Agreement and Plan of Merger - Yahoo! Inc. and Viaweb inc.
AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 4, 1998
AMONG
YAHOO! INC.,
XY ACQUISITION CORPORATION
AND
VIAWEB INC.
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TABLE OF CONTENTS
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ARTICLE I - THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Effective Time of the Merger . . . . . . . . . . . . . . . 2
Section 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . 2
Section 1.4 Directors and Officers . . . . . . . . . . . . . . . . . . 2
ARTICLE II - CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . 3
Section 2.1 Conversion of Capital Stock . . . . . . . . . . . . . . . 3
Section 2.2 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . 5
Section 2.3 Dissenting Shares . . . . . . . . . . . . . . . . . . . . 5
Section 2.4 Exchange of Certificates . . . . . . . . . . . . . . . . . 6
Section 2.5 Distributions with Respect to Unexchanged Shares . . . . . 7
Section 2.6 No Fractional Shares . . . . . . . . . . . . . . . . . . . 7
Section 2.7 Tax Consequences . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF TARGET. . . . . . . . . . . 7
Section 3.1 Organization of Target . . . . . . . . . . . . . . . . . . 8
Section 3.2 Target Capital Structure . . . . . . . . . . . . . . . . . 8
Section 3.3 Authority; No Conflict; Required Filings and Consents . . 10
Section 3.4 Financial Statements; Absence of Undisclosed Liabilities . 11
Section 3.5 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.6 Absence of Certain Changes or Events . . . . . . . . . . . 13
Section 3.7 Title and Related Matters . . . . . . . . . . . . . . . . 15
Section 3.8 Proprietary Rights . . . . . . . . . . . . . . . . . . . . 15
Section 3.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . 18
Section 3.10 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.11 Contracts . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.12 Orders, Commitments and Returns . . . . . . . . . . . . . 22
Section 3.13 Compliance With Law . . . . . . . . . . . . . . . . . . . 22
Section 3.14 Labor Difficulties; No Discrimination . . . . . . . . . . 22
Section 3.15 Trade Regulation . . . . . . . . . . . . . . . . . . . . 23
Section 3.16 Insider Transactions . . . . . . . . . . . . . . . . . . 23
Section 3.17 Employees, Independent Contractors and Consultants . . . 23
Section 3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.19 Litigation . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.20 Governmental Authorizations and Regulations . . . . . . . 24
Section 3.21 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.22 Compliance with Environmental Requirements . . . . . . . 24
Section 3.23 Corporate Documents . . . . . . . . . . . . . . . . . . . 25
Section 3.24 No Brokers . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.25 Advertisers, Customers and Suppliers . . . . . . . . . . 25
Section 3.26 Target Action . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.27 Offers . . . . . . . . . . . . . . . . . . . . . . . . . 26
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Section 3.28 Information Statement . . . . . . . . . . . . . . . . . . 26
Section 3.29 Accounts Receivable . . . . . . . . . . . . . . . . . . . 26
Section 3.30 Disclosure . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.31 Target Disclosure Schedule . . . . . . . . . . . . . . . 27
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND SUB . . . . . . 27
Section 4.1 Organization of Acquiror and Sub . . . . . . . . . . . . . 27
Section 4.2 Acquiror Capital Structure . . . . . . . . . . . . . . . . 27
Section 4.3 Authority; No Conflict; Required Filings and Consents . . 28
Section 4.4 Commission Filings; Financial Statements . . . . . . . . . 29
Section 4.5 Absence of Certain Changes or Events . . . . . . . . . . . 30
Section 4.6 Compliance with Laws . . . . . . . . . . . . . . . . . . . 30
Section 4.7 Interim Operations of Sub . . . . . . . . . . . . . . . . 30
Section 4.8 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.9 Shareholders Consent . . . . . . . . . . . . . . . . . . . 30
Section 4.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.11 Investigation . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE V - PRECLOSING COVENANTS OF TARGET . . . . . . . . . . . . . . . . 31
Section 5.1 Approval of Target Stockholders . . . . . . . . . . . . . 31
Section 5.2 Advice of Changes . . . . . . . . . . . . . . . . . . . . 32
Section 5.3 Operation of Business . . . . . . . . . . . . . . . . . . 32
Section 5.4 Access to Information . . . . . . . . . . . . . . . . . . 35
Section 5.5 Satisfaction of Conditions Precedent . . . . . . . . . . . 35
Section 5.6 Other Negotiations . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VI - PRECLOSING AND OTHER COVENANTS OF ACQUIROR AND SUB . . . . . . 36
Section 6.1 Advice of Changes . . . . . . . . . . . . . . . . . . . . 36
Section 6.2 Reservation of Acquiror Common Stock . . . . . . . . . . . 36
Section 6.3 Satisfaction of Conditions Precedent . . . . . . . . . . . 36
Section 6.4 Nasdaq National Market Listing . . . . . . . . . . . . . . 36
Section 6.5 Stock Options . . . . . . . . . . . . . . . . . . . . . . 36
Section 6.6 Registration of Shares Issued in the Merger . . . . . . . 37
Section 6.7 Procedures for Sale of Shares Under Registration Statement 41
Section 6.8 Certain Employee Benefit Matters . . . . . . . . . . . . . 42
Section 6.9 Indemnification . . . . . . . . . . . . . . . . . . . . . 42
Section 6.10 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VII - OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . 43
Section 7.2 No Public Announcement . . . . . . . . . . . . . . . . . . 43
Section 7.3 Regulatory Filings; Consents; Reasonable Efforts . . . . . 43
Section 7.4 Further Assurances . . . . . . . . . . . . . . . . . . . . 43
Section 7.5 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . 43
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Section 7.6 FIRPTA . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.7 Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.8 Other Filings . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.9 Target Stock Options . . . . . . . . . . . . . . . . . . . 44
ARTICLE VIII - CONDITIONS TO MERGER . . . . . . . . . . . . . . . . . . . . 45
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger 45
Section 8.2 Additional Conditions to Obligations of Acquiror and Sub . 45
Section 8.3 Additional Conditions to Obligations of Target . . . . . . 46
ARTICLE IX - TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . 47
Section 9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.2 Effect of Termination . . . . . . . . . . . . . . . . . . 48
Section 9.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . 48
ARTICLE X - ESCROW AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . 49
Section 10.1 Indemnification . . . . . . . . . . . . . . . . . . . . . 49
Section 10.2 Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . 49
Section 10.3 Damage Threshold . . . . . . . . . . . . . . . . . . . . 49
Section 10.4 Escrow Periods . . . . . . . . . . . . . . . . . . . . . 50
Section 10.5 Claims Upon Escrow Fund . . . . . . . . . . . . . . . . . 50
Section 10.6 Valuation . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.7 Objections to Claims . . . . . . . . . . . . . . . . . . 50
Section 10.8 Resolution of Conflicts . . . . . . . . . . . . . . . . . 51
Section 10.9 Stockholders' Agents . . . . . . . . . . . . . . . . . . 51
Section 10.10 Actions of the Stockholders' Agents . . . . . . . . . . 52
Section 10.11 Claims . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE XI - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 11.1 Survival of Representations and Covenants . . . . . . . . 53
Section 11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 11.3 Interpretation . . . . . . . . . . . . . . . . . . . . . 54
Section 11.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.5 Entire Agreement; No Third Party Beneficiaries . . . . . 55
Section 11.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.8 Amendment . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.9 Extension; Waiver . . . . . . . . . . . . . . . . . . . . 55
Section 11.10 Specific Performance . . . . . . . . . . . . . . . . . . 55
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EXHIBITS
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EXHIBIT A - VOTING AGREEMENT
EXHIBIT B-1 - NONCOMPETITION AGREEMENT (I)
EXHIBIT B-2 - NONCOMPETITION AGREEMENT (II)
EXHIBIT C - STOCKHOLDER AGREEMENT
EXHIBIT D - ESCROW AGREEMENT
EXHIBIT E - TARGET OPTION ACKNOWLEDGEMENT AGREEMENT
EXHIBIT F - SUBJECT MATTER OF OPINION OF COUNSEL TO TARGET
EXHIBIT G - SUBJECT MATTER OF OPINION OF COUNSEL TO ACQUIROR
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of June 4, 1998 (this
"AGREEMENT"), is entered into by and among Yahoo! Inc., a California corporation
("ACQUIROR"), XY Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Acquiror ("SUB"), and Viaweb Inc., a Delaware
corporation ("TARGET").
RECITALS:
A. The Boards of Directors of Acquiror, Sub and Target deem it advisable
and in the best interests of each corporation and the respective stockholders
that Acquiror and Target combine in order to advance the long-term business
interests of Acquiror and Target;
B. The combination of Acquiror and Target shall be effected by the terms
of this Agreement through a transaction in which Sub will merge with and into
Target, Target will become a wholly-owned subsidiary of Acquiror and the
stockholders of Target will become shareholders of Acquiror (the "MERGER");
C. For Federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "CODE");
D. As a condition and inducement to Acquiror's willingness to enter into
this Agreement, certain Target stockholders (including Paul Graham, Trevor
Blackwell, Robert Morris, Mark Nitzberg, Frederick Egan, Harris Fishman, Omar
Khudari, Alan Docter, Julian Weber and Mark Kristoff) holding no less than 90%
of the issued and outstanding voting stock of the Target have, concurrently with
the execution of this Agreement, executed and delivered Voting Agreements in the
form attached hereto as EXHIBIT A (the "VOTING AGREEMENTS"), pursuant to which
such stockholders have, among other things, agreed to vote their shares of
Target capital stock in favor of the Merger and to grant Acquiror irrevocable
proxies to vote such shares;
E. As a further condition and inducement to Acquiror's willingness to
enter into this Agreement, certain employees of Target who are also stockholders
and/or optionholders of Target (including Paul Graham, Trevor Blackwell, Robert
Morris, Mark Nitzberg, Frederick Egan and Harris Fishman) have, concurrently
with the execution of this Agreement executed and delivered Noncompetition
Agreements in the forms attached hereto as EXHIBITS B-1 AND B-2 (the
"NONCOMPETITION AGREEMENTs"), which agreements shall only become effective at
the Effective Time (as defined in Section 1.1 below).
F. As a further condition and inducement to Acquiror's willingness to
enter into this Agreement, certain stockholders of Target have executed and
delivered to Acquiror Stockholders Agreements in the form attached hereto as
EXHIBIT C (the "STOCKHOLDERS AGREEMENTS").
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NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of
this Agreement, a certificate of merger (the "Certificate of Merger") in such
mutually acceptable form as is required by the relevant provisions of the
Delaware General Corporation Law ("Delaware Law") shall be duly executed and
delivered by the parties hereto and thereafter delivered to the Secretary of
State of the State of Delaware for filing on the Closing Date (as defined in
Section 1.2). The Merger shall become effective upon the due and valid filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware or at such time thereafter as is provided in the Certificate of Merger
(the "EFFECTIVE TIME").
Section 1.2 CLOSING. The closing of the Merger (the "CLOSING") will
take place at 10:00 a.m. EDT, on June 10, 1998 or such later date as is agreed
upon by Acquiror and Target, which shall be no later than the second business
day after satisfaction or waiver of the latest to occur of the conditions set
forth in Article VIII (other than the delivery of the officers' certificates
referred to therein) (the "Closing Date"), at the offices of Hale and Dorr LLP,
60 State Street, Boston, Massachusetts, unless another date, time or place is
agreed to in writing by Acquiror and Target.
Section 1.3 EFFECTS OF THE MERGER.
(a) At the Effective Time (i) the separate existence of Sub
shall cease and Sub shall be merged with and into Target (Sub and Target are
sometimes referred to herein as the "CONSTITUENT CORPORATIONS" and Target
following consummation of the Merger is sometimes referred to herein as the
"SURVIVING CORPORATION"), (ii) the Certificate of Incorporation of Sub shall be
the Certificate of Incorporation of the Surviving Corporation and (iii) the
Bylaws of Sub as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation.
(b) At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of Delaware Law. Without limiting the
generality of the foregoing, at and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises of a
public as well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations.
Section 1.4 DIRECTORS AND OFFICERS. The directors of Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of Sub
immediately prior to the Effective Time shall be the initial officers of the
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Surviving Corporation, in each case until their respective successors are duly
elected or appointed.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 CONVERSION OF CAPITAL STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Common Stock, $0.001 par value, of Target ("TARGET COMMON STOCK") or
capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of
the capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, no par value, of the Surviving Corporation.
(b) CANCELLATION OF ACQUIROR-OWNED AND TARGET-OWNED STOCK. Any
shares of Target Common Stock that are owned by Acquiror, Sub, Target or any
other direct or indirect wholly-owned Subsidiary (as defined below) of Acquiror
or Target shall be canceled and retired and shall cease to exist and no stock of
Acquiror or other consideration shall be delivered in exchange. As used in this
Agreement, the word "SUBSIDIARY" means, with respect to any other party, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting
interest in such partnership) or (ii) at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the Board of Directors or others performing similar functions with respect to
such corporation or other organization or a majority of the profit interests in
such other organization is directly or indirectly owned or controlled by such
party or by any one or more of its Subsidiaries, or by such party and one or
more of its Subsidiaries.
(c) EXCHANGE RATIO.
(i) Subject to Sections 2.2 and 2.4, each issued and
outstanding share of Target Common Stock (other than shares to be canceled in
accordance with Section 2.1(b) and any Dissenting Shares as defined in and to
the extent provided in Section 2.3) shall be converted into the right to receive
a fraction of a fully paid and nonassessable share of Acquiror Common Stock (as
defined in Section 4.2) equal to the "EXCHANGE RATIO" as defined in and
determined in accordance with the provisions of this Section 2.1(c). All such
shares of Target Common Stock, when so converted, shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive the shares of
Acquiror Common Stock and any cash in lieu of fractional shares of Acquiror
Common Stock to be issued or paid in consideration therefor upon the surrender
of such certificate in accordance with Section 2.4, without interest.
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(ii) The "EXCHANGE RATIO" for the conversion of the
Target Common Stock shall be determined by DIVIDING (x) 454,734 by (y) the sum
of (A) the total number of shares of Target Common Stock issued and outstanding
at the Effective Time, PLUS (B) the total number of shares of Target Common
Stock issuable upon exercise for cash of Target Options (as defined in Section
2.1(d)) outstanding at the Effective Time, whether vested or unvested, PLUS (C)
the total number of shares of Target Common Stock issuable upon exercise of the
Target Warrants, PLUS (D) the total number of shares of Target Common Stock
issuable upon conversion of all outstanding convertible debt of Target, PLUS (E)
the total number of shares of Target Common Stock issuable upon cancellation of
all outstanding Professional Obligations (as defined in Section 2.1(f)).
(iii) If, between the date of this Agreement and the
Effective Time, the outstanding shares of Acquiror Common Stock shall have been
changed into a different number of shares or a different class by reason of any
reclassification, split-up, stock dividend or stock combination, then the
Exchange Ratio shall be correspondingly adjusted. The Exchange Ratio shall not
change as a result of fluctuations in the market price of Acquiror Common Stock
between the date of this Agreement and the Effective Time.
(d) TARGET STOCK OPTIONS. At the Effective Time, all then
outstanding options, whether vested or unvested, ("TARGET OPTIONS") to purchase
Target Common Stock issued under Target's 1997 Stock Option Plan (the "TARGET
OPTION PLAN") or otherwise that by their terms survive the Closing will be
assumed by Acquiror in accordance with Section 6.5. All of the Target Options
issued and outstanding as of the date of this Agreement are listed on Schedule
2.1(d) attached hereto. An updated Schedule 2.1(d) of Target Options shall be
delivered by Target to Acquiror on the Closing Date.
(e) CONVERTIBLE NOTES. Simultaneously with the Effective Time,
all then outstanding convertible notes of Target ("TARGET CONVERTIBLE NOTES")
shall be converted into Target Common Stock. All of the Target Convertible
Notes issued and outstanding as of the date of this Agreement are listed on
Schedule 2.1(e) attached hereto. An updated Schedule 2.1(e) of Target
Convertible Notes shall be delivered by Target to Acquiror on the Closing Date.
(f) PROFESSIONAL OBLIGATIONS. Simultaneously with the Effective
Time, certain then outstanding obligations of Target to Harris Fishman and Hale
and Dorr LLP (the "PROFESSIONAL OBLIGATIONS") shall be converted into Target
Common Stock. All of the Professional Obligations issued and outstanding as of
the date of this Agreement are listed on Schedule 2.1(f) attached hereto. An
updated Schedule 2.1(f) of Professional Obligations shall be delivered by Target
to Acquiror on the Closing Date.
(g) TARGET WARRANTS. Prior to or simultaneously with the
Effective Time, all then issued and outstanding warrants to acquire shares of
Target Common Stock ("TARGET WARRANTS") shall be exercised in full. All of the
Target Warrants issued and outstanding as of the date of this Agreement are
listed on Schedule 2.1(g) attached hereto. An updated Schedule 2.1(g) of Target
Warrants shall be delivered by Target to Acquiror on the Closing Date. Any
Target Warrants that remain unexercised following the Effective Time shall be
cancelled.
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Section 2.2 ESCROW AGREEMENT. At the Effective Time or such later time
as determined in accordance with Section 2.3(b), Acquiror will, on behalf of the
holders of Target Common Stock and of Target Options, deposit in escrow
certificates and/or Target Options representing a total of 68,210 shares of
Acquiror Common Stock and/or rights to acquire shares of Acquiror Common Stock,
as the case may be. Such shares and options shall be held in escrow on behalf
of the persons who are the holders of Target Common Stock and/or Target Options
immediately prior to the Effective Time (collectively, the "FORMER TARGET
STOCKHOLDERS"), on a pro rata basis, in accordance with each such Former Target
Stockholders' percentage ownership ("PRO RATA PORTION") of Target Common Stock
(or rights to acquire shares of Target Common Stock upon the exercise of Target
Options) immediately prior to the Effective Time. Such shares and options
(together, the "ESCROW SHARES") shall be held as security for the Former Target
Stockholders' indemnification obligations under Article X and pursuant to the
provisions of an escrow agreement (the "ESCROW AGREEMENT") to be executed
pursuant to Section 7.5.
Section 2.3 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Target Common Stock held by a holder who has exercised
such holder's dissenter's rights in accordance with Section 262 of Delaware Law
and who, as of the Effective Time, has not effectively withdrawn or lost such
dissenter's rights ("Dissenting Shares"), shall not be converted into or
represent a right to receive Acquiror Common Stock pursuant to Section 2.1, but
the holder of the Dissenting Shares shall only be entitled to such rights as are
granted by Section 262 of Delaware Law.
(b) Notwithstanding the provisions of Section 2.3(a), if any
holder of shares of Target Common Stock who demands his dissenter's rights with
respect to such shares under Section 2.1 shall effectively withdraw or lose
(through failure to perfect or otherwise) his rights to receive payment for the
fair market value of such shares under Delaware Law, then, as of the later of
the Effective Time or the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Acquiror
Common Stock and payment for fractional shares as provided in Section 2.1(c) and
2.6, without interest, upon surrender of the certificate or certificates
representing such shares; PROVIDED that if such holder effectively withdraws or
loses his right to receive payment for the fair market value of such shares
after the Effective Time, then, at such time Acquiror will deposit in escrow
certificates representing such holder's Pro Rata Portion of the Escrow Shares.
(c) Target shall give Acquiror (i) prompt notice of any written
demands for payment with respect to any shares of capital stock of Target
pursuant to Section 262 of Delaware Law, withdrawals of such demands, and any
other instruments served pursuant to Delaware Law and received by the Target and
(ii) the opportunity to participate in all negotiations and proceedings with
respect to demands for dissenter's rights under Delaware Law. Target shall not,
except with the prior written consent of Acquiror, voluntarily make any payment
with respect to any demands for dissenter's rights with respect to Target Common
Stock or offer to settle or settle any such demands.
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Section 2.4 EXCHANGE OF CERTIFICATES.
(a) From and after the Effective Time, each holder of an
outstanding certificate or certificates ("CERTIFICATES") which represented
shares of Target Common Stock immediately prior to the Effective Time shall have
the right to surrender each Certificate to Acquiror (or at Acquiror's option, an
exchange agent to be appointed by Acquiror), and receive in exchange for all
Certificates held by such holder a certificate representing the number of whole
shares of Acquiror Common Stock (other than the Escrow Shares) into which the
Target Common Stock evidenced by the Certificates so surrendered shall have been
converted pursuant to the provisions of Article II of this Agreement. The
surrender of Certificates shall be accompanied by duly completed and executed
Letters of Transmittal in such form as may be reasonably specified by Acquiror.
Until surrendered, each outstanding Certificate which prior to the Effective
Time represented shares of Target Common Stock shall be deemed for all corporate
purposes to evidence ownership of the number of whole shares of Acquiror Common
Stock into which the shares of Target Common Stock have been converted but
shall, subject to applicable dissenter's rights under Delaware Law and Section
2.3, have no other rights. Subject to dissenter's rights under Delaware Law and
Section 2.3, from and after the Effective Time, the holders of shares of Target
Common Stock shall cease to have any rights in respect of such shares and their
rights shall be solely in respect of the Acquiror Common Stock into which such
shares of Target Common Stock have been converted. From and after the Effective
Time, there shall be no further registration of transfers on the records of
Target of shares of Target Common Stock outstanding immediately prior to the
Effective Time.
(b) If any shares of Acquiror Common Stock are to be issued in
the name of a person other than the person in whose name the Certificate(s)
surrendered in exchange therefor is registered, it shall be a condition to the
issuance of such shares that (i) the Certificate(s) so surrendered shall be
transferable, and shall be properly assigned, endorsed or accompanied by
appropriate stock powers, (ii) such transfer shall otherwise be proper and (iii)
the person requesting such transfer shall pay Acquiror, or its exchange agent,
any transfer or other taxes payable by reason of the foregoing or establish to
the satisfaction of Acquiror that such taxes have been paid or are not required
to be paid. Notwithstanding the foregoing, neither Acquiror or Target shall be
liable to a holder of shares of Target Common Stock for shares of Acquiror
Common Stock issuable to such holder pursuant to the provisions of Article II of
the Agreement that are delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(c) In the event any Certificate shall have 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, Acquiror shall issue in
exchange for such lost, stolen or destroyed Certificate the shares of Acquiror
Common Stock issuable in exchange therefor pursuant to the provisions of Article
II of the Agreement. The Board of Directors of Acquiror may in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed Certificate to provide to Acquiror an indemnity
agreement against any claim that may be made against Acquiror with respect to
the Certificate alleged to have been lost, stolen or destroyed.
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Section 2.5 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions declared or made after the Effective Time with
respect to Acquiror Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to the
shares of Acquiror Common Stock represented thereby and no cash payment in lieu
of fractional shares shall be paid to any such holder pursuant to Section 2.6
below until the holder of record of such Certificate shall surrender such
Certificate. Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Acquiror Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of Acquiror Common
Stock to which such holder is entitled pursuant to Section 2.6 below and the
amount of dividends or other distributions with a record date after the
Effective Time previously paid with respect to such whole shares of Acquiror
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Acquiror Common Stock.
Section 2.6 NO FRACTIONAL SHARES. No certificate or scrip representing
fractional shares of Acquiror Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a shareholder of Acquiror.
Notwithstanding any other provision of this Agreement, each holder of shares of
Target Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Acquiror Common Stock (after
taking into account all Certificates delivered by such holder) shall receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of Acquiror Common Stock multiplied by $104.66 (the "REFERENCE STOCK
PRICE").
Section 2.7 TAX CONSEQUENCES. It is intended by the parties hereto that
the Merger shall constitute a "reorganization" within the meaning of Section 368
of the Code. The parties hereto 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 Income Tax Regulations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
Target represents and warrants to Acquiror and Sub that the statements
contained in this Article III are true and correct, except as set forth in the
disclosure schedule delivered by Target to Acquiror on or before the date of
this Agreement (the "TARGET DISCLOSURE SCHEDULE"). The Target Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article III.
Section 3.1 ORGANIZATION OF TARGET. Target is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has all requisite corporate power to own, lease and operate its
property and to carry on its business as now being conducted, and is duly
qualified or licensed to do business and is in good standing as a foreign
corporation
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in each jurisdiction in which the nature of its business or ownership or leasing
of properties makes such qualification or licensing necessary and where the
failure to be so qualified or licensed is reasonably likely to result in a
material adverse effect on the business, as presently conducted, assets
(including intangible assets), liabilities, condition (financial or otherwise),
prospects, property or results of operations (a "MATERIAL ADVERSE EFFECT") of
Target. The Target Disclosure Schedule contains a true and complete listing of
the locations of all sales offices, manufacturing facilities, and any other
offices or facilities of Target and a true and complete list of all states in
which Target maintains any employees. The Target Disclosure Schedule contains a
true and complete list of all states in which Target is duly qualified or
licensed to transact business as a foreign corporation.
Section 3.2 TARGET CAPITAL STRUCTURE.
(a) The authorized capital stock of Target consists of 2,500,000
shares of Target Common Stock and 300,000 shares of Target Preferred Stock, of
which 272,667 shares are designated as Series A Preferred Stock. As of the date
of this Agreement, there are (i) 1,066,000 shares of Target Common Stock issued
and outstanding, all of which are validly issued, fully paid and nonassessable;
(ii) Target Warrants to purchase up to 47,248 shares of Target Common Stock;
(iii) 47,248 shares of Target Common Stock reserved for future issuance upon
exercise of the Target Warrants; (iv) Target Convertible Notes convertible into
up to 197,108 shares of Target Common Stock upon the consummation of the Merger;
(v) 197,108 shares of Target Common Stock reserved for issuance upon conversion
of Target Convertible Notes; (vi) 203,050 shares of Target Common Stock reserved
for future issuance pursuant to Target Options granted and outstanding under the
Target Option Plan or otherwise; (vii) 9,855 shares of Common Stock reserved for
issuance in cancellation of the Professional Obligations; and (viii) no shares
of Target Preferred Stock are issued and outstanding. The issued and
outstanding shares of Target Common Stock are held of record by the stockholders
of Target as set forth and identified in the stockholder list attached as
Schedule 3.2(a) to the Target Disclosure Schedule. The issued and outstanding
Target Options are held of record by the option holders as set forth and
identified in Schedule 2.1(d) of the Target Disclosure Schedules. The issued
and outstanding Target Warrants are held of record by the warrantholders as set
forth and identified in Schedule 2.1(g) of the Target Disclosure Schedule. The
issued and outstanding Target Convertible Notes are held of record by the
noteholders as set forth and identified in Schedule 2.1(e) of the Target
Disclosure Schedule. The Professional Obligations are owed to the organizations
set forth in Schedule 2.1(f) of the Target Disclosure Schedule. All shares of
Target Common Stock subject to issuance as specified above, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, shall be duly authorized, validly issued, fully paid and
nonassessable. All shares of Target Common Stock subject to issuance upon the
exercise of Target Options and Target Warrants or upon the conversion of Target
Convertible Notes, upon issuance on the terms and conditions specified in the
instrument pursuant to which they are issuable, will be duly authorized, validly
issued, fully paid and nonassessable. None of the issued and outstanding shares
of Target Common Stock are subject to contractual rights to repurchase upon the
termination of the employment of the holder thereof with Target or its
affiliates. All outstanding shares of Target Common Stock and outstanding
Target Options, Target Warrants and Target Convertible Notes (collectively
"TARGET
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SECURITIES") were issued in compliance with applicable federal and state
securities laws. Except as set forth in the Target Disclosure Schedule, there
are no obligations, contingent or otherwise, of Target to repurchase, redeem or
otherwise acquire any shares of Target Common Stock or make any investment (in
the form of a loan, capital contribution or otherwise) in any other entity. An
updated Schedule 3.2(a) reflecting changes permitted by this Agreement in the
capitalization of Target between the date hereof and the Effective Time shall be
delivered by Target to Acquiror on the Closing Date.
(b) Except as set forth in this Section 3.2, there are no equity
securities of any class or series of Target, or any security exchangeable into
or exercisable for such equity securities, issued, reserved for issuance or
outstanding. Except as set forth in this Section 3.2, there are no options,
warrants, equity securities, calls, rights, commitments or agreements of any
character to which Target is a party or by which it is bound obligating Target
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of Target or obligating Target to grant, extend,
accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement. Except as provided in this
Agreement and the other Transaction Documents (as defined in Section 3.3(a)) or
any transaction contemplated hereby or thereby, there are no voting trusts,
proxies or other agreements or understandings with respect to the voting of the
shares of capital stock of Target.
(c) All Target Options have been issued in accordance with the
terms of the Target Option Plan and pursuant to the standard forms of option
agreement previously provided to Acquiror or its representatives. Except as
contemplated by this Agreement, no option will by its terms require an
adjustment in connection with the Merger. Neither the consummation of
transactions contemplated by this Agreement or the other Transaction Documents
nor any action taken by Target in connection with such transactions will result
in (i) any acceleration of vesting in favor of any optionee under any Target
Option; (ii) any additional benefits for any optionee under any Target Option;
or (iii) the inability of Acquiror after the Effective Date to exercise any
right or benefit held by Target prior to the Effective Time with respect to any
Target Option assumed by Acquiror, including, without limitation, the right to
repurchase an optionee's unvested shares on termination of such optionee's
employment. The assumption by Acquiror of Target Options in accordance with
Section 6.5 hereunder will not (i) give the optionees additional benefits which
they did not have under their options prior to such assumption (after taking
into account the existing provisions of the options, such as their respective
exercise prices and vesting schedules) and (ii) constitute a breach of the
Target Plan or any agreement entered into pursuant to such plan.
Section 3.3 AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Target has all requisite corporate power and authority to
enter into this Agreement and all Transaction Documents to which it is or will
become a party and to consummate the transactions contemplated by this Agreement
and such Transaction Documents. The execution and delivery of this Agreement
and such Transaction Documents and the consummation of the transactions
contemplated by this Agreement and such Transaction Documents have been duly
authorized by all necessary corporate action on the part of Target,
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subject only to the approval of the Merger by Target's stockholders under the
provisions of Delaware Law and Target's Certificate of Incorporation. This
Agreement has been and such Transaction Documents have been or, to the extent
not executed as of the date hereof, will be duly executed and delivered by
Target. This Agreement and each of the Transaction Documents to which Target is
a party constitutes, and each of the Transaction Documents to which Target will
become a party when executed and delivered by Target will constitute, assuming
the due authorization, execution and delivery by the other parties hereto and
thereto, the valid and binding obligation of Target, enforceable against Target
in accordance with their respective terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding at law or in equity. For purposes
of this Agreement, "TRANSACTION DOCUMENTS" means all documents or agreements
required to be delivered by any party under this Agreement including the
Certificate of Merger, the Escrow Agreement, the Voting Agreements, the
Stockholders Agreements and the Noncompetition Agreements.
(b) The execution and delivery by Target of this Agreement and
the Transaction Documents to which it is or will become a party does not and the
consummation of the transactions contemplated by this Agreement and the
Transaction Documents to which it is or will become a party will not, (i)
conflict with, or result in any violation or breach of any provision of the
Certificate of Incorporation or Bylaws of Target, (ii) result in any violation
or breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which Target is a party or by which it or
any of its properties or assets may be bound, or (iii) conflict or violate any
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Target or any of its properties or
assets, except in the case of (ii) and (iii) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which would not have a
Material Adverse Effect on Target.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("GOVERNMENTAL
ENTITY") is required by or with respect to Target in connection with the
execution and delivery of this Agreement or of any other Transaction Document to
which it is or will become a party or the consummation of the transactions
contemplated by this Agreement or such Transaction Document or the continuation
of the business activities of Target following consummation of the Merger
without a Material Adverse Change (as defined in Section 3.6(a)), except for
(i) the filing of the Certificate of Merger with the Delaware Secretary of
State, (ii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and (iii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, could be expected to
have a Material Adverse Effect on Target.
Section 3.4 FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED LIABILITIES.
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(a) Target has delivered to Acquiror copies of Target's
unaudited balance sheet as of April 30, 1998 (the "MOST RECENT BALANCE SHEET")
and unaudited statements of operations, stockholders' deficit and cash flow for
the four-month period then-ended and for the period from inception (August 31,
1995) to April 30, 1998 (together with the Most Recent Balance Sheet, the
"TARGET INTERIM UNAUDITED FINANCIALS") and the audited balance sheets as of
December 31, 1996 and 1997 and the related statements of operations,
stockholders' equity (deficit) and cash flows for the years ended December 31,
1996 and 1997 and for the period from inception (August 31, 1995) to
December 31, 1997, as audited by Arthur Andersen LLP, together with the report
of Arthur Andersen LLP thereon (collectively with the Target Interim Unaudited
Financials, the "TARGET FINANCIAL STATEMENTS").
(b) The Target Financial Statements are complete and in
accordance with the books and records of Target and present fairly in all
material respects the financial position, results of operations and cash flows
of Target as of their historical dates and for the periods indicated, except
that the Target Interim Unaudited Financials are subject to normal and
reasonable year-end adjustments and do not include footnotes. The Target
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods (except
as may be expressly indicated therein or on the face of the schedules or notes
to such Target Financial Statements).
(c) Target has no material debt, liability, or obligation of any
nature, whether accrued, absolute, contingent, or otherwise, and whether due or
to become due, that is not reflected or reserved against in the Most Recent
Balance Sheet, except for those that may have been incurred after the date of
the Most Recent Balance Sheet. Except as set forth on the Target Disclosure
Schedule, all debts, liabilities, and obligations incurred after the date of the
Most Recent Balance Sheet were incurred in the ordinary course of business and
do not exceed $10,000 on an individual basis.
Section 3.5 TAX MATTERS.
(a) For purposes of this Section 3.5 and other provisions of
this Agreement relating to Taxes, the following definitions shall apply:
(i) The term "TAXES" shall mean all taxes, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, (A) imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, all income or profits taxes (including but not limited to,
federal income taxes and state income taxes), payroll and employee withholding
taxes, unemployment insurance, social security taxes, sales and use taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, ozone depleting chemicals taxes, transfer taxes, workers'
compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar nature
to any of the foregoing, which are required to be paid, withheld or collected,
(B) any liability for the payment
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of amounts referred to in (A) as a result of being a member of any affiliated,
consolidated, combined or unitary group, or (C) any liability for amounts
referred to in (A) or (B) as a result of any obligations to indemnify another
person.
(ii) The term "RETURNS" shall mean all reports,
estimates, declarations of estimated tax, information statements and returns
relating to, or required to be filed in connection with, any Taxes, including
information returns or reports with respect to backup withholding and other
payments to third parties.
(b) All material Returns required to be filed by or on behalf of
Target have been duly filed on a timely basis and such Returns are true,
complete and correct. All Taxes shown to be payable on such Returns or on
subsequent assessments with respect thereto, and all payments of estimated Taxes
required to be made by or on behalf of Target under Section 6655 of the Code or
comparable provisions of state, local or foreign law, have been paid in full on
a timely basis or have been accrued on the Most Recent Balance Sheet, and no
other Taxes are payable by Target with respect to items or periods covered by
such Returns (whether or not shown on or reportable on such Returns). Target
has withheld and paid over all Taxes required to have been withheld and paid
over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto, in
connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party. There are no liens on any of the assets of
Target with respect to Taxes, other than liens for Taxes not yet due and payable
or for Taxes that Target is contesting in good faith through appropriate
proceedings and for which appropriate reserves have been established on the Most
Recent Balance Sheet or liens that are otherwise permitted by Section 3.7.
Target has not at any time been (i) a member of an affiliated group of
corporations filing consolidated, combined or unitary income or franchise tax
returns, or (ii) a member of any partnership or joint venture for a period for
which the statue of limitations for any Tax potentially applicable as a result
of such membership has not expired.
(c) The amount of Target's liability for unpaid Taxes (whether
actual or contingent) for all periods through the date of the Most Recent
Balance Sheet does not, in the aggregate, exceed the amount of the current
liability accruals for Taxes reflected on the Most Recent Balance Sheet, and the
Most Recent Balance Sheet reflects proper accrual in accordance with generally
accepted accounting principles applied on a basis consistent with prior periods
of all liabilities for Taxes payable after the date of the Most Recent Balance
Sheet attributable to transactions and events occurring prior to such date. No
liability for Taxes has been incurred (or prior to Closing will be incurred)
since such date other than in the ordinary course of business.
(d) Acquiror has been furnished by Target with true and complete
copies of (i) relevant portions of income tax audit reports, statements of
deficiencies, closing or other agreements received by or on behalf of Target
relating to Taxes, and (ii) all federal and state income or franchise tax
Returns and state sales and use tax Returns for or including Target for all
periods since the inception of Target. Target does not do business in or derive
income from any state other than states for which Returns have been duly filed
and furnished to Acquiror.
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(e) The Returns of or including Target have never been audited
by a government or taxing authority, nor is any such audit in process, pending
or, to Target's knowledge, threatened (either in writing or verbally, formally
or informally). No deficiencies exist or have been asserted (either in writing
or verbally, formally or informally), and Target has not received notice (either
in writing or verbally, formally or informally) that it has not filed a Return
or paid Taxes required to be filed or paid. Target is neither a party to any
action or proceeding for assessment or collection of Taxes, nor has such event
been asserted or threatened (either in writing or verbally, formally or
informally) against Target or any of its assets. No waiver or extension of any
statute of limitations is in effect with respect to Taxes or Returns of Target.
Target has disclosed on its federal and state income and franchise tax Returns
all positions taken therein that could give rise to a substantial understatement
penalty within the meaning of Code Section 6662 or comparable provisions of
applicable state tax laws.
(f) Target is not, nor has it ever been, a party to any tax
sharing agreement.
(g) Target is not, nor has it 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.
Target is not a "consenting corporation" under Section 341(f) of the Code.
Target has not entered into any compensatory agreements with respect to the
performance of services which payment thereunder would result in a nondeductible
expense to Target pursuant to Section 280G of the Code or an excise tax to the
recipient of such payment pursuant to Section 4999 of the Code. Target has not
agreed to, nor is it required to make any adjustment under Code Section 481(a)
by reason of, a change in accounting method. Target is not, nor has it been, a
"reporting corporation" subject to the information reporting and record
maintenance requirements of Section 6038A and the regulations thereunder.
Target is in compliance with the terms and conditions of any applicable tax
exemptions, agreements or orders of any foreign government to which it may be
subject or which it may have claimed, and the transactions contemplated by this
Agreement will not have any adverse effect on such compliance.
Section 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in the Target Disclosure Schedule, since December 31, 1997, Target has not:
(a) suffered any material adverse change in its business, as
presently conducted, assets (including intangible assets), liabilities,
condition (financial or otherwise), prospects, property or results of operations
("MATERIAL ADVERSE CHANGE").
(b) suffered any damage, destruction or loss, whether covered by
insurance or not, that has resulted, or could be reasonably expected to result,
in a Material Adverse Effect on Target;
(c) granted or agreed to make any increase in the compensation
payable or to become payable by Target to its officers or employees;
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(d) declared, set aside or paid any dividend or made any other
distribution on or in respect of the shares of the capital stock of Target or
declared any direct or indirect redemption, retirement, purchase or other
acquisition by Target of such shares;
(e) issued any shares of capital stock of Target or any
warrants, rights, options or entered into any commitment relating to the shares
of Target, except for the issuance of shares of Target capital stock pursuant to
the exercise of Target Options and Target Warrants or the conversion of the
Target Convertible Notes or the cancellation of all or a portion of the
Professional Obligations listed in the Target Disclosure Schedule;
(f) made any change in the accounting methods or practices it
follows, whether for general financial or tax purposes, or any change in
depreciation or amortization policies or rates adopted therein;
(g) sold, leased, abandoned or otherwise disposed of any real
property or any machinery, equipment or other operating property with an
individual net book value of $2,500 or more;
(h) sold, assigned, transferred, licensed or otherwise disposed
of any patent, trademark, trade name, brand name, copyright (or pending
application for any patent, trademark or copyright) invention, work of
authorship, process, know-how, formula or trade secret or interest thereunder or
other intangible asset;
(i) permitted or allowed any of its property or assets to be
subjected to any mortgage, deed of trust, pledge, lien, security interest or
other encumbrance of any kind (except those permitted under Section 3.7);
(j) made any capital expenditure or commitment individually in
excess of $10,000;
(k) paid, loaned or advanced any amount to, or sold, transferred
or leased any properties or assets to, or entered into any agreement or
arrangement with, any of its Affiliates (as defined in Section 3.16), officers,
directors or stockholders or any affiliate or associate of any of the foregoing;
or
(l) agreed to take any action described in this Section 3.6 or
which would constitute a material breach of any of the representations contained
in this Agreement.
Section 3.7 TITLE AND RELATED MATTERS. Target has good and marketable
title to all the properties, interests in properties and assets, real and
personal, used in or necessary for the operation of the business of Target, free
and clear of all mortgages, liens, pledges, charges or encumbrances of any kind
or character, except (i) the lien of current taxes not yet due and payable,
(ii) such imperfections of title and encumbrances, if any, that are not material
in character, amount or extent and that do not materially detract from the value
or materially interfere with the present use of the property subject thereto or
affected thereby and (iii) the security interest granted to the holders of the
Target Convertible Notes, which security interest
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shall be released at or prior to the Effective Time. The equipment of Target
used in the operation of its business is, taken as a whole, (i) adequate for the
business conducted by Target and (ii) in good operating condition and repair,
ordinary wear and tear excepted. All real or personal property leases to which
Target is a party are valid, binding, enforceable and effective in accordance
with their respective terms. To the knowledge of Target, there is not under any
of such leases any existing default or event of default or event which, with
notice or lapse of time or both, would constitute a default. The Target
Disclosure Schedule contains a description of all personal property with an
individual net book value in excess of $6,000 as of April 30, 1998 and real
property leased or owned by Target as of such date, describing its interest in
said property. True and correct copies of Target's real property and personal
property leases have been provided to Acquiror or its representatives.
Section 3.8 PROPRIETARY RIGHTS.
(a) Target owns all right, title and interest in and to, or
otherwise has the right to use, or is licensed to use, all patents, patent
rights, copyrights, technology, software, software tools, know-how, processes,
inventions, ideas, algorithms, trade secrets, trademarks, service marks, trade
names, Internet domain names and other proprietary rights used in or necessary
for the conduct of Target's business as conducted to the date of this Agreement
and proposed by Target to be conducted, including, without limitation, the
technology, information, databases, data lists, data compilations, and all
proprietary rights developed or discovered or used in connection with or
contained in all versions and implementations of Target's World Wide Web sites
or any product or technology which has been or is being distributed, licensed,
used or sold by Target or currently is under development by Target
(collectively, including such Web site, the "TARGET PRODUCTS"), free and clear
of all liens, claims and encumbrances (including without limitation linking,
licensing and distribution rights) (all of which are referred to as "TARGET
PROPRIETARY RIGHTS"). The Target Products, including all software used in
connection with Target's Web-based services, are free from material defects and
perform in substantial accordance with all published specifications. In
addition, Target is not aware of any legal restrictions or impediments that
would prevent Target from incorporating those features identified on Schedule
3.8(a) of the Target Disclosure Schedule into a release version of the product.
The Target Disclosure Schedule contains an accurate and complete (i) description
of all patents and patent applications, trademarks (with separate listings of
registered and unregistered trademarks), trade names, Internet domain names and
registered copyrights in or related to the Target Products or otherwise included
in the Target Proprietary Rights and all applications and registrations
therefor, including the jurisdictions in which each such Target Proprietary
Right has been issued or registered or in which any such application of such
issuance and registration has been filed, (ii) list of all licenses and other
agreements with third parties (the "THIRD PARTY LICENSES") relating to any
patents, patent rights, copyrights, trade secrets, software, inventions, ideas,
algorithms, technology, know-how, processes or other proprietary rights that
Target is licensed or otherwise authorized by such third parties to license,
use, market, distribute or incorporate in Target Products (such patents, patent
rights, copyrights, trade secrets, software, inventions, ideas, algorithms,
technology, know-how, processes or other proprietary rights are collectively
referred to as the "THIRD PARTY TECHNOLOGY"), (iii) list of all licenses and
other agreements with third parties relating to any material information,
compilations, data lists or
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databases that Target is licensed or otherwise authorized by such third parties
to license, use, market, disseminate distribute or incorporate in Target
Products. Target represents and warrants that (i) Target has provided to
Acquiror copies of any and all standard forms of click-wrap agreement, merchant
agreement and other customer agreements and copies of any agreements that
materially deviate from such standard form agreements, (ii) all such agreements
with Target customers are valid and binding obligations of the parties to such
agreements, and (iii) Target has complete and accurate records indicating that
all such Target customers have assented to the terms of such agreements and has
provided to Acquiror evidence of such records. Target has not engaged in any
distribution of any software licensed through Free Software Foundation, Inc. (or
any similar organization) in a manner that would require disclosure to any third
party of software source code developed or modified by Target. To the knowledge
of Target, all of Target's patents, patent rights, copyrights, trademark, trade
name or Internet domain name registrations related to or in the Target Products
are valid and in full force and effect; and consummation of the transactions
contemplated by this Agreement will not alter or impair any such rights. No
claims have been asserted or, to its knowledge, threatened against Target (and
Target is not aware of any claims which could be asserted or threatened against
Target or which have been asserted or threatened against others relating to
Target Proprietary Rights or Target Products) by any person challenging Target's
use, possession, manufacture, license, sale or distribution of Target Products
under any Target Proprietary Rights (including, without limitation, the Third
Party Technology) or challenging or questioning the validity or effectiveness of
any material license or agreement relating thereto (including, without
limitation, the Third Party Licenses) or alleging a violation of any person's or
entity's privacy, personal or confidentiality rights. To the knowledge of
Target, there is no valid basis for any claim of the type specified in the
immediately preceding sentence which could in any material way relate to or
interfere with the continued enhancement, exploitation, licensing and use by
Target of any of the Target Products. None of the Target Products nor the
license and use or exploitation of any Target Proprietary Rights in Target's
current business infringes on the rights of or constitutes misappropriation of
any proprietary information or intangible property right of any third person or
entity, including without limitation any patent, patent right, trade secret,
copyright, trademark or trade name, and Target has not been sued or named in any
suit, action or proceeding which involves a claim of such infringement,
misappropriation or unfair competition; PROVIDED, HOWEVER, that the foregoing
representation as to the license, use or exploitation by Target of any of the
Third Party Technology licensed to Target under the Third Party Licenses
identified in Section 3.8(a) of the Target Disclosure Schedule is made to the
knowledge of Target only.
(b) Except as set forth in the Target Disclosure Schedule,
Target has not granted any third party any right to manufacture, reproduce,
license, use, distribute or market any of the Target Products or any
adaptations, translations, or derivative works based on the Target Products or
any portion thereof.
(c) All material designs, drawings, specifications, source code,
object code, scripts, documentation, flow charts, diagrams, data lists,
databases, compilations and information incorporating, embodying or reflecting
any of the Target Products at any stage of their development (the "TARGET
COMPONENTS") were written, developed and created solely and exclusively by
employees of Target without the assistance of any third party or entity or were
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created by third parties who assigned ownership of their rights to Target by
means of valid and enforceable consultant confidentiality and invention
assignment agreements, copies of which have been delivered to Acquiror. Target
has at all times used commercially reasonable efforts customary in its industry
to treat the Target Proprietary Rights related to the applicable Target Products
and Target Components as containing trade secrets and has not disclosed or
otherwise dealt with such items in such a manner as intended or reasonably
likely to cause the loss of such trade secrets by release into the public
domain.
(d) To Target's knowledge, no employee, contractor or consultant
of Target is in violation in any material respect of any term of any written
employment contract, patent disclosure agreement or any other written contract
or agreement relating to the relationship of any such employee, consultant or
contractor with Target or, to Target's knowledge, any other party because of the
nature of the business conducted by Target or proposed to be conducted by
Target. The Target Disclosure Schedule lists all employees, contractors and
consultants who have participated in any way in the development of the Target
Products or the Target Proprietary Rights.
(e) Each person presently or previously employed by Target
(including independent contractors, if any) with access authorized by Target to
confidential information has executed a confidentiality and non-disclosure
agreement pursuant to the form of agreement previously provided to Acquiror or
its representatives. To the knowledge of Target, such confidentiality and
non-disclosure agreements constitute valid and binding obligations of Target and
such person, enforceable in accordance with their respective terms.
(f) No product liability or warranty claims have been
communicated in writing to or threatened against Target.
(g) To Target's knowledge, there is no material unauthorized
use, disclosure, infringement or misappropriation of any Target Proprietary
Rights, or any Third Party Technology to the extent licensed by or through
Target, by any third party, including any employee or former employee of Target.
Target has not entered into any agreement to indemnify any other person against
any charge of infringement of any Target Proprietary Rights.
(h) All use, disclosure or appropriation of confidential
information not otherwise protected by patents, patent applications or copyright
("CONFIDENTIAL INFORMATION") owned by Target by or to a third party as
applicable has been pursuant to the terms of a written agreement between Target
and such third party. All use, disclosure or appropriation of Confidential
Information not owned by Target has been made pursuant to the terms of a written
agreement between Target and the owner of such Confidential Information, or is
otherwise lawful.
Section 3.9 EMPLOYEE BENEFIT PLANS.
(a) The Target Disclosure Schedule lists, with respect to Target
and any trade or business (whether or not incorporated) which is treated as a
single employer with Target (an "ERISA AFFILIATE") within the meaning of Section
414(b), (c), (m) or (o) of the Code, (i) all
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material employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), (ii) each loan to
a non-officer employee, loans to officers and directors and any stock option,
stock purchase, phantom stock, stock appreciation right, supplemental
retirement, severance, sabbatical, medical, dental, vision care, disability,
employee relocation, cafeteria benefit (Code Section 125) or dependent care
(Code Section 129), life insurance or accident insurance plans, programs or
arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (iv) other fringe or
employee benefit plans, programs or arrangements that apply to senior management
of Target and that do not generally apply to all employees, and (v) any current
or former employment or executive compensation or severance agreements, written
or otherwise, for the benefit of, or relating to, any present or former
employee, consultant or director of Target as to which (with respect to any of
items (i) through (v) above) any potential liability is borne by Target
(together, the "TARGET EMPLOYEE PLANS").
(b) Target has delivered or made available to Acquiror or its
representatives a copy of each of the Target Employee Plans which have been
reduced to writing, a summary of any unwritten plan and related plan documents
(including trust documents, insurance policies or contracts, employee booklets,
summary plan descriptions and other authorizing documents, and, to the extent
still in its possession, any material employee communications relating thereto)
and has, with respect to each Target Employee Plan which is subject to ERISA
reporting requirements, provided copies of any Form 5500 reports filed for the
last three plan years. Any Target Employee Plan intended to be qualified under
Section 401(a) of the Code has either obtained from the Internal Revenue Service
a favorable determination letter as to its qualified status under the Code,
including all amendments to the Code effected by the Tax Reform Act of 1986 and
subsequent legislation, or has applied to the Internal Revenue Service for such
a determination letter prior to the expiration of the requisite period under
applicable Treasury Regulations or Internal Revenue Service pronouncements in
which to apply for such determination letter and to make any amendments
necessary to obtain a favorable determination. Target has also furnished
Acquiror with the most recent Internal Revenue Service determination letter
issued with respect to each such Target Employee Plan, and nothing has occurred
since the issuance of each such letter which could reasonably be expected to
cause the loss of the tax-qualified status of any Target Employee Plan subject
to Code Section 401(a).
(c) (i) None of the Target Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person except as
required by applicable law; (ii) there has been no "prohibited transaction," as
such term is defined in Section 406 of ERISA and Section 4975 of the Code, with
respect to any Target Employee Plan; which could reasonably be expected to have,
in the aggregate, a Material Adverse Effect on Target, (iii) each Target
Employee Plan has been administered in accordance with its terms and in
compliance with the requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code), except as would not have, in the
aggregate, a Material Adverse Effect on Target, and Target and each subsidiary
or ERISA Affiliate have performed all material obligations required to be
performed by them under, are not in any material respect in default, under or
violation of, and have no knowledge of any material default or violation by any
other party to, any of the Target Employee Plans; (iv) neither Target nor any
subsidiary or ERISA Affiliate is subject to
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any material liability or penalty under Sections 4976 through 4980 of the Code
or Title I of ERISA with respect to any of the Target Employee Plans; (v) all
material contributions required to be made by Target or any subsidiary or ERISA
Affiliate to any Target Employee Plan have been made on or before their due
dates and a reasonable amount has been accrued for contributions to each Target
Employee Plan for the current plan years; (vi) with respect to each Target
Employee Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the thirty (30) day notice requirement has
been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 of ERISA has occurred; and (vii) no
Target Employee Plan is covered by, and neither Target nor any subsidiary or
ERISA Affiliate has incurred or expects to incur any material liability under
Title IV of ERISA or Section 412 of the Code. With respect to each Target
Employee Plan subject to ERISA as either an employee pension plan within the
meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the
meaning of Section 3(1) of ERISA, Target has prepared in good faith and timely
filed all requisite governmental reports (which were true and correct as of the
date filed) and has properly and timely filed and distributed or posted all
notices and reports to employees required to be filed, distributed or posted
with respect to each such Target Employee Plan except as would not give rise, in
the aggregate, to a Material Adverse Effect on Target. No suit, administrative
proceeding, action or other litigation has been brought, or to the best
knowledge of Target is threatened, against or with respect to any such Target
Employee Plan, including any audit or inquiry by the IRS or United States
Department of Labor. Neither Target nor any ERISA Affiliate is a party to, or
has made any contribution to or otherwise incurred any obligation under, any
"multi-employer plan" as defined in Section 3(37) of ERISA.
(d) With respect to each Target Employee Plan, Target has
complied with (i) the applicable health care continuation and notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
proposed regulations thereunder and (ii) the applicable requirements of the
Family Leave Act of 1993 and the regulations thereunder, except with respect to
both clauses (i) and (ii) to the extent that such failure to comply would not,
in the aggregate, have a Material Adverse Effect on Target.
(e) Except as set forth in the Target Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee or other service provider of Target or
any other ERISA Affiliate to severance benefits or any other payment (including,
without limitation, unemployment compensation, golden parachute or bonus),
except as expressly provided in this Agreement, or (ii) accelerate the time of
payment or vesting of any such benefits, or (iii) increase or accelerate any
benefits or the amount of compensation due any such employee or service
provider.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by Target or other ERISA Affiliate
relating to, or change in participation or coverage under, any Target Employee
Plan which would materially increase the expense of maintaining such Plan above
the level of expense incurred with respect to that Plan for the most recent
fiscal year included in the Target Financial Statements.
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Section 3.10 BANK ACCOUNTS. The Target Disclosure Schedule sets forth
the names and locations of all banks, trusts, companies, savings and loan
associations, and other financial institutions at which Target maintains
accounts of any nature and the names of all persons authorized to draw thereon
or make withdrawals therefrom.
Section 3.11 CONTRACTS.
(a) Except as set forth on the Target Disclosure Schedule:
(i) Target has no agreements, contracts or commitments
that provide for the sale, licensing, distribution, marketing, promotion or
resale by Target of any Target Products or Target Proprietary Rights. The
description included in the Target Disclosure Schedule for each of Target's
merchant agreements shall include the name of the merchant party, the date of
the agreement and a brief description of the version of Target's standard
merchant agreement into which such merchant party shall have entered, if any.
Without limiting the foregoing, Target has not granted to any third party
(including, without limitation, OEMs and site-license customers) any rights to
reproduce, manufacture or distribute any of the Target Products, nor has Target
granted to any third party any exclusive rights of any kind (including, without
limitation, exclusivity with regard to categories of advertisers on Target's
World Wide Web site, territorial exclusivity or exclusivity with respect to
particular versions, implementations or translations of any of the Target
Products), nor has Target granted any third party any right to market any of the
Target Products under any private label or "OEM" arrangements, nor has Target
granted any license of any Target trademarks or servicemarks.
(ii) Target has no Third Party Licenses.
(iii) Target has no agreements, contracts or commitments
that provide for fixed and/or contingent payments or expenditures by or to
Target (including, without limitation, any advertising or revenue sharing
arrangement) in excess of $15,000 over the term of such agreement, contract or
commitment.
(iv) Target has no outstanding sales or advertising
contract, commitment or proposal (including, without limitation, insertion
orders, slotting agreements or other agreements under which Target has allowed
third parties to advertise on or otherwise be included in Target's World Wide
Web sites) that Target currently expects to result in any loss to Target in
excess of $15,000 upon completion or performance thereof.
(v) Target has no currently effective collective
bargaining or union agreements, contracts or commitments.
(vi) Target is not restricted by agreement from competing
with any person or from carrying on its business anywhere in the world.
(vii) Target has not guaranteed any obligations of other
persons or made any agreements to acquire or guarantee any obligations of other
persons.
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(viii) Target has no outstanding loan or advance to any
person; nor is it party to any line of credit, standby financing, revolving
credit or other similar financing arrangement of any sort which would permit the
borrowing by Target of any sum.
(ix) Target has no agreements pursuant to which Target
has agreed to manufacture for, supply to or distribute to any third party any
Target Products or Target Components.
True and correct copies of each document or instrument listed on the Target
Disclosure Schedule pursuant to this Section 3.11(a) (the "MATERIAL CONTRACTS")
have been provided to Acquiror or its representatives.
(b) All of the Material Contracts listed on the Target
Disclosure Schedule are valid, binding, in full force and effect, and
enforceable by Target in accordance with their respective terms. No Material
Contract contains any liquidated damages, penalty or similar provision. To the
knowledge of Target, no party to any such Material Contract intends to cancel,
withdraw, modify or amend such contract, agreement or arrangement.
(c) Target is not in material default under or in material
breach or violation of, nor, to Target's knowledge, is there any valid basis for
any claim of material default by Target under, or material breach or violation
by Target of, any Material Contract. To Target's knowledge, no other party is
in default under or in breach or violation of, nor is there any valid basis for
any claim of default by any other party under or any breach or violation by any
other party of, any Material Contract.
(d) Except as specifically indicated on the Target Disclosure
Schedule, none of the Material Contracts provides for indemnification by Target
of any third party. No claims have been made or threatened that would require
indemnification by Target, and Target has not paid any amounts to indemnify any
third party as a result of indemnification requirements of any kind.
Section 3.12 ORDERS, COMMITMENTS AND RETURNS. All accepted advertising
arrangements for Target Products entered into by Target for, and all material
agreements, contracts, or commitments for the purchase of supplies by Target,
were made in the ordinary course of business. To the knowledge of Target, no
outstanding purchase or outstanding lease commitment of Target is in excess of
the normal, ordinary and usual requirements of the business. There are no oral
contracts or arrangements for the sale of advertising or any other product or
service by Target.
Section 3.13 COMPLIANCE WITH LAW. Target and the operation of its
business are in compliance in all material respects with all applicable laws and
regulations. Neither Target nor, to Target's knowledge, any of its employees has
directly or indirectly paid or delivered any fee, commission or other sum of
money or item of property, however characterized, to any finder, agent,
government official or other party in the United States or any other country,
that was or is in violation of any federal, state, or local statute or law or of
any statute or law of any other country having jurisdiction. Target has not
participated directly or indirectly in any boycotts or
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other similar practices affecting any of its customers. Target has complied in
all material respects at all times with any and all applicable federal, state
and foreign laws, rules, regulations, proclamations and orders relating to the
importation or exportation of its products.
Section 3.14 LABOR DIFFICULTIES; NO DISCRIMINATION.
(a) Target is not engaged in any unfair labor practice and is
not in material violation of any applicable laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours.
There is no unfair labor practice complaint against Target actually pending or,
to the knowledge of Target, threatened before the National Labor Relations
Board. There is no strike, labor dispute, slowdown, or stoppage actually pending
or, to the knowledge of Target, threatened against Target. To the knowledge of
Target, no union organizing activities are taking place with respect to the
business of Target. No grievance, nor any arbitration proceeding arising out of
or under any collective bargaining agreement is pending and, to the knowledge of
Target, no claims therefor exist. No collective bargaining agreement that is
binding on Target restricts it from relocating or closing any of its operations.
Target has not experienced any material work stoppage or other material labor
difficulty.
(b) There is and has not been any claim against Target, or to
Target's knowledge, threatened against Target, based on actual or alleged race,
age, sex, disability or other harassment or discrimination, or similar tortuous
conduct, nor to the knowledge of Target, is there any valid basis for any such
claim.
(c) There are no pending claims against Target or any of its
Subsidiaries under any workers compensation plan or policy or for long term
disability. Neither Target nor any of its subsidiaries has any material
obligations under COBRA with respect to any former employees or qualifying
beneficiaries thereunder. There are no proceedings pending or, to the knowledge
of Target, threatened, between Target and any of their respective employees,
which proceedings have or could reasonably be expected to have a Material
Adverse Effect on Target.
Section 3.15 TRADE REGULATION. All of the prices charged by Target in
connection with the marketing or sale of any products or services have been in
compliance with all applicable laws and regulations. No claims have been
communicated or threatened in writing against Target with respect to wrongful
termination of any dealer, distributor or any other marketing entity,
discriminatory pricing, price fixing, unfair competition, false advertising, or
any other violation of any laws or regulations relating to anti-competitive
practices or unfair trade practices of any kind, and to Target's knowledge, no
specific situation, set of facts, or occurrence provides any basis for any such
claim.
Section 3.16 INSIDER TRANSACTIONS. To the knowledge of Target, no
affiliate ("AFFILIATE") as defined in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), of Target has any interest in any
equipment or other property, real or personal, tangible or intangible,
including, without limitation, any Target Proprietary Rights or any creditor,
supplier, customer, manufacturer, agent, representative, or distributor of
Target Products; PROVIDED, HOWEVER, that no such Affiliate or other person shall
be deemed to have such an interest solely by virtue of the ownership of less
than 1% of the outstanding stock or debt
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securities of any publicly-held company, the stock or debt securities of which
are traded on a recognized stock exchange or quoted on the Nasdaq National
Market.
Section 3.17 EMPLOYEES, INDEPENDENT CONTRACTORS AND CONSULTANTS. The
Target Disclosure Schedule lists and describes all past and all currently
effective written or, to Target's knowledge, oral: (i) employment agreements
and other material agreements concluded with individual employees to which
Target is a party; and (ii) independent contractor or consulting agreements with
independent contractors or consultants performing services in connection with
the development of Target Products or Target Proprietary Rights. True and
correct copies of all such written agreements have been provided to Acquiror or
its representatives. All independent contractors have been properly classified
as independent contractors for the purposes of federal and applicable state tax
laws, laws applicable to employee benefits and other applicable law. All
salaries and wages paid by Target are in compliance in all material respects
with applicable federal, state and local laws. Also shown on the Target
Disclosure Schedule are the names, positions and salaries or rates of pay,
including bonuses, of all persons presently employed by Target.
Section 3.18 INSURANCE. The Target Disclosure Schedule contains a list
of the principal policies of fire, liability and other forms of insurance
currently held by Target, which policies or their predecessors have been in
effect since 1997, and all claims made by Target under such policies. To the
knowledge of Target, Target has not done anything, either by way of action or
inaction, that might invalidate such policies in whole or in part. There is no
claim pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have been paid
and Target is otherwise in compliance with the terms of such policies and bonds
in all material respects. Target has no knowledge of any threatened termination
of, or material premium increase with respect to, any of such policies.
Section 3.19 LITIGATION. There is no private or governmental action,
suit, proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of Target,
threatened against Target or any of its properties or any of its officers or
directors (in their capacities as such). There is no judgment, decree or order
against Target, or, to the knowledge of Target, any of its respective directors
or officers (in their capacities as such) relating to the business of Target.
To Target's knowledge, no circumstances exist that could reasonably be expected
to result in a claim against Target as a result of the conduct of Target's
business (including, without limitation, any claim of infringement of any
intellectual property right).
Section 3.20 GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS. Target has
obtained each federal, state, county, local or foreign governmental consent,
license, permit, grant, or other authorization of a Governmental Entity (i)
pursuant to which Target currently operates or holds any interest in any of its
properties or (ii) that is required for the operation of Target's business or
the holding of any such interest, and all of such authorizations are in full
force and effect, except where the failure to obtain or have any such Target
authorizations could not reasonably be expected to have a Material Adverse
Effect on Target.
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Section 3.21 SUBSIDIARIES. Target has no Subsidiaries. Target does not
own or control (directly or indirectly) any capital stock, bonds or other
securities of, and does not have any proprietary interest in, any other
corporation, general or limited partnership, firm, association or business
organization, entity or enterprise, and Target does not control (directly or
indirectly) the management or policies of any other corporation, partnership,
firm, association or business organization, entity or enterprise.
Section 3.22 COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS. To the
knowledge of Target, no permits, licenses or other authorizations are required
for the conduct of its business as currently conducted under federal, state or
local laws applicable to Target and relating to pollution or protection of the
environment, including laws or provisions relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, or hazardous or
toxic materials, substances, or wastes into air, surface water, groundwater, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants, contaminants
or hazardous or toxic materials, substances, or wastes or which are intended to
assure the safety of employees, workers or other persons. Target is not aware
of, nor has Target received written notice of, any conditions, circumstances,
activities, practices, incidents, or actions which may form the basis of any
claim, action, suit, proceeding, hearing, or investigation of, by, against or
relating to Target, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling, or the
emission, discharge, release or threatened release into the environment, of any
pollutant, contaminant, or hazardous or toxic substance, material or waste, or
relating to the safety of employees, workers or other persons.
Section 3.23 CORPORATE DOCUMENTS. Target has furnished to Acquiror or
its representatives: (a) copies of its Certificate of Incorporation and Bylaws,
as amended to date; (b) its minute book containing all records required to be
set forth of all proceedings, consents, actions, and meetings of the
stockholders, the board of directors and any committees thereof; (c) all
material permits, orders, and consents issued by any regulatory agency with
respect to Target, or any securities of Target, and all applications for such
permits, orders, and consents; and (d) the stock transfer books of Target
setting forth all transfers of any capital stock. The corporate minute books,
stock certificate books, stock registers and other corporate records of Target
are complete and accurate in all material respects, and the signatures appearing
on all documents contained therein are the true signatures of the persons
purporting to have signed the same. All actions reflected in such books and
records were duly and validly taken in compliance with the laws of the
applicable jurisdiction.
Section 3.24 NO BROKERS. Except for the fees of Broadview Associates,
neither Target nor, to Target's knowledge, any Target stockholder is obligated
for the payment of fees or expenses of any broker or finder in connection with
the origin, negotiation or execution of this Agreement or the other Transaction
Documents or in connection with any transaction contemplated hereby or thereby.
Target has provided to Acquiror or its representatives a true and complete copy
of its engagement letter, and all other agreements relating to the Merger, with
Broadview Associates.
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Section 3.25 ADVERTISERS, CUSTOMERS AND SUPPLIERS. As of the date
hereof, no advertiser or other customer which individually accounted for more
than 5% of Target's gross revenues during the 1997 fiscal year, and no supplier
of Target, has canceled or otherwise terminated, or made any written threat to
Target to cancel or otherwise terminate its relationship with Target, or has at
any time on or after December 31, 1997 decreased materially its services or
supplies to Target in the case of any such supplier, or its usage of the
services or products of Target in the case of such customer, and to Target's
knowledge, no such supplier or customer intends to cancel or otherwise terminate
its relationship with Target or to decrease materially its services or supplies
to Target or its usage of the services or products of Target, as the case may
be. From and after the date hereof, no customer which individually accounted
for more than 5% of Target's gross revenues during the 1997 fiscal year, has
canceled or otherwise terminated, or made any written threat to Target to cancel
or otherwise terminate, for any reason, including without limitation the
consummation of the transactions contemplated hereby, its relationship with
Target, and to Target's knowledge, no such customer intends to cancel or
otherwise terminate its relationship with Target or to decrease materially its
usage of the services or products of Target. Target has not knowingly breached,
so as to provide a benefit to Target that was not intended by the parties, any
agreement with, or engaged in any fraudulent conduct with respect to, any
customer or supplier or Target.
Section 3.26 TARGET ACTION. The Board of Directors of Target, by
unanimous written consent or at a meeting duly called and held, has by the
unanimous vote of all directors (i) determined that the Merger is fair and in
the best interests of Target and its stockholders, (ii) approved the Merger and
this Agreement in accordance with the provisions of Delaware Law, and
(iii) directed that this Agreement and the Merger be submitted to Target
stockholders for their approval and resolved to recommend that Target
stockholders vote in favor of the approval of this Agreement and the Merger.
Section 3.27 OFFERS. Target has suspended or terminated, and has the
legal right to terminate or suspend, all negotiations and discussions of
Acquisition Transactions (as defined in Section 5.6) with parties other than
Acquiror.
Section 3.28 INFORMATION STATEMENT. The information supplied by Target
for inclusion in the information statement to be sent to the stockholders of
Target in connection with the meeting of Target stockholders to consider the
Merger (the "TARGET STOCKHOLDERS MEETING") or in connection with any written
consent of stockholders of Target (such information statement as amended or
supplemented is referred to herein as the "INFORMATION STATEMENT") shall not, on
the date the Information Statement is first mailed to Target stockholders, at
the time of the Target Stockholders Meeting, or written consent of stockholders
and at the Effective Time, contain any statement which is false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they are made, not false or misleading. If at any time prior to the
Effective Time any event or information should be discovered by Target which
should be set forth in an amendment to the Information Statement, Target shall
promptly inform Acquiror and Sub and shall communicate such information to the
Target stockholders in an appropriate manner. Notwithstanding the foregoing,
Target makes no representation, warranty or covenant
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with respect to any information supplied by Acquiror or Sub which is contained
in any of the foregoing documents.
Section 3.29 ACCOUNTS RECEIVABLE. Subject to any reserves set forth in
the Most Recent Balance Sheet, the accounts receivable shown on the Most Recent
Balance Sheet represent and will represent bona fide claims against debtors for
sales and other charges, and are not subject to discount except for normal cash
and immaterial trade discounts. The amount carried for doubtful accounts and
allowances in the Most Recent Balance Sheet is sufficient to provide for any
losses which may be sustained on realization of the receivables.
Section 3.30 DISCLOSURE. No statements by Target contained in this
Agreement, its exhibits and schedules nor in any of the certificates or
documents, including any of the Transaction Documents, delivered or required to
be delivered by Target to Acquiror or Sub under Section 8.2 of this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made.
Section 3.31 TARGET DISCLOSURE SCHEDULE. Notwithstanding anything to the
contrary contained in this Agreement, any information disclosed in one section
of the Target Disclosure Schedule shall, should the existence of the information
be relevant to any other section of the Target Disclosure Schedule and should
such relevancy be reasonably apparent on the face of such disclosure without
reference to extrinsic documentation to an objective third party reviewing such
disclosure, be deemed to be disclosed in all sections of the Target Disclosure
Schedule where such information shall be relevant. The disclosure of any
required information shall not be deemed to constitute an acknowledgment that
such information is required to be disclosed in connection with the
representations and warranties made by Target in this Agreement or that it is
material, nor shall such information be deemed to establish a standard of
materiality for purposes of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND SUB
Acquiror and Sub represent and warrant to Target that the statements
contained in this Article IV are true and correct.
Section 4.1 ORGANIZATION OF ACQUIROR AND SUB. Each of Acquiror and its
Subsidiaries, including Sub, is a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation and has all requisite corporate power to own, lease and operate
its property and to carry on its business as now being conducted and is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the failure to be so qualified or licensed would have a
Material Adverse Effect on Acquiror.
Section 4.2 ACQUIROR CAPITAL STRUCTURE. The authorized capital stock
of Acquiror consists of 225,000,000 shares of Common Stock, par value of
$0.00067 per share ("ACQUIROR COMMON STOCK"), and 10,000,000 shares of
Preferred Stock, par value $0.00067 per share
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("ACQUIROR PREFERRED STOCK"), of which there were issued and outstanding as
of the close of business on June 1, 1998, 46,376,329 shares of Acquiror
Common Stock and no shares of Acquiror Preferred Stock. There are no other
outstanding shares of capital stock or voting securities of Acquiror other
than shares of Acquiror Common Stock issued after June 1, 1998 under the
Yahoo! Inc. 1996 Employee Stock Purchase Plan (the "ESPP") or upon the
exercise of options issued under the Yahoo! Inc. 1995 Stock Plan and the
Yahoo! Inc. 1996 Director Stock Option Plan. The authorized capital stock of
Sub consists of 1,000 shares of Common Stock, all of which are issued and
outstanding and are held by Acquiror. All outstanding shares of Acquiror and
Sub have been duly authorized, validly issued, fully paid and are
nonassessable and free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof. As of the close
of business on June 1, 1998, Acquiror has reserved an aggregate of 11,603,522
shares of Common Stock for issuance to employees, directors and independent
contractors upon exercise of outstanding options to acquire shares of
Acquiror Common Stock issued under the Acquiror stock option plans and no
shares of Common Stock for issuance upon exercise of outstanding warrants.
Other than as contemplated by this Agreement or under the ESPP, and except as
described in this Section 4.2, there are no other options, warrants, calls,
rights, commitments or agreements to which Acquiror or Sub is a party or by
which either of them is bound obligating Acquiror or Sub to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of Acquiror or Sub
or obligating Acquiror or Sub to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. The shares of Acquiror Common
Stock to be issued pursuant to the Merger (including shares of Acquiror
Common Stock issued upon exercise of Target Options and Target Warrants
assumed by Acquiror) have been reserved for issuance and will be duly
authorized, validly issued, fully paid, and non-assessable and issued in
compliance with all applicable federal or state securities laws.
Section 4.3 AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Each of Acquiror and Sub has all requisite corporate power
and authority to enter into this Agreement and the other Transaction Documents
to which it is or will become a party and to consummate the transactions
contemplated by this Agreement and such Transaction Documents. The execution
and delivery of this Agreement and such Transaction Documents and the
consummation of the transactions contemplated by this Agreement and such
Transaction Documents have been duly authorized by all necessary corporate
action on the part of Acquiror and Sub. This Agreement has been and such
Transaction Documents have been or, to the extent not executed as of the date
hereof, will be duly executed and delivered by Acquiror and Sub. This Agreement
and each of the Transaction Documents to which Acquiror or Sub is a party
constitutes, and each of the Transaction Documents to which Acquiror or Sub will
become a party when executed and delivered by Acquiror or Sub will constitute,
the valid and binding obligation of Acquiror or Sub, enforceable in accordance
with its terms, except to the extent that enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability is considered in
a proceeding at law or in equity.
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(b) The execution and delivery by Acquiror or Sub of this
Agreement and the Transaction Documents to which it is or will become a party
does not, and consummation of the transactions contemplated by this Agreement or
the Transaction Documents to which it is or will become a party will not, (i)
conflict with, or result in any violation or breach of any provision of the
Articles of Incorporation or Bylaws of Acquiror or Sub, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
contract or other agreement, instrument or obligation to which Acquiror or Sub
is a party or by which either of them or any of their properties or assets may
be bound, or (iii) conflict or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Acquiror or Sub or any of their properties or assets, except in
the case of (ii) and (iii) for any such conflicts, violations, defaults,
terminations, cancellations or accelerations which would not have a Material
Adverse Effect on Acquiror and its Subsidiaries, taken as a whole.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Acquiror or Sub in connection with the execution and delivery
of this Agreement or the Transaction Documents to which it is or will become a
party or the consummation of the transactions contemplated hereby or thereby,
except for (i) the filing of the Certificate of Merger with the Delaware
Secretary of State, (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country, and (iii)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, could be expected to have a Material Adverse Effect on
Acquiror and its Subsidiaries, taken as a whole.
Section 4.4 COMMISSION FILINGS; FINANCIAL STATEMENTS.
(a) Acquiror has filed with the Commission and made available to
Target or its representatives all forms, reports and documents required to be
filed by Acquiror with the Securities and Exchange Commission (the "Commission")
since December 31, 1997 (collectively, the "ACQUIROR COMMISSION REPORTS"). The
Acquiror Commission Reports constitute all of the documents required to be filed
by the Acquiror under Section 13 of the Exchange Act with the Commission since
December 31, 1997. The Acquiror Commission Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended, (the "SECURITIES ACT"), and the Exchange
Act, as the case may be, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated in such Acquiror Commission
Reports or necessary in order to make the statements in such Acquiror Commission
Reports, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the financial statements (including, in each case,
any related notes) contained in the Acquiror Commission Reports, including any
Acquiror Commission
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Reports filed after the date of this Agreement until the Closing, complied or
will comply as to form in all material respects with the applicable published
rules and regulations of the Commission with respect thereto, was prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements or, in the case of unaudited statements, as
permitted by Form 10-Q of the Commission) and fairly presented the consolidated
financial position of Acquiror and its Subsidiaries as at the respective dates
and the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount.
Section 4.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1997, Acquiror and its Subsidiaries have conducted their business in the
ordinary course and, since such date, there has not been (i) any Material
Adverse Change with respect to Acquiror and any of its Subsidiaries, taken as a
whole; or (ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to Acquiror or any of its Subsidiaries having a Material
Adverse Effect on Acquiror and its Subsidiaries, taken as a whole.
Section 4.6 COMPLIANCE WITH LAWS. Acquiror has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state or local statute, law or regulation with respect to the conduct
of its business, or the ownership or operation of its business, except for
failures to comply or violations which would not have a Material Adverse Effect
on Acquiror and its Subsidiaries, taken as a whole.
Section 4.7 INTERIM OPERATIONS OF SUB. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.
Section 4.8 DISCLOSURE. No statements by Acquiror contained in this
Agreement, its exhibits and schedules, or any of the certificates or documents,
including any of the Transaction Documents, required to be delivered by Acquiror
or Sub to Target under this Agreement contain any untrue statement of material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made.
Section 4.9 SHAREHOLDERS CONSENT. No consent or approval of the
shareholders of Acquiror is required or necessary for Acquiror to enter into
this Agreement or the Transaction Documents or to consummate the transactions
contemplated hereby and thereby.
Section 4.10 LITIGATION. Except as otherwise disclosed in the Acquiror
Commission Reports, (i) there is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Acquiror or any of its
subsidiaries, threatened against Acquiror or any of its properties or any of its
officers or directors (in their capacities as such), which, if determined
adversely to Acquiror, would have a Material Adverse Effect on Acquiror and its
Subsidiaries, taken as a whole, and (ii) there is no judgment, decree or order
against Acquiror, or, to the
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knowledge of Acquiror, any of its respective directors or officers (in their
capacities as such) relating to the business of Acquiror, the presence of which
would have Material Adverse Effect with respect Acquiror and its Subsidiaries,
taken as a whole. To Acquiror's knowledge, no circumstances exist that could
reasonably be expected to result in a claim against Acquiror as a result of the
conduct of Acquiror's business (including, without limitation, any claim of
infringement of any intellectual property right) that would have a Material
Adverse Effect with respect to Acquiror.
Section 4.11 INVESTIGATION. Acquiror is knowledgeable about the industry
in which the Target operates and is experienced in the acquisition and
management of businesses. Acquiror has conducted a full due diligence
investigation of the Target and has received answers to all inquiries it has
made respecting the Target; PROVIDED that the foregoing shall in no way restrict
or qualify the indemnification rights of Acquiror pursuant to Article X hereof ,
except with respect to the Target Financial Statements to the extent described
in Article X. To the knowledge of Acquiror, none of the representations or
warranties in Article III, as qualified by the appropriate Target Disclosure
Schedule, is untrue or incorrect in any material respect. Target acknowledges
that it shall bear the burden of proof in connection with any assertion that
Acquiror shall have had knowledge prior to the date hereof of any untruthfulness
or inaccuracy of any of Target's representations and warranties set forth
herein.
ARTICLE V
PRECLOSING COVENANTS OF TARGET
During the period from the date of this Agreement until the Effective Time,
Target covenant and agree as follows:
Section 5.1 APPROVAL OF TARGET STOCKHOLDERS. Prior to the Closing Date
and at the earliest practicable date following the date hereof, Target will
solicit written consents from its stockholders seeking, or hold a stockholders'
meeting (the "TARGET STOCKHOLDERS' MEETING") for the purpose of seeking,
approval of this Agreement, the Merger and related matters. If Target holds a
stockholders' meeting, the Board of Directors will solicit proxies from Target's
stockholders to vote such stockholders' shares at the Target Stockholders'
Meeting. In soliciting such written consent or proxies, the Board of Directors
of Target will recommend to the stockholders of Target that they approve this
Agreement and the Merger and shall use its reasonable efforts to obtain the
approval of the stockholders of Target entitled to vote on or consent to this
Agreement and the Merger in accordance with Delaware Law and Target's
Certificate of Incorporation. Target will prepare as soon as reasonably
practicable the Information Statement in form and substance reasonably
acceptable to Acquiror, with respect to the solicitation of written consents
and/or proxies from the stockholders of Target to approve this Agreement, the
Merger and related matters. The Information Statement shall be in such form and
contain such information so as to permit compliance by Acquiror with the
requirements of Section 4(2) and/or Regulation D under the Securities Act in
connection with the issuance of shares of Acquiror Common Stock in the Merger
and will comply in all material respects with all applicable requirements of law
and the rules and regulations promulgated thereunder. Within
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two business days after the execution of this Agreement, Target will distribute
the Information Statement to the stockholders of Target. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Information Statement, Target will promptly inform the Acquiror of such
occurrence and cooperate in making any appropriate amendment or supplement,
and/or mailing to stockholders of Target, such amendment or supplement. The
Information Statement will include the recommendation of the Board of Directors
of Target in favor of adoption and approval of this Agreement and approval of
the Merger.
Section 5.2 ADVICE OF CHANGES. Target will promptly advise Acquiror in
writing of any event occurring subsequent to the date of this Agreement which
would render any representation or warranty of Target contained in this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect.
Section 5.3 OPERATION OF BUSINESS. During the period from the date of
this Agreement and continuing until the earlier of the termination of the
Agreement or the Effective Time, Target agrees (except to the extent that
Acquiror shall otherwise consent in writing), to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
previously conducted, to pay its debts and taxes when due, subject to good faith
disputes over such debts or taxes, to pay or perform other obligations when due,
and, to the extent consistent with such business, use all reasonable efforts
consistent with past practices and policies to preserve intact its present
business organization, keep available the services of its present officers and
key employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it,
to the end that its goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Target shall promptly notify Acquiror of any event or
occurrence not in the ordinary course of business of Target. Except as
expressly contemplated by this Agreement, Target shall not, without the prior
written consent of Acquiror:
(a) Accelerate, amend or change the period of exercisability or
the vesting schedule of options granted under any employee stock plan or
agreements or authorize cash payments in exchange for any Target Option or any
options granted under any of such plans except as specifically required by the
terms of such plans or any related agreements or any such agreements in effect
as of the date of this Agreement and disclosed in the Target Disclosure
Schedule;
(b) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of such party, or purchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service by such party;
(c) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of its
capital stock or securities convertible into shares of its capital stock, or
subscriptions, rights, warrants or options to acquire, or other
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agreements or commitments of any character obligating it to issue any such
shares or other convertible securities, other than (i) the issuance of (A)
shares of Target Common Stock issuable upon exercise of Target Options or Target
Warrants, which are outstanding on the date of this Agreement, (B) shares of
Target Common Stock issuable upon conversion of Target Convertible Notes or (C)
shares of Target Common Stock issuable upon cancellation of outstanding
Professional Obligations, or (ii) the repurchase of shares of Common Stock from
terminated employees pursuant to the terms of outstanding stock restriction or
similar agreements;
(d) Acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division, or otherwise acquire or
agree to acquire any assets;
(e) Sell, lease, license or otherwise dispose of any of its
properties or assets which are material, individually or in the aggregate, to
the business of Target, except in the ordinary course of business;
(f) (i) Increase or agree to increase the compensation payable
or to become payable to its officers or employees, except for increases in
salary or wages of non-officer employees in accordance with past practices, (ii)
grant any additional severance or termination pay to, or enter into any
employment or severance agreements with, officers, (iii) grant any severance or
termination pay to, or enter into any employment or severance agreement, with
any non-officer employee, except in accordance with past practices, (iv) enter
into any collective bargaining agreement, or (v) establish, adopt, enter into or
amend in any material respect any bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees;
(g) Revalue any of its assets, including writing down the value
of inventory or writing off notes or accounts receivable;
(h) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities or guarantee any debt securities of others;
(i) Amend or propose to amend its Certificate of Incorporation
or Bylaws;
(j) Incur or commit to incur any capital expenditures in excess
of $25,000 in the aggregate or in excess of $5,000 as to any individual matter;
(k) Lease, license, sell, transfer or encumber or permit to be
encumbered any asset, Target Proprietary Right or other property associated with
the business of Target (including sales or transfers to Affiliates of Target);
(l) Enter into any lease or contract for the purchase or sale of
any property, real or personal except in the ordinary course of business;
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(m) Fail to maintain its equipment and other assets in good
working condition and repair according to the standards it has maintained up to
the date of this Agreement, subject only to ordinary wear and tear;
(n) Change accounting methods;
(o) Amend or terminate any material contract, agreement or
license to which it is a party except in the ordinary course of business;
(p) Loan any amount to any person or entity, or guaranty or act
as a surety for any obligation;
(q) Waive or release any material right or claim, except in the
ordinary course of business;
(r) Make or change any Tax or accounting election, change any
annual accounting period, adopt or change any accounting method, file any
amended Return, enter into any closing agreement, settle any Tax claim or
assessment relating to Target, surrender any right to claim refund of Taxes,
consent to any extension or waiver of the limitation period applicable to any
Tax claim or assessment relating to Target, or take any other action or omit to
take any action, if any such action or omission would have the effect of
increasing the Tax liability of Target or Acquiror;
(s) take any action, or fail to take any action, would cause
there to be a Material Adverse Change with respect to Target;
(t) Enter into any agreement in which the obligation of Target
exceeds $25,000 or shall not terminate or be subject to termination for
convenience within 180 days following execution;
(u) Enter into any agreement not in the ordinary course of
business (including without limitation any material licenses to information or
databases, any OEM agreements, any exclusive agreements of any kind, or any
agreements providing for obligations that would extend beyond six months of the
date of this Agreement); or
(v) Take, or agree in writing or otherwise to take, any of the
actions described in Sections (a) through (u) above, or any action which is
reasonably likely to make any of Target's representations or warranties
contained in this Agreement untrue or incorrect in any material respect on the
date made (to the extent so limited) or as of the Effective Time.
In the event that the Closing Date shall not occur on or before June 12,
1998, Acquiror agrees that it will consider in good faith reasonable increases
in or deviations from the limitations set forth in this Section 5.3 in order to
permit the business of Target to continue in its ordinary course consistent with
past practice, and specifically will agree to modifications to subsection (h) to
permit the issuance of Target Convertible Notes in a principal amount not to
exceed $100,000
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and an increase in the capital expenditure limits contemplated by subsection (j)
to $50,000 in the aggregate and $15,000 in any individual case.
Section 5.4 ACCESS TO INFORMATION. Until the Closing, Target shall
allow Acquiror and its agents reasonable free access during normal business
hours upon reasonable notice to its files, books, records, and offices,
including, without limitation, any and all information relating to taxes,
commitments, contracts, leases, licenses, and personal property and financial
condition. Until the Closing, Target shall cause its accountants to cooperate
with Acquiror and its agents in making available all financial information
requested, including without limitation the right to examine all working papers
pertaining to all financial statements prepared or audited by such accountants.
No information or knowledge obtained in any investigation pursuant to this
Section shall effect or be deemed to modify any representation or warranty
contained in this Agreement or its exhibits and schedules. All such access
shall be subject to the terms of the Confidentiality Agreement (as defined in
Section 7.1).
Section 5.5 SATISFACTION OF CONDITIONS PRECEDENT. Target will use its
best efforts to satisfy or cause to be satisfied all the conditions precedent
which are set forth in Sections 8.1 and 8.2, and Target will use its best
efforts to cause the transactions contemplated by this Agreement to be
consummated, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties which may be necessary or reasonably
required on its part in order to effect the transactions contemplated by this
Agreement. Target shall use its best efforts to obtain any and all consents
necessary with respect to those Material Contracts listed on Schedule 5.5 of the
Target Disclosure Schedule in connection with the Merger (the "MATERIAL
CONSENTS").
Section 5.6 OTHER NEGOTIATIONS. Target will not, directly or
indirectly, through any of its officers, directors, employees, agents and
Affiliates take any action to solicit, initiate, seek, encourage or support any
inquiry, proposal or offer from, furnish any information to, or participate in
any negotiations with, any corporation, partnership, person or other entity or
group (other than Acquiror) regarding any acquisition of Target, any merger or
consolidation with or involving Target, or any acquisition of any material
portion of the stock or assets of Target or any material license of Target
Proprietary Rights (any of the foregoing being referred to in this Agreement as
an "ACQUISITION TRANSACTION") or enter into an agreement concerning any
Acquisition Transaction with any party other than Acquiror. If between the date
of this Agreement and the termination of this Agreement pursuant to Section 9.1,
Target receives from a third party any offer or indication of interest regarding
any Acquisition Transaction, or any request for information regarding any
Acquisition Transaction, Target shall (i) notify Acquiror immediately (orally
and in writing) of such offer, indication of interest or request, including the
identity of such party and the full terms of any proposal therein, and (ii)
notify such third party of Target's obligations under this Agreement.
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ARTICLE VI
PRECLOSING AND OTHER COVENANTS OF ACQUIROR AND SUB
Section 6.1 ADVICE OF CHANGES. Acquiror and Sub will promptly advise
Target in writing of any event occurring subsequent to the date of this
Agreement which would render any representation or warranty of Acquiror or Sub
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect.
Section 6.2 RESERVATION OF ACQUIROR COMMON STOCK. Acquiror shall
reserve for issuance, out of its authorized but unissued capital stock, the
maximum number of shares of Acquiror Common Stock as may be issuable upon
consummation of the Merger, including shares of Acquiror Common Stock that will
be issued upon exercise of Target Options assumed by Acquiror.
Section 6.3 SATISFACTION OF CONDITIONS PRECEDENT. Acquiror and Sub will
use their best efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Sections 8.1 and 8.3, and Acquiror and Sub will
use their best efforts to cause the transactions contemplated by this Agreement
to be consummated, and, without limiting the generality of the foregoing, to
obtain all consents and authorizations of third parties and to make all filings
with, and give all notices to, third parties which may be necessary or
reasonably required on its part in order to effect the transactions contemplated
hereby.
Section 6.4 NASDAQ NATIONAL MARKET LISTING. Acquiror shall cause the
shares of Acquiror Common Stock issuable to the stockholders of Target in the
Merger, including shares of Acquiror Common Stock issuable upon exercise of
Acquiror Options, to be authorized for listing on the Nasdaq National Market.
Section 6.5 STOCK OPTIONS.
(a) At the Effective Time, each outstanding Target Option under
the Target Option Plan or otherwise, whether vested or unvested, shall be
assumed by Acquiror and deemed to constitute an option (a "ACQUIROR OPTION") to
acquire, on the same terms and conditions as were applicable under the Target
Option, the same number of shares of Acquiror Common Stock as the holder of such
Target Option would have been entitled to receive pursuant to the Merger had
such holder exercised such option in full immediately prior to the Effective
Time (rounded down to the nearest whole number), at a price per share (rounded
up to the nearest whole cent) equal to (i) the aggregate exercise price for the
shares of Target Common Stock otherwise purchasable pursuant to such Target
Option divided by (ii) the number of full shares of Acquiror Common Stock deemed
purchasable pursuant to such Acquiror Option in accordance with the foregoing;
PROVIDED, HOWEVER, that, in the case of any Target Option to which Section 422
of the Code applies ("INCENTIVE STOCK OPTIONS"), the option price, the number of
shares purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with Section
424(a) of the Code. The term, exercisability, vesting schedule, acceleration
events, status as an "incentive stock option" under Section 422 of the Code, if
applicable, and all of the other terms of the option shall otherwise remain
unchanged.
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(b) As soon as practicable after the Effective Time, Acquiror
shall deliver to the participants in the Target Option Plan and other option
holders appropriate notice setting forth such participants' rights pursuant
thereto and stating that the grants pursuant to the Target Option Plan or
otherwise shall continue in effect on the same terms and conditions (subject to
the adjustments required by this Section 6.5 after giving effect to the Merger).
Acquiror shall comply with the terms of the Target Option Plan and use best
efforts to ensure, to the extent required by, and subject to the provisions of,
such Target Option Plan and Sections 422 and 424(a) of the Code, that Target
Options which qualified as incentive stock options prior the Effective Time
continue to qualify as incentive stock options after the Effective Time.
(c) Acquiror shall on or prior to the Effective Time take all
corporate action necessary to reserve for issuance a sufficient number of shares
of Acquiror Common Stock for delivery upon exercise of Target Options assumed in
accordance with this Section 6.5. Acquiror shall use its best efforts to file a
registration statement on Form S-8 (or any successor or other appropriate forms
that Acquiror is eligible to use) under the Securities Act or another
appropriate form with respect to the shares of Acquiror Common Stock subject to
such options within two (2) business days following the Closing Date and shall
use its best efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such options remain
outstanding.
Section 6.6 REGISTRATION OF SHARES ISSUED IN THE MERGER.
(a) REGISTRABLE SHARES. For purposes of this Agreement,
"REGISTRABLE SHARES" shall mean the shares of Acquiror Common Stock issued in
the Merger, including any and all Escrow Shares, but excluding shares of
Acquiror Common Stock issued in the Merger that have been sold or otherwise
transferred by the stockholders of Target who initially received such shares in
the Merger or by the holder of the Target Warrants prior to the effective date
of the Registration Statement (as defined below) (collectively, the "HOLDERS")
and excluding shares of Acquiror Common Stock issuable upon exercise of Target
Options (the issuance of which will be registered on Form S-8); PROVIDED,
HOWEVER, that a distribution of shares of Acquiror Common Stock issued in the
Merger without additional consideration, to underlying beneficial owners (such
as the general and limited partners, stockholders or trust beneficiaries of a
Holder) shall not be deemed such a sale or transfer for purposes of this Section
6.6 and such underlying beneficial owners shall be entitled to the same rights
under this Section 6.6 as the initial Holder from which the Registrable Shares
were received and shall be deemed Holders for the purposes of this Section 6.6.
(b) REQUIRED REGISTRATION. Acquiror shall use its best efforts
to prepare and file with the Commission a registration statement on Form S-3 (or
such successor or other appropriate form that Acquiror is eligible to use) under
the Securities Act with respect to the Registrable Shares (the "Registration
Statement") within two (2) business days following the Closing Date and to
effect all such registrations, qualifications and compliances (including,
without limitation, obtaining appropriate qualifications under applicable state
securities or "blue sky" laws and compliance with any other applicable
governmental requirements or regulations)
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as any selling Holder may reasonably request and that would permit or facilitate
the sale of Registrable Shares (provided however that Acquiror shall not be
required in connection therewith to qualify to do business or to file a general
consent to service of process in any such state or jurisdiction), in each case
so that such Registration Statement and all other such registrations,
qualifications and compliances may become effective no later than 10 days after
the Closing Date, or as soon as practicable thereafter in the event such
Registration Statement becomes subject to review by the Commission Staff. The
Acquiror does not have any knowledge of any reason, event or state of facts
which would prevent it from filing such Registration Statement within two (2)
business days after the Closing Date or which would prevent the Commission from
declaring such Registration Statement effective in the ordinary course
thereafter.
(c) EFFECTIVENESS.
(i) Acquiror will use its best efforts to maintain the
effectiveness of the Registration Statement and other applicable registrations,
qualifications and compliances for up to the later to occur of (A) one (1) year
from the Closing Date or (B) such time as each Holder shall be permitted to sell
all of the remaining Registrable Shares in one three-month period under Rule 144
or (C) such time as all of the Registrable Shares shall have been sold or
otherwise disposed of by the Holders (the "REGISTRATION EFFECTIVE PERIOD"), and
from time to time will amend or supplement the Registration Statement and the
prospectus contained therein as and to the extent necessary to comply with the
Securities Act, the Exchange Act and any applicable state securities statute or
regulation, subject to the following limitations and qualifications.
(ii) Following the date on which the Registration
Statement is first declared effective, the Holders will be permitted (subject in
all cases to Section 6.7 below) to offer and sell Registrable Shares during the
Registration Effective Period in the manner described in the Registration
Statement provided that the Registration Statement remains effective and has not
been suspended.
(iii) Notwithstanding any other provision of this Section
6.6 but subject to Section 6.7, Acquiror shall have the right at any time to
require that all Holders suspend further open market offers and sales of
Registrable Shares whenever, and for so long as, in the reasonable judgment of
Acquiror after consultation with counsel there is or may be in existence
material undisclosed information or events with respect to Acquiror (the
"SUSPENSION RIGHT"). In the event Acquiror exercises the Suspension Right, such
suspension will continue for the period of time reasonably necessary for
disclosure to occur at a time that is not detrimental to Acquiror and its
stockholders or until such time as the information or event is no longer
material, each as determined in good faith by Acquiror after consultation with
counsel (the "SUSPENSION PERIOD"). Acquiror will use all reasonable efforts to
minimize the length of the Suspension Period and cause the termination of the
Suspension Period to occur as quickly as reasonably practicable. The parties
agree that the one-year component of the Registration Effective Period
contemplated by subparagraph (c)(i)(A) above shall be extended for a period of
time equal to the Suspension Period, PROVIDED that in no case will the one-year
component be extended to a date later than 18 months following the Closing Date
and PROVIDED FURTHER that in no event will the Registration Effective Period be
extended for any reason beyond the time at which each Holder
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shall be permitted to sell all of such Holder's remaining Registrable Shares in
one three-month period under Rule 144.
(d) EXPENSES. The Acquiror shall bear all costs and expenses
for purposes of complying with this Section 6.6 including, without limitation,
printing expenses (including a reasonable number of prospectuses for circulation
by the selling Holders), legal fees and disbursements of counsel for Acquiror,
"blue sky" expenses, accounting fees and filing fees, but shall not include
underwriting commissions or similar charges, legal fees and disbursements of
counsel for the selling Holders.
(e) INDEMNIFICATION.
(i) To the extent permitted by law, Acquiror will
indemnify and hold harmless each Holder, any underwriter (as defined in the
Securities Act) for such Holder, its officers, directors, stockholders or
partners and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (A) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (B) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (C) any violation or
alleged violation by Acquiror of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law; and Acquiror will pay to each such
Holder (and its officers, directors, stockholders or partners), underwriter or
controlling person, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 6.6(e)(i) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected
without the consent of Acquiror; nor shall Acquiror be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon (a) a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in the
Registration Statement by any such Holder, or (b) a Violation that would not
have occurred if such Holder had delivered to the purchaser the version of the
Prospectus most recently provided by Acquiror to the Holder as of the date of
such sale.
(ii) To the extent permitted by law, each selling Holder
will indemnify and hold harmless Acquiror, each of its directors, each of its
officers who has signed the Registration Statement, each person, if any, who
controls Acquiror within the meaning of the Securities Act, any underwriter, any
other Holder selling securities pursuant to the Registration Statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may
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become subject, under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation (which includes
without limitation the failure of the Holder to comply with the prospectus
delivery requirements under the Securities Act, and the failure of the Holder to
deliver the most current prospectus provided by Acquiror prior to such sale), in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in the Registration Statement or such Violation is
caused by the Holder's failure to deliver to the purchaser of the Holder's
Registrable Shares a prospectus (or amendment or supplement thereto) that had
been made available to the Holder by Acquiror; and each such Holder will pay any
legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Section 6.6(e)(ii) in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 6.6(e)(ii) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld. The aggregate
indemnification and contribution liability of each Holder under this Section
6.6(e)(ii) shall not exceed the net proceeds received by such Holder in
connection with sale of shares pursuant to the Registration Statement.
(iii) Each person entitled to indemnification under this
Section 6.6(e) (the "INDEMNIFIED PARTY") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought and shall permit the Indemnifying Party to assume the defense of any such
claim and any litigation resulting therefrom, PROVIDED that counsel for the
Indemnifying Party who conducts the defense of such claim or any litigation
resulting therefrom shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may participate
in such defense at such party's expense, and PROVIDED FURTHER that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 6.6 unless the
Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in
the defense of any such claim or litigation, shall (except with the consent of
each Indemnified Party) consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.
(iv) To the extent that the indemnification provided for
in this Section 6.6(e) is held by a court of competent jurisdiction to be
unavailable to an Indemnified Party with respect to any loss, liability, claim,
damage or expense referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such loss, liability,
claim, damage or expense in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the Indemnified
Party on the other in connection with the statements or
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omissions which resulted in such loss, liability, claim, damage or expense, as
well as any other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(f) CURRENT PUBLIC INFORMATION. Until the earlier of the second
anniversary of the Closing Date (or, if any Holder is an affiliate of Acquiror,
the third anniversary of the Closing Date) or the date all shares of Acquiror
Common Stock subject to this Section 6.6 have been sold, Acquiror will timely
file all reports required to be filed by it under the Exchange Act, and the
rules and regulations adopted by the Commission thereunder, all to the extent
required to enable such Holders to sell their shares pursuant to Rule 144 and
the Registration Statement. Upon written request, Acquiror will deliver to such
holders a written statement as to whether it has compiled with such
requirements.
Section 6.7 PROCEDURES FOR SALE OF SHARES UNDER REGISTRATION STATEMENT.
(a) NOTICE AND APPROVAL. If any Holder shall propose to sell
any Registrable Shares pursuant to the Registration Statement, it shall notify
Acquiror of its intent to do so (including the proposed manner and timing of all
sales) at least two (2) full trading days prior to such sale, and the provision
of such notice to Acquiror shall conclusively be deemed to reestablish and
reconfirm an agreement by such Holder to comply with the registration provisions
set forth in this Agreement. Unless otherwise specified in such notice, such
notice shall be deemed to constitute a representation that any information
previously supplied by such Holder expressly for inclusion in the Registration
Statement (as the same may have been superseded by subsequent such information)
is accurate as of the date of such notice. At any time within such two (2)
trading-day period, Acquiror may refuse to permit the Holder to resell any
Registrable Shares pursuant to the Registration Statement; provided, however,
that in order to exercise this right, Acquiror must deliver a certificate in
writing to the Holder to the effect that a delay in such sale is necessary
because a sale pursuant to the Registration Statement in its then-current form
without the addition of material, non-public information about Acquiror, could
constitute a violation of the federal securities laws. Notwithstanding the
foregoing, Acquiror will ensure that in any event the Holders shall have at
least twenty (20) trading days (prorated for partial quarters) available to sell
Registrable Shares during each calendar quarter (or portion thereof) during the
Registration Effective Period.
(b) DELIVERY OF PROSPECTUS. For any offer or sale of any of the
Registrable Shares by a Holder in a transaction that is not exempt under the
Securities Act, the Holder, in addition to complying with any other federal
securities laws, shall deliver a copy of the final prospectus (or amendment of
or supplement to such prospectus) of Acquiror covering the Registrable Shares in
the form furnished to the Holder by Acquiror to the purchaser of any of the
Registrable Shares on or before the settlement date for the purchase of such
Registrable Shares.
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(c) COPIES OF PROSPECTUSES. Subject to the provisions of this
Section 6.7, when a Holder entitled to sell gives notice of its intent to sell
Registrable Shares pursuant to the Registration Statement, Acquiror shall,
within two (2) trading days following a request from such Holder, furnish to
such Holder a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Shares, such prospectus shall not as of the date
of delivery to the Holder include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing.
Section 6.8 CERTAIN EMPLOYEE BENEFIT MATTERS. From and after the
Effective Time, employees of Target at the Effective Time will be provided with
employee benefits by the Surviving Corporation or Acquiror which in the
aggregate are no less favorable to such employees than those provided from time
to time by Acquiror to similarly situated employees. If any employee of Target
becomes a participant in any employee benefit plan, program, policy or
arrangement of Acquiror, such employee shall be given credit for all service
prior to the Effective Time with Target to the extent permissible under such
plan, program, policy or arrangement. All Target Options assumed by Acquiror at
the Effective Time pursuant to the terms of Section 6.5(a) shall remain
outstanding following the Effective on the same terms and conditions as prior to
the Effective Time, subject to the adjustments contemplated by such Section 6.5.
Employees of Target as of the Effective Time shall be permitted to participate
in the ESPP commencing on the first enrollment date following the Effective
Time, subject to compliance with the eligibility and other provisions of such
plan.
Section 6.9 INDEMNIFICATION. The Acquiror shall not, for a period of
six years after the Effective Time, take any action to alter or impair any
exculpatory or indemnification provisions now existing in the Certificate of
Incorporation or By-laws of Target for the benefit of any individual who served
as a director or officer of Target at any time prior to the Effective Time,
except for any changes which may be required to conform with changes in
applicable law and any changes which do not affect the application of such
provisions to acts or omissions of such individuals prior to the Effective Time.
Section 6.10 TAX TREATMENT. Acquiror and its Subsidiaries will not take,
or cause Target to take, any action after the Effective Time which reasonably
could be expected to cause the Merger to fail to qualify as a reorganization
under the provisions of Section 368(a) of the Code.
ARTICLE VII
OTHER AGREEMENTS
Section 7.1 CONFIDENTIALITY. Each party acknowledges Acquiror and
Target have previously executed a Mutual Non-Disclosure Agreement dated
February 19, 1998 (the "CONFIDENTIALITY AGREEMENT"), which agreement shall
continue in full force and effect in accordance with its terms.
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Section 7.2 NO PUBLIC ANNOUNCEMENT. The parties have agreed upon the
form and substances of a joint press release announcing the consummation of the
Merger, which shall be issued at a time and in a manner mutually agreed upon.
Other than such joint press release, the parties shall make no public
announcement concerning this Agreement, their discussions or any other
memoranda, letters or agreements between the parties relating to the Merger;
PROVIDED, HOWEVER, that either of the parties, but only after reasonable
consultation with the other, may make disclosure if required under applicable
law.
Section 7.3 REGULATORY FILINGS; CONSENTS; REASONABLE EFFORTS. Subject
to the terms and conditions of this Agreement, Target and Acquiror shall use
their respective best efforts to (i) make all necessary filings with respect to
the Merger and this Agreement under the Exchange Act and applicable blue sky or
similar securities laws and obtain required approvals and clearances with
respect thereto and supply all additional information requested in connection
therewith; (ii) make merger notification or other appropriate filings with
federal, state or local governmental bodies or applicable foreign governmental
agencies and obtain required approvals and clearances with respect thereto and
supply all additional information requested in connection therewith;
(iii) obtain all consents, waivers, approvals, authorizations and orders
required in connection with the authorization, execution and delivery of this
Agreement and the consummation of the Merger; and (iv) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable, but no later than
June 11, 1998.
Section 7.4 FURTHER ASSURANCES. Prior to and following the Closing,
each party agrees to cooperate fully with the other parties and to execute such
further instruments, documents and agreements and to give such further written
assurances, as may be reasonably requested by any other party to better evidence
and reflect the transactions described herein and contemplated hereby and to
carry into effect the intents and purposes of this Agreement.
Section 7.5 ESCROW AGREEMENT. On or before the Effective Date, Acquiror
shall, and the parties hereto shall exercise their best efforts to cause the
Escrow Agent (as defined in Section 10.2) and the Stockholders' Agents (as
defined in Section 10.9) to enter into an Escrow Agreement in the form attached
hereto as EXHIBIT D.
Section 7.6 FIRPTA. Target shall, prior to the Closing Date, provide
Acquiror with a properly executed Foreign Investment and Real Property Tax Act
of 1980 ("FIRPTA") FIRPTA Notification Letter which states that shares of
capital stock of Target do not constitute "United States real property
interests" under Section 897(c) of the Code, for purposes of satisfying
Acquiror's obligations under Treasury Regulation Section 1.1445-2(c)(3). In
addition, simultaneously with delivery of such FIRPTA Notification Letter,
Target shall provide to Acquiror, as agent for Target, a form of notice to the
Internal Revenue Service in accordance with the requirements of Treasury
Regulation Section 1.897-2(h)(2), along with written authorization for Acquiror
to deliver such notice form to the Internal Revenue Service on behalf of Target
upon the Closing of the Merger.
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Section 7.7 BLUE SKY LAWS. Acquiror shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the Acquiror Common Stock in connection
with the Merger. Target shall use its best efforts to assist Acquiror as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable in connection with the issuance of Acquiror Common Stock in
connection with the Merger.
Section 7.8 OTHER FILINGS. As promptly as practicable after the date of
this Agreement, Target and Acquiror will prepare and file any other filings
required under the Exchange Act, the Securities Act or any other Federal,
foreign or state securities or blue sky laws relating to the Merger and the
transactions contemplated by this Agreement (the "OTHER FILINGS"). The Other
Filings will comply in all material respects with all applicable requirements of
law and the rules and regulations promulgated thereunder. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Other Filing, Target or Acquiror, as the case may be, will promptly inform the
other of such occurrence and cooperate in making any appropriate amendment or
supplement, and/or mailing to stockholders of Target, such amendment or
supplement.
Section 7.9 TARGET STOCK OPTIONS. Target and Acquiror agree that prior
to the Closing Date, Target shall cause all of the holders of Target Options to
enter into an acknowledgement in the form attached hereto as EXHIBIT E (the
"TARGET OPTION ACKNOWLEDGEMENT AGREEMENT") to provide that the holder of the
Target Option shall acknowledge such holder's obligations under this Agreement
and the Escrow Agreement and shall authorize Acquiror to place the portion of
such options into the Escrow Fund (as defined in Section 10.2) in the manner
contemplated by Sections 2.2 and 10.2 and shall further authorize the
Stockholders' Agents to administer the Escrow Fund on such holders' behalf.
ARTICLE VIII
CONDITIONS TO MERGER
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVAL. The stockholders of Target entitled
to vote on or consent to this Agreement and the Merger in accordance with the
Delaware Law and Target's Certificate of Incorporation shall have approved this
Agreement and the Merger.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger or limiting or restricting
conduct or operation of the business of Acquiror after the Merger shall have
been issued, nor shall any proceeding brought by a domestic administrative
agency or commission or other domestic Governmental Entity or other third party,
seeking any of the foregoing be pending; nor shall there be any action taken, or
any statute, rule, regulation or order
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enacted, entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal.
(c) TAX OPINION. Target shall have received the opinion dated
the Closing Date of Hale and Dorr LLP, counsel to Target, to the effect that the
Merger will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Code. In rendering
such opinion, counsel shall be entitled to rely upon, among other things,
reasonable assumptions as well as representations of Acquiror, Sub and Target.
Section 8.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR AND SUB.
The obligations of Acquiror and Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived in
writing exclusively by Acquiror and Sub:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Target set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except for changes
contemplated by this Agreement; and Acquiror shall have received a certificate
signed on behalf of Target by the chief executive officer and the chief
financial officer of Target to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF TARGET. Target shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date; and Acquiror shall have
received a certificate signed on behalf of Target by the chief executive officer
and the chief financial officer of Target to such effect.
(c) ESCROW AGREEMENT. The Escrow Agent and Stockholders' Agents
shall have executed and delivered to Acquiror the Escrow Agreement and such
agreement shall remain in full force and effect.
(d) STOCKHOLDER'S AGREEMENTS. Each stockholder of Target who is
receiving shares of Acquiror Common Stock in the Merger shall have executed and
delivered to Acquiror the Stockholders Agreement, and such agreements shall
remain in full force and effect.
(e) OPTION ACKNOWLEDGEMENT AGREEMENT. Each holder of a Target
Option on the Closing Date shall have executed and delivered to Acquiror the
Target Option Acknowledgement Agreement, and such acknowledgement shall remain
in full force and effect.
(f) ANCILLARY AGREEMENTS. Each of the Noncompetition Agreements
executed and delivered concurrently with the execution of this Agreement shall
remain in full force and effect.
(g) OPINION OF TARGET'S COUNSEL. Acquiror shall have received
an opinion dated the Closing Date of Hale and Dorr LLP, counsel to Target, as to
the matters in the form attached hereto as EXHIBIT F.
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(h) BOARD RESIGNATIONS. Target shall have received written
letters of resignation from each of the current members of the Target Board of
Directors and from each of the officers of Target.
(i) CONVERSION OF CONVERTIBLE NOTES. The holders of each of the
issued and outstanding Target Convertible Notes and Target shall have taken all
necessary action to convert all of such indebtedness into shares of Target
Common Stock, and the security interest on the assets of Target relating to such
indebtedness shall have been terminated and released in full.
(j) EXERCISE OF TARGET WARRANTS. The holders of each of the
issued and outstanding Target Warrants shall have taken all necessary action to
cause the exercise of all of such warrants in full and Target shall have caused
the issuance of all of the shares of Target Common Stock underlying such
warrants.
(k) AMENDMENTS TO PROMISSORY NOTES. Each of Mssrs. Egan,
Blackwell and Nitzberg shall executed amendments in the form previously agreed
to by the parties to their respective secured promissory notes evidencing
indebtedness to Target.
Section 8.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TARGET. The
obligation of Target to effect the Merger is subject to the satisfaction of each
of the following conditions, any of which may be waived, in writing, exclusively
by Target:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Acquiror and Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and (except to
the extent such representations speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, and Target shall have
received a certificate signed on behalf of Acquiror by the chief executive
officer and the chief financial officer of Acquiror to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF ACQUIROR AND SUB. Acquiror
and Sub 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;
and Target shall have received a certificate signed on behalf of Acquiror by the
chief executive officer and the chief financial officer of Acquiror to such
effect.
(c) OPINION OF ACQUIROR'S COUNSEL. Target shall have received
an opinion dated the Closing Date of Venture Law Group, A Professional
Corporation, counsel to Acquiror, as to the matters attached hereto as EXHIBIT
G.
(d) PAYMENT OF CERTAIN EXPENSES. Acquiror shall have agreed to
pay on behalf of Target the accrued fees of Arthur Andersen LLP in an amount not
to exceed $30,000.
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ARTICLE IX
TERMINATION AND AMENDMENT
Section 9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of Acquiror and Target;
(b) by either Acquiror or Target, by giving written notice to
the other party, if a court of competent jurisdiction or other Governmental
Entity shall have issued a nonappealable final order, decree or ruling or taken
any other action, in each case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger, except, if such party relying on
such order, decree or ruling or other action shall not have complied with its
respective obligations under Sections 5.5 or 6.3 of this Agreement, as the case
may be;
(c) by Acquiror or Target, by giving written notice to the other
party, if the other party is in material breach of any representation, warranty,
or covenant of such other party contained in this Agreement, which breach shall
not have been cured, if subject to cure, within 10 business days following
receipt by the breaching party of written notice of such breach by the other
party;
(d) by Acquiror, by giving written notice to Target, if the
Closing shall not have occurred on or before June 26, 1998 by reason of the
failure of any condition precedent under Section 8.1 or 8.2 (unless the failure
results primarily from a breach by Acquiror of any representation, warranty, or
covenant of Acquiror contained in this Agreement or Acquiror's failure to
fulfill a condition precedent to closing or other default);
(e) by Target, by giving written notice to Acquiror, if the
Closing shall not have occurred on or before June 26, 1998 by reason of the
failure of any condition precedent under Section 8.1 or 8.3 (unless the failure
results primarily from a breach by Target of any representation, warranty, or
covenant of Target contained in this Agreement or Target's failure to fulfill a
condition precedent to closing or other default); or
(f) by Acquiror, by giving written notice to Target, if the
required approvals of the stockholders of Target contemplated by this Agreement
shall not have been obtained by reason of the failure to obtain the required
consents or votes upon a vote taken by written consent or at a meeting of
stockholders, duly convened therefor or at any adjournment thereof.
Section 9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Acquiror,
Target, Sub or their respective officers, directors, stockholders or Affiliates,
except as set forth in Section 9.3 and further except to the extent that such
termination results from the willful breach by any such party of any of its
representations, warranties or covenants set forth in this Agreement.
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Section 9.3 FEES AND EXPENSES.
(a) Except as set forth in this Section 9.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated. Target has submitted a budget to Acquiror for
completion of the Merger. Target shall use its best efforts to consummate the
Merger within such budget and shall not enter into any agreement inconsistent
with such budget.
(b) If the Merger is consummated, all legal, accounting,
investment banking, broker's and finder's fees and expenses incurred by Target
or its stockholders in connection with the Merger shall be deemed expenses of
the stockholders of Target to the extent such fees and expenses exceed $150,000
(excluding fees payable to Broadview Associates, which amount is set forth on
Schedule 9.3(b) hereto and which shall be paid by the Acquiror) and shall be
borne by the stockholders of Target to such extent and will not become
obligations of Target. Except as otherwise contemplated by Section 8.3(d),
Target will make arrangements for the payments of such fees acceptable to
Acquiror. Any such fees and expenses in excess of $150,000 incurred by Target
shall be recoverable from the Escrow Fund (as defined in Section 10.2) as
Damages (as defined in Section 10.1) without regard to the damage threshold as
contemplated by Section 10.3. The payment by Acquiror of certain of such fees
in the manner contemplated by Section 8.3(d) shall in no way increase or
otherwise affect the $150,000 expense limitation provided for in this Section.
ARTICLE X
ESCROW AND INDEMNIFICATION
Section 10.1 INDEMNIFICATION. From and after the Effective Time and
subject to the limitations contained in Section 10.2, the Former Target
Stockholders will, severally and pro rata, in accordance with their Pro Rata
Portion, indemnify and hold Acquiror harmless against any loss, expense,
liability or other damage, including attorneys' fees, to the extent of the
amount of such loss, expense, liability or other damage (collectively "DAMAGES")
that Acquiror has incurred by reason of the breach or alleged breach by Target
of any representation, warranty, covenant or agreement of Target contained in
this Agreement that occurs or becomes known to Acquiror during the Escrow Period
(as defined in Section 10.4 below). Such indemnification shall be the
Acquiror's sole and exclusive remedy for any such breach by Target, except for
cases fraud on the part of Target. Acquiror acknowledges that, with respect to
the evaluation of the Target Financial Statements for purposes of making any
claim under this Section 10.1 for a breach of the representations set forth in
Section 3.4(b), Acquiror and its independent public accountants, Price
Waterhouse, have had the opportunity to review Target's accounting policies and
methods and underlying assumptions inherent in the Target Financial Statements
and, accordingly, Acquiror shall be required to consistently apply the
accounting policies, methods and assumptions in the audited Target Financial
Statements.
Section 10.2 ESCROW FUND. As security for the indemnities in Section
10.1, as soon as practicable after the Effective Date, the Escrow Shares shall
be deposited with Chase Trust
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Company of California (or such other institution selected by Acquiror with the
reasonable consent of Target) as escrow agent (the "ESCROW AGENT"), such deposit
to constitute the Escrow Fund (the "ESCROW FUND") and to be governed by the
terms set forth in this Article X and in the Escrow Agreement. Notwithstanding
the foregoing, the indemnification obligations of each Former Target Stockholder
pursuant to this Article X shall be limited to the amount and assets deposited
by such Former Target Stockholder and present in the Escrow Fund and Acquiror
shall not be entitled to pursue any claims for indemnification under this
Article X or otherwise against any Former Target Stockholder directly or
personally and the sole recourse of Acquiror shall be to make claims against the
Escrow Fund in accordance with the terms of the Escrow Agreement (except for
cases involving fraud on the part of Target).
Section 10.3 DAMAGE THRESHOLD. Notwithstanding the foregoing, the Former
Target Stockholders shall have no liability under Section 10.1 and Acquiror may
not receive any shares from the Escrow Fund unless and until an Officer's
Certificate or Certificates (as defined in Section 10.5 below) for an aggregate
amount of Acquiror's Damages in excess of $125,000 has been delivered to the
Stockholders' Agents and to the Escrow Agent; PROVIDED, HOWEVER, that after an
Officer's Certificate or Certificates for an aggregate of $125,000 in Damages
has been delivered, Acquiror shall be entitled to receive Escrow Shares equal in
value to the full amount of Damages identified in such Officer's Certificate or
Certificates.
Section 10.4 ESCROW PERIODS. The Escrow Fund shall commence on the
Closing Date and terminate eighteen (18) months from the Closing Date (the
period from the Closing to such date referred to as the "ESCROW PERIOD"),
PROVIDED, HOWEVER, that the number of Escrow Shares, which, in the reasonable
judgment of Acquiror, subject to the objection of the Stockholders' Agents (as
defined in Section 10.8) and the subsequent resolution of the matter in the
manner provided in Section 10.8, are necessary to satisfy any unsatisfied claims
specified in any Officer's Certificate theretofore delivered to the Escrow Agent
and the Stockholders' Agents prior to termination of the Escrow Period with
respect to Damages incurred or litigation pending prior to expiration of the
Escrow Period, shall remain in the Escrow Fund until such claims have been
finally resolved.
Section 10.5 CLAIMS UPON ESCROW FUND. Upon receipt by the Escrow Agent
on or before the last day of the Escrow Period of a certificate signed by any
appropriately authorized officer of Acquiror (an "OFFICER'S CERTIFICATE"):
(i) Stating the aggregate amount of Acquiror's Damages
or an estimate thereof, in each case to the extent known or determinable at such
time, and,
(ii) Specifying in reasonable detail the individual items
of such Damages included in the amount so stated, the date each such item was
paid or properly accrued or arose, and the nature of the misrepresentation,
breach or claim to which such item is related, the Escrow Agent shall, subject
to the provisions of Sections 10.3, 10.7 and 10.8 hereof, deliver to Acquiror
out of the Escrow Fund, as promptly as practicable, Escrow Shares having a value
equal to such Damages all in accordance with the Escrow Agreement and Section
10.6 below. Amounts paid or distributed from the Escrow Fund shall be paid or
distributed pro rata among
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the Holders (as defined in the Escrow Agreement) based upon their respective
percentage interests therein at the time in the form (Acquiror Common Stock or
options to acquire Acquiror Common Stock or cash) contributed by each such
Holder.
Section 10.6 VALUATION. For the purpose of compensating Acquiror for its
Damages pursuant to this Agreement, the value per share of the Escrow Shares
shall be the Reference Stock Price.
Section 10.7 OBJECTIONS TO CLAIMS. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such Officer's
Certificate shall be delivered to the Stockholders' Agents (as defined in
Section 10.9 below) and for a period of thirty (30) days after such delivery,
the Escrow Agent shall make no delivery of Escrow Shares pursuant to Section
10.4 unless the Escrow Agent shall have received written authorization from the
Stockholders' Agents to make such delivery. After the expiration of such thirty
(30) day period, the Escrow Agent shall make delivery of the Escrow Shares in
the Escrow Fund in accordance with Section 10.5, PROVIDED that no such delivery
may be made if the Stockholders' Agents shall object in a written statement to
the claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent and to Acquiror prior to the expiration of such
thirty (30) day period.
Section 10.8 RESOLUTION OF CONFLICTS.
(a) In case the Stockholders' Agents shall so object in writing
to any claim or claims by Acquiror made in any Officer's Certificate, Acquiror
shall have thirty (30) days to respond in a written statement to the objection
of the Stockholders' Agents. If after such thirty (30) day period there remains
a dispute as to any claims, the Stockholders' Agents and Acquiror shall attempt
in good faith for thirty (30) days to agree upon the rights of the respective
parties with respect to each of such claims. If the Stockholders' Agents and
Acquiror should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties and shall be furnished to the Escrow Agent.
The Escrow Agent shall be entitled to rely on any such memorandum and shall
distribute the Escrow Shares from the Escrow Fund in accordance with the terms
of the memorandum.
(b) If no such agreement can be reached after good faith
negotiation, either Acquiror or the Stockholders' Agents may, by written notice
to the other, demand arbitration of the matter unless the amount of the damage
or loss is at issue in pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter shall be
settled by arbitration conducted by three arbitrators. Within fifteen (15) days
after such written notice is sent, Acquiror (on the one hand) and the
Stockholders' Agents (on the other hand) shall each select one arbitrator, and
the two arbitrators so selected shall select a third arbitrator. The decision
of the arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in Section 10.8, the Escrow Agent shall be entitled
to act in accordance with such decision and make or withhold payments out of the
Escrow Fund in accordance with such decision.
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(c) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Santa Clara or San Mateo County, California under the commercial rules then in
effect of the American Arbitration Association.
Section 10.9 STOCKHOLDERS' AGENTS.
(a) Omar Khudari and Alan Docter shall be constituted and
appointed as agents (the "STOCKHOLDERS' AGENTS") for and on behalf of the Former
Target Stockholders to give and receive notices and communications, to authorize
delivery to Acquiror of the Escrow Shares or other property from the Escrow Fund
in satisfaction of claims by Acquiror, to object to such deliveries, to agree
to, negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Stockholders' Agents for the accomplishment of the foregoing. All actions of
the Stockholders' Agents shall be taken jointly, not individually. Such agency
may be changed by the holders of a majority in interest of the Escrow Shares
from time to time upon not less than ten (10) days' prior written notice to
Acquiror. No bond shall be required of the Stockholders' Agents, and the
Stockholders' Agents shall receive no compensation for services. Notices or
communications to or from the Stockholders' Agents shall constitute notice to or
from each of the Former Target Stockholders.
(b) The Stockholders' Agents shall not be liable for any act
done or omitted hereunder as Stockholders' Agent while acting in good faith and
in the exercise of reasonable judgment, and any act done or omitted pursuant to
the advice of counsel shall be conclusive evidence of such good faith. The
Former Target Stockholders shall severally and pro rata, in accordance with
their Pro Rata Portion, indemnify the Stockholders' Agents and hold them
harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Stockholders' Agents and arising out
of or in connection with the acceptance or administration of their duties
hereunder under this Agreement or the Escrow Agreement.
(c) The Stockholders' Agents shall have reasonable access to
information about Target and Acquiror and the reasonable assistance of Target's
and Acquiror's officers and employees for purposes of performing their duties
and exercising their rights under this Article X, PROVIDED that the
Stockholders' Agents shall treat confidentially and not disclose any nonpublic
information from or about Target or Acquiror to anyone (except on a need to know
basis to individuals who agree to treat such information confidentially).
Section 10.10 ACTIONS OF THE STOCKHOLDERS' AGENTS. A decision, act,
consent or instruction of the Stockholders' Agents shall constitute a decision
of all of the Former Target Stockholders for whom shares of Acquiror Common
Stock otherwise issuable to them are deposited in the Escrow Fund and shall be
final, binding and conclusive upon each such Former Target Stockholder, and the
Escrow Agent and Acquiror may rely upon any decision, act, consent or
instruction of the Stockholders' Agents as being the decision, act, consent or
instruction of each and every such Former Target Stockholder. The Escrow Agent
and Acquiror
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are hereby relieved from any liability to any person for any acts done by them
in accordance with such decision, act, consent or instruction of the
Stockholders' Agents.
Section 10.11 CLAIMS. In the event Acquiror becomes aware of a
third-party claim which Acquiror believes may result in a demand against the
Escrow Fund, Acquiror shall notify the Stockholders' Agents of such claim, and
the Stockholders' Agents and the Former Target Stockholders for whom shares of
Acquiror Common Stock otherwise issuable to them are deposited in the Escrow
Fund shall be entitled, at their expense, to participate in any defense of such
claim. Acquiror shall have the right to settle any such claim; PROVIDED,
HOWEVER, that Acquiror may not affect the settlement of any such claim without
the consent of the Stockholders' Agents, which consent shall not be unreasonably
withheld. In the event that the Stockholders' Agents have consented to any such
settlement, the Stockholders' Agents shall have no power or authority to object
to the amount of any claim by Acquiror against the Escrow Fund for indemnity
with respect to such settlement, unless such claim is in an amount in excess of
any amount consented to by the Stockholders' Agents.
ARTICLE XI
MISCELLANEOUS
Section 11.1 SURVIVAL OF REPRESENTATIONS AND COVENANTS. All
representations, warranties, covenants and agreements of Target contained in
this Agreement shall survive the Closing and any investigation at any time made
by or on behalf of Acquiror until the end of the Escrow Period. If Escrow
Shares or other assets are retained in the Escrow Fund beyond expiration of the
period specified in the Escrow Agreement, then (notwithstanding the expiration
of such time period) the representation, warranty, covenant or agreement
applicable to such claim shall survive until, but only for purposes of, the
resolution of the claim to which such retained Escrow Shares or other assets
relate. All representations, warranties, covenants and agreements of Acquiror
contained in this Agreement shall terminate as of the Effective Time, provided
that the covenants and agreements contained in Sections 6.5, 6.6, 6.7 and 9.3
and Article X shall survive the Closing and shall continue in full force and
effect.
Section 11.2 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or two business days after being mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Acquiror or Sub:
Yahoo! Inc.
3420 Central Expressway
Santa Clara, CA 95051
Attention: Chief Executive Officer
Fax No: (408) 731-3510
Telephone No: (408) 731-3300
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with a copy at the same address to the attention of the General
Counsel and Secretary and with a copy to:
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
Attention: Steven Tonsfeldt
Fax No: (650) 233-8386
Telephone No: (650) 854-4488
(b) if to Target, to:
Viaweb Inc.
56 John F. Kennedy Street
Cambridge, MA 02138
Attention: President
Fax No: (617) 354-2624
Telephone No: (617) 876-2692
with copies to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: Paul V. Rogers
Fax No: (617) 526-5000
Telephone No: (617) 526-6000
Omar Khudari
16 Belfry Terrace
Lexington, MA 02421
Fax No: (781) 862-8809
Telephone No: (617) 747-3982
Alan Docter
100 Worth Avenue
Suite 715
Palm Beach, FL 33480
Fax No: (561) 659-5643
Telephone No: (561) 832-7515
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Section 11.3 INTERPRETATION. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available.
References to the "knowledge of Target" or "Target's knowledge" or any similar
expression shall mean the actual knowledge, after reasonable inquiry, of Omar
Khudari, Frederick Egan, Harris Fishman, Paul Graham, Edward L. Steinart, David
Parker and Mark Nitzberg and any other individual who is an executive officer or
director of Target.
Section 11.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 11.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement (including the documents and the instruments referred to herein), the
Confidentiality Agreement, and the Transaction Documents (a) constitute the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and (b) are not intended to confer upon any person other than the parties hereto
(including without limitation any Target employees) any rights or remedies
hereunder.
Section 11.6 GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of California without regard
to any applicable conflicts of law.
Section 11.7 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
Section 11.8 AMENDMENT. This Agreement may be amended by the parties
hereto, at any time before or after approval of matters presented in connection
with the Merger by the stockholders of Target, but after any such stockholder
approval, no amendment shall be made which by law requires the further approval
of stockholders without obtaining such further approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 11.9 EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties hereto may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or the other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations or warranties
contained herein or in any document delivered pursuant hereto and
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(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party.
Section 11.10 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to injunctive relief to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Acquiror, Sub and Target have caused this Agreement and
Plan of Reorganization to be signed by their respective officers thereunto duly
authorized as of the date first written above.
YAHOO! INC.
By: /s/ Timothy Koogle
------------------------------------
Name: Timothy Koogle
Title: President & CEO
XY ACQUISITION CORPORATION
By: /s/ Timothy Koogle
------------------------------------
Name: Timothy Koogle
Title: President & CEO
VIAWEB INC.
By: /s/ Paul Graham
------------------------------------
Name: Paul Graham
Title: President