Agreement and Plan of Merger and Reorganization - eBay Inc. and Jump Inc.
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
eBay Inc.,
a Delaware corporation;
Jump Acquisition Sub, Inc.
an Ohio corporation;
Jump Incorporated,
an Ohio corporation;
and
Certain Shareholders of Jump Incorporated
___________________________
Dated as of June 30, 1998
___________________________
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1.
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TABLE OF CONTENTS
PAGE
SECTION 1. DESCRIPTION OF TRANSACTION................................................................... 1
1.1 Merger of Merger Sub into the Company.................................................... 1
1.2 Effect of the Merger..................................................................... 1
1.3 Closing; Effective Time.................................................................. 2
1.4 [Articles of Incorporation] and Bylaws; Directors and Officers........................... 3
1.5 Conversion of Shares..................................................................... 3
1.6 Closing of the Company's Transfer Books.................................................. 3
1.7 Exchange of Certificates................................................................. 4
1.8 Tax Consequences......................................................................... 4
1.9 Prepayment of Loans to Company Shareholders.............................................. 4
1.10 Further Action........................................................................... 5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY SHAREHOLDERS................... 5
2.1 Due Organization; No Subsidiaries; Etc................................................... 5
2.2 Articles of Incorporation and Bylaws; Records............................................ 6
2.3 Capitalization, Etc...................................................................... 6
2.4 Financial Statements..................................................................... 7
2.5 Absence of Changes....................................................................... 7
2.6 Title to Assets.......................................................................... 8
2.7 Bank Accounts............................................................................ 8
2.8 Equipment; Leasehold..................................................................... 8
2.9 Proprietary Assets....................................................................... 9
2.10 Contracts................................................................................ 10
2.11 Liabilities.............................................................................. 11
2.12 Compliance with Legal Requirements....................................................... 11
2.13 Governmental Authorizations.............................................................. 11
2.14 Tax Matters.............................................................................. 12
2.15 Employee and Labor Matters; Benefit Plans................................................ 13
2.16 Environmental Matters.................................................................... 13
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Table Of Contents
(continued)
Page
2.17 Related Party Transactions............................................................... 13
2.18 Legal Proceedings; Orders................................................................ 14
2.19 Authority; Binding Nature of Agreement................................................... 14
2.20 Non-Contravention; Consents.............................................................. 14
2.21 Full Disclosure.......................................................................... 15
2.22 Investment Representations............................................................... 15
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...................................... 16
3.1 Authority; Binding Nature of Agreement................................................... 16
3.2 Valid Issuance........................................................................... 17
SECTION 4. INDEMNIFICATION, ETC......................................................................... 17
4.1 Survival of Representations, Etc......................................................... 17
4.2 Indemnification by Company Shareholders.................................................. 17
4.3 Threshold; Recourse...................................................................... 18
4.4 Escrow of Shares; Satisfaction of Indemnification Claim.................................. 18
4.5 No Contribution.......................................................................... 22
4.6 Defense of Third Party Claims............................................................ 22
4.7 Exercise of Remedies by Indemnitees Other Than Parent.................................... 23
SECTION 5. MISCELLANEOUS PROVISIONS..................................................................... 24
5.1 Designated Shareholders' Agent........................................................... 24
5.2 Further Assurances....................................................................... 24
5.3 Fees and Expenses........................................................................ 24
5.4 Attorneys' Fees.......................................................................... 24
5.5 Notices.................................................................................. 25
5.6 Confidentiality.......................................................................... 25
5.7 Headings................................................................................. 25
5.8 Counterparts............................................................................. 26
5.9 Governing Law............................................................................ 26
5.10 Successors and Assigns................................................................... 26
5.11 Specific Performance..................................................................... 26
ii.
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Table Of Contents
(continued)
Page
5.12 Waiver.................................................................................... 26
5.13 Amendments................................................................................ 26
5.14 Severability.............................................................................. 27
5.15 Parties in Interest....................................................................... 27
5.16 Entire Agreement.......................................................................... 27
5.17 Construction.............................................................................. 27
iii.
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AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
This Agreement And Plan Of Merger And Reorganization ("Agreement") is made
and entered into as of June 30, 1998, by and among: eBay Inc., a Delaware
corporation ("Parent"); Jump Acquisition Sub, Inc., an Ohio corporation and a
wholly owned subsidiary of Parent ("Merger Sub"); Jump Incorporated, an Ohio
corporation (the "Company"); and Walter N. Carroll, Christopher M. Downie,
Thomas P. Duvall and Robert J. Ratterman (the "Company Shareholders").
Recitals
A. Parent, Merger Sub and the Company intend to effect a merger of Merger
Sub into the Company in accordance with this Agreement and the Ohio General
Corporation Law (the "Merger"). Upon consummation of the Merger, Merger Sub
will cease to exist, and the Company will become a wholly owned subsidiary of
Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
C. This Agreement has been approved by the respective boards of directors
of Parent, Merger Sub and the Company and has been approved by the shareholders
of Merger Sub and the shareholders of the Company.
D. The Company Shareholders own a total of 300 shares of the Common Stock,
no par value per share, of the Company constituting all of the outstanding
capital stock of the Company (the "Company Shares").
Agreement
The parties to this Agreement agree as follows:
SECTION 1. Description of Transaction.
1.1 Merger of Merger Sub into the Company. Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as defined
in Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
Surviving corporation in the Merger (the "Surviving Corporation").
1.2 Effect of the Merger. The Merger shall have the effects set forth
in this Agreement and in the applicable provisions of the Ohio General
Corporation Law.
1.
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1.3 Closing; Effective Time.
(a) The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Cooley Godward llp,
Five Palo Alto Square, Palo Alto, California 94306 at 10:00 a.m. Ohio time on
June 30, 1998 (the "Closing Date"). Contemporaneously with or as promptly as
practicable after the Closing, a properly executed certificate of merger
conforming to the requirements of (S)1701.81(A) of the Ohio General Corporation
Law shall be filed with the Secretary of State of the State of Ohio. The Merger
shall become effective at the time such certificate of merger is filed with and
accepted by the Secretary of State of the State of Ohio (the "Effective Time").
(b) in addition to the foregoing, at the Closing:
(i) the Company and each Company Shareholder shall enter into
an employment agreement in substantially the form attached hereto as Exhibit
1.3(b)(i) (each, an "Employment Agreement");
(ii) the Company and each Company Shareholder shall enter into
an non-competition agreement in substantially the form attached hereto as
Exhibit 1.3(b)(ii) (each, a "Non-Competition Agreement"); and
(iii) each Company Shareholder shall tender his resignation as a
director and officer of the Company.
(iv) the Company, (or the Company Shareholders, as applicable)
shall deliver, or provide with respect to 1.3(b)(iv)(2)-(3) an affidavit of
intended filing within 60 days of the Closing Date, the following documents:
(1) Copies of the Company's charter documents and copies
of the resolutions approving this transaction all certified by an appropriate
officer of the Company;
(2) A recently-updated "good standing" certificate of the
Company;
(3) A recently-dated certificate from the applicable
taxing agency in Ohio showing payment of all recent franchise taxes, if
applicable;
(4) Stock Certificates representing all of the
outstanding common stock of the Company for cancellation at the Closing;
(5) The Company's minute books;
(6) A legal opinion of Taft, Stettinius & Hollister,
L.L.P. in form and substance reasonably acceptable to parent and its counsel
carry the matters set forth in Exhibit 1.3(b)(iv)(6);
2.
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(7) Such other documents as may reasonably be requested
by Parent and its counsel; and
(v) Parent shall deliver the following day:
(1) Stock certificates, in the name of each Company
Shareholder, representing the number of shares of the common stock of Parent,
par value $.001 per share, ("Parent Common Stock") to each Company Shareholder
equal to the Exchange Ratio (as defined in Section 1.5 below) times the number
of shares of Company Common Stock owned) by each Company Shareholder, less such
Common Shareholder's share of the Escrow Fund;
(2) Such other documents as the Company or it's counsel
shall reasonably request;
(3) Check in the amount required to be paid at closing
pursuant to the terms of the Employment Agreements and Non-Competition
Agreements; and
1.4 Articles of Incorporation and Code of Regulations; Directors and
Officers. (a) The Articles of Incorporation of the Surviving Corporation
shall be amended and restated as of the Effective Time to conform to the
Articles of Incorporation of Merger Sub as in effect immediately prior to the
Effective Time; (b) the Code of Regulations of the Surviving Corporation shall
be amended and restated as of the Effective Time to conform to the Code of
Regulations of Merger Sub as in effect immediately prior to the Effective Time;
and (c) the directors and officers of the Surviving Corporation immediately
after the Effective Time shall be the individuals identified on Exhibit 1.4.
1.5 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any further action on the part of Parent, Merger Sub, the
Company or any shareholder of the Company: (a) each share of Company Common
Stock outstanding immediately prior to the Effective Time shall be converted
into the right to receive 158.73 (the "Exchange Ratio") shares of Parent Common
Stock (and cash in lieu of any fractional share of Parent Common Stock; and (b)
each share of the common stock, no par value per share, of Merger Sub
outstanding immediately prior to the Effective Time shall be converted into one
share of common stock of the Surviving Corporation.
No fractional shares of Parent Common Stock shall be issued, but in lieu
thereof each holder of shares of Company Common Stock who would otherwise be
entitled to receive a fraction of a share of Parent Common Stock shall receive
from Parent a cash amount equal to $42.00 multiplied by the fraction of a share
of Parent Common Stock to which such holder would otherwise be entitled.
1.6 Closing of the Company's Transfer Books. At the Effective Time,
holders of certificates representing shares of the Company's capital stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as shareholders of
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the Company, and the stock transfer books of the Company shall be closed with
respect to all shares of such capital stock outstanding immediately prior to the
Effective Time. No further transfer of any such shares of the Company's capital
stock shall be made on such stock transfer books after the Effective Time. If,
after the Effective Time, a valid certificate previously representing any of
such shares of the Company's capital stock (a "Company Stock Certificate") is
presented to the Surviving Corporation or Parent, such Company Stock Certificate
shall be canceled and shall be exchanged as provided in Section 1.7.
1.7 Exchange of Certificates.
(a) Immediately after the Effective Time, each Company Shareholder
shall surrender each Company Stock Certificate held by such Company Shareholder,
together with such other documents as may be reasonably required by Parent, to
Parent, in exchange for a certificate representing the number of whole shares of
Parent Common Stock that such holder has the right to receive pursuant to the
provisions of this Section 1 (less the number of shares that such holder has the
right to receive but which are being placed in the Escrow Fund in accordance
with Section 4.4), and the Company Stock Certificate so surrendered shall be
canceled. Until surrendered as contemplated by this Section 1.7, each Company
Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive upon such surrender a certificate
representing shares of Parent Common Stock as contemplated by this Section 1.
(b) Parent and the Surviving Corporation shall be entitled to deduct
and withhold from any consideration payable or otherwise deliverable to any
holder or former holder of capital stock of the Company pursuant to this
Agreement such amounts as Parent or the Surviving Corporation may be required to
deduct or withhold therefrom under the Code or under any provision of state,
local or foreign tax law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the person or entity to whom such amounts would otherwise
have been paid.
(c) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of capital stock of the Company for any shares of
Parent Common Stock (or dividends or distributions with respect thereto), or for
any cash amounts, delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law.
1.8 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.9 Prepayment of Loans to Company Shareholders. Immediately after the
Effective Time, Parent shall cause the Company to repay, at any time within one
year of the Closing Date, the Shareholder Indebtedness (as such term is defined
in Section 2.4) to the Company's Shareholders.
4.
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1.10 Further Action. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Corporation or Parent
with full right, title and possession of and to all rights and property of
Merger Sub and the Company, the officers and directors of the Surviving
Corporation and Parent shall be fully authorized (in the name of Merger Sub, in
the name of the Company and otherwise) to take such action.
SECTION 2. Representations and Warranties of the Company and the Company
Shareholders.
Except as set forth on a disclosure schedule delivered to Parent on
the date of this Agreement and certified by the Company Shareholders (the
"Disclosure Schedule"). The Company and the Company Shareholders jointly and
severally represent and warrant, to and for the benefit of the Indemnitees, as
follows:
2.1 Due Organization; No Subsidiaries; Etc.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Ohio and has all necessary power
and authority: (i) to conduct its business in the manner in which its business
is currently being conducted; (ii) to own and use its assets in the manner in
which its assets are currently owned and used; and (iii) to perform its
obligations under all Company Contracts (as defined in Section 2.10).
(b) The Company has not conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious name, assumed name,
trade name or other name, other than the name "Jump Incorporated" and "Up4Sale".
(c) To the best of the knowledge of the Company and the Company
Shareholders, the Company is qualified, authorized, registered or licensed to do
business as a foreign corporation in, and is in good standing as a foreign
corporation in, each jurisdiction where such qualification, authorization,
registration licensing or good standing is required.
(d) The entire board of directors of the Company is comprised of
Company Shareholders.
(e) The Company does not own any interest in any corporation,
partnership, limited liability company, joint venture or similar entity
("Entity") and has never owned, beneficially or otherwise, any shares or other
securities of, or any direct or indirect equity interest in, any Entity. The
Company has not agreed and is not obligated to make any future investment in or
capital contribution to any Entity. Part 2.1(e) of the Disclosure Schedule
accurately describes the Company's "Spark! Leadership" program. The Company has
no Liabilities associated with the Spark! Leadership program and the Company may
discontinue its Spark! Leadership program at any time without any penalty or any
other Liability to the Company.
5.
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2.2 Articles of Incorporation and Code of Regulations; Records. The
Company has delivered to Parent accurate and complete copies of: (1) the
Company's articles of incorporation and Code of Regulations; (2) the stock
records of the Company; and (3), the minutes and other records of the meetings
and other proceedings (including any actions taken by written consent or
otherwise without a meeting) of the shareholders of the Company, the board of
directors of the Company and all committees of the board of directors of the
Company. There have been no formal meetings or other proceedings of the
shareholders of the Company, the board of directors of the Company or any
committee of the board of directors of the Company that are not fully reflected
in such minutes or other records. There has not been any violation of any of
the provisions of the Company's articles of incorporation or Code of
Regulations, and the Company has not taken any action that is inconsistent in
any material respect with any resolution adopted by the Company's shareholders,
the Company's board of directors or any committee of the Company's board of
directors. The books of account, stock records, minute books and other records
of the Company are accurate, up-to-date and complete in all material respects,
and have been maintained in accordance with prudent business practices. The
Company has never amended its articles of incorporation or Code of Regulations.
The Company has not effected or been a party to any merger, consolidation,
business combination, reorganization, or sale of all or a portion of the assets
or capital stock of the Company, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction.
2.3 Capitalization, Etc.
(a) The authorized capital stock of the Company consists of: 500
shares of Common Stock, no par value, of which 300 shares have been issued and
are outstanding as of the date of this Agreement. All of the outstanding shares
of Company Common Stock have been duly authorized and validly issued, and are
fully paid and non-assessable. The Company Shareholders collectively own, of
record and beneficially, all of the issued and outstanding shares of Company
Common Stock.
(b) There is no: (i) outstanding subscription, option, call, warrant
or right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Company; (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of the Company; (iii)
written, oral or other agreement, contract, understanding, note or other legally
binding commitment or instrument ("Contract") under which the Company is or may
become obligated to sell or otherwise issue any shares of its capital stock or
any other securities; or (iv) to the best of the knowledge of the Company and
the Company Shareholders, condition or circumstance that may give rise to or
provide a basis for the assertion of a claim by any person or entity to the
effect that such person or entity is entitled to acquire or receive any shares
of capital stock or other securities of the Company.
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(c) All outstanding shares of Company Common Stock have been issued
and granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in applicable
Contracts.
(d) The Company has never declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities of the Company;
(e) Other than in connection with the issuance of the Company Common
Stock to the Company Shareholders in connection with the Company's formation,
the Company has never sold, issued or authorized the issuance of (i) any capital
stock or other security, (ii) any option or right to acquire any capital stock
or any other security, or (iii) any instrument convertible into or exchangeable
for any capital stock or other security;
2.4 Financial Statements.
(a) The Company has delivered to Parent unaudited balance sheets of
the Company as of June 26, 1998 (the "Interim Balance Sheet") and the related
unaudited income statement, statement of stockholders' equity and statement of
cash flows of the Company for the periods then ended (collectively, the
"Financial Statements"). The Financial Statements: (i) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered (except that the Financial Statements do
not contain footnotes and the Financial Statement for the period ended June 30,
1998 is subject to normal and recurring year-end adjustments which will not,
individually or in the aggregate, be material in amount), and (ii) fairly
present the financial position of the Company as of the respective dates thereof
and the results of operations of the Company for the periods covered thereby.
(b) All debts, obligations and other liabilities of any nature of the
Company ("Liabilities") are accurately and completely recorded on the Interim
Balance Sheet or Part 2.4(b) of the Disclosure Schedule regardless of whether
any such Liability would be required to be disclosed on a balance sheet in
accordance with generally accepted accounting principles. Any and all past,
present or future Shareholder Indebtedness is accurately reflected in the
Financial Statements.
2.5 Absence of Changes. Since the date of the Interim Balance Sheet:
(a) there has not been any material adverse change in the Company's
business, condition, assets, liabilities or operations, and, to the best of the
knowledge of the Company and the Company Shareholders, no event has occurred
that could reasonably be expected to have a material adverse effect on the
Company's business, condition, assets, liabilities, operations, financial
performance or prospects (a "Material Adverse Effect").
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the Company assets;
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(c) the Company has not incurred or guaranteed any indebtedness for
borrowed money or any other Liabilities in excess of $5,000.00;
(d) the Company has not entered into any transaction or taken any
other material action outside the ordinary course of business or inconsistent
with its past practices;
(e) the Company has not entered into any transaction with any Related
Party (or such term is defined in Section 2.17) including any loan to any
Company Shareholder; and
(f) the Company has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(e)" above.
2.6 Title to Assets.
(a) The Company owns, and has good, valid and marketable title to,
all assets purported to be owned by it, including: (i) all assets reflected on
the Interim Balance Sheet; (ii) all assets referred to in Part 2.9 of the
Disclosure Schedule and all of the Company's rights under the Company Contracts
and User Agreements (as defined in Section 2.10); and (iii) all other assets
reflected in the Company's books and records as being owned by the Company. All
of said assets are owned by the Company free and clear of any lien, pledge,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or other restriction or encumbrance of any nature
("Encumbrance"), except for any immaterial lien for current taxes not yet due
and payable which has arisen in the ordinary course of business.
(b) The assets referred to in clauses (i) and (ii) of subsection
2.6(a) above constitute all of the assets that are material to the business of
the Company or are necessary to conduct such business as it has been and is
being conducted.
(c) As of the date hereof, not less than 53,000 member accounts have
been established for use of the Company's online auction services.
2.7 Bank Accounts. The Company has provided Parent with accurate
information with respect to each account maintained by or for the benefit of the
Company at any bank or other financial institution.
2.8 Equipment; Leasehold.
(a) All material items of equipment and other tangible assets owned
by or leased to the Company are adequate for the uses to which they are being
put, are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of the Company's business in the manner in which such
business is currently being conducted.
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(b) The Company does not own any real property or any interest in
real property, except for the leasehold created under the real property lease
identified in Part 2.10(b) of the Disclosure Schedule.
2.9 Proprietary Assets.
(a) Part 2.9 of the Disclosure Schedule identifies all Proprietary
Assets owned by the Company ("Company Proprietary Assets"). No Proprietary
Asset is licensed to the Company by any person or entity (except for any
Proprietary Asset that is licensed to the Company under any third party software
license generally available to the public at a cost of less than $10,000). The
Company has good, valid and marketable title to all of the Company Proprietary
Assets free and clear of all liens and other Encumbrances. The Company is not
obligated to make any payment to any person or entity for the use of any Company
Proprietary Asset. The Company has not developed jointly with any other person
or entity any Proprietary Asset with respect to which such other person or
entity has any rights.
(b) The Company has taken all measures and precautions as are
consistent with prudent business practices to protect and maintain the
confidentiality and secrecy of all Company Proprietary Assets (except Company
Proprietary Assets whose value would be unimpaired by public disclosure) and
otherwise to maintain and protect the value of all Company Proprietary Assets.
The Company has not disclosed or delivered to any person or entity or entity, or
permitted the disclosure or delivery to any person or entity or entity of the
source code, or any portion or aspect of the source code, of any Company
Proprietary Asset.
(c) The Company is not infringing, misappropriating or making any
unlawful use of, and the Company has not at any time infringed, misappropriated
or made any unlawful use of and none of the Company Proprietary Assets infringes
or conflicts with, any Proprietary Asset owned or used by any other person or
entity. To the best of the knowledge of the Company and the Company
Shareholders, no other person or entity is infringing, misappropriating or
making any unlawful use of, and no Proprietary Asset owned or used by any other
person or entity infringes or conflicts with, any Company Proprietary Asset.
(d) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner in
which such business has been and is being conducted. The Company has not
entered into any covenant not to compete or Contract limiting its ability to
exploit fully and freely any of its Proprietary Assets or to transact business
in any market or geographical area or with any person or entity.
For purposes of this Agreement "Proprietary Asset" shall mean any: (a)
patent, patent application, trademark (whether registered or unregistered),
trademark application, trade name, fictitious business name, service mark
(whether registered or unregistered), service mark application, copyright
(whether registered or unregistered), copyright
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application, maskwork, maskwork application, trade secret, know-how, customer
list, franchise, system, computer software, computer program, invention, design,
blueprint, engineering drawing, proprietary product, technology, proprietary
right or other intellectual property right or intangible asset; or (b) right to
use or exploit any of the foregoing.
(e) No IP addresses owned, controlled or used by the Company has been
blocked or is currently blocked by any third party, nor is the Company aware of
any threats to block such IP addresses. To the best of the knowledge of the
Company and the Company Shareholders, the Company (or its domain names or any IP
address owned, controlled or used by the Company) is not currently and has not
been on the Realtime Blackhole List or any other similar list of rogue or
blacklisted websites, nor is the Company aware of any threats to place the
Company on such lists.
2.10 Contracts.
(a) There is no, and there has never been any Contract between the
Company and its customers relating to the online services provided by the
Company to is customers other than Contracts with terms identical to the form(s)
of user agreement(s) previously provided to Parent (the "User Agreements");
(b) Part 2.10(b) of the Disclosure Schedule is a complete and
accurate list of each Contract other than a User Agreement: (i) to which the
Company is a party; (ii) by which the Company or any of its assets is or may
become bound or under which the Company has, or may become subject to, any
obligation; or (iii) under which the Company has or may acquire any right or
interest involving or potentially involving more than $5,000.00 (each such
Contract being referred to herein as a "Company Contract").
(c) The Company has delivered to Parent accurate and complete copies
of all written Contracts identified in Part 2.10(b) of the Disclosure Schedule,
including all amendments thereto. There is no Company Contract that is not in
written form.
(d) (i) The Company has not violated or breached, or committed any
default under, any Company Contract or User Agreement; (ii) to the best of the
knowledge of the Company and the Company Shareholders, no event has occurred,
and no circumstance or condition exists, that (with or without notice or lapse
of time) will, or could reasonably be expected to, result in any such violation
or breach; and (iii) the Company has not waived any of its material rights under
any Company Contract.
(e) The Company Contracts and User Agreements collectively constitute
all of the Contracts necessary to enable the Company to conduct its business in
the manner in which its business is currently being conducted.
(f) Except as described on Part 2.10(b) of the Disclosure Schedule,
each Contract listed or required to be listed on Part 2.10(b) of the Disclosure
Schedule is terminable by the Company on no more than 90-days written notice
without any penalty or
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any other Liability to the Company (including any advertising Contract listed
or required to be listed on such Schedule).
2.11 Liabilities.
(a) The Company has no accrued, contingent or other liabilities of
any nature, either matured or unmatured (whether or not required to be reflected
in financial statements in accordance with generally accepted accounting
principles, and whether due or to become due), except for liabilities identified
as such in the "liabilities" column of the Interim Balance Sheet.
(b) Following the consummation of the Merger, should Parent
discontinue the online auction services offered by the Company, neither Parent
nor the Company will be liable or have any continuing obligations as a result of
any promotional policy or program that the Company maintains, supports or has
any obligations with respect to (including its "Free Auctions Forever" "Spark!
Leadership" and "Tell A Friend" programs) or that the Company has ever
maintained supported or had obligations with respect to ("Promotional Policy").
The Company is not currently in violation of or in breach under the terms of any
Promotional Policy. All Liabilities associated with any Promotional Policy are
fully reflected on the Interim Balance Sheet.
2.12 Compliance with Legal Requirements. To the best of the knowledge of
the Company and the Company Shareholders, the Company is, and has at all times
since inception been, in compliance with all applicable federal, state, local,
municipal or other laws, statutes, ordinances, codes, or other similar rules and
regulations ("Legal Requirements") issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
federal, state, local, municipal, foreign or other government or governmental or
quasi-governmental authority ("Governmental Body"). The Company has not
received any notice or other communication from any person, entity or
Governmental Body regarding any actual or possible violation of, or failure to
comply with, any Legal Requirement. Part 2.12 of the Disclosure Schedule
describes each inquiry, notice and other communication received by the Company
and the Company Shareholders from any Governmental Body (including the Federal
Bureau of Alcohol, Tobacco and Firearms or the Federal Trade Commission)
regarding the operation of the Company's website, any members using the
Company's website or any items offered for sale on such website.
2.13 Governmental Authorizations. Part 2.13 of the Disclosure Schedule
identifies each permit, license, registration, qualification, approval, or
similar authorization issued or granted by a Governmental Body (a "Governmental
Authorization") to the Company, and the Company has delivered to Parent accurate
and complete copies of all Governmental Authorizations identified in Part 2.13
of the Disclosure Schedule. The Governmental Authorizations identified in Part
2.13 of the Disclosure Schedule are valid and in full force and effect, and
collectively constitute all Governmental Authorizations necessary to enable the
Company to conduct its business in the manner in which its
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business is currently being conducted. The Company is, and at all times since
inception has been, in substantial compliance with the terms and requirements of
the respective Governmental Authorizations identified in Part 2.13 of the
Disclosure Schedule. Since inception, the Company has not received any notice or
other communication from any Governmental Body regarding (a) any actual or
possible violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization.
2.14 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of the
Company with any Governmental Body with respect to any taxable period ending on
or before the Closing Date (the "Company Returns") (i) have been filed on or
before the applicable due date (including any extensions of such due date), and
(ii) have been, or will be when filed, accurately and completely prepared in all
material respects in compliance with all applicable Legal Requirements. All
amounts shown on the Company Returns to be due on or before the Closing Date
have been paid. The Company has delivered to Parent accurate and complete
copies of all Company Returns filed since inception.
(b) No Company Return relating to income Taxes has ever been examined
or audited by any Governmental Body. No claim or Proceeding is pending or has
been threatened against or with respect to the Company in respect of any Tax and
no notice of deficiency or similar document has been received by the Company
with respect to any Tax. There are no liens for Taxes upon any of the assets of
the Company except liens for current Taxes not yet due and payable. The Company
has not entered into or become bound by any agreement or consent with any
Governmental Body relating to Taxes and the Company is not, and has never been,
a party to or bound by any tax indemnity agreement, tax sharing agreement, tax
allocation agreement or similar Contract. The Company has properly withheld all
amounts required to be withheld for its employees for all federal, state and
local tax purposes.
For purposes of this Agreement:
"Tax" shall mean any tax (including any income tax, franchise tax, capital
gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad valorem
tax, transfer tax, stamp tax, sales tax, use tax, property tax, business tax,
withholding tax or payroll tax), levy, assessment, tariff, duty (including any
customs duty), deficiency or fee, and any related charge or amount (including
any fine, penalty or interest), imposed, assessed or collected by or under the
authority of any Governmental Body; and
"Tax Return" shall mean any return (including any information return),
report, statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment,
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collection or payment of any Tax or in connection with the administration,
implementation or enforcement of or compliance with any Legal Requirement
relating to any Tax.
2.15 Employee and Labor Matters; Benefit Plans.
(a) Except as set forth on Part 2.15(a) of the Disclosure Schedule,
the Company does not sponsor, maintain, contribute to and is not required to
contribute to any salary, bonus, deferred compensation, incentive compensation,
stock purchase, stock option, severance pay, termination pay, hospitalization,
medical, life or other insurance, supplemental unemployment benefits, profit-
sharing, pension or retirement plan (including any employee pension benefit plan
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended)), program or agreement for the benefit of any current or
former employee, director shareholder or other person.
(b) Except as set forth on Part 2.15(b) of the Disclosure Schedule,
other than the Company Shareholders, the Company does not and has not employed
or utilized the services of any employees or consultants. All individuals who
are performing or have performed services for the Company and are or were
classified as "independent contractors" for tax purposes qualify for such
classification.
(c) The "Advisory Board" is a voluntary program and the Company has
not paid, reimbursed, incentivized, granted any interests, rights or equity to
or made any commitment or promise to (written or oral) and has no obligation or
Contract to, pay, reimburse, incentivize, grant any interests, rights or equity
to or otherwise compensate the members of the Advisory Board.
2.16 Environmental Matters. The Company is in compliance with all
applicable federal, state and local Legal Requirements relating to pollution or
protection of human health or the environment ("Environmental Laws"). The
Company is not required to possess any permits or other Governmental
Authorizations under applicable Environmental Laws for the ownership of its
properties or conduct of its business.
2.17 Related Party Transactions. Except as set forth in Part 2.17 of
the Disclosure Schedule, no Related Party (a) has any direct or indirect
interest in any material asset used in or otherwise relating to the business of
the Company (other than the Company Shareholders by virtue of their ownership of
the Company Shares); (b) has loaned money to or is indebted to the Company; (c)
has entered into, or has had any direct or indirect financial interest in, any
material Contract, transaction or business dealing involving the Company; (d) is
competing directly or indirectly, with the Company; or (e) has any claim or
right against the Company. (For purposes of this Section 2.17 each of the
following shall be deemed to be a "Related Party": (i) each of the Company
Shareholders; (ii) each individual who is, or who has at any time since
inception been, an officer of the Company; (iii) each member of the immediate
family of each of the individuals referred to in clauses "(i)" and "(ii)" above;
and (iv) any trust or other Entity (other than the Company) in which any one of
the individuals referred to in clauses "(i)", "(ii)" and "(iii)" above holds
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(or in which more than one of such individuals collectively hold), beneficially
or otherwise, a material voting, proprietary or equity interest.)
2.18 Legal Proceedings; Orders.
(a) There is no action, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate
proceeding), hearing, inquiry, audit, examination or investigation commenced,
brought, conducted or heard by or before, or otherwise involving, any court or
other Governmental Body or any arbitrator or arbitration panel ("Legal
Proceeding") pending or, to the best of the knowledge of the Company and the
Company Shareholders threatened, against the Company or any of the Company
Shareholders relating to the business of the Company: (i) that involves the
Company or any of the assets owned or used by the Company or any person or
whose liability the Company has or may have retained or assumed, either
contractually or by operation of law; or (ii) that challenges, or that may have
the effect of preventing, delaying, making illegal or otherwise interfering
with, the Merger or any of the other transactions contemplated by this
Agreement. No event has occurred, and no claim, dispute or other condition or
circumstance exists, that will, or that could reasonably be expected to, give
rise to or serve as a basis for the commencement of any such Legal Proceeding.
No Legal Proceeding has ever been commenced by or has ever been pending against
the Company.
(b) There is no order, writ, injunction, judgment or decree to which
the Company, or any of the assets owned or used by the Company, is subject.
None of the Company Shareholders is subject to any order, writ, injunction,
judgment or decree that relates to the Company's business or to any of the
assets owned or used by the Company. No officer or other employee of the
Company is subject to any order, writ, injunction, judgment or decree that
prohibits such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to the Company's business.
2.19 Authority; Binding Nature of Agreement. The Company has the
absolute and unrestricted right, power and authority to enter into and to
perform its obligations under this Agreement; and the execution, delivery and
performance by the Company of this Agreement have been duly authorized by all
necessary action on the part of the Company, its shareholders and its board of
directors. This Agreement constitutes the legal, valid and binding obligation
of the Company and each Company Shareholder, enforceable against the Company and
each Company Shareholder in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
2.20 Non-Contravention; Consents. Neither (1) the execution, delivery
or performance of this Agreement or any of the other agreements referred to in
this Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time): (a) contravene, conflict with or result in
a violation of (i) any of the provisions of
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the Company's articles of incorporation or Code of Regulations, or (ii) any
resolution adopted by the Company's shareholders, the Company's board of
directors or any committee of the Company's board of directors; (b) contravene,
conflict with or result in a violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is held by the Company
or that otherwise relates to the Company's business or to any of the assets
owned or used by the Company; (c) contravene, conflict with or result in a
violation or breach of, or result in a default under, any provision of any
Company Contract, or give any person or the right to (i) declare a default or
exercise any remedy under any such Company Contract, (ii) accelerate the
maturity or performance of any such Company Contract, or (iii) cancel, terminate
or modify any such Company Contract; or (d) result in the imposition or creation
of any lien or other Encumbrance upon or with respect to any asset owned or used
by the Company (except for minor liens that will not, in any case or in the
aggregate, materially detract from the value of the assets subject thereto or
materially impair the operations of the Company).
The Company is not and will not be required to make any filing with or give
any notice to, or to obtain any consent, approval or other authorization from,
any person or in connection with (x) the execution, delivery or performance of
this Agreement or any of the other agreements referred to in this Agreement, or
(y) the consummation of the Merger or any of the other transactions contemplated
by this Agreement.
2.21 Full Disclosure. This Agreement (including the Disclosure
Schedule) does not (i) contain any representation, warranty or information that
is false or misleading with respect to any material fact, or (ii) omit to state
any material fact or necessary in order to make the representations, warranties
and information contained and to be contained herein and therein (in the light
of the circumstances under which such representations, warranties and
information were or will be made or provided) not false or misleading.
2.22 Investment Representations.
(a) Each Company Shareholder is acquiring the Parent Common Stock
solely for his own account for investment and not with a view to distribution or
resale. Each Company Shareholder agrees that he will not sell, hypothecate,
pledge or otherwise dispose of the Parent Common Stock to be received by him in
the Merger in whole or in part unless such Parent Common Stock either has been
registered under the Securities Act of 1933, as amended (the "Securities Act")
and any applicable state securities law, or is exempt from the registration
requirements of the Securities Act and any such state securities law.
(b) Each Company Shareholder has sufficient knowledge and experience
in (i) business and financial matters and (ii) the technology of Parent and
industry in which Parent operates, such that he is able to evaluate Parent, its
proposed activities and the risks and merits of an investment in Parent Common
Stock. Each Company Shareholder has the ability to accept the high risk and
lack of liquidity inherent in this type of investing.
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(c) Each Company Shareholder recognizes that investment in Parent
involves certain risks and has reviewed and understands all of the risk factors
related to an investment in Parent.
(d) Each Company Shareholder has had the opportunity to ask questions
of and receive answers from the representatives of Parent concerning the terms,
conditions and activities of Parent and to obtain any additional information
necessary to verify the accuracy of the information provided.
(e) Each Company Shareholder has been advised to consult with its own
attorney regarding legal matters concerning this investment in Parent.
(f) Each Company Shareholder is aware that the Parent Common Stock it
will receive in the Merger has not been registered under the Securities Act (and
that no such registration is contemplated) and are being sold in reliance upon
the exemption from the registration requirements under that Act provided in
Regulation D and/or Section 4(2). Each Company Shareholder further understands
that it is not anticipated that there will be any market for its interest in
Parent and that he must therefore bear the economic risk of this investment for
indefinitely. Each Company Shareholder is also aware that: (i) Parent is under
no obligation to file a registration statement with respect to such Parent
Common Stock to be issued to him in the Merger; and (ii) the provisions of Rule
144 under the Act will permit resale of the Parent Common Stock to be issued to
him in the Merger only under limited circumstances. The undersigned
acknowledges that transfer of the Parent Common Stock is restricted by state and
federal securities laws and that each certificate representing such shares shall
bear a legend identical or similar in effect to the following legend (together
with any legend or legends required by state securities laws or otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS REGISTERED UNDER
THE ACT OR UNLESS AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT IS AVAILABLE"
SECTION 3. Representations and Warranties of Parent and Merger Sub.
Parent and Merger Sub jointly and severally represent and warrant
to the Company and the Signing Shareholders as follows:
3.1 Authority; Binding Nature of Agreement. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance by
Parent and Merger Sub of this Agreement (including the contemplated issuance of
Parent Common Stock in the Merger in accordance with this Agreement) have been
duly authorized by all necessary
16.
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action on the part of Parent and Merger Sub and their respective boards of
directors. No vote of Parent's stockholders is needed to approve the Merger.
This Agreement constitutes the legal, valid and binding obligation of Parent and
Merger Sub, enforceable against them in accordance with its terms, subject to
(i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
3.2 Valid Issuance. The Parent Common Stock to be issued in the Merger
will, when issued in accordance with the provisions of this Agreement be validly
issued, fully paid and nonassessable.
SECTION 4. Indemnification, Etc.
4.1 Survival of Representations, Etc. The representations and
warranties made by the Company Shareholders in this Agreement shall survive the
Closing and shall expire on the first anniversary of the Closing Date; provided,
however, that if, at any time prior to the first anniversary of the Closing
Date, any Indemnitee (acting in good faith) delivers to any of the Company
Shareholders a written notice alleging the existence of an inaccuracy in or a
breach of any of the representations and warranties made by the Company
Shareholders (and setting forth in reasonable detail the basis for such
Indemnity's belief that such an inaccuracy or breach may exist) and asserting a
claim for recovery under Section 4.2 based on such alleged inaccuracy or breach,
then the claim asserted in such notice shall survive the first anniversary of
the Closing until such time as such claim is fully and finally resolved. The
representations, warranties, covenants and obligations of the Company and the
Company Shareholders, and the rights and remedies that may be exercised by the
Indemnitees, shall not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by or knowledge of, any of
the Indemnitees or any of their Representatives.
For purposes of this Agreement, the term Indemnitee shall mean the
following person or Entities: (a) Parent; (b) Parent's current and future
affiliates (including the Surviving Corporation); (c) the respective attorneys,
accountants and other representatives of the person or Entities referred to in
clauses "(a)" and "(b)" above; and (c) the respective successors and assigns of
the person or Entities referred to in clauses "(a)", "(b)" and "(c)" above;
provided, however, that the Company Shareholders shall not be deemed to be
"Indemnitees."
4.2 Indemnification by Company Shareholders.
(a) From and after the Effective Time (but subject to Section 4.1),
the Company Shareholders, jointly and severally, shall hold harmless and
indemnify each of the Indemnitees from and against, and shall compensate and
reimburse each of the Indemnitees for, any loss, damage, injury, liability,
claim, demand, settlement, judgment, fine, penalty, Tax, fee (including
reasonable attorneys' fees), charge, cost (including costs of investigation) or
expense of any nature ("Damages") which are directly or indirectly suffered or
incurred by any of the Indemnitees or to which any of the Indemnitees may
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otherwise become subject (regardless of whether or not such Damages relate to
any third-party claim) and which arise from or as a result of, or are directly
or indirectly connected with: (i) any inaccuracy in or breach of any
representation or warranty set forth in Section 2 (without giving effect to any
"Material Adverse Effect" or other materiality qualification or any similar
qualification contained or incorporated directly or indirectly in such
representation or warranty); (ii) any breach of any covenant or obligation of
the Company or any of the Company Shareholders contained in this Agreement or in
any of the other agreements and instruments delivered in connection with the
transactions contemplated hereby; or (iii) any Legal Proceeding relating to any
inaccuracy or breach of the type referred to in clause "(i)" or "(ii)" above
(including any Legal Proceeding commenced by any Indemnitee for the purpose of
enforcing any of its rights under this Section 4).
(b) The Company Shareholders acknowledge and agree that, if the
Surviving Corporation suffers, incurs or otherwise becomes subject to any
Damages as a result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation, then (without limiting any of
the rights of the Surviving Corporation as an Indemnitee) Parent shall also be
deemed, by virtue of its ownership of the stock of the Surviving Corporation, to
have incurred Damages as a result of and in connection with such inaccuracy or
breach.
4.3 Threshold; Recourse.
(a) The Company Shareholders shall not be required to make any
indemnification payment pursuant to Section 4.2(a) for any inaccuracy in or
breach of any of their representations and warranties set forth in Section 2
unless the Damages arising from such inaccuracy or breach that have been
directly or indirectly suffered or incurred by any one or more of the
Indemnitees, or to which any one or more of the Indemnitees has or have
otherwise become subject, exceed $5,000 in any individual case and $25,000 in
the aggregate. If the total amount of such Damages exceed $5,000 or $25,000 as
the case may be, then the Indemnitees shall be entitled to be indemnified
against and compensated and reimbursed for the full amount of such Damages and
not merely for the portion of such damages exceeding $5,000 or $25,000 as the
case may be.
(b) Other than in the case of fraud or willful misconduct, in the
event that any Indemnitee shall become entitled to any indemnification under
this Section 4, resort to the Escrow Shares (as defined in Section 4.4) shall be
the sole and exclusive remedy for such Indemnitee. In the case of fraud or
willful misconduct, the Indemnitees may seek recourse against the Escrow Shares
as well as any such other remedies as may be available in law or in equity.
4.4 Escrow of Shares; Satisfaction of Indemnification Claim.
(a) On the date hereof, Parent shall issue a certificate for 9,524
shares of Parent Common Stock (the "Escrow Shares") in the name of the eBay Inc.
as escrow agent (the "Escrow Agent"), evidencing the shares of Parent Common
Stock to be held in escrow (the "Escrow Fund") in accordance with this
Agreement. The Escrow Fund shall be held
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as a trust fund and shall not be subject to any lien, attachment, trustee
process or any other judicial process of any creditor of any party hereto. The
Escrow Agent agrees to accept delivery of the Escrow Fund and to hold the Escrow
Fund in escrow (the "Escrow"), subject to the terms and conditions of this
Agreement.
In the event that, after the Closing, the Company Shareholders desire to
replace the Escrow Agent with an independent third party escrow agent, Parent
and the Company Shareholders hereby agree to replace eBay Inc. as Escrow Agent
with a third party escrow agent reasonably acceptable to Parent and the Company
Shareholders and to enter into an Escrow Agreement with such third party with
terms substantially similar to the terms contained herein. In such event,
Parent on the one hand and the Company Shareholders on the other hand agree that
they would each be responsible for the paying of 50% of the legal and other fees
and expenses associated with establishing and maintaining such third party
escrow account.
(b) The Escrow Shares shall be used to compensate and reimburse each
of the Indemnitees for indemnifiable claims as set forth herein. The Escrow
Fund shall be security for such indemnity obligation, subject to the
limitations, and in the manner provided, in this Agreement.
(c) On any matter brought before the Parent stockholders for a vote,
the Escrow Agent shall vote the Escrow Shares in the Escrow Fund as directed by
the Company Shareholders individually. Each Company Shareholder shall have the
right to direct the vote of 25% of the number of Escrow Shares then held in the
Escrow Account.
(d) Any distributions of cash, securities or other property in
respect of or in exchange for any of the Escrow Shares in the Escrow Fund, other
than distributions of capital stock of Parent (by way of stock dividend, stock
split or otherwise) not constituting a dividend for purposes of Section 301 of
the Code, shall be payable and distributed directly to the Escrow and shall
become a part of the Escrow Fund and become included in the definition of
"Escrow Shares". At the time any of the Escrow Shares in the Escrow Fund are
required to be released from the Escrow to any person pursuant to this Escrow
Agreement, any distributions of capital stock of Parent previously made in
respect of such released Escrow Shares and held in the Escrow shall be released
from the Escrow to such person. Each certificate representing shares deposited
in the Escrow Fund shall be accompanied by executed stock powers, executed in
blank as to the assignee and certificate number, in form sufficient for the
transfer thereof. It is understood that shares of Parent Common Stock which may
be distributed on or with respect to the shares in the Escrow Fund during the
term of this Agreement by reason of stock dividends, stock splits or otherwise
shall be deposited directly by Parent with the Escrow Agent (with the applicable
executed stock powers) pursuant to the terms and conditions hereof (such
additional shares shall be deemed to become a part of the Escrow Fund when
deposited with the Escrow Agent).
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(e) The interests of the Company Shareholders in the Escrow and in
the Escrow Shares in the Escrow Fund shall not be assignable or transferable,
other than by operation of law.
(f) No fractional shares of Parent Common Stock shall be retained in
or released from the Escrow pursuant to this Agreement. In connection with any
release of Shares from the Escrow, the Escrow Agent shall be permitted to "round
down" or to follow such other rounding procedures as the Escrow Agent reasonably
determines to be appropriate in order to avoid (i) retaining any fractional
shares in the Escrow Fund or (ii) releasing any fractional shares from the
Escrow.
(g) If Parent determines in good faith that it is entitled, under the
terms of this Agreement, to make a claim against the Escrow for indemnification,
then Parent may deliver to the Designated Shareholders" Agent (as defined in
Section 5.1) a written notice of such inaccuracy or breach (a "Claim Notice")
setting forth (i) a brief description of the circumstances supporting Parent's
reasonable belief that such inaccuracy or breach exists or has occurred, and
(ii) to the extent possible, a non-binding, preliminary estimate of the
aggregate dollar amount of all indemnifiable claims that have arisen and may
arise as a result of such inaccuracy or breach (such aggregate amount being
referred to as the "Claim Amount"). Such Claim Notice must be delivered on or
before the first anniversary of the Closing Date.
(h) Within thirty (30) days after the delivery of a Claim Notice to
the Designated Shareholders" Agent, the Designated Shareholders" Agent shall
deliver to the Escrow Agent, a written notice (the "Response Notice")
containing: (i) instructions to the effect that Shares having a Fair Market
Value (as defined below) equal to the entire Claim Amount set forth in such
Claim Notice is to be released from the Escrow to Parent; or (ii) instructions
to the effect that Escrow Shares having a Fair Market Value equal to a specified
portion (but not the entire amount) of the Claim Amount set forth in such Claim
Notice are to be released from the Escrow to Parent, together with a statement
that the remaining portion of such Claim Amount is being disputed; or (iii) a
statement that the entire Claim Amount set forth in such Claim Notice is being
disputed. If no Response Notice is received by Parent from the Designated
Shareholders" Agent within thirty (30) days after the delivery of a Claim Notice
to the Designated Shareholders" Agent, then the Designated Shareholders" Agent
shall be deemed to have given instructions that shares of Parent Common Stock
having a Fair Market Value equal to the entire Claim Amount set forth in such
Claim Notice are to be released to Parent from the Escrow.
(i) If the Designated Shareholders" Agent gives (or is deemed to have
given) instructions that Escrow Shares having a Fair Market Value equal to the
entire Claim Amount set forth in a Claim Notice are to be released from the
Escrow to Parent, then the Escrow Agent shall promptly following the required
delivery date for the Response Notice transfer, deliver and assign to Parent
such number of Escrow Shares from the Escrow Fund as have a Fair Market Value
equal to the Claim Amount (or such lesser amount as is then held in Escrow).
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(j) If a Response Notice delivered by the Designated Shareholders"
Agent in response to a Claim Notice contains instructions to the effect that
Shares having a Fair Market Value equal to a specified portion (but not the
entire amount) of the Claim Amount set forth in such Claim Notice are to be
released from the Escrow to Parent, then (i) the Escrow Agent shall promptly
following the required delivery date for the Response Notice transfer, deliver
and assign to Parent such number of Shares from the Escrow Fund as have a Fair
Market Value equal to such specified portion of such Claim Amount, and (ii) the
procedures set forth in subsection 4.4(k) of this Agreement shall be followed
with respect to the remaining portion of such Claim Amount.
(k) If a Response Notice delivered by the Designated Shareholders"
Agent in response to a Claim Notice contains a statement that all or a portion
of the Claim Amount set forth in such Claim Notice is being disputed (such Claim
Amount or the disputed portion thereof being referred to as the "Disputed
Amount"), then, notwithstanding anything contained in Section 4 of this
Agreement, the Escrow Agent shall continue to hold in Escrow (in addition to any
other Shares of Parent Common Stock permitted to be retained in Escrow, whether
in connection with any other dispute or otherwise) Shares of Parent Common Stock
having a Fair Market Value equal to 120% of the Disputed Amount. Such amount
shall continue to be held in the Escrow until (i) delivery of a notice executed
by Parent and the Designated Shareholders" Agent setting forth instructions to
the Escrow Agent regarding the release of such Escrow Shares, or (ii) delivery
of a copy of a final and non-appealable judgment of a court setting forth
instructions to the Escrow Agent as to the release of such shares. The Escrow
Agent shall thereupon release shares of Parent Common Stock from the Escrow in
accordance with the instructions set forth in such notice or arbitrator's award.
(l) In the event that any Response Notice indicates that there is a
Disputed Amount, the Designated Shareholders" Agent and Parent shall for a
period of 60 days attempt in good faith to resolve the rights of the respective
parties with respect to such claims. If the Designated Shareholders" Agent and
Parent should so agree, a notice setting forth such agreement shall be signed by
both parties and delivered to the Escrow Agent who shall thereupon transfer,
deliver and assign to Parent such amount as is equal to the agreed upon amount
(or such lesser amount as is then held in Escrow).
(m) After the first anniversary of the Closing Date, the Escrow Agent
shall release to the Company Shareholders from the Escrow all shares then held
in the Escrow, except for any amounts that are to be retained in the Escrow in
accordance with subsection 4.4(k) of this Agreement.
(n) If the Escrow Agent becomes obligated to transfer to Parent any
shares held in the Escrow Fund in accordance with the terms of this Agreement,
the Escrow Agent shall deliver certificates representing such shares together
with a completed stock power to Parent. If the Escrow Agent becomes obligated
to transfer to the Company Shareholders any Escrow Shares held in the Escrow
Fund in accordance with the terms of this Agreement, the Escrow Agent shall
deliver the certificate representing the shares in the
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Escrow Fund, together with a completed stock power, to the Parent. Any
distribution of all or a portion of the Shares in the Escrow Fund to the Company
Shareholders shall be made 25% to each Company Shareholder and in such event,
Parent agrees to issue one or more certificates representing each Company
Shareholder's pro rata portion of the Escrow Fund and to deliver such
certificates or to cause its transfer agent to deliver such certificate to each
respective Company Shareholder at the address set forth on the transfer agent's
books and records or, at the request of the Company Shareholder, and upon
submission of evidence satisfactory to Parent of such designation, to deliver
such certificate to the Company Shareholder's designee.
(o) For purposes of this Agreement, the "Fair Market Value" of each
of the Escrow Shares in the Escrow Fund shall be deemed to be the average
closing price for a share of Parent Common Stock for the ten trading days
immediately prior to the release of shares of Parent Common Stock from the
Escrow; provided, however, that, in the event that the Parent Common Stock is
not listed or quoted on a securities exchange or quotation system at the time
the Escrow Shares are to be release from Escrow, the Fair Market Value of each
of the Escrow Shares shall be $42.00 (as adjusted as appropriate to reflect any
stock split, reverse stock split, stock dividend, recapitalization or other
similar transaction effected by Parent between the Effective Time and the date
such liability is to be satisfied).
4.5 No Contribution. Each Company Shareholder waives, and acknowledges
and agrees that he shall not have and shall not exercise or assert (or attempt
to exercise or assert), any right of contribution, right of indemnity or other
right or remedy against the Surviving Corporation in connection with any
indemnification obligation or any other liability to which he may become subject
under or in connection with this Agreement.
4.6 Defense of Third Party Claims. In the event of the assertion or
commencement by any person, Entity or Governmental Body of any claim or Legal
Proceeding (whether against the Surviving Corporation, against Parent or against
any other person, Entity or Governmental Body) with respect to which any of the
Company Shareholders may become obligated to hold harmless, indemnify,
compensate or reimburse any Indemnitee pursuant to this Section 4, Parent shall
have the right, at its election, to proceed with the defense of such claim or
Legal Proceeding on its own. If Parent so proceeds with the defense of any such
claim or Legal Proceeding: (a) all reasonable expenses relating to the defense
of such claim or Legal Proceeding shall be borne and paid exclusively by the
Company Shareholders; (b) each Company Shareholder shall make available to
Parent any documents and materials in his possession or control that may be
necessary to the defense of such claim or Legal Proceeding; and (c) Parent shall
have the right to settle, adjust or compromise such claim or Legal Proceeding
with the consent of the Company Shareholders" Agent (as defined in Section 5.1);
provided, however, that such consent shall not be unreasonably withheld.
Parent shall give the Designated Shareholders" Agent prompt notice of the
commencement of any such Legal Proceeding against Parent or the Surviving
Corporation; provided, however, that any failure on the part of Parent to so
notify the Designated
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Shareholders" Agent shall not limit any of the obligations of the Company
Shareholders under this Section 4 (except to the extent such failure materially
prejudices the defense of such Legal Proceeding).
4.7 Exercise of Remedies by Indemnitees Other Than Parent. No
Indemnitee (other than Parent or any successor thereto or assign thereof) shall
be permitted to assert any indemnification claim or exercise any other remedy
under this Agreement unless Parent (or any successor thereto or assign thereof)
shall have consented to the assertion of such indemnification claim or the
exercise of such other remedy.
4.8 General Release.
(a) Each Company Shareholder, for himself and for each of such
Company Shareholder's Associated Parties, hereby generally, irrevocably,
unconditionally and completely releases and forever discharges each of the
Releasees from, and hereby irrevocably, unconditionally and completely waives
and relinquishes, each of the Released Claims.
(b) Each Company Shareholder also hereby waives the benefits of, and
any rights such Company Shareholder may have under, any statute or common law
principle of similar effect in any jurisdiction.
For purposes of this Agreement:
"Associated Parties", when used herein with respect to a Company
Shareholder, shall mean and include: (i) such Company Shareholder's
predecessors, successors, executors, administrators, heirs and estate; (ii) such
Company Shareholder's past, present and future assigns, agents and
representatives; (iii) each entity that such Company Shareholder has the power
to bind (by such Company Shareholder's acts or signature) or over which such
Company Shareholder directly or indirectly exercises control; and (iv) each
entity of which such Company Shareholder owns, directly or indirectly, at least
50% of the outstanding equity, beneficial, proprietary, ownership or voting
interests.
"Releasees" shall mean and include: (i) Parent; (ii) the Company;
(iii) each of the direct and indirect subsidiaries of the Company; (iv) each
other affiliate of the Company; and (v) the successors and past, present and
future assigns, directors, officers, employees, agents, attorneys and
representatives of the respective entities identified or otherwise referred to
in clauses "(i)" through "(iv)" of this sentence, other than the Company
Shareholders.
"Claims" shall mean and include all past, present and future disputes,
claims, controversies, demands, rights, obligations, liabilities, actions and
causes of action of every kind and nature, including: (i) any unknown,
unsuspected or undisclosed claim; (ii) any claim or right that may be asserted
or exercised by a Company Shareholder in such Company Shareholder's capacity as
a stockholder, director, officer or employee of the
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Company or in any other capacity; and (iii) any claim, right or cause of action
based upon any breach of any express, implied, oral or written contract or
agreement.
"Released Claims" shall mean and include each and every Claim that (i) any
Company Shareholder or any Associated Party of any Company Shareholder may have
had in the past, may now have or may have in the future against any of the
Releasees, and (ii) has arisen or arises directly or indirectly out of, or
relates directly or indirectly to, any circumstance, agreement, activity,
action, omission, event or matter occurring or existing on or prior to the date
of this General Release (excluding only claims related to the Shareholder
Indebtedness and such Company Shareholder's rights, if any, under this
Agreement, the Employment Agreement and the Non-Competition Agreement).
SECTION 5. Miscellaneous Provisions.
5.1 Designated Shareholders' Agent. The Company Shareholders hereby
irrevocably appoint Walter Carroll as their agent for purposes of Section 4 (the
"Designated Shareholders" Agent"), and Walter Carroll hereby accepts his
appointment as the Designated Shareholders" Agent. Parent shall be entitled to
deal exclusively with the Designated Shareholders" Agent on all matters relating
to Section 4, and shall be entitled to rely conclusively (without further
evidence of any kind whatsoever) on any document executed or purported to be
executed on behalf of any Company Shareholder by the Designated Shareholders"
Agent, and on any other action taken or purported to be taken on behalf of any
Company Shareholder by the Designated Shareholders" Agent, as fully binding upon
such Company Shareholder. If the Designated Shareholders" Agent shall die,
become disabled or otherwise be unable to fulfill his responsibilities as agent
of the Company Shareholders, then the Company Shareholders shall, within ten
days after such death or disability, appoint a successor agent and, promptly
thereafter, shall notify Parent of the identity of such successor. Any such
successor shall become the "Designated Shareholders" Agent" for purposes of
Section 4 and this Section 5.1. If for any reason there is no Designated
Shareholders" Agent at any time, all references herein to the Designated
Shareholders" Agent shall be deemed to refer to the Company Shareholders.
5.2 Further Assurances. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
5.3 Fees and Expenses. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement.
5.4 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and
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disbursements (in addition to any other relief to which the prevailing party may
be entitled).
5.5 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to Parent:
eBay Inc.
2005 Hamilton Ave.
Ste. #350
Attention:Legal Department
Telephone: (408) 369-4830
Fax: (408) 369-0667
if to the Company:
Jump Incorporated
5592 Sidney Rd.
Cincinnati, OH 54238
Attention: Walter Carroll
Telephone: (513) 922-9752
if to any of the Company Shareholders:
Walter Carroll
5592 Sidney Rd.
Cincinnati, OH 54238
Telephone: (513) 922-9752
5.6 Confidentiality. On and at all times after the Closing Date, each
Company Shareholder shall keep confidential, and shall not use or disclose to
any other person or entity, any non-public document or other non-public
information in such Company Shareholder's possession that relates to the
business of the Company or Parent.
5.7 Headings. The underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
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5.8 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which,
when taken together, shall constitute one agreement.
5.9 Governing Law. This Agreement shall be construed in accordance
with, and governed in all respects by, the internal laws of the State of
California (without giving effect to principles of conflicts of laws).
5.10 Successors and Assigns. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); the Company Shareholders
and their respective personal representatives, executors, administrators,
estates, heirs, successors and assigns (if any); Parent and its successors
and assigns (if any); and Merger Sub and its successors and assigns (if
any). This Agreement shall inure to the benefit of: the Company; the
Company Shareholders; Parent; Merger Sub; the other Indemnitees (subject to
Section 4.8); and the respective successors and assigns (if any) of the
foregoing. Parent may freely assign any or all of its rights under this
Agreement (including its indemnification rights under Section 4), in whole
or in part, to any other person or entity without obtaining the consent or
approval of any other party hereto or of any other person or entity.
5.11 Specific Performance. The parties to this Agreement agree that,
in the event of any breach or threatened breach by any party to this
Agreement of any covenant, obligation or other provision set forth in this
Agreement for the benefit of any other party to this Agreement, such other
party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant,
obligation or other provision, and (b) an injunction restraining such
breach or threatened breach.
5.12 Waiver.
(a) No failure on the part of any person or entity to exercise
any power, right, privilege or remedy under this Agreement, and no delay on
the part of any person or entity in exercising any power, right, privilege
or remedy under this Agreement, shall operate as a waiver of such power,
right, privilege or remedy; and no single or partial exercise of any such
power, right, privilege or remedy shall preclude any other or further
exercise thereof or of any other power, right, privilege or remedy.
(b) No person or entity shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy
under this Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a written instrument duly
executed and delivered on behalf of such person or entity; and any such
waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
5.13 Amendments. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed
and delivered on behalf of all of the parties hereto.
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5.14 Severability. In the event that any provision of this Agreement,
or the application of any such provision to any person or entity or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to person or entitys or circumstances other
than those as to which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and shall
continue to be valid and enforceable to the fullest extent permitted by
law.
5.15 Parties in Interest. Except for the provisions of Section 4, none
of the provisions of this Agreement is intended to provide any rights or
remedies to any person or entity other than the parties hereto and their
respective successors and assigns (if any).
5.16 Entire Agreement. This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties hereto
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating
to the subject matter hereof and thereof;
5.17 Construction.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the
feminine gender shall include the masculine and neuter genders; and the
neuter gender shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "sections" and "Exhibits" are intended to refer to Sections of
this Agreement and Exhibits to this Agreement.
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The parties hereto have caused this Agreement to be executed and delivered
as of June 30, 1998.
eBay Inc., a Delaware corporation Jump Incorporated, an Ohio corporation
By: /s/ J Skoll By:/s/ Robert J. Ratterman
--------------------------------- ---------------------------------------
Name:Jeff Skoll Name:Robert J. Ratterman
Title:Vice President Strategic Planning Title:Co-President
By:/s/ Christopher M. Downie
------------------------------------
Name:Christopher M. Downie
Title:Co-President
Jump Acquisition Corp., an Ohio corporation Company Shareholders
By:/s/ J Skoll /s/ Walter N. Carroll
--------------------------------- -------------------------------
Name: Jeff Skoll Walter N. Carroll
Title: President
/s/ Christopher M. Downie
-------------------------------
Christopher M. Downie
/s/ Thomas D. Duvall
-------------------------------
Thomas D. Duvall
/s/ Robert J. Ratterman
-------------------------------
Robert J. Ratterman
28.