, know-how, licenses, trade names, brand names, trade secrets,
trademarks, copyrights, service marks, trademark registrations and applications,
service mark registrations and applications and copyright registrations and
applications and all other intangible property rights or technology owned or
used by the Company in the operation of its business (collectively the
"Intellectual Property").
(b) Except as set forth in SCHEDULE 5.13, the Company, without
payment of any license fee, royalty or similar charge, owns the entire right,
title and interest in and to the Intellectual Property and the trade secrets,
know-how and technology used in the operation of its business, and the Company
has the exclusive right to use and license the same without infringement or
violation of the rights of others. Except as set forth in SCHEDULE 5.13, no
claim is pending or, to the best knowledge of any Majority Stockholder,
threatened against the Company nor has the Company received any written notice
or claim from any Person asserting that any of the Company's present or
contemplated activities infringe or may infringe any Intellectual Property
Rights (as defined below) of such Person and no Majority Stockholder is aware of
any infringement by any other Person of any rights of the Company under any
Intellectual Property Rights.
As used herein, the term "Intellectual Property Rights" means all intellectual
property rights including, without limitation, all of the registered rights set
forth on SCHEDULE 5.13 and all patent, patent applications, patent rights,
trademarks, trademark applications, trade names, service marks, service mark
applications, copyrights, copyright applications, computer programs and other
computer software, inventions, designs, samples, specifications, schematics,
know-how, trade secrets, proprietary processes and formulae, including
production technology and processes, all source and object code, algorithms,
promotional materials, customer lists, supplier and dealer lists and marketing
research, and all documentation and media constituting, describing or relating
to the foregoing, including without limitation, manuals, memoranda and records.
SCHEDULE 5.13 contains a list and brief description of all registered
Intellectual Property Rights.
5.14 WEB SITE DOMAINS. The Company owns or has valid licenses
to use all of the content (including, without limitation, the domain names) and
software relating to the World Wide Web domains set forth on SCHEDULE 5.14. The
Company does not own and does not have any licenses to use any of the software
or content of any web domains other than those set forth on SCHEDULE 5.14.
5.15 LITIGATION AND ORDERS. Except as set forth on SCHEDULE
5.15, there are no Actions pending, or to the best knowledge of the Majority
Stockholders threatened, against or affecting the Company or any of its
properties, assets, officers (in their capacity as such) or directors (in their
capacity as such), including any seeking to enjoin or prevent the consummation
of the transactions contemplated hereby, or otherwise claiming this Agreement or
the
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Employment Agreements or the transactions contemplated hereby or thereby are
unlawful. The Company and its properties and assets are not subject to any
material Orders.
5.16 TAXES.
(a) All Tax Returns were required to be filed or provided
before the date of this Agreement by or with respect to the Company or its
income, properties, or operations have been filed or provided. No Company assets
are subject to any Liens, whether or not perfected, for any Taxes, assessments,
or similar charges of a Governmental Authority, other than Liens for current
Taxes, assessments or similar charges not yet due and delinquent. There are no
pending or, to the best knowledge of the Majority Stockholders, threatened
audits, claims, deficiencies, or adjustments against the Company for Taxes.
(b) Each estimated payment for Current Period Taxes payable by
the Company has been made on or before the date on which payment is required in
an amount sufficient to avoid the imposition of a penalty.
(c) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other Person.
(d) The Company has not been a United States real property
holding corporation within the meaning of section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(e) The Company has never been a member of an affiliated group
filing a consolidated federal income Tax Return and has no liability for the
Taxes of any other Person.
(f) The Company has never been a "qualified personal service
corporation" within the meaning of Section 448(d)(2) of the Code.
5.17 ENVIRONMENTAL. The Company's operations, properties and
assets (a) are and have been in substantial compliance with the requirements of
all applicable federal, state, local and foreign environmental, health and
safety statutes and regulations, and (b) are not the subject of any federal,
state, local or foreign investigation evaluating whether any remedial action is
needed to respond to a release or threatened release of any Contaminant into the
environment.
5.18 INSURANCE. SCHEDULE 5.18 sets forth a true and complete
list and brief description (including applicable premiums and deductibles) of
all policies of, and binders evidencing, life, fire, workmen's compensation,
product liability, general liability and other forms of insurance, including
title insurance, owned or maintained by the Company. All such policies are in
full force and effect, and the Company is not in material default under any of
them.
5.19 ACCOUNTS RECEIVABLE. To the best knowledge of the
Majority Stockholders and the Company, all trade and other accounts receivable
of the Company have arisen only from bona fide transactions in the Ordinary
Course of Business, are valid receivables and, to the best of the Majority
Stockholders' knowledge, the Company has not received notice
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from any Person owing accounts receivable disputing the amounts owed or stating
that such party is or will be unable to pay such accounts when due.
5.20 REAL PROPERTY AND LEASES. The Company does not own, and
has never owned, any real property. SCHEDULE 5.20 constitutes a complete and
correct list of all real properties leased by the Company. The Company has
delivered or caused to be delivered true, complete and correct copies of all
leases for leased properties reflected in SCHEDULE 5.20. The Company has valid
and enforceable leasehold interests in, all its real properties, free and clear
of all Liens except (a) Liens set forth in SCHEDULE 5.20 and (b) Liens for
current Taxes, assessments or other governmental charges not yet due and
delinquent. The Company is not in violation, in any material respect, of any
zoning, building or safety ordinance, regulation or requirement or any other
Law, nor has it received any notice of such violation. The performance by the
Majority Stockholders of this Agreement will not result in the termination of,
or in any increase of any amounts payable under, any of its real property
leases.
5.21 TITLE TO ASSETS AND PROPERTIES. The Company has good and
marketable title to, or valid and enforceable leasehold interests in, all of its
tangible assets and properties shown as assets on the Financial Statements
(other than assets disposed of since December 31, 1999 in the Ordinary Course of
Business) and all assets and properties acquired since December 31, 1999, free
and clear of all Liens, except (a) Liens set forth in SCHEDULE 5.21 and (b)
Liens for current Taxes, assessments or other governmental charges not yet due
and delinquent. Except as set forth on SCHEDULE 5.21, the assets and properties
owned or leased by the Company are, taken as a whole and in all material
respects, in good condition and repair (subject to normal wear and tear
consistent with the age of the assets and properties) and are sufficient for the
conduct of the Company's business as presently conducted.
5.22 UNDISCLOSED LIABILITIES. Except as set forth in SCHEDULE
5.22, there are no Debts, liabilities or obligations, contingent or otherwise,
of the Company, that are required by GAAP to be recorded as balance sheet
liabilities of the Company or described in footnotes to the Company's financial
statements.
5.23 CUSTOMERS AND SUPPLIERS. SCHEDULE 5.23 sets forth all
customers, licensees and other Persons that accounted for five percent (5%) or
more of the Company's revenues for the 12-month period ended December 31, 1999
("Material Customers"). Except as set forth on SCHEDULE 5.23, (a) no Material
Customer has terminated an engagement of the Company prior to its completion,
or, to the best knowledge of any Majority Stockholder, no Material Customer has
provided notice that such customer intends to do so; (b) the Company is not
involved in any claim, dispute or controversy with any of its Material Customers
other than claims, disputes or controversies arising in the Ordinary Course of
Business, which do not involve more than $10,000 in the aggregate with respect
to any one Material Customer; and (c) the Company is not involved in any claim,
dispute or controversy with any of its other customers or licensees or any of
its suppliers or licensors that, individually or in the aggregate, as of the
date of this Agreement could reasonably be expected to have a material adverse
effect upon the Company's assets, properties, liabilities, financial condition,
results of operations or business, in each case taken as a whole.
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5.24 COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE
5.24, the Company has complied in all material respects with, and is not in
violation of or in default in any material respect under, any Laws or Orders
applicable to the Company or to any of its businesses, assets, properties or
employees.
5.25 NO BROKERS', FINDERS' OR INSIDER FEES. Except as set
forth in SCHEDULE 5.25, no Person has, or immediately following the consummation
of the transactions contemplated hereby will have, as a result of any act or
omission of the Majority Stockholders or the Company, any right, interest, or
valid claim against the Majority Stockholders, the Company or Parent for any
commission, fee or other compensation as a finder or broker in connection with
the transactions contemplated by this Agreement.
5.26 PRODUCT WARRANTY AND PRODUCT LIABILITY. Except as set
forth in SCHEDULE 5.26, there are no product warranty or product liability
claims pending or, to the best knowledge of the Majority Stockholders,
threatened against the Company. The Company has provided Parent with a complete
and accurate list of all warranty information provided to or relied upon by its
customers (other than warranties, if any, that apply to the Company's goods and
services by operation of law).
5.27 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Except for the employee plans disclosed on SCHEDULE 5.27
(collectively, the "Employee Plans"), the Company does not maintain, contribute
to or have an obligation to contribute to any Employee Benefit Plan, or any
other severance, bonus, stock option, stock appreciation, stock purchase,
retirement, insurance, health, welfare, vacation, pension, profit-sharing or
deferred compensation plan, agreement or arrangement providing benefits for
employees or former employees of the Company nor has the Company or any officer
or director of the Company taken any action directly or indirectly to obligate
the Company to institute any such Employee Benefit Plan.
(b) The Company does not have any liability with respect to
any plans, arrangements or practices of the type described in the preceding
sentence previously maintained or contributed to the Company, or to which the
Company previously had an obligation to contribute, which could have a material
adverse effect upon the assets and properties, operations, condition (financial
or otherwise) or business of the Company, taken as a whole. The Majority
Stockholders previously delivered to Parent true, complete and correct copies of
each of the Employee Plans, including all amendments thereto, and any other
documents, forms or other instruments relating thereto reasonably requested by
Parent. All Employee Plans have been maintained in substantial compliance with
all Laws, including, without limitation, ERISA, and all Orders and have been
administered in accordance with the terms of the applicable plan documents,
except where such failure to comply could not have a material adverse effect on
the assets and properties, operations, condition (financial or otherwise) or
business of the Company, taken as a whole.
(c) The Company has not made any promises or commitments to
provide, and is under no obligation or liability to provide, (i) medical
benefits (including through insurance) to
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retirees of the Company or their dependents or (ii) life insurance or other
death benefits (including through insurance) to retirees of the Company or their
dependents.
(d) No Employee Plan (i) is or at any time was funded through
a "welfare benefit fund" as defined in Section 419(e) of the Code, (ii) is or at
any time was subject to Title IV of ERISA, (iii) is or at any time was subject
to the minimum funding standards of Section 302 of ERISA or Section 412 of the
Code, or (iv) is or at any time was a "multiemployer plan" within the meaning of
Section 3(37) or 4001(a)(13) of ERISA, or Section 414(f) of the Code, or a
"multiple employer plan" within the meaning of Section 413(c) of the Code. No
trade or business is or, at any time, has been, treated, together with the
Company, as a single employer under Section 414 of the Code or Section 4001 of
ERISA.
(e) The execution and performance of this Agreement or any of
the Employment Agreements will not (i) constitute a stated triggering event
under any Employee Plan that will result in any payment (whether of severance
pay or otherwise) becoming due from the Company to any present or former
officer, employee, director, stockholder or consultant, or former employee (or
dependents of any thereof), or (ii) accelerate the time of payment or vesting,
or increase the amount, of compensation due to any employee, officer, director,
stockholder or consultant of the Company.
(f) All contributions, transfers, and payments by the Company
in respect of any Employee Plan have been or are fully deductible under the
Code.
(g) No Employee Plan provides benefits to any individual who
is not a current or former employee of the Company, or the dependents or other
beneficiaries of any such current or former employee.
(h) Other than routine claims for benefits, there are no
Actions with respect to any employee plan, nor to the best knowledge of the
Majority Stockholders and the Company, is there any basis for such Actions.
(i) All (i) insurance premiums required to be paid with
respect to, (ii) benefits, expenses, and other amounts due and payable under,
and (iii) contributions, transfers, or payments required to be made to, any
Employee Plan before the date of this Agreement will have been paid, made or
accrued on or before the date of this Agreement.
(j) Except as expressly stated to the contrary in Contracts or
the instruments governing each Employee Plan made available to Parent before the
date of this Agreement, the Company has reserved all rights necessary to amend
or terminate each of the Employee Plans without any Consents of any other
Person.
5.28 EMPLOYEES. SCHEDULE 5.28 contains a list of all managers,
employees and consultants of the Company who, individually, have received or
will receive compensation from the Company for the fiscal year of the Company
ended December 31, 1999 in excess of $50,000. In each case, such Schedule
includes the current job title and aggregate annual compensation and benefits of
each such individual. Except as set forth on SCHEDULE 5.28, the Company has not
received any written notice from any key employee regarding such key employee's
intention to terminate his or her employment with the Company. The Company is in
compliance in all
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material respects with the immigration laws of the United States with respect to
the hiring, employment and engagement of all of its employees and consultants
who are not United States citizens.
5.29 DISCLOSURE. Neither this Agreement (including the
Exhibits and Schedules hereto) nor any certificate or instrument signed and
delivered or to be delivered by the Majority Stockholders to the Parent pursuant
to the terms of this Agreement contains or will contain any untrue statement of
a material fact.
5.30 NO OTHER REPRESENTATIONS. Except as expressly set forth
in Section 5 and the Schedules corresponding to the representations and
warranties set forth therein and herein, the Company and the Majority
Stockholders make no representations, warranties or statements, express or
implied, with respect to the Company, its business, operations, assets or
prospects, upon which Parent may rely in entering into this Agreement or
consummating the transactions contemplated herein. Any information disclosed on
a Schedule hereto shall be deemed automatically to qualify any other
representation or warranty contained herein to the extent that such information
might reasonably be considered relevant to such other representation or
warranty, regardless of whether there is a specific cross reference.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF PARENT
Except as set forth in the Parent Disclosure Schedules, Parent
represents and warrants to the Majority Stockholders that:
6.1 ORGANIZATION AND GOOD STANDING. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to own, operate and
lease its properties and to carry on its business as presently being conducted.
The Parent is duly qualified to do business and is in good standing in each
state where failure to qualify would have a material adverse affect on the
business, operations or financial condition of the Parent taken as a whole.
6.2 VALIDITY OF AGREEMENTS. This Agreement and the Employment
Agreements constitute the legal, valid and binding obligations of Parent,
enforceable against Parent in accordance with their terms except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting generally the entrustment of
creditors' interests and (b) the availability of equitable remedies (whether in
a proceeding in equity or at law). Parent has the corporate power and authority
to enter into this Agreement and the Employment Agreements and to undertake and
perform fully the transactions contemplated hereby or thereby. All necessary
corporate action has been taken by and on behalf of Parent with respect to the
authorization, execution, delivery and performance of this Agreement and the
Employment Agreements.
6.3 NO BREACH. Neither the execution and delivery of this
Agreement or the Employment Agreements by Parent nor the performance of its
obligations hereunder or thereunder will violate, conflict with or result in a
breach of any Laws, Orders, the Certificate of Incorporation or Bylaws of
Parent.
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6.4 NO BROKERS', FINDERS' OR INSIDER FEES. No Person has or,
immediately following the consummation of the transactions contemplated hereby,
will have, as a result of any act or omission of Parent, any right, interest or
valid claim against the Majority Stockholders, the Company or Parent for any
commission, fee or other compensation as a finder or broker in connection with
the transactions contemplated by this Agreement.
6.5 CONSENTS. No Consents are required in connection with the
execution and delivery by Parent of this Agreement or the Employment Agreements
or the consummation of the transactions contemplated hereby or thereby.
6.6 CAPITALIZATION. The authorized capital stock of the Parent
consists of 95,000,000 shares of Parent Common Stock and 5,000,000 shares of
preferred stock ("Parent Preferred Stock"). As of the date hereof, 34,018,298
shares of Parent Common Stock are issued and outstanding, all of which were duly
issued and are fully paid and nonassessable and 0 shares of Parent Preferred
Stock are issued and outstanding. The Parent (a) has full power, right and
authority, and any approval required by Law, to make and enter into this
Agreement and the Employment Agreements. Attached hereto as SCHEDULE 6.6 is a
complete list of all outstanding Options, the shares issuable thereunder, and
the issuee of the Options.
6.7 DISCLOSURE AND PUBLIC FILINGS. Neither this Agreement
(including the Exhibits and Parent Disclosure Schedules hereto) nor any
certificate or instrument signed and delivered or to be delivered by Parent or
Sub to the Company or the Majority Stockholders pursuant to the terms of this
Agreement contains or will contain an untrue statement of a material fact. All
publicly filed documents of Parent over its past two fiscal years were true and
correct as of the date filed.
6.8 CAPITALIZATION OF SUB. The authorized capital stock of Sub
consists of 100 shares of common stock, par value $0.01 per share, all of which
are validly issued and outstanding. All of the issued and outstanding capital
stock of Sub is, and at the Effective Time will be, owned by Parent, and there
are (i) no other shares of capital stock or voting securities of Sub, (ii) no
securities of Sub convertible into or exchangeable for shares of capital stock
or voting securities of Sub and (iii) no options or other rights to acquire from
Sub, and no obligations of Sub to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of Sub. Sub has not conducted any business prior to the date hereof
and has no, and prior to the Effective Time will have no, assets, liabilities or
obligations of any nature other than those incident to its formation and
pursuant to this Agreement and the Merger and the other transactions
contemplated by this Agreement.
SECTION 7. COVENANTS
7.1 CONDUCT OF BUSINESS BY THE COMPANY. Except as otherwise
expressly contemplated by this Agreement or except as consented to by Parent,
during the period from the date of this Agreement to the Closing Date, the
Company shall carry on its business in the ordinary course consistent with past
practice and in compliance in all material respects with all applicable laws and
regulations and, to the extent consistent therewith, use all reasonable efforts
to preserve intact its current business organization, use all reasonable efforts
to keep available the services of its current officers and other key employees
and preserve its relationships with those
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persons having business dealings with them to the end that its goodwill,
business prospects and ongoing business will be unimpaired at the Closing Date.
Without limiting the generality of the foregoing (but subject to the above
exceptions), during the period from the date of this Agreement to the Closing
Date, the Company shall not, and shall not permit any of its subsidiaries to:
(a) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, split, combine,
exchange, recapitalize or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock;
(b) issue, deliver, sell, pledge or otherwise encumber or
subject to any Lien any shares of its capital stock, any other voting securities
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities;
(c) amend its Certificate of Incorporation, Bylaws or other
comparable organizational documents;
(d) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets or capital stock of,
or by any other manner, any business or any person;
(e) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets
other than in the ordinary course of business consistent with past practice;
(f) (A) grant to any current or former director, executive
officer or other key employee of the Company any increase in compensation, bonus
or other benefits, except for normal increases in the ordinary course of
business or as was required under any employment agreements in effect as of the
date hereof, (B) grant to any such current or former director, executive officer
or key employee of any increase in severance or termination pay, or (C) enter
into, or amend, any employment, deferred compensation, consulting, severance,
termination or indemnification agreement with any such current or former
director, executive officer or key employee;
(g) incur any long-term indebtedness (whether evidenced by a
note or other instrument) or incur any short-term indebtedness other than under
lines of credit existing on the date hereof;
(h) incur or commit to incur any capital expenditures or any
obligations or liabilities in connection therewith other than capital
expenditures and obligations or liabilities incurred or committed to in the
ordinary course of business consistent with past practices; or
(i) authorize, or commit or agree to take, any of the
foregoing actions.
7.2 ADVICE OF CHANGES. The Company shall promptly advise the
Parent orally and in writing to the extent it has knowledge of any change or
event having, or which could reasonably be expected to have, a material adverse
effect on the Company or on the truth of its
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representations and warranties or the ability of the conditions set forth in
Section 8 to be satisfied; PROVIDED, HOWEVER, that no such notification will
affect the representations, warranties, covenants or agreements of the parties
(or remedies with respect thereto) or the conditions to the obligations of the
parties under this Agreement.
7.3 COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
conditions of this Agreement, each party will use its commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the Closing and the other transactions contemplated by
this Agreement.
SECTION 8. CONDITIONS PRECEDENT
8.1 CONDITIONS TO PARENT'S OBLIGATION TO EFFECT THE CLOSING.
The obligation of Parent to effect the Closing is subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) GOVERNMENTAL AND REGULATORY APPROVALS. All consents,
approvals and actions of, filings with and notices to any Governmental Authority
required of the Company or Parent to consummate the Closing, the failure of
which to be obtained or taken is reasonably expected to have a material adverse
effect on the Company or Parent, taken as a whole, shall have been obtained in
form and substance reasonably satisfactory to Parent.
(b) NO INJUNCTIONS OR RESTRAINTS. No judgment, order, decree,
statute, law, ordinance, rule or regulation, entered, enacted, promulgated,
enforced or issued by any court or other Governmental Authority of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") effecting the Closing or seeking to prohibit the transactions
contemplated under this Agreement shall be in effect; PROVIDED, HOWEVER, that
each of the parties shall have used its reasonable best efforts to prevent the
entry of any such Restraints and to appeal as promptly as possible any such
Restraints that may be entered.
(c) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Majority Stockholders and the Company set forth herein shall
be true and correct both when made and at and as of the Closing Date, as if made
at and as of such time, except where the failure of such representations and
warranties to be so true and correct (without giving effect to any limitation as
to "materiality" or "material adverse effect" set forth therein) would not have,
individually or in the aggregate, a material adverse effect on the Company.
(d) PERFORMANCE OF OBLIGATIONS OF MAJORITY STOCKHOLDERS. The
Majority Stockholders shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to
the Closing Date.
(e) NO MATERIAL ADVERSE CHANGE. Any time after the date of
this Agreement there shall not have occurred any material adverse change
relating to the Company or its business prospects.
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(f) ELECTION AGREEMENT. The Election Agreement, dated as of
the date hereof, by and among Parent and certain stockholders of the Company,
shall be in effect and shall not have been breached by any stockholder.
8.2 CONDITIONS TO THE COMPANY'S AND MAJORITY STOCKHOLDERS'
OBLIGATION TO EFFECT THE CLOSING. The obligation of the Company and the Majority
Stockholders to effect the Closing is subject to the satisfaction or waiver on
or prior to the Closing Date of the following conditions:
(a) GOVERNMENTAL AND REGULATORY APPROVALS. All consents,
approvals and actions of, filings with and notices to any Governmental Authority
required of the Company or Parent to consummate the Closing, the failure of
which to be obtained or taken is reasonably expected to have a material adverse
effect on the Company or Parent, taken as a whole, shall have been obtained in
form and substance reasonably satisfactory to Parent.
(b) NO INJUNCTIONS OR RESTRAINTS. No Restraints effecting the
Closing or seeking to prohibit the transactions contemplated under this
Agreement shall be in effect; PROVIDED, HOWEVER, that each of the parties shall
have used its reasonable best efforts to prevent the entry of any such
Restraints and to appeal as promptly as possible any such Restraints that may be
entered.
(c) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Parent set forth herein shall be true and correct both when
made and at and as of the Closing Date, as if made at and as of such time,
except where the failure of such representations and warranties to be so true
and correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein) would not have, individually or in
the aggregate, a material adverse effect on the Parent.
SECTION 9. TERMINATION.
This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual written consent of the Majority Stockholders,
Parent and Sub;
(b) by either the Majority Stockholders or Parent:
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(i) if the Merger has not been consummated by April
14, 2000; PROVIDED, HOWEVER, that the right to terminate this
Agreement pursuant to this Section 9(b)(i) is not available to
any party whose failure to perform any of its obligations
under this Agreement results in the failure of the Merger to
be consummated by such time; or
(ii) if any Restraint having any of the effects set
forth in Section 8.1(b) is in effect and has become final and
nonappealable; PROVIDED, that the party seeking to terminate
this Agreement pursuant to this Section 9(b)(ii) shall have
used best efforts to prevent the entry of and to remove such
Restraint.
SECTION 10. INDEMNIFICATION AND SURVIVAL
10.1 INDEMNIFICATION BY MAJORITY STOCKHOLDERS. Following the
date of this Agreement, subject to the terms and conditions of this Section 10,
the Majority Stockholders, severally and not jointly, shall indemnify, defend
and hold harmless Parent and its respective officers, directors, employees,
agents and Affiliates from and against, and shall reimburse them for,
liabilities, damages, claims, penalties, fines, judgments, awards, settlements,
Taxes, costs, fees, expenses (including, but not limited to, reasonable
attorneys' fees) and disbursements, and any interest that has accrued on any of
the foregoing (collectively, "Losses") resulting from or arising in connection
with:
(a) any breach of or misrepresentation in (i) any
representation or warranty made by the Company or the Majority Stockholders in
this Agreement or (ii) any covenant or agreement made by the Company or the
Majority Stockholders in this Agreement to be performed on or prior to the date
of this Agreement;
(b) any breach of any covenant or agreement made by the
Company or Majority Stockholders performed after the date of this Agreement; and
(c) any claims or Actions by Richard Janney or Mireille de la
Beaujardiese.
10.2 INDEMNIFICATION BY PARENT. Following the date of this
Agreement, subject to the terms and conditions of this Section 10, Parent shall
indemnify, defend and hold harmless the Majority Stockholders, and their heirs,
assigns and successors and, if applicable, their respective officers, directors,
employees, agents and Affiliates, from and against, and shall reimburse them
for, any Losses resulting from or arising in connection with:
(a) any breach of or misrepresentation in (i) any
representation or warranty made by Parent in this Agreement; or (ii) any
covenant or agreement made by Parent in this Agreement to be performed at or
prior to the date of this Agreement; and
(b) any breach of any covenant or agreement made by Parent in
this Agreement to be performed after the date of this Agreement.
10.3 CLAIMS. In the event any Majority Stockholder or Parent
(the "Claimant") desires to make a claim for indemnification pursuant to
Sections 10.1 or 10.2 hereof against the other (the "Indemnitor"), the Claimant
shall give prompt written notice of the claim to the
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Indemnitor, describing, in reasonable detail, the nature of the claim. Failure
to give such notice shall not affect the indemnification provided hereunder
except to the extent that such failure shall have actually prejudiced the
Indemnitor as a result thereof.
10.4 THIRD PARTY CLAIMS. If the Claimant's notice involves a
claim against the Claimant by a Person not a party to this Agreement (a "Third
Party"), the Indemnitor shall have the exclusive right to defend and settle, at
Indemnitor's own expense and by Indemnitor's own counsel, any such matter so
long as the Indemnitor pursues the same diligently and in good faith. If the
Indemnitor undertakes to defend or settle, it shall promptly notify the Claimant
of its intention to do so, and the Claimant shall cooperate, at the sole expense
of the Indemnitor, with the Indemnitor and its counsel in all commercially
reasonable respects in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnitor with any books, records, access to personnel and facilities and other
information reasonably requested by the Indemnitor and in the Claimant's
possession or control. After the Indemnitor has notified the Claimant of
Indemnitor's intention to undertake to defend or settle any such asserted
liability, and for so long as the Indemnitor diligently pursues such defense,
the Indemnitor shall not be liable for any additional legal expenses incurred by
the Claimant in connection with any defense or settlement of such asserted
liability; provided, however, that the Claimant shall be entitled, at its
expense, to participate in the defense of such asserted liability and the
negotiations of the settlement thereof, and the Indemnitor shall not settle any
such Third Party claim without the consent of the Claimant unless the settlement
thereof imposes no liability or obligation on, and includes a complete release
from liability of, the Claimant; and provided further, however, that, if it
reasonably appears that such Third Party claim, if proven could result in an
aggregate Loss to the Claimant of greater than $500,000, then the Claimant shall
be entitled to reimbursement of reasonable legal fees and expenses incurred in
connection with Claimant's participation in such defense and settlement
discussions. If, upon receiving notice, the Indemnitor does not timely undertake
to defend such matter to which the Claimant is entitled to indemnification
hereunder, or fails diligently to pursue such defense, the Claimant may
undertake such defense through counsel of its choice, at the cost and expense of
the Indemnitor, and the Claimant may settle such matter, and the Indemnitor
shall reimburse the Claimant for any losses incurred by the Claimant in
connection therewith.
10.5 LIMITATIONS ON INDEMNIFICATION.
(a) Subject to Section 10.5(b) below, (i) neither Parent nor
any Majority Stockholder shall be entitled to indemnification under this
Agreement until the aggregate amount of all Losses (other than Losses in
connection with claims excluded from application of the Basket pursuant to
Section 10.5(b)) exceeds $50,000 (the "Basket"), and then such party shall be
entitled to indemnification only for the amount by which such Losses exceed the
Basket amount; and (ii) the maximum aggregate obligation of Majority
Stockholders or the Parent with respect to all matters for which either party
may seek indemnification under this Agreement shall not exceed $11,062,500 (the
"Cap").
(b) Neither the Basket nor the Cap provided for in Section
10.5(a) shall apply to any claim made by Parent based on the representations and
warranties contained in any of Sections 5.1, 5.2, 5.3, 5.4, 5.5, 5.16, 5.25 and
5.27, or to any claims made by the Majority Stockholders based on the
representations and warranties contained in any of Sections 6.2, 6.3
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and 6.5. Furthermore, neither the Basket nor the Cap shall apply to any
indemnification claims made pursuant to Sections 10.1(b), 10.1(c) or 10.2(b).
10.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Majority Stockholders and Parent contained
in Sections 5 and 6 above shall survive following the date of this Agreement and
continue in full force and effect for a period of 18 months thereafter, except
(i) representations and warranties contained in Sections 5.16 and 5.27, which
shall survive until the expiration of the longest applicable period of
limitations, if any, applicable to the matters therein represented (as such
period may be extended pursuant to the request of the appropriate Governmental
Authorities), and (ii) representations and warranties contained in Sections 5.1,
5.2, 5.3, 5.5, 6.2, 6.3 and 6.5, which shall survive indefinitely.
10.7 INDEMNIFICATION EXCLUSIVE. Except in the case of actual
fraud (intentional misrepresentation of a material fact reasonably relied upon
by the Claimant), indemnification pursuant to Sections 10.1 or 10.2, subject to
all terms, conditions and limitations provided for in this Section 10, shall be
the sole and exclusive remedy of the parties hereto or the other parties named
as beneficiaries of Sections 10.1 or 10.2 for monetary damages with respect to
any claims arising from, under or with respect to this Agreement, the
transactions contemplated herein or the matters subject to indemnification
hereunder.
10.8 GENERAL QUALIFICATIONS ON INDEMNIFICATION.
Notwithstanding any provision of this Section 10 to the contrary, the right of
any Claimant to indemnification from an Indemnitor shall be subject to the
following:
(a) The liability of an Indemnitor with respect to any
indemnification claim shall be reduced by the amount of any tax benefit actually
realized or any insurance proceeds received by any claimant as a result of any
Loss upon which such claim is based, and shall include any tax detriment
actually suffered by the Claimant as a result of such Loss. The amount of such
tax benefit or detriment shall be determined by taking into account the effect,
if any, and to the extent determinable, of timing differences resulting from the
acceleration or deferral of items of gain or loss resulting from such Loss.
(b) A Loss shall include actual damages only and shall not
include any special, punitive, multiplied or consequential damages, except to
the extent the same are included in a Third Party judgment against the Claimant.
(c) Upon payment in full of any indemnification claim, the
Indemnitor shall be subrogated to the extent of such payment to the rights of
the Claimant against any Third Party with respect to the subject matter of such
indemnification claim.
(d) An Indemnitor shall be relieved its duty to indemnify
Claimant hereunder if and to the extent the Claimant fails to take commercially
reasonable steps in good faith to mitigate its Loss, including, but not limited
to, failure to pursue recovery under available policies of insurance.
(e) Any indemnification payment hereunder shall be deemed an
adjustment to the Consideration.
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(f) The Parent shall not be deemed to have incurred any Loss
relative to the Company to the extent such Loss is charged against reserves
established in the Financial Statements (other than reserves related to Section
10.1(c)).
SECTION 11. OTHER ACTIONS
11.1 STOCK OPTIONS.
(a) As of the Effective Time, (i) each outstanding Option to
purchase Company Common Stock (a "Company Option") shall be converted into an
option (an "Adjusted Option") to purchase the number of shares of Parent Common
Stock equal to the number of shares of Company Common Stock subject to such
Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio (rounded down to the nearest whole number of shares of Parent
Common Stock), at an exercise price per share equal to the exercise price for
each such share of Company Common Stock subject to such option divided by the
Exchange Ratio (rounded up to the nearest whole cent), and all references in
each such option to the Company shall be deemed to refer to Parent, where
appropriate, and (ii) Parent shall assume the obligations of the Company under
the Company Stock Plan. The other terms of each Adjusted Option, and the plans
or agreements under which they were issued, shall continue to apply in
accordance with the terms of their corresponding Company Option. The date of
grant of each Adjusted Option shall be the date on which the corresponding
Company Option was granted.
(b) The Company and Parent agree that the Company Stock Plan
and Parent Stock Plan shall be amended, to the extent necessary, to reflect the
transactions contemplated by this Agreement, including, but not limited to the
conversion of shares of the Company Common Stock held or to be awarded or paid
pursuant to such benefit plans, programs or arrangements into shares of Parent
Common Stock on a basis consistent with the transactions contemplated by this
Agreement. The Company and Parent agree to submit the amendments to the Parent
Stock Plan or the Company Stock Plan to their respective stockholders, if such
submission is determined to be necessary by counsel to the Company or Parent
after consultation with one another; PROVIDED, HOWEVER, that such approval shall
not be a condition to the consummation of the Merger.
(c) Parent shall (i) reserve for issuance the number of shares
of Parent Common Stock that will become subject to the benefit plans, programs
and arrangements referred to in this Section 11.1 and (ii) issue or cause to be
issued the appropriate number of shares of Parent Common Stock pursuant to
applicable plans, programs and arrangements, upon the exercise or maturation of
rights existing thereunder on the Effective Time or thereafter granted or
awarded.
(d) As soon as practicable after the Effective Time, Parent
shall deliver to the holders of the Company Options appropriate notices setting
forth such holders' rights pursuant to the Company Stock Plan and the agreements
evidencing the grants of such Company Options and that such Company Options and
the related agreements shall be assumed by Parent and shall continue in effect
on the same terms and conditions (subject to the adjustments required by this
Section after giving effect to the Merger).
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11.2 WORKING CAPITAL CONTRIBUTION. Parent shall contribute at
least $2,000,000 cash to the working capital of the Company within 180 days of
the Closing. Parent, at its sole discretion, may decide the form of this cash
contribution.
SECTION 12. MISCELLANEOUS
12.1 WAIVERS AND AMENDMENTS. This Agreement may be amended or
modified only by an instrument in writing duly executed by the parties to this
Agreement, which makes specific reference to this Agreement.
12.2 NOTICES. All notices, requests, demands, claims, and
other communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given and received
for all purposes when delivered by hand, telecopy, telex or other method of
facsimile, or five (5) days after being sent by registered or certified mail,
return receipt requested, postage prepaid or two (2) days after being sent by
overnight delivery providing receipt of delivery, to the following addresses:
If to Parent or Sub:
Transmedia Asia Pacific, Inc.
11 St. James' Square
London SW1Y4LB
Facsimile No. (44) 171-839-5727
Attention: James Fyfe
With a copy to Parent's counsel:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Facsimile No.: (216) 579-0212
Attention: Christopher M. Kelly, Esq.
If to the Company or the Majority Stockholders:
MonsterBook.com, Inc.
1329 Columbus Avenue, Suite B
San Francisco, California 94133
Facsimile: (415) 674-8701
Attention: William H. McKee, III and
Frank T. Vega
With copies to:
Heller Ehrman White & McAuliffe
2500 Sand Hill Road, Suite 100
Menlo Park, California 94025
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Facsimile: (650) 234-4299
Attention: Brian J. Griffith, Esq.
12.3 FEES AND EXPENSES. Each party shall bear his or its own
costs, fees and expenses (including attorneys' and advisors' fees and expenses)
incurred in connection with the negotiation, preparation and execution of this
Agreement, the Employment Agreements and the transactions contemplated hereby or
thereby; PROVIDED, HOWEVER, that the Company shall pay at or prior to the date
of this Agreement all legal or accountants' fees incurred by the Company or the
Majority Stockholders in connection with the negotiation, preparation and
execution of this Agreement, up to a maximum of $20,000.
12.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and the successors and
assigns of the parties hereto, but no rights, obligations or liabilities
hereunder shall be assignable by any party without the prior written consent of
the other parties hereto; provided, however, that the Parent may assign the
rights, obligations and liabilities to an affiliate of the Parent without such
consent.
12.5 CHOICE OF LAW.
(a) This Agreement shall be governed by and construed and
interpreted in accordance with the internal, substantive laws of the State of
Delaware, without regard to conflicts of laws principles.
(b) In the event a dispute arises as a result of this
agreement resulting in litigation, all parties to this Agreement agree that such
dispute litigation shall take place in the United States District Court for the
District of Delaware and all parties hereto hereby submit to the exclusive
jurisdiction of such court.
12.6 SEVERABILITY. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the offending term or provision in any
other situation or in any other jurisdiction.
12.7 ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements, or representations by or among
the parties, written or oral, to the extent they have related in any way to the
subject matter hereof.
12.8 CONSTRUCTION. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Unless the context otherwise requires, any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder. Unless the
context otherwise requires, the use of the singular shall include the plural,
the use of the masculine shall include the feminine, and vice versa. The word
"including" shall mean including without limitation.
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12.9 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
12.10 HEADINGS AND RECITALS. The section Headings and Recitals
contained in this Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this Agreement.
12.11 COUNTERPARTS. This Agreement may be executed
concurrently in two (2) or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
12.12 KNOWLEDGE. Wherever any statement in this Agreement or
the Schedules hereto is qualified to the Majority Stockholders' "knowledge" or
the "best of Majority Stockholders' knowledge", or words of similar import, such
reference shall be to the Majority Stockholders' actual knowledge after due
inquiry and reasonable investigation as to the matters subject to such
qualification, and shall not include knowledge imputed to the Majority
Stockholders for any reason.
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IN WITNESS WHEREOF, the parties hereto have executed or caused
this Agreement to be executed as of the day and year first above written.
TRANSMEDIA ASIA PACIFIC, INC.
By: /s/ James Fyfe
----------------------------------
Name: James Fyfe
Title: Director
ASIA MERGER SUB II, INC.
By: /s/ James Fyfe
----------------------------------
Name: James Fyfe
Title: President
MONSTERBOOK.COM, INC.
By: /s/ William H. McKee, III
----------------------------------
Name: William H. McKee, III
Title: Founder and Chief Executive
Officer
WILLIAM H. MCKEE, III
/s/ William H. McKee, III
---------------------------------------
FRANK T. VEGA
/s/ Frank T. Vega
---------------------------------------
33
