Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
SHOPNOW.COM INC.,
RACER ACQUISITION, INC.,
SPEEDYCLICK, CORP.
AND
THE PRINCIPAL SHAREHOLDERS OF SPEEDYCLICK, CORP.
DATED AS OF NOVEMBER 10, 1999
CONTENTS
ARTICLE I - THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1A The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Effective Date and Time. . . . . . . . . . . . . . . . . . . . . 2
1.3 Articles of Incorporation of the Surviving Corporation . . . . . 2
1.4 Bylaws of the Surviving Corporation. . . . . . . . . . . . . . . 2
1.5 Directors and Officers . . . . . . . . . . . . . . . . . . . . . 3
1.6 Merger Consideration . . . . . . . . . . . . . . . . . . . . . . 3
1.6.1 Conversion of Shares. . . . . . . . . . . . . . . . . . 3
1.6.2 Exchange of Certificates; Payment of Closing Cash . . . 6
1.6.3 No Fractional Shares. . . . . . . . . . . . . . . . . . 8
1.6.4 No Further Transfers. . . . . . . . . . . . . . . . . . 8
1.7 Shareholder Representative . . . . . . . . . . . . . . . . . . . 8
1.8 Option Shares; Registration. . . . . . . . . . . . . . . . . . . 9
1.9 Option Grants. . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.10 Shareholder Indebtedness . . . . . . . . . . . . . . . . . . . .10
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . .10
2.1 Organization; Power and Authority. . . . . . . . . . . . . . . .10
2.2 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . .11
2.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . .11
2.4 Subsidiaries and Affiliates. . . . . . . . . . . . . . . . . . .13
2.5 No Approvals; No Conflicts . . . . . . . . . . . . . . . . . . .13
2.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . .14
2.7 Absence of Certain Changes or Events . . . . . . . . . . . . . .14
2.8 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
2.9 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
2.10 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
2.10.1 Material Contracts. . . . . . . . . . . . . . . . . . .20
2.10.2 Required Consents and Waivers . . . . . . . . . . . . .21
2.11 Claims and Legal Proceedings . . . . . . . . . . . . . . . . . .21
2.12 Labor and Employment Matters . . . . . . . . . . . . . . . . . .22
2.13 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . .23
2.13.1 Employee Benefit Plan Listing . . . . . . . . . . . . .23
2.13.2 Documents Provided. . . . . . . . . . . . . . . . . . .23
2.13.3 Compliance. . . . . . . . . . . . . . . . . . . . . . .23
2.13.4 Pension Plans . . . . . . . . . . . . . . . . . . . . .24
2.13.5 Contributions and Premium Payments. . . . . . . . . . .24
2.13.6 Related Employers . . . . . . . . . . . . . . . . . . .24
2.13.7 Post-Termination Benefits . . . . . . . . . . . . . . .25
2.13.8 Parachute Payments. . . . . . . . . . . . . . . . . . .25
2.13.9 Suits, Claims and Investigations. . . . . . . . . . . .25
2.13.10 Payments Resulting from Transactions. . . . . . . . . .25
2.13.11 Definitions . . . . . . . . . . . . . . . . . . . . . .26
2.14 Intellectual Property. . . . . . . . . . . . . . . . . . . . . .26
2.14.1 General . . . . . . . . . . . . . . . . . . . . . . . .26
2.14.2 Company Technology. . . . . . . . . . . . . . . . . . .27
2.14.3 Third Party Technology. . . . . . . . . . . . . . . . .27
2.14.4 Trademarks. . . . . . . . . . . . . . . . . . . . . . .28
2.14.5 Intellectual Property Rights. . . . . . . . . . . . . .28
2.14.6 Maintenance of Rights . . . . . . . . . . . . . . . . .28
2.14.7 Third Party Claims. . . . . . . . . . . . . . . . . . .29
2.14.8 Infringement by the Company . . . . . . . . . . . . . .29
2.14.9 Confidentiality . . . . . . . . . . . . . . . . . . . .30
2.14.10 Warranty Against Defects. . . . . . . . . . . . . . . .30
2.14.11 Domain Names. . . . . . . . . . . . . . . . . . . . . .30
2.14.12 Year 2000 . . . . . . . . . . . . . . . . . . . . . . .30
2.15 Corporate Books and Records. . . . . . . . . . . . . . . . . . .31
2.16 Licenses, Permits, Authorizations, etc.. . . . . . . . . . . . .31
2.17 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . .31
2.18 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . .32
2.19 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . .32
2.20 Absence of Questionable Payments . . . . . . . . . . . . . . . .32
2.21 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . .33
2.22 Customers and Suppliers. . . . . . . . . . . . . . . . . . . . .33
2.23 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . .33
2.24 Creditors' List. . . . . . . . . . . . . . . . . . . . . . . . .34
2.25 Insider Interests. . . . . . . . . . . . . . . . . . . . . . . .34
2.26 Compliance With Environmental Laws . . . . . . . . . . . . . . .34
2.27 Information Supplied by the Company. . . . . . . . . . . . . . .35
2.28 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . .35
2.29 Hart-Scott-Rodino. . . . . . . . . . . . . . . . . . . . . . . .35
2.30 Participating Developers . . . . . . . . . . . . . . . . . . . .36
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SHOPNOW AND THE PURCHASER. .36
3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . .36
3.2 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . .37
3.3 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . .37
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3.4 No Approvals or Notices Required; No Conflicts With Instruments.37
3.5 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . .38
3.6 SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . .38
3.7 Information Supplied by ShopNow. . . . . . . . . . . . . . . . .38
3.8 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . .38
ARTICLE IV - DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . .39
4.1 Deliveries by the Company and the Shareholders . . . . . . . . .39
4.2 Deliveries by ShopNow and the Purchaser. . . . . . . . . . . . .41
ARTICLE IVA - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SHOPNOW AND THE
PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
4A.1 Accuracy of Representations and Warranties . . . . . . . . . . .42
4A.2 Performance of Agreements; Deliveries. . . . . . . . . . . . . .42
4A.3 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . .43
4A.4 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . .43
ARTICLE IVB - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
PRINCIPAL SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . .43
4B.1 Accuracy of Representations and Warranties . . . . . . . . . . .43
4B.2 Performance of Agreements; Deliveries. . . . . . . . . . . . . .43
4B.3 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . .44
4B.4 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . .44
ARTICLE IVC - COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . .44
4C.1 Conduct of Business by the Company Pending the Merger. . . . . .44
4C.2. No Alternative Transactions. . . . . . . . . . . . . . . . . . .44
4C.3 Notification of Certain Matters. . . . . . . . . . . . . . . . .45
4C.4 Further Action; Commercially Reasonable Efforts. . . . . . . . .45
4C.5 Limitation on Sales of Company Common Stock. . . . . . . . . . .45
ARTICLE V - SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . . . . .46
5.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
5.2 Indemnification by the Shareholders. . . . . . . . . . . . . . .46
5.3 Indemnification by ShopNow . . . . . . . . . . . . . . . . . . .47
5.4 Threshold and Limitations. . . . . . . . . . . . . . . . . . . .47
5.5 Procedure for Indemnification. . . . . . . . . . . . . . . . . .48
5.6 Holdback . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
5.6.1 Pledge. . . . . . . . . . . . . . . . . . . . . . . . .49
5.6.2 Holdback Release. . . . . . . . . . . . . . . . . . . .50
5.6.3 Claims Procedure. . . . . . . . . . . . . . . . . . . .50
5.6.4 Voting; Disposition . . . . . . . . . . . . . . . . . .51
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5.6.5 Merger or Recapitalization. . . . . . . . . . . . . . .52
5.6.6 Taxation of Dividends . . . . . . . . . . . . . . . . .52
5.7 Specific Performance . . . . . . . . . . . . . . . . . . . . . .52
ARTICLE VA - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . .52
5A.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . .52
5A.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . .53
ARTICLE VI - GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
6.1 Further Action; Reasonable Best Efforts; Domain Name Transfer. .53
6.2 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . .54
6.3 Noncompetition Agreement . . . . . . . . . . . . . . . . . . . .54
6.4 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . .55
6.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
6.6 Tax Matters - Company and Shareholders . . . . . . . . . . . . .55
6.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
6.8 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
6.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . .57
6.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . .57
6.11 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . .57
6.12 Parties in Interest. . . . . . . . . . . . . . . . . . . . . . .57
6.13 Governing Law; Venue . . . . . . . . . . . . . . . . . . . . . .58
6.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
6.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . .58
6.16 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . .58
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EXHIBITS
1.2 -- Articles of Merger
1.3 -- Articles of Incorporation of Surviving Corporation
1.6.2 -- Letter of Transmittal
2 -- Company Disclosure Memorandum
2.14.10 -- Technology Specifications
2.30(a) -- Form of Confidential Information and Inventions Agreement
2.30(b) -- Form of Amendment to Employment Policy and Agreement and
Confidential Information and Inventions Agreement
4.1(a) -- Opinion of Counsel for the Company
4.1(e) -- FIRPTA Affidavit
4.1(f) -- Form of Intellectual Property Agreement (Confidentiality,
Invention Assignment, Nonraiding and Noncompetition)
4.1(h) -- Form of Investor Questionnaire
4.1(m) -- Form of Employment Agreement
4.2(a) -- Opinion of Counsel for ShopNow and the Purchaser
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT") is made and entered
into as of November 10, 1999, by and among ShopNow.com Inc., a Washington
corporation ("SHOPNOW"), Racer Acquisition, Inc., a Washington corporation and
wholly owned subsidiary of ShopNow ("PURCHASER"), Farid Tabibzadeh, Majid
Tabibzadeh and Shahab Emrani (the "PRINCIPAL SHAREHOLDERS") and SpeedyClick,
Corp., a California corporation (the "COMPANY").
RECITALS
A. The Company, the Principal Shareholders, ShopNow and Purchaser believe
it advisable and in their respective best interests to effect a merger of the
Company and Purchaser pursuant to this Agreement (the "MERGER").
B. The Board of Directors of the Company and the shareholders of the
Company (the "SHAREHOLDERS") have approved this Agreement and the Merger as
required by applicable law.
C. The Boards of Directors of ShopNow and the Purchaser and the sole
shareholder of Purchaser have approved this Agreement and the Merger as required
by applicable law.
D. It is intended that the Merger will qualify as a reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "CODE").
E. The Company is a corporation doing business in every county in
California, in every state in the United States and throughout the world.
AGREEMENT
In consideration of the terms hereof, the parties hereto agree as
follows:
ARTICLE I - THE MERGER
1.1 THE MERGER
Upon the terms and subject to the conditions hereof, (a) at the Effective
Time (as defined in Section 1.2 hereof), the separate existence of the Purchaser
shall cease and the Purchaser shall be merged with and into the Company (the
Company is sometimes referred to herein as the "SURVIVING CORPORATION") and (b)
from and after
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the Effective Time, the Merger shall have all the effects of a merger under the
laws of Washington and California and other applicable law.
1.1A THE CLOSING
Subject to the terms and conditions of this Agreement, the closing of the
Merger (the "CLOSING") shall take place on the earliest practicable business day
(the "CLOSING DATE") after the satisfaction or waiver of the conditions set
forth in Articles IVA and IVB at 10 a.m. local time at the offices of Perkins
Coie LLP, 1201 Third Avenue, 48th Floor, Seattle, Washington, or such other
date, time or location as ShopNow and the Company shall agree.
1.2 EFFECTIVE DATE AND TIME
On the Closing Date, subject to the terms and conditions hereof, articles
of merger (the "ARTICLES OF MERGER") substantially in the form attached hereto
as EXHIBIT 1.2 complying with the applicable provisions of the Washington
Business Corporation Act ("WASHINGTON LAW") and the California General
Corporation Law ("CALIFORNIA LAW") and in such form and executed in such manner
as required by Washington Law and California Law shall be delivered for filing
with the Secretary of State of the State of Washington (the "WASHINGTON
SECRETARY") and the Secretary of State of the State of California (the
"CALIFORNIA SECRETARY"). The Merger shall become effective on the date (the
"EFFECTIVE DATE") and at the time (the "EFFECTIVE TIME") of filing of the
Articles of Merger or at such other time as may be specified in the Articles of
Merger as filed. If either the Washington Secretary or the California Secretary
requires any changes in the Articles of Merger as a condition to filing or
issuing its certificate to the effect that the Merger is effective, ShopNow, the
Purchaser and the Company will execute any necessary revisions incorporating
such changes, provided such changes are not inconsistent with and do not result
in any material change in the terms of this Agreement.
1.3 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION
At the Effective Time, the Articles of Incorporation of the Surviving
Corporation shall be amended and restated in their entirety to conform to the
Articles of Incorporation attached hereto as EXHIBIT 1.3. Thereafter, the
Articles of Incorporation of the Surviving Corporation may be amended in
accordance with their terms and as provided by law.
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1.4 BYLAWS OF THE SURVIVING CORPORATION
At the Effective Time, the Bylaws of the Company as in effect immediately
prior to the Effective Time shall become the Bylaws of the Surviving
Corporation. Thereafter, the Bylaws may be amended or repealed in accordance
with their terms and the Articles of Incorporation of the Surviving Corporation
and as provided by law.
1.5 DIRECTORS AND OFFICERS
At the Effective Time, the directors and officers of the Company shall
resign and the directors of Purchaser shall continue in office as the directors
of the Surviving Corporation and the officers of Purchaser shall continue in
office as the officers of the Surviving Corporation, and such directors and
officers shall hold office in accordance with and subject to the Articles of
Incorporation and Bylaws of the Surviving Corporation.
1.6 MERGER CONSIDERATION
1.6.1 CONVERSION OF SHARES
As of the Effective Time, by virtue of the Merger and without any action
on the part of the holders thereof:
(a) All shares of any class of capital stock of the Company held
by the Company as treasury shares shall be canceled.
(b) Each share of common stock, no par value, of the Company (the
"COMPANY COMMON STOCK") that is issued and outstanding immediately prior to the
Effective Time, including each share of Company Common Stock issued upon
conversion of each issued and outstanding share of the Company's Series A
Preferred Stock (the "COMPANY PREFERRED STOCK"), other than those shares for
which dissenters' rights are perfected or as provided in Section 1.6.1(a), shall
be converted into the right to receive from ShopNow:
(i) an amount in cash equal to $.51, which amount has
been determined by dividing (a) $3 million (the "CLOSING CASH") by (b) the total
number of shares of Company Common Stock outstanding immediately prior to the
Effective Time, as set forth on Schedule 2.3(b) to the Company Disclosure
Memorandum; and
(ii) a number of shares of ShopNow common stock, par
value $.001 per share (the "SHOPNOW COMMON STOCK"), determined by dividing (a)
the ShopNow Base Shares by (b) the Fully Diluted Common Stock Number.
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The quotient derived in Section 1.6.1(b)(ii) shall be rounded to three decimal
points and shall be referred to herein as the "STOCK EXCHANGE RATIO." The
"SHOPNOW BASE SHARES" shall mean the total number of shares of ShopNow Common
Stock to be issued in the Merger, which shall be equal to the number of shares
determined by dividing (i) the Vested Base Consideration (as defined below) by
(ii) $12.313 (the "BASE PRICE"), subject to adjustment as provided in Section
1.6.1(h). The "FULLY DILUTED COMMON STOCK NUMBER" shall mean the total number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time on a fully diluted basis, as set forth on SCHEDULE 2.3(b) to the Company
Disclosure Memorandum, which calculation assumes (x) the exercise of all
outstanding rights, warrants or options, vested but not unvested, to acquire
Company Common Stock, regardless of restrictions on exercise or conversion and
(y) the conversion of all outstanding securities (including, without limitation,
the Company Preferred Stock) and notes convertible at any time into Company
Common Stock (such rights, warrants, notes, options and convertible securities
referenced in clauses (x) and (y) being referred to herein as "STOCK PURCHASE
RIGHTS"). The shares of ShopNow Common Stock so issued shall be referred to
herein as the "CLOSING SHARES," which together with the Closing Cash, shall be
referred to as the "MERGER CONSIDERATION." The Company Common Stock, together
with the Company Preferred Stock, shall be referred to herein as the "COMPANY
CAPITAL STOCK." The "VESTED BASE CONSIDERATION" shall mean the number determined
by subtracting (i) the Vested Cash Consideration from (ii) $47,000,000. The
"VESTED CASH CONSIDERATION" shall mean the product obtained by multiplying (i)
the quotient obtained by dividing $3,000,000 by the Fully Diluted Common Stock
Number by (ii) the total number of shares of Company Common Stock subject to
outstanding options that are vested immediately prior to the Effective Time. The
number of shares of ShopNow Common Stock to be issued to each Shareholder under
this Section 1.6.1(b) shall be calculated by aggregating all shares of Company
Common Stock held by each such Shareholder, so that such number of shares of
ShopNow Common Stock to be issued shall be equal to the number of shares of
Company Common Stock held by such shareholder multiplied by the Stock Exchange
Ratio, with fractional shares rounded up to the nearest whole number, or
converted to cash, as required by Section 1.6.3 hereof.
(c) On or prior to the Closing Date, ShopNow shall deposit or
cause to be deposited in trust with Continental Stock Transfer & Trust Company
("CONTINENTAL"), as exchange agent, the aggregate Closing Cash to which the
Shareholders shall be entitled at the Effective Time pursuant to Section 1.6.1.
(d) Notwithstanding the foregoing, as collateral security for the
indemnification obligations of the Principal Shareholders pursuant to Article V,
the Principal Shareholders hereby pledge, transfer and assign to ShopNow,
subject to the
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effectiveness of the Merger, that number of shares of ShopNow Common Stock
determined by dividing (x) $1,410,000 by (y) the Base Price (the
"INDEMNIFICATION SHARES") to secure the indemnification obligations of the
Principal Shareholders pursuant to Article V hereof (the "HOLDBACK"). Such
pledge is for the benefit of ShopNow, and each Principal Shareholder grants a
security interest in such Principal Shareholder's pro rata share of the
Indemnification Shares, and the certificates and instruments, if any,
representing or evidencing such Indemnification Shares. Fractional shares of
ShopNow Common Stock shall not be pledged. In lieu thereof, each Principal
Shareholder shall round up such fractional share to the nearest whole number and
pledge a full share of ShopNow Common Stock for such fractional share.
(e) ShopNow shall assume the Company's 1999 Stock Incentive Plan
(the "COMPANY OPTION PLAN"), and each outstanding option to purchase shares of
Company Common Stock issued pursuant to the Company Option Plan or any other
stock option agreement, whether or not vested or exercisable (each an "OPTION"),
shall be assumed by ShopNow and shall constitute an option to acquire, on the
same vesting terms, and on substantially the same other terms and conditions as
were applicable under such assumed Option, that number of shares of ShopNow
Common Stock equal to the product of the Option Exchange Ratio (as defined
below) and the number of shares of Company Common Stock subject to such Option,
at a price per share (rounded to the nearest $.01, with $.005 rounded up) equal
to the aggregate exercise price for the shares of Company Common Stock subject
to such Option divided by the number of full shares of ShopNow Common Stock
deemed to be purchasable pursuant to such Option; provided, however, that (i)
subject to the provisions of clause (ii) below, the number of shares of ShopNow
Common Stock that may be purchased upon exercise of such Option shall not
include any fractional shares, and, upon the last exercise of such Option,
ShopNow shall pay to the holder thereof as soon as practicable an amount of cash
equal to such fraction, if any, multiplied by the Base Price, and (ii) in the
case of any Option to which Section 421 of the Code applies by reason of its
qualification under Section 422 of the Code, the option, price, the number of
shares purchasable pursuant to such Option and the terms and condition of
exercise of such Option shall be determined in order to comply with Section 424
of the Code (as defined below). ShopNow shall assume the obligations of the
Company under the Company Option Plan at the Effective Time and shall comply
with the terms of such plan as they apply to the Options assumed as set forth
above. Within 15 days after the Closing Date, ShopNow shall notify each holder
of an Option under the Company Option Plan of the assumption of such Option by
ShopNow and the revisions to be effected thereby. The "OPTION EXCHANGE RATIO"
shall be determined by dividing (x) the Aggregate Base Consideration by (y) the
Fully Diluted Common Stock Number. "AGGREGATE BASE CONSIDERATION" shall mean the
number determined by dividing (x) the
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total value of the Merger Consideration, which shall be $50 million, less the
dollar value of any Increase (as defined in Section 1.6.1(h), by (y) the Base
Price.
(f) Holders of shares of Company Capital Stock who have complied
with all the requirements for perfecting dissenters' rights, as required under
California Law, shall be entitled to their rights under California Law with
respect to such shares (the "DISSENTING SHARES"). Notwithstanding the foregoing,
if any holder of Dissenting Shares shall effectively withdraw or lose (through
failure to perfect or otherwise) the right to dissent, then, as of the later of
the Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent the right to receive the shares of
ShopNow Common Stock to which such holder is then entitled under this Agreement
and California Law, without interest thereon and upon surrender of the
certificate representing such shares. Notwithstanding any provision of this
Agreement to the contrary, any Dissenting Shares held by a Shareholder who has
perfected dissenters' rights for such shares in accordance with California Law
shall not be converted into ShopNow Common Stock pursuant to this Section 1.6.1.
(g) Each issued and outstanding share of capital stock of the
Purchaser shall be converted into one share of common stock of the Surviving
Corporation.
(h) The number of ShopNow Base Shares shall be subject to
adjustment as follows:
(i) The Company shall prepare and deliver to ShopNow, on
the date immediately prior to the Closing Date, a pro forma balance sheet for
the Company as of the Closing Date (the "CLOSING BALANCE SHEET"). The Closing
Balance Sheet shall be prepared by the Company from the books and records of the
Company in accordance with GAAP (as defined below), applied on a basis
consistent with the policies employed in the preparation of the Company Balance
Sheet (as defined in Section 2.6 hereto).
(ii) In the event that the Closing Balance Sheet reflects
Company Debt Liability in an amount greater than $150,000, as reflected on the
Company Balance Sheet (an "INCREASE"), the number of ShopNow Base Shares and the
Aggregate Base Consideration shall both be reduced by a number of shares, or a
dollar amount, as applicable, determined by dividing (x) the dollar amount of
the Increase by (y) the Base Price. "COMPANY DEBT LIABILITY" shall mean any
long-term liability, notes payable, loans, lease obligations or other debt of
the Company.
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1.6.2 EXCHANGE OF CERTIFICATES; PAYMENT OF CLOSING CASH
(a) As soon as practicable after the Effective Time, Continental
shall make available, and each Shareholder will be entitled to receive, promptly
after surrender to Continental of a letter of transmittal in the form set forth
at Exhibit 1.6.2 hereto (the "LETTER OF TRANSMITTAL") together with documents
delivered as required therein, including certificates representing shares of
Company Capital Stock for cancellation: (i) certificates representing the
numbers of shares of ShopNow Common Stock that such Shareholder is entitled to
receive pursuant to Section 1.6.1 hereof and (ii) a check representing the
portion of the Closing Cash that such Shareholder is entitled to receive
pursuant to Section 1.6.1 hereof; provided, however, that those certificates
representing the Indemnification Shares shall be delivered to ShopNow directly
by the transfer agent. In the event that any certificates representing shares of
Company Capital Stock shall have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the Shareholder claiming such certificate to be
lost, stolen or destroyed, ShopNow shall issue in exchange for such lost, stolen
or destroyed certificate the shares of ShopNow Common Stock that such
Shareholder is entitled to receive pursuant to Section 1.6.1; provided, however,
that ShopNow may in its discretion and as a condition precedent to the issuance
thereof, require such Shareholder to provide ShopNow with an indemnity agreement
against any claim that may be made against ShopNow with respect to the
certificate alleged to have been lost, stolen or destroyed. The shares of
ShopNow Common Stock that each Shareholder shall be entitled to receive pursuant
to the Merger shall be deemed to have been issued at the Effective Time. No
interest shall accrue on any portion of the Merger Consideration. If the Merger
Consideration (or any portion thereof) is to be delivered to any person other
than the person in whose name the certificate or certificates representing
shares of Company Capital Stock surrendered in exchange therefor is registered,
it shall be a condition to such exchange that the person requesting such
exchange shall pay to ShopNow any transfer or other taxes required by reason of
the payment of the Merger Consideration to a person other than the registered
holder of the certificate or certificates so surrendered or shall establish to
the satisfaction of ShopNow that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither ShopNow nor any other party hereto shall
be liable to a holder of shares of Company Capital Stock for any
MergerConsideration delivered to a public official pursuant to applicable
abandoned property, escheat and similar laws.
(b) Any portion of the Merger Consideration deposited with
Continental pursuant to Section 1.6.1(c) that remains unclaimed by the
Shareholders one year after the Effective Time shall be returned upon demand to
ShopNow, and any Shareholder who has not exchanged his, her or its shares of
Company Common Stock for the Merger Consideration in accordance with this
Section 1.6.2 prior to that time
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shall thereafter look only to ShopNow for payment of the Merger Consideration in
respect of his, her or its shares of Company Common Stock, but shall have no
greater rights against ShopNow than may be accorded to its general creditors
under applicable law. Any portion of the Merger Consideration remaining
unclaimed by holders of shares of Company Common Stock as of a date which is
immediately prior to such time as such amounts would otherwise escheat to or
become property of any government entity shall, to the extent permitted by
applicable law, become the property of ShopNow free and clear of any claims or
interest of any person previously entitled thereto.
1.6.3 NO FRACTIONAL SHARES
No certificates or scrip representing fractional shares of ShopNow Common
Stock shall be issued by virtue of the Merger. If a fraction of a share of
ShopNow Common Stock that any holder would otherwise receive pursuant to Section
1.6.1 is less than one-half of 1% of the total shares of ShopNow Common Stock
that such holder is entitled to receive, then such holder shall receive shares
of ShopNow Common Stock rounded off to the nearest whole number in lieu of any
fractional share of ShopNow Common Stock, with .5 of a share rounded up. If a
fraction of a share of ShopNow Common Stock that any holder would otherwise
receive pursuant to Section 1.6.1 equals or exceeds one-half of 1% of the total
shares of ShopNow Common Stock that such holder is entitled to receive pursuant
to Section 1.6.1, then such holder shall receive an amount in cash, without
interest, rounded to the nearest cent, determined by multiplying the fractional
interest to which such holder would otherwise be entitled by $12.313. The
aggregate number of shares of ShopNow Common Stock a Shareholder is entitled to
receive pursuant to Section 1.6.1 shall be rounded to the nearest whole number
of shares, with .5 being rounded up.
1.6.4 NO FURTHER TRANSFERS
After the Effective Time, there shall be no transfers of any shares of
Company Common Stock on the stock transfer books of the Surviving Corporation.
If, after the Effective Time, certificates formerly representing shares of
Company Common Stock are presented to the Surviving Corporation, they shall be
forwarded to ShopNow and shall be canceled and exchanged in accordance with this
Section 1.6.
1.7 SHAREHOLDER REPRESENTATIVE
(a) Each Principal Shareholder hereby irrevocably authorizes and appoints
Farid Tabibzadeh (the "SHAREHOLDER REPRESENTATIVE"), with full power of
substitution and resubstitution, as his or its representative and agent in
connection with the Merger.
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(b) Each Principal Shareholder agrees that the Shareholder Representative
shall have the full power, authority and right to perform, do and take any and
all actions he deems necessary or advisable to carry out the purposes of this
Agreement and each Operative Document all without liability to such Principal
Shareholder (except as expressly stated herein or therein), so long as same are
carried out by the Shareholder Representative in good faith. Such actions
include the power to amend, modify or waive any agreement in the name of each
Principal Shareholder as if such Principal Shareholder had himself or itself
amended, modified or waived such agreement; provided that the Shareholder
Representative shall have no power to alter any term of this Agreement which
would reduce the amount or change the type of consideration to be received by
any Shareholder in respect of the Merger unless a majority of the Shareholders
shall so agree. In particular, but not by way of limitation, the Shareholder
Representative shall have the power to make and carry out decisions under this
Agreement and the Operative Documents on behalf of each Principal Shareholder
and to sign documents and make filings on behalf of each Principal Shareholder
as if such Principal Shareholder had himself or itself signed or filed such
document.
(c) Each Principal Shareholder understands that this appointment is
irrevocable.
(d) The Shareholder Representative may resign at any time. Upon such
resignation, each Principal Shareholder hereby authorizes the Shareholder
Representative to appoint a new Shareholder Representative to replace such
resigning Shareholder Representative with the same powers and duties as such
resigning Shareholder Representative, provided that such newly appointed
Shareholder Representative shall have been a Principal Shareholder immediately
prior to the Effective Time.
(e) If the Shareholder Representative or any successor shall die, or
become unable to act as the Shareholder Representative, a replacement shall
promptly be appointed by a writing signed by the other Principal Shareholders,
provided that such newly appointed Shareholder Representative shall have been a
Principal Shareholder immediately prior to the Effective Time.
1.8 OPTION SHARES; REGISTRATION
ShopNow shall use best efforts to cause to be filed with respect to
ShopNow Common Stock subject to Options assumed in accordance with Section
1.6.1(e) a registration statement on Form S-8 (or any successor form) with
respect to those shares eligible to be registered on a primary basis on such
form to be effective within two
-9-
weeks of the date on which the requirements of Items 2, 5 and 7 of Form 8-K have
been satisfied and the complete responsive Report on Form 8-K, as it may be
amended, with respect to the Merger has been filed with the SEC.
1.9 OPTION GRANTS
No later than thirty days after the Effective Time, ShopNow will act to
grant stock options under its Amended and Restated 1996 Combined Incentive and
Nonqualified Stock Option Plan (the "SHOPNOW OPTION PLAN"), or such other plan
having substantially similar terms as ShopNow shall determine in its sole
discretion, to acquire an aggregate number of shares of ShopNow Common Stock
equal to the number determined by dividing (i) the Aggregate Unvested Assumed
Option Value (as defined below) by (ii) the Base Price, to employees of the
Company immediately prior to the Effective Time who have been offered and have
accepted employment with ShopNow or the Surviving Corporation (with the
allocation of such grants among such employees to be mutually acceptable to the
Principal Shareholders and ShopNow), at an exercise per share of $14.03, with
vesting in accordance with ShopNow's standard three-year vesting schedule. The
Aggregate Assumed Unvested Option Value shall mean the number determined by
subtracting (i) the product obtained by multiplying the total number of unvested
Options assumed by ShopNow pursuant to Section 1.6.1(e) (as converted into
Options to purchase shares of ShopNow Common Stock in accordance with Section
1.6.1(e)) by the Base Price from (ii) the sum of $5,000,000.
1.10 SHAREHOLDER INDEBTEDNESS
ShopNow shall assume and repay on the Closing Date the indebtedness of
the Company to Farid Tabibzadeh, as set forth on the Closing Balance Sheet (the
"SHAREHOLDER INDEBTEDNESS").
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
Except as is otherwise set forth with appropriate section references in
the Company Disclosure Memorandum attached as EXHIBIT 2 (the "COMPANY DISCLOSURE
MEMORANDUM"), each of which exceptions shall specifically identify or
cross-reference the provision of this Article II to which such exception
relates, and which shall constitute in its entirety a representation and
warranty under this Article II, and in order to induce ShopNow and the Purchaser
to enter into and perform this Agreement, and the other agreements, certificates
and questionnaires that are required to be completed and executed pursuant to
this Agreement (collectively, the "OPERATIVE
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DOCUMENTS"), the Company and the Principal Shareholders jointly and severally
represent and warrant to ShopNow and the Purchaser as follows in this Article
II.
2.1 ORGANIZATION; POWER AND AUTHORITY
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of California. The Company has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the Operative Documents, and to consummate
the transactions contemplated hereby and thereby. Each Principal Shareholder has
the power, authority and capacity to execute, deliver and perform his, her or
its obligations under this Agreement and each of the Operative Documents and to
consummate the transactions contemplated hereby and thereby. The Company is duly
qualified and licensed as a foreign corporation to do business and is in good
standing in each jurisdiction in which the character of the Company's properties
occupied, owned or held under lease or the nature of the business conducted by
the Company makes such qualification or licensing necessary, except where the
failure to be so qualified would not have a material adverse effect on the
business or financial condition of the Company (a "COMPANY MATERIAL ADVERSE
EFFECT").
2.2 ENFORCEABILITY
All corporate action on the part of the Company and its officers,
directors and Shareholders necessary for the authorization, execution, delivery
and performance of this Agreement and the Operative Documents, the consummation
of the Merger, and the performance of all the Company's obligations under this
Agreement and the Operative Documents has been taken. This Agreement and each of
the Operative Documents has been duly executed and delivered by the Company and
each Principal Shareholder, as applicable, and this Agreement is, and each of
the Operative Documents is a legal, valid and binding obligation of the Company
and each Principal Shareholder, as applicable, enforceable against each of them
in accordance with its terms.
2.3 CAPITALIZATION
(a) The authorized capital stock of the Company consists of 7,000,000
shares of Company Common Stock and 1,000,000 shares of Company Preferred Stock,
no par value.
(b) The issued and outstanding capital stock of the Company consists
solely of 5,863,020 shares of Company Common Stock (collectively, the
"OUTSTANDING SHARES"), which are held of record and beneficially by the
Shareholders as set forth on
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SCHEDULE 2.3(b) to the Company Disclosure Memorandum. All outstanding shares of
Company Preferred Stock have been converted into Company Common Stock prior to
the execution of this Agreement. All outstanding indebtedness of the Company to
Doug Dohring has been converted into Company Common Stock prior to the execution
of this Agreement. The Outstanding Shares are duly authorized and validly
issued, fully paid and nonassessable, and issued in compliance with all
applicable federal and state securities laws. No Person (as defined in Section
2.5 hereof) other than the Principal Shareholders holds any interest in any of
the Outstanding Shares that are held of record by the Principal Shareholders. To
the knowledge of the Company or any Principal Shareholder, no Person other than
the Shareholders holds any interest in any of the Outstanding Shares that are
held of record by those Shareholders who are not Principal Shareholders. True
and correct copies of the stock records of the Company, showing all issuances
and transfers of shares of capital stock of the Company since inception, have
been delivered to ShopNow or its counsel.
(c) As of the date of this Agreement and as of the Closing Date, other
than Options to purchase up to 228,315 shares of Company Common Stock that have
been granted under the Company Stock Option Plan, and there are no outstanding
rights of first refusal or offer, preemptive rights, Stock Purchase Rights or
other agreements, either directly or indirectly, for the purchase or acquisition
from the Company or any Shareholder of any shares of Company Capital Stock or
any securities convertible into or exchangeable for shares of Company Capital
Stock. Set forth on SCHEDULE 2.3(c) to the Company Disclosure Memorandum is a
spreadsheet accurately reflecting the number of Options and other Stock Purchase
Rights outstanding, the grant or issue dates, vesting schedules and exercise or
conversion prices thereof and, in each case, the identities of the holders and
an indication of their relationships to the Company (if any exist other than a
security holder). The Company has delivered to ShopNow or its counsel true and
correct copies of the Company Option Plan, all stock option agreements and
exercise documentation relating to Options granted thereunder and all agreements
with respect to Stock Purchase Rights. SCHEDULE 2.3(c) to the Company Disclosure
Memorandum also identifies all options, warrants or other Stock Purchase Rights
that have been offered in connection with any employee or consulting agreement
but that, as of the date hereof, have not been issued or granted.
(d) The Company is not a party or subject to any agreement or
understanding and, to the knowledge of the Company or any Principal Shareholder,
there is no agreement or understanding between any Persons that affects or
relates to the voting or giving of written consents with respect to any
securities of the Company or the voting by any director of the Company. No
Shareholder or any affiliate thereof is indebted to the Company, and the Company
is not indebted to any Shareholder or any affiliate thereof. The Company is not
under any contractual or other obligation to register any
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of its presently outstanding securities or any of its securities that may
hereafter be issued.
(e) All rights of refusal, co-sale rights and registration rights granted
by the Company with respect to the Company Capital Stock or Stock Purchase
Rights of the Company are described on SCHEDULE 2.3(e) to the Company Disclosure
Memorandum.
(f) All options, Stock Purchase Rights and shares of Company Capital
Stock have been granted or issued at fair market value, as determined by the
Company's Board of Directors at the date of grant or issuance.
(g) All Options to be assumed by ShopNow have been granted pursuant to
the exemption from registration provided for by Rule 701 promulgated by the
Securities and Exchange Commission under the Securities Act.
2.4 SUBSIDIARIES AND AFFILIATES
The Company does not own, directly or indirectly, any ownership, equity,
or voting interest in, any corporation, partnership, joint venture or other
entity, and has no agreement or commitment to purchase any such interest.
2.5 NO APPROVALS; NO CONFLICTS
The execution, delivery and performance of this Agreement and the
Operative Documents by the Company and each of the Principal Shareholders, as
applicable, and the consummation by them of the transactions contemplated hereby
and thereby will not
(a) constitute a material violation (with or without the giving of
notice or lapse of time, or both) of any provision of law or any judgment,
decree, order, regulation or rule of any court or other governmental authority
applicable to the Company or the Principal Shareholders;
(b) except as contemplated by this Agreement and the Operative
Documents, require any consent, approval or authorization of, or declaration,
filing or registration with, any person, corporation, partnership, joint
venture, association, organization, other entity or governmental or regulatory
authority (a "PERSON"), except for the filing of all documents necessary to
consummate the Merger with the Washington Secretary and the California
Secretary;
(c) result in a material default under (with or without the giving
of notice or lapse of time, or both), or acceleration or termination of, or the
creation in
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any party of the right to accelerate, terminate, modify or cancel, any
agreement, lease, note or other restriction, encumbrance, obligation or
liability to which the Company or the Principal Shareholders are parties or by
which they are bound or to which their assets are subject;
(d) result in the creation of any liens, mortgages, pledges, deeds
of trust, security interests, charges, encumbrances or other adverse claims of
interest of any kind (each, an "ENCUMBRANCE") upon any assets of the Company or
the Outstanding Shares;
(e) conflict with or result in a breach of or constitute a default
under any provision of the Company's Articles of Incorporation or Bylaws, or
(f) invalidate or adversely affect any material permit, license or
authorization or status used in the conduct of the Company's business.
2.6 FINANCIAL STATEMENTS
The Company has delivered to ShopNow (a) unaudited balance sheets,
statements of income and expense, statements of cash flow and statements of
shareholders' equity of the Company as of or for the fiscal years ended December
31, 1998, (b) an unaudited balance sheet, statement of income and expense,
statements of cash flow and statements of shareholders' equity of the Company as
of and for the nine-month period ended September 30, 1999 and (c) the Closing
Balance Sheet. All the foregoing financial statements are herein referred to as
the "COMPANY FINANCIAL STATEMENTS." The balance sheet of the Company as of
September 30, 1999 is herein referred to as the "COMPANY BALANCE SHEET." The
Company Financial Statements have been prepared in conformity with generally
accepted accounting principles in the United States ("GAAP") on a basis
consistent with prior accounting periods and fairly present the financial
position, results of operations and changes in financial position of the Company
as of the dates and for the periods indicated. The Company has no contractual
liabilities or obligations and, to the knowledge of the Company or any Principal
Shareholder, no other liabilities or obligations of any nature (absolute,
contingent or otherwise) that are not fully reflected or reserved against in the
Company Balance Sheet, except liabilities or obligations incurred since the date
of the Company Balance Sheet in the ordinary course of business and consistent
with past practice that are not in excess of $25,000 in the aggregate or $10,000
individually. The Company maintains standard systems of accounting that are
adequate for its business. The Company is not a guarantor, indemnitor, surety or
other obligor of any indebtedness of any other Person. The Company has not
capitalized software development costs.
-14-
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS
Since the date of the Company Balance Sheet, neither the Company nor any
of its officers or directors in their representative capacities on behalf of the
Company have:
(a) taken any action or entered into or agreed to enter into any
transaction, agreement or commitment other than in the ordinary course of
business;
(b) forgiven or canceled any indebtedness or waived any claims or
rights of material value (including, without limitation, any indebtedness owing
by any Shareholder, officer, director, employee or affiliate of the Company);
(c) granted any increase in the compensation of directors,
officers, employees or consultants;
(d) suffered any change having a material adverse effect on the
Company's business operations, assets, liabilities (absolute, accrued,
contingent or otherwise) condition (financial or otherwise) or prospects;
(e) borrowed or agreed to borrow any funds, incurred or become
subject to, whether directly or by way of assumption or guarantee or otherwise,
any obligations or liabilities (absolute, accrued, contingent or otherwise) in
excess of $10,000 individually or in excess of $25,000 in the aggregate, except
liabilities and obligations that are incurred in the ordinary course of business
and consistent with past practice, or increased, or experienced any change in
any assumptions underlying or methods of calculating any bad debt, contingency
or other reserves;
(f) paid, discharged or satisfied any material claims, liabilities
or obligations (absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of claims, liabilities and obligations reflected
or reserved against in the Company Balance Sheet or incurred in the ordinary
course of business and consistent with past practice since the date of the
Company Balance Sheet, or prepaid any obligation having a fixed maturity of more
than 90 days from the date such obligation was issued or incurred;
(g) knowingly permitted or allowed any of its property or assets
(real, personal or mixed, tangible or intangible) to be subjected to any
Encumbrance;
(h) purchased or sold, transferred or otherwise disposed of any of
its material properties or assets (real, personal or mixed, tangible or
intangible);
-15-
(i) disposed of or permitted to lapse any rights to the use of any
trademark, trade name, patent or copyright, or disclosed to any Person without
obtaining an appropriate confidentiality agreement from any such Person any
trade secret, formula, process or know-how not theretofore a matter of public
knowledge;
(j) made any single capital expenditure or commitment in excess of
$5,000 for additions to property, plant, equipment or intangible capital assets
or made aggregate capital expenditures in excess of $10,000 for additions to
property, plant, equipment or intangible capital assets;
(k) made any change in accounting methods or practices or internal
control procedure;
(l) issued any capital stock or other securities, or declared,
paid or set aside for payment any dividend or other distribution in respect of
its capital stock, or redeemed, purchased or otherwise acquired, directly or
indirectly, any shares of capital stock or other securities of the Company, or
otherwise permitted the withdrawal by any of the holders of Company Capital
Stock of any cash or other assets (real, personal or mixed, tangible or
intangible), in compensation, indebtedness or otherwise, other than payments of
compensation in the ordinary course of business and consistent with past
practice;
(m) paid, loaned or advanced any amount to, or sold, transferred
or leased any properties or assets (real, personal or mixed, tangible or
intangible) to any of the Shareholders or any of the Company's officers,
directors or employees or any affiliate of any of the Shareholders or of the
Company's officers, directors or employees, except compensation paid to officers
and employees at rates not exceeding the rates of compensation paid during the
fiscal year last ended and except for advances for travel and other
business-related expenses; or
(n) agreed, whether in writing or otherwise, to take any action
described in this Section 2.7.
2.8 TAXES
(a) (i) All Tax Returns (as defined below) required to be filed by or on
behalf of the Company have been timely filed and all such Tax Returns were (at
the time they were filed) and are true, correct and complete in all respects;
(ii) all Taxes (as defined below) of the Company due and payable for periods
ending on or prior to the Closing Date (whether or not reflected on any Tax
Return) have been fully and timely paid; (iii) no waivers of statutes of
limitation have been given or requested with respect to the Company in
connection with any Tax Returns covering the Company
-16-
with respect to any Taxes payable by it; (iv) no taxing authority in a
jurisdiction where the Company does not file Tax Returns has made a claim,
assertion or threat to the Company that the Company is or may be subject to
taxation by such jurisdiction; (v) the Company has duly and timely withheld from
employee salaries, wages and other compensation and paid over to the appropriate
governmental authority all amounts required to be so withheld and paid over for
all periods under all applicable laws; (vi) there are no liens with respect to
Taxes on any of the Company's property or assets other than liens for current
Taxes not yet payable; (vii) there are no Tax rulings, requests for rulings, or
closing agreements relating to the Company that could affect the liability for
Taxes or the amount of taxable income of the Company for any period (or portion
of a period) after the date hereof; and (viii) any adjustment of Taxes of the
Company made by the IRS in any examination that is required to be reported to
the appropriate state, local or foreign taxing authorities has been reported,
and any additional Taxes due with respect thereto have been paid.
(b) Neither the Company nor any other Person on behalf of the Company (i)
has filed a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by the Company;
(ii) has executed or entered into a closing agreement pursuant to Section 7121
of the Code or any predecessor provision thereof or any similar provision of
state, local or foreign law; or (iii) has agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Code or any similar provision of
state, local or foreign law by reason of a change in accounting method initiated
by the Company or has notice that a governmental authority has proposed any such
adjustment or change in accounting method.
(c) There is no outstanding dispute or claim concerning any Tax liability
of the Company, nor to the knowledge of the Company or any Principal Shareholder
is any such claim or dispute pending. SCHEDULE 2.8 to the Company Disclosure
Memorandum lists all Tax Returns filed with respect to the Company for taxable
periods ended on or after the Company's inception or the inception of any
predecessor that have been audited, and indicates those Tax Returns that
currently are the subject of audit. The Company has delivered to ShopNow correct
and complete copies of all Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company since the Company's
inception.
(d) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
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(e) The Company is not a party to any Tax allocation or sharing
agreement. The Company (i) has not been a member of a Tax Group (as defined
below) filing a consolidated income Tax Return under Section 1501 of the Code
(or any similar provision of state, local or foreign law) and (ii) does not have
any liability for Taxes of any Person under Treasury Regulations Section
1.1502-6 (or any similar provision of state, local or foreign law) as a
transferee or successor by contract or otherwise.
(f) The unpaid Taxes of the Company (i) did not, as of September 30,
1999, exceed the reserve for Tax liability set forth on the face (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) of the Company Balance Sheet and (ii) do not exceed that
reserve as adjusted for the passage of time and operations in the ordinary
course of business through the Closing Date.
(g) There has been no ownership change, as defined in Section 382(g) of
the Code (or any comparable provision of state, local or foreign law), with
respect to the Company during or after any taxable period in which the Company
incurred a net operating loss.
(h) All Options that the Company has treated as incentive stock options
under Section 421 of the Code meet the requirements of Section 422 of the Code
(other than a failure by reason of disposition of the underlying Company Common
Stock prior to the time periods set forth in Section 422(a)(1) of the Code).
As used in this Agreement, the following terms shall have the following
meanings:
"TAXES" means all foreign, federal, state, county or local taxes,
charges, fees, levies, imposts, duties and other assessments, including, but not
limited to, any income, alternative minimum or add-on, estimated, gross income,
gross receipts, sales, use, transfer, transactions, intangibles, ad valorem,
value-added, franchise, registration, title, license, capital, paid-up capital,
profits, withholding, payroll, employment, excise, severance, stamp, occupation,
Pension Benefit Guaranty Corporation premiums, real property, recording,
personal property, federal highway use, commercial rent, environmental
(including, but not limited to, taxes under Section 59A of the Code) or windfall
profit tax, custom, duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest, penalties or
additions to tax; and "TAX" means any of the foregoing Taxes.
-18-
"TAX GROUP" means any federal, state, local or foreign consolidated,
affiliated, combined, unitary or other similar group of which the Company is now
or was formerly a member.
"TAX RETURNS" means any return, declaration, report, claim or refund,
information return, statement or other similar document relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
2.9 PROPERTY
(a) The Company owns no real property other than the leasehold interests
described on SCHEDULE 2.9(a) to the Company Disclosure Memorandum (the "REAL
PROPERTY"). The Company has delivered to ShopNow or its counsel true and
complete copies of all written leases, subleases, rental agreements, contracts
of sale, tenancies or licenses relating to the Real Property and written
summaries of the terms of any oral leases, subleases, rental agreements,
contracts of sale, tenancies or licenses to which the Real Property is subject.
(b) SCHEDULE 2.9(b) to the Company Disclosure Memorandum contains a
complete and accurate list of each item of personal property having a value in
excess of $5,000 that is owned, leased, rented or used by the Company (the
"PERSONAL PROPERTY"); provided that such list need not describe the Technology
or the IP Rights (as defined in Sections 2.14.2 and 2.14.5, respectively),
listed on SCHEDULE 2.14 to the Company Disclosure Memorandum. The Company has
delivered to ShopNow or its counsel true and complete copies of all leases,
subleases, rental agreements, contracts of sale, tenancies or licenses to which
the Personal Property is subject.
(c) The Real Property and the Personal Property include all the
properties and assets (whether real, personal or mixed, tangible or intangible)
(other than, in the case of the Personal Property, property rights with an
individual value of less than $5,000 and the Technology and IP Rights) reflected
in the Company Balance Sheet. The Real Property and the Personal Property
include all material property used in the business of the Company, other than
the Technology and IP Rights. The Company's offices and other structures and its
Personal Property are in good operating condition and repair, normal wear and
tear excepted, are adequate for the uses to which they are being put, and comply
in all material respects with applicable safety and other laws and regulations.
(d) The Company's leasehold interest in each parcel of the Real Property
is free and clear of all Encumbrances. Each lease of any portion of the Real
Property is valid, binding and enforceable in accordance with its terms against
the parties thereto,
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the Company has performed in all material respects all obligations imposed on it
thereunder, and neither the Company nor, to the knowledge of the Company or any
Principal Shareholder, any other party thereto is in default thereunder, nor is
there any event that with notice or lapse of time, or both, would constitute a
default thereunder by the Company or, to the knowledge of the Company or any
Principal Shareholder, by any other party. The Company has not granted any
lease, sublease, tenancy or license of, or entered into any rental agreement or
contract of sale with respect to, any portion of the Real Property.
(e) The Personal Property is free and clear of all Encumbrances, and,
other than leased Personal Property that is so noted on the list supplied
pursuant to Section 2.9(b), the Company owns such Personal Property. Each lease,
license, rental agreement, contract of sale or other agreement to which the
Personal Property is subject is valid, binding and enforceable in accordance
with its terms against the parties thereto, the Company has performed in all
material respects all obligations imposed on it thereunder, and neither the
Company nor, to the knowledge of the Company or any Principal Shareholder, any
other party thereto is in material default thereunder, nor is there any event
that with notice or lapse of time, or both, would constitute a material default
by the Company or, to the knowledge of the Company or any Principal Shareholder,
any other party thereunder. The Company has not granted any lease, sublease,
tenancy or license of any portion of the Personal Property, except in the
ordinary course of business.
2.10 CONTRACTS
2.10.1 MATERIAL CONTRACTS
SCHEDULE 2.10.1 to the Company Disclosure Memorandum contains a complete
and accurate list (other than the IP Rights listed on SCHEDULE 2.14 to the
Company Disclosure Memorandum) of all contracts, agreements and understandings,
oral or written, to which the Company is currently a party or by which the
Company is currently bound providing for potential payments by or to the Company
in excess of $10,000 (the "MATERIAL CONTRACTS"), including, without limitation,
security agreements, license agreements, software development agreements,
distribution agreements, joint venture agreements, reseller agreements, credit
agreements and instruments relating to the borrowing of money. All Material
Contracts are valid, binding and enforceable in accordance with their terms
against each party thereto, the Company has performed in all material respects
all obligations imposed on it thereunder, and neither the Company nor, to the
knowledge of the Company or any Principal Shareholder, any other party thereto
is in default thereunder, nor to the knowledge of the Company or any Principal
Shareholder is there any event that with notice or lapse of time, or both, would
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constitute a default by the Company or, to the knowledge of the Company or any
Principal Shareholder, any other party thereunder. True and complete copies of
each such written Material Contract (or written summaries of the terms of any
such oral Material Contract) have been delivered to ShopNow by the Company. The
Company has no
(a) contracts with directors, officers, shareholders, employees,
agents, consultants, advisors, salespeople, sales representatives, distributors
or dealers that cannot be canceled by the Company within 30 days' notice without
liability, penalty or premium, any agreement or arrangement providing for the
payment of any bonus or commission based on sales or earnings, or any
compensation agreement or arrangement affecting or relating to former employees
of the Company;
(b) employment agreement, whether express or implied, or any other
agreement for services that contains severance or termination pay liabilities or
obligations;
(c) noncompetition agreement or other arrangement that would
prevent the Company from carrying on its business anywhere in the world;
(d) written notice or, to the knowledge of the Company or any
Principal Shareholder, oral notice that any party to any Material Contract
intends to cancel, terminate or refuse to renew such contract (if such contract
is renewable);
(e) material dispute with any of its suppliers, customers,
distributors, OEM resellers, licensors or licensees;
(f) product distribution agreement, development agreement or
license agreement as licensor or licensee (except for standard nonexclusive
software licenses granted to end-user customers in the ordinary course of
business, the form of which has been provided to ShopNow, or standard licenses
purchased by the Company for off-the-shelf software);
(g) joint venture contract or arrangement or any other agreement
that involves a sharing of profits with other persons;
(h) instrument evidencing indebtedness for borrowed money by way
of a direct loan, sale of debt securities, purchase money obligation,
conditional sale or guarantee, or otherwise, except for trade indebtedness
incurred in the ordinary course of business, and except as disclosed in the
Company Financial Statements; and
(i) agreements or commitments to provide indemnification.
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2.10.2 REQUIRED CONSENTS AND WAIVERS
The execution and delivery of this Agreement and the performance of the
obligations of the Company and the Principal Shareholders hereunder will not
constitute a default under any Material Contract and do not require the consent
or waiver of any other party to any such Material Contract. All of those
consents and/or waivers listed on SCHEDULE 2.10.2 to the Company Disclosure
Memorandum will be obtained on or prior to the Closing Date.
2.11 CLAIMS AND LEGAL PROCEEDINGS
There are no claims, actions, suits, arbitrations, investigations or
proceedings pending or involving or, to the knowledge of the Company or any
Principal Shareholder, threatened against the Company before or by any court or
governmental or nongovernmental department, commission, board, bureau, agency or
instrumentality, or any other Person. To the knowledge of the Company or any
Principal Shareholder, there is no valid basis for any claim, action, suit,
arbitration, proceeding or investigation before or by any Person. There are no
outstanding or unsatisfied judgments, orders, decrees or stipulations to which
the Company is a party. SCHEDULE 2.11 to the Company Disclosure Memorandum sets
forth a description of any material disputes that have been settled or resolved
by litigation or arbitration since the Company's inception.
2.12 LABOR AND EMPLOYMENT MATTERS
There are no material labor disputes, employee grievances or disciplinary
actions pending or, to the knowledge of the Company or any Principal
Shareholder, threatened against or involving the Company or any of its present
or former employees. The Company has complied with all provisions of law
relating to employment and employment practices, terms and conditions of
employment, wages and hours, except for such instances of non-compliance as
would not have a Company Material Adverse Effect. The Company is not engaged in
any unfair labor practice and has no liability for any arrears of wages or Taxes
or penalties for failure to comply with any such provisions of law. There is no
labor strike, dispute, slowdown or stoppage pending or, to the knowledge of the
Company or any Principal Shareholder, threatened against or affecting the
Company, and the Company has not experienced any work stoppage or other labor
difficulty since its incorporation. No collective bargaining agreement is
binding on the Company. Neither the Company nor any of the Principal
Shareholders has knowledge of any organizational efforts presently being made or
threatened by or on behalf of any labor union with respect to employees of the
Company. Each employee, officer and consultant of the Company has executed a
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nondisclosure agreement in the form provided to ShopNow. To the knowledge of the
Company or any Principal Shareholder, no employee (or person performing similar
functions) of the Company is in violation of any such agreement or any
employment agreement, noncompetition agreement, patent disclosure agreement,
invention assignment agreement, proprietary information agreement or other
contract or agreement relating to the relationship of such employee with the
Company or any other party.
SCHEDULE 2.12 to the Company Disclosure Memorandum lists (a) the names
and current compensation amounts of all directors and officers of the Company;
(b) the wage rates for nonsalaried and nonofficer salaried employees of the
Company by classification, and all union contracts (if any); (c) all group
insurance programs in effect for employees of the Company; and (d) the names and
current compensation packages of all independent contractors and consultants of
the Company. The Company is not in default with respect to any of its
obligations referred to in clause (b) above and has no, and will not incur any,
material obligation or liability for severance or back pay owed through or by
virtue of the Merger. All employees of the Company are employed on an "at will"
basis, and to the knowledge of the Company or any Principal Shareholder, are
eligible to work and are lawfully employed in the United States.
2.13 EMPLOYEE BENEFIT PLANS
2.13.1 EMPLOYEE BENEFIT PLAN LISTING
SCHEDULE 2.13.1 to the Company Disclosure Memorandum contains a true,
accurate and complete list and description of each Employee Benefit Plan. The
Company does not have any agreement, arrangement or commitment to create any
additional Employee Benefit Plan or to modify any existing Employee Benefit Plan
(as defined below). There has been no amendment, interpretation or other
announcement or communication (written or oral) by the Company (or any other
Person) relating to, or change in participation or coverage under, any Employee
Benefit Plan that, either alone or together with other such occurrences or
events, could materially increase the expense of maintaining the Employee
Benefit Plans above the level of expense incurred with respect thereto for the
most recent fiscal year included in the Company Financial Statements. The terms
of each Employee Benefit Plan permit the Company to amend or terminate such
Employee Benefit Plan at any time and for any reason without penalty or material
expense.
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2.13.2 DOCUMENTS PROVIDED
The Company has delivered to ShopNow true, correct and complete copies
(or, in the case of unwritten Employee Benefit Plans, descriptions) of all
Employee Benefit Plans (and all amendments thereto), along with, to the extent
applicable to the particular Employee Benefit Plan, copies of the following: (i)
all annual reports (Form 5500 series) filed since inception for such Employee
Benefit Plan; (ii) the summary plan descriptions, summary annual reports,
summaries of material modifications and all material employee manuals or
communications filed or distributed with respect to the Employee Benefit Plan
since inception; (iii) all contracts and agreements (and any amendments thereto)
relating to the Employee Benefit Plan, including, without limitation, trust
agreements, service provider agreements, insurance contracts, ERISA (as defined
below) bonds and indemnification agreements; (iv) all written communications
relating to the amendment, creation or termination of such Employee Benefit
Plan, or an increase or decrease in benefits, acceleration of payments or
vesting or other events that could result in liability to the Company since the
date of the most recently completed and filed annual report; (v) all
correspondence to or from any governmental entity or agency relating to such
Employee Benefit Plan; and (vi) all COBRA and HIPAA forms and notices currently
in use.
2.13.3 COMPLIANCE
With respect to each Employee Benefit Plan: (i) such Employee Benefit
Plan is, and at all times since inception has been, maintained, administered,
operated and funded in compliance with its terms and with all applicable
requirements of all applicable laws, statutes, orders, rules and regulations,
including, without limitation, ERISA and the Code; (ii) the Company and all
other Persons have, at all times, properly performed all obligations, whether
arising by operation of law or by contract, required to be performed by any of
them in connection with such Employee Benefit Plan; (iii) all reports, Tax
Returns, information returns and other information relating to such Employee
Benefit Plan required to be filed with any governmental entity or agency have
been accurately, timely and properly filed; (iv) all notices, statements,
reports and other disclosure required to be given or made to participants in
such Employee Benefit Plan or their beneficiaries have been accurately, timely
and properly disclosed or provided; (v) neither the Company nor any other
fiduciary of such Employee Benefit Plan has engaged in any transaction or acted
or failed to act in a manner that violates the fiduciary requirements of ERISA
or any other applicable law; (vi) no transaction or event has occurred or is
threatened or about to occur (including, without limitation, any of the
transactions contemplated in or by this Agreement or any of the Operative
Documents) that could constitute a "prohibited transaction," as defined in
Section 4975 of the Code or Section 406 or 407 of ERISA; and (vii) no
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transaction, event or omission has occurred or failed to occur that could
subject the Company or any other Person, directly or indirectly, to a tax, fine,
penalty or related charge under any law, statute, order, rule or regulation,
including, without limitation, Chapter 43 of Subtitle D of the Code and Sections
502(c), 502(i), 502(l) and 4071 of ERISA.
2.13.4 PENSION PLANS
None of the Employee Benefit Plans is, and the Company has never
maintained or contributed to (or been obligated to contribute to), an "employee
pension benefit plan," as defined in Section 3(2) of ERISA.
2.13.5 CONTRIBUTIONS AND PREMIUM PAYMENTS
All contributions, premiums and other payments due or required to be paid
to (or with respect to) each Employee Benefit Plan have been timely paid, or, if
not yet due, have been properly recorded on the books of the Company.
2.13.6 RELATED EMPLOYERS
The Company is not, and has never been, a member of (i) a controlled
group of corporations, within the meaning of Section 414(b) of the Code, (ii) a
group of trades or businesses under common control, within the meaning of
Section 414(c) of the Code, (iii) an affiliated service group, within the
meaning of Section 414(m) of the Code, or (iv) any other group of Persons
treated as a single employer under Section 414(o) of the Code.
2.13.7 POST-TERMINATION BENEFITS
Neither the Company nor any Employee Benefit Plan provides or has any
obligation to provide (or contribute toward the cost of) post-employment or
post-termination benefits of any kind, including, without limitation, death and
medical benefits, with respect to any current or former officer, employee,
agent, director or independent contractor of the Company, other than
continuation coverage mandated by Sections 601 through 608 of ERISA and Section
4980B(f) of the Code.
2.13.8 PARACHUTE PAYMENTS
The Company has not made any payments, is not obligated to make any
payments and is not a party to any agreement that could obligate it to make any
payments that would not be deductible under Section 280G of the Code (or any
similar provision of state, local or foreign law).
-25-
2.13.9 SUITS, CLAIMS AND INVESTIGATIONS
There are no actions, suits or claims (other than routine claims for
benefits) pending or, to the knowledge of the Company or any Principal
Shareholder, threatened with respect to (or against the assets of) any Employee
Benefit Plan, nor is there a basis for any such action, suit or claim. No
Employee Benefit Plan is currently under investigation, audit or review,
directly or indirectly, by the IRS (as defined below), the DOL (as defined
below) or any other governmental entity or agency, and, to the knowledge of the
Company or any Shareholder, no such action is contemplated or under
consideration by the IRS, the DOL or any other governmental entity or agency.
2.13.10 PAYMENTS RESULTING FROM TRANSACTIONS
Neither the execution and delivery of this Agreement and the Operative
Documents nor the consummation of the transactions contemplated by this
Agreement and the Operative Documents (either alone or together with any other
transaction or event) will (i) entitle any current or former officer, employee,
agent, director or independent contractor of the Company to any bonus,
retirement, severance, unemployment or other benefit, or otherwise increase the
amount of compensation due to any such individual, (ii) result in any benefit or
right becoming established or increased, or accelerate the time of payment or
vesting of any benefit, under any Employee Benefit Plan or otherwise, or (iii)
require the Company to transfer or set aside any assets to fund or otherwise
provide for any benefits for any Person.
2.13.11 DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
(a) "DOL" means the United States Department of Labor.
(b) "IRS" means the United States Internal Revenue Service.
(c) "EMPLOYEE BENEFIT PLAN" means any retirement, pension, profit
sharing, deferred compensation, stock bonus, savings, bonus, incentive,
cafeteria, medical, dental, vision, hospitalization, life insurance, accidental
death and dismemberment, medical expense reimbursement, dependent care
assistance, tuition reimbursement, disability, sick pay, holiday, vacation,
severance, change of control, stock purchase, stock option, stock appreciation
rights, fringe benefit or other employee benefit plan, fund, policy, program,
contract, arrangement or payroll practice (including, without limitation, any
"employee benefit plan," as defined in Section 3(3) of ERISA) or any employment,
consulting or personal services contract, whether written or oral,
-26-
qualified or nonqualified, or funded or unfunded, (i) sponsored, maintained or
contributed to by the Company or to which the Company is a party, (ii) covering
or benefiting any current or former officer, employee, agent, director or
independent contractor of the Company (or any dependent or beneficiary of any
such individual), or (iii) with respect to which the Company has (or could have)
any obligation or liability.
(d) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
2.14 INTELLECTUAL PROPERTY
2.14.1 GENERAL
The Company owns or is licensed and has all rights that are required to
conduct its business as now conducted in and to the following: (a) all products,
tools, computer programs, specifications, source code, object code, graphics,
devices, techniques, algorithms, methods, processes, procedures, packaging,
trade dress, formulae, drawings, designs, improvements, discoveries, concepts,
user interfaces, "look and feel" software, development and other tools, content,
inventions (whether or not patentable or copyrightable and whether or not
reduced to practice), designs, logos, themes, know-how, concepts and other
technology that are now, or during the two years prior to the date of this
Agreement have been, or currently are proposed to be, developed, produced, used,
marketed or sold by the Company (collectively, the "TECHNOLOGY-RELATED ASSETS");
and (b) all intellectual property and other proprietary rights in the
Technology-Related Assets, including, without limitation, all trade names,
trademarks, domain names, service marks, logos, brand names and other
identifiers, trade secrets, copyrights and domestic and foreign letters patent,
and the registrations, applications, renewals, extensions and continuations (in
whole or in part) thereof. The Company has such rights in the Technology-Related
Assets as are necessary or required to conduct its business as currently
conducted.
2.14.2 COMPANY TECHNOLOGY
SCHEDULE 2.14.2 to the Company Disclosure Memorandum sets forth a list of
all products developed, produced, used, marketed or sold by the Company since
its inception and required to conduct its business as now conducted (whether
used internally or provided to third parties), together with all prior versions,
predecessors or precursors to such products or tools (collectively, the
"PRODUCTS"). Except for the Third Party Technologies (as defined in Section
2.14.3 hereof), the Company owns, free and clear of all Encumbrances, together
with all goodwill associated therewith and all rights and causes of action for
infringement, misappropriation, misuse, dilution or
-27-
unfair trade practices associated therewith, all right, title and interest in
and to the following (collectively, the "TECHNOLOGY"): (a) the Products,
together with any and all codes, techniques, software tools, formats, designs,
user interfaces, content and "look and feel" related thereto; (b) any and all
updates, enhancements, corrections, modifications, improvements and new releases
related to the items set forth in clause (a) above; (c) any and all technology
and work in progress related to the items set forth in clauses (a) and (b)
above; and (d) all inventions, discoveries, processes, designs, trade secrets,
know-how and other confidential or proprietary information related to the items
set forth in clauses (a), (b), and (c) above. The Technology, excluding the
Third Party Technologies (as defined below), is sometimes referred to herein as
the "COMPANY TECHNOLOGY."
2.14.3 THIRD PARTY TECHNOLOGY
SCHEDULE 2.14.3 to the Company Disclosure Memorandum sets forth a list of
all Technology used in the Company's business for which the Company does not own
all right, title and interest (collectively, the "THIRD PARTY TECHNOLOGIES"),
and all license agreements or other contracts pursuant to which the Company has
the right to use (in the manner used by the Company, or intended or necessary
for use with the Company Technology) the Third Party Technologies (the "THIRD
PARTY LICENSES"), indicating, with respect to each of the Third Party
Technologies listed therein, the owner thereof and the Third Party License
applicable thereto. The Company has sufficient rights under the Third Party
Licenses to use (free of any material restriction, other than those expressly
set forth in the Third Party Licenses) (a) all Third Party Technology that is
incorporated in or used in the development or production of the Company
Technology and (b) all other Third Party Technology necessary for the conduct of
the Company's business as now conducted and as proposed to be conducted. All
Third Party Licenses are valid, binding and in full force and effect; the
Company and, to the knowledge of the Company or any Principal Shareholder, each
other party thereto has performed in all material respects his, her or its
obligations thereunder; and neither the Company nor, to the knowledge of the
Company or any Principal Shareholder, any other party thereto is in default
thereunder, nor to the knowledge of the Company or any Principal Shareholder,
has there occurred any event or circumstance that with notice or lapse of time
or both would constitute a default or event of default on the part of the
Company or, to the knowledge of the Company or any Principal Shareholder, any
other party thereto or give to any other party thereto the right to terminate or
modify any Third Party License. The Company has not received notice that any
party to any Third Party License intends to cancel, terminate or refuse to renew
such Third Party License or to exercise or decline to exercise any option or
right thereunder.
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2.14.4 TRADEMARKS
SCHEDULE 2.14.4 to the Company Disclosure Memorandum sets forth a list of
all trademarks, trade names, brand names, service marks, logos or other
identifiers for the Products or otherwise used by the Company in its business
(the "MARKS"). The Company has full legal and beneficial ownership, free and
clear of any Encumbrances, of all rights conferred by use of the Marks in
connection with the Products or otherwise in the Company's business and, as to
those Marks that have been registered in the United States Patent and Trademark
Office, by federal registration of the Marks.
2.14.5 INTELLECTUAL PROPERTY RIGHTS
SCHEDULE 2.14.5 to the Company Disclosure Memorandum sets forth all
patents, patent applications, copyright registrations (and applications
therefor) and trademark registrations (and applications therefor) (collectively,
the "IP REGISTRATIONS") associated with the Company Technology and the Marks.
The Company owns all right, title and interest, free and clear of any
Encumbrances, in and to the IP Registrations, together with any other rights in
or to any copyrights (registered or unregistered), rights in the Marks
(registered or unregistered), trade secret rights and other intellectual
property rights (including, without limitation, rights of enforcement) contained
or embodied in the Company Technology and the Marks (collectively, the "IP
RIGHTS").
2.14.6 MAINTENANCE OF RIGHTS
The Company has not conducted its business, and has not used or enforced
(or, to the knowledge of the Company or any Principal Shareholder, failed to use
or enforce) the IP Rights, in a manner that would result in the abandonment,
cancellation or unenforceability of any item of the IP Rights or the IP
Registrations, and the Company has not taken (or, to the knowledge of the
Company or any Principal Shareholder, failed to take) any action that would
result in the forfeiture or relinquishment of any IP Rights or IP Registrations.
The Company has not granted to any third party any rights or permissions to use
any of the Technology or the IP Rights. To the knowledge of the Company or any
Principal Shareholder, except pursuant to reasonably prudent safeguards, (a) no
third party has received any confidential information relating to the Technology
or the IP Rights and (b) the Company is not under any contractual or other
obligation to disclose to any third party any Company Technology.
2.14.7 THIRD PARTY CLAIMS
The Company has not received any notice or claim (whether written, oral
or otherwise) challenging the Company's ownership or rights in the Company
-29-
Technology or the IP Rights or claiming that any other person or entity has any
legal or beneficial ownership with respect thereto. All the IP Rights are
legally valid and enforceable without any material qualification, limitation or
restriction on their use, and the Company has not received any notice or claim
(whether written, oral or otherwise) challenging the validity or enforceability
of any of the IP Rights. To the knowledge of the Company or any Principal
Shareholder, no other person or entity is infringing or misappropriating any
part of the IP Rights or otherwise making any unauthorized use of the Company
Technology.
2.14.8 INFRINGEMENT BY THE COMPANY
Except as set forth on SCHEDULE 2.14.8 to the Company Disclosure
Memorandum, (a) the use of any of the Technology in the Company's business does
not and will not infringe, violate or interfere with or constitute an
appropriation of any right, title or interest (including, without limitation,
any patent, copyright or trade secret right) held by any other person or entity,
and there have been no claims made with respect thereto; (b) the use of any of
the Marks and other IP Rights in the Company's business will not infringe,
violate or interfere with or constitute an appropriation of any right, title or
interest (including, without limitation, any patent, copyright, trademark or
trade secret right) held by any other person or entity, and there have been no
claims made with respect thereto; and (c) the Company has not received any
notice or claim (whether written, oral or otherwise) regarding any infringement,
misappropriation, misuse, abuse or other interference with any third party
intellectual property or proprietary rights (including, without limitation,
infringement of any patent, copyright, trademark or trade secret right of any
third party) by the Company, the Technology or the Marks or other IP Rights, or
claiming that any other entity has any claim of infringement with respect
thereto.
2.14.9 CONFIDENTIALITY
The Company has not disclosed any source code regarding the Technology to
any person or entity other than an employee of the Company who is under a
written nondisclosure agreement. The Company has at all times maintained and
diligently enforced commercially reasonable procedures to protect all
confidential information relating to the Technology. Neither the Company nor any
escrow agent is under any contractual or other obligation to disclose the source
code or any other proprietary information included in or relating to the
Technology; and (d) the Company has not deposited any source code relating to
the Technology into any source code escrows or similar arrangements. If, as
disclosed on SCHEDULE 2.14.9 to the Company Disclosure Memorandum, the Company
has deposited any source code to the Technology into source code escrows or
similar arrangements, no event has occurred that has or could
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reasonably form the basis for a release of such source code from such escrows or
arrangements.
2.14.10 WARRANTY AGAINST DEFECTS
The Technology is free from known material defects and substantially
conforms to the specifications attached as EXHIBIT 2.14.10 hereto.
2.14.11 DOMAIN NAMES
SCHEDULE 2.14.11 of the Company Disclosure Memorandum sets forth a list
of all Internet domain names used by the Company in its business (collectively,
the "DOMAIN NAMES"). The Company has, and after the Effective Time the Surviving
Corporation will have, a valid registration and all material rights (free of any
material restriction) in and to the Domain Names, including, without limitation,
all rights necessary to continue to conduct the Company's business as it is
currently conducted and proposed to be conducted following the Effective Time.
2.14.12 YEAR 2000
The Company's Technology, and, to the knowledge of the Company and each
Principal Shareholder (without any independent investigation or review of the
Third Party Technology), the Third Party Technology, is Year 2000 Compliant. The
Company's business, financial condition and results of operations will not be
materially adversely affected by Year 2000 Compliance related issues. The term
"YEAR 2000 COMPLIANT" as used herein means that (i) each item of Company
Technology, on dates on and after January 1, 2000 (the "MILLENNIAL DATES"), will
calculate any information dependent on or relating to dates on or after January
1, 2000 in the same manner, and with the same functionality, data integrity and
performance, as such Company Technology records, stores, processes, calculates
and presents calendar dates on or before any Millennial Date, and (ii) the
Millennial Dates will not adversely affect the operation of such Company
Technology with respect to date-dependent data or computations, output, or other
routines or functions.
2.15 CORPORATE BOOKS AND RECORDS
The Company has furnished to ShopNow or its representatives for their
examination true and complete copies of (a) the Articles of Incorporation and
Bylaws of the Company as currently in effect, including all amendments thereto,
(b) the minute books of the Company, and (c) the stock transfer books of the
Company. Such minutes reflect all meetings of the Company's shareholders, Board
of Directors and any committees thereof since the Company's inception, and such
minutes accurately
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reflect in all material respects the events of and actions taken at such
meetings. Such stock transfer books accurately reflect all issuances and
transfers of shares of capital stock of the Company since its inception.
2.16 LICENSES, PERMITS, AUTHORIZATIONS, ETC.
The Company has received all currently required material governmental
approvals, authorizations, consents, licenses, orders, registrations and permits
of all agencies, whether federal, state, local or foreign (the "PERMITS") the
failure of which to obtain would have a Company Material Adverse Effect. The
Company is in compliance in all material respects with the terms of all Permits,
and except as would not have a Company Material Adverse Effect, all the Permits
are valid and in full force and effect, and no proceeding is pending, or to the
knowledge of the Company or any Principal Shareholder, threatened, the object of
which is to revoke, limit or otherwise affect any of the Permits. The Company
has not received any notifications of any asserted present failure by it to have
obtained any Permit, or any past and unremedied failure to obtain such items.
2.17 COMPLIANCE WITH LAWS
The Company is in compliance in all material respects with all material
federal, state, local and foreign laws, rules, regulations, ordinances, decrees
and orders applicable to it, to its employees or to the Real Property and the
Personal Property, including, without limitation, all such laws, rules,
regulations, ordinances, decrees and orders relating to intellectual property
protection, antitrust matters, consumer protection, currency exchange,
environmental protection, equal employment opportunity, health and occupational
safety, pension and employee benefit matters, securities and investor protection
matters, labor and employment matters and trading-with-the-enemy matters. The
Company has not received any written, or to the knowledge of the Company and the
Principal Shareholders, oral notification of any asserted present or past
unremedied failure by the Company to comply with any of such laws, rules,
regulations, ordinances, decrees or orders.
2.18 INSURANCE
The Company maintains commercially reasonable levels of (a) insurance on
its property (including leased premises) that insures against loss or damage by
fire or other casualty and (b) insurance against liabilities, claims and risks
of a nature and in such amounts as are normal and customary in the Company's
industry for companies of similar size and financial condition. All insurance
policies of the Company are in full force and effect, all premiums with respect
thereto covering all periods up to and
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including the date this representation is made have been paid, and no notice of
cancellation or termination has been received with respect to any such policy or
binder. Such policies or binders are sufficient for compliance with all material
requirements of law currently applicable to the Company and of all agreements to
which the Company is a party, will remain in full force and effect through the
respective expiration dates of such policies or binders without the payment of
additional premiums, and will not in any way be affected by, or terminate or
lapse by reason of, the transactions contemplated by this Agreement. The Company
has not been refused any insurance with respect to its assets or operations, nor
has its coverage been limited, by any insurance carrier to which it has applied
for any such insurance or with which it has carried insurance.
2.19 BROKERS OR FINDERS
The Company has not incurred, and will not incur, directly or indirectly,
as a result of any action taken by or on behalf of the Company, any liability
for brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Merger, this Agreement or any transaction contemplated
hereby.
2.20 ABSENCE OF QUESTIONABLE PAYMENTS
Neither the Company nor any director, officer, agent, employee or other
Person acting on behalf of the Company has used any Company funds for improper
or unlawful contributions, payments, gifts or entertainment, or made any
improper or unlawful expenditures relating to political activity to domestic or
foreign government officials or others. The Company has reasonable financial
controls to prevent such improper or unlawful contributions, payments, gifts,
entertainment or expenditures. Neither the Company nor any current director,
officer, agent, employee or other Person acting on behalf of the Company has
accepted or received any improper or unlawful contributions, payments, gifts or
expenditures. The Company has at all times complied, and is in compliance, in
all respects with the Foreign Corrupt Practices Act and all foreign laws and
regulations relating to prevention of corrupt practices and similar matters.
2.21 BANK ACCOUNTS
SCHEDULE 2.21 to the Company Disclosure Memorandum sets forth the names
and locations of all banks, trust companies, savings and loan associations and
other financial institutions at which the Company maintains safe deposit boxes
or accounts of any nature and the names of all Persons authorized to draw
thereon, make withdrawals therefrom or have access to such safe deposit boxes or
accounts.
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2.22 CUSTOMERS AND SUPPLIERS
SCHEDULE 2.22 to the Company Disclosure Memorandum sets forth (a) a
complete and accurate list of the customers of the Company accounting for 5% or
more of the Company's revenues during the fiscal year last ended and the period
ended September 30, 1999, showing the approximate total revenues from each such
customer during the fiscal year last ended and the period ended September 30,
1999 and (b) a complete and accurate list of the suppliers of the Company from
whom the Company has purchased 5% or more of the goods or services purchased by
the Company in the fiscal year last ended and the period ended September 30,
1999. The Company has not received any notice from its customers or suppliers
that would cause it, in its reasonable judgment, to expect any material
modification to its relationship with any customer or supplier named on such
SCHEDULE 2.22 to the Company Disclosure Memorandum.
2.23 ACCOUNTS RECEIVABLE
All accounts receivable of the Company reflected in the Closing Balance
Sheet ("ACCOUNTS"), or existing at the Effective Time, represent sales actually
made in the ordinary course of business and were recorded in the Company's books
consistent with the presentation applied in the Company Financial Statements for
the year ended December 31, 1998. The bad debt reserves and sales return
allowances reflected in the Closing Balance Sheet are adequate. Set forth on
SCHEDULE 2.23 to the Company Disclosure Memorandum are a full and complete list
and aging study of all Accounts. To the knowledge of the Company or any
Principal Shareholder, all Accounts existing and remaining unpaid at the
Effective Time will be collectible by the Surviving Corporation in the ordinary
course of business, consistent with past practice.
2.24 CREDITORS' LIST
SCHEDULE 2.24 to the Company Disclosure Memorandum sets forth a full,
complete and accurate list of all creditors of the Company, with the amount
payable to each such creditor as of three days prior to the Closing Date.
2.25 INSIDER INTERESTS
No Shareholder or officer or director of the Company has any interest
(other than as a shareholder of the Company) (a) in any Real Property, Personal
Property, Technology or IP Rights used in or directly pertaining to the business
of the Company, including, without limitation, inventions, patents, trademarks
or trade names, or (b) in any agreement, contract, arrangement or obligation
relating to the Company, its present or prospective business or its operations.
There are no agreements, understandings or
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proposed transactions between the Company and any of its officers, directors,
Shareholders, affiliates or any affiliate thereof. The Company and its officers
and directors have no interest, either directly or indirectly, in any entity,
including, without limitation, any corporation, partnership, joint venture,
proprietorship, firm, licensee, business or association (whether as an employee,
officer, director, shareholder, agent, independent contractor, security holder,
creditor, consultant or otherwise), other than ownership of capital stock
comprising less than 1% of any publicly held company, that presently (i)
provides any services, produces and/or sells any products or product lines, or
engages in any activity that is the same, similar to or competitive with any
activity or business in which the Company is now engaged or proposes to engage;
(ii) is a supplier, customer or creditor; or (iii) has any direct or indirect
interest in any asset or property (real or personal, tangible or intangible) of
the Company or any property (real or personal, tangible or intangible) that is
necessary or desirable for the present or currently anticipated future conduct
of the Company's business.
2.26 COMPLIANCE WITH ENVIRONMENTAL LAWS
Neither the Company nor, to the knowledge of the Company or any Principal
Shareholder, any other Person (including, without limitation, any previous
owner, lessee or sublessee) has treated, stored or disposed of any material
amounts of petroleum products, hazardous waste, hazardous substances, pollutants
or contaminants on the Real Property, or any real property previously owned,
leased, subleased or used by the Company in the operation of its business, in
violation of any applicable foreign, federal, state or local statutes,
regulations or ordinances, or common law, in each case as in existence at or
prior to the Closing. To the knowledge of the Company or any Principal
Shareholder, there have been no releases of any material amounts of petroleum,
petroleum products, hazardous waste, hazardous substances, pollutants or
contaminants on, at or from any assets or properties, including, without
limitation, the Real Property, owned, leased or subleased by the Company in the
operation of its business during the time such assets or properties were owned,
leased or subleased by the Company (or, to the knowledge of the Company or any
Principal Shareholder, prior to such time), including, without limitation, any
releases of any material amounts of petroleum, petroleum products, hazardous
waste, hazardous substances, pollutants or contaminants in violation of any law.
2.27 INFORMATION SUPPLIED BY THE COMPANY
None of the information supplied by the Company for inclusion in the
proxy statement delivered to the Shareholders in connection with any written
consent by or meeting of such Shareholders (collectively, "SHAREHOLDER
MATERIALS"), at the date on which such information was supplied contained any
untrue statement of a material fact
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or omitted to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not materially misleading; provided, however, that the
Company makes no representations or warranties regarding information furnished
by or related to ShopNow or the Purchaser.
2.28 FULL DISCLOSURE
No information furnished by the Company or the Shareholders to ShopNow or
its representatives in connection with this Agreement (including, but not
limited to, the Company Financial Statements and all information in the Company
Disclosure Memorandum and the other Exhibits hereto) or the Operative Documents
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements so made or information so
delivered not misleading.
2.29 HART-SCOTT-RODINO
(a) The Company is its own ultimate parent entity as defined under the
rules and regulations promulgated under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HART-SCOTT-RODINO ACT"). The Company
is not a $10 million person as defined in the Hart-Scott-Rodino Act and is not
"engaged in manufacturing" for purposes thereof.
(b) Each of the Principal Shareholders is either (a) not a $10 million
person as defined under the Hart-Scott-Rodino Act or (b) acquiring the ShopNow
Common Stock solely for the purpose of investment within the meaning of 16
C.F.R. 802.9.
(c) The representations and warranties set forth in this Section 2.29 are
made by the Company and the Principal Shareholders solely for the purpose of
determining the applicability to the Merger and the other transactions
contemplated by this Agreement of the notification requirements of the
Hart-Scott-Rodino Act.
2.30 PARTICIPATING DEVELOPERS
SCHEDULE 2.30 to the Company Disclosure Memorandum contains a complete
list of all Participating Developers (as defined below), specifying for each any
relationship between the Participating Developer and the Company (e.g.,
employee, contractor, etc.), all dates during which the relationship was in
effect and a list of any documents or other items relating to such relationship.
The Company has furnished to ShopNow or its counsel full and complete copies of
such documents and other items identified in SCHEDULE 2.30. "PARTICIPATING
DEVELOPER" means any person or entity that has, at any time and in any way,
participated or contributed to the Development of any
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IP Rights or any of the Company Technology. "DEVELOPMENT" means create, author,
design, engineer, invent, modify, discover, reduce to practice or develop. Each
Participating Developer who is or was an independent contractor of the Company
has signed the form Confidential Information and Inventions Agreement attached
hereto as Exhibit 2.30(a) (the "INVENTION AGREEMENT"), and each Participating
Developer who is or was an employee of the Company has signed the Amendment to
Employment Policy and Agreement and Confidential Information and Inventions
Agreement attached hereto as Exhibit 2.30(b) (the "Amended Employee Agreement").
Each such Invention Agreement or Amended Employee Agreement, as the case may be,
legally, fully and effectively transfers to the named transferee any and all
right, title and interest which the named Participating Developer may have or
acquire in and to the IP Rights and the Technology.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF
SHOPNOW AND THE PURCHASER
In order to induce the Company and the Principal Shareholders to enter
into and perform this Agreement and the Operative Documents, ShopNow and the
Purchaser jointly and severally represent and warrant to the Company and the
Principal Shareholders as of the date of this Agreement as follows in this
Article III:
3.1 ORGANIZATION
ShopNow is a corporation duly organized and validly existing under the
laws of the State of Washington. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Washington.
Each of ShopNow and the Purchaser has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the Operative Documents and to consummate the transactions contemplated
hereby and thereby. Each of ShopNow and the Purchaser is duly qualified and
licensed as a foreign corporation to do business and is in good standing in each
foreign jurisdiction in which the character of ShopNow and the Purchaser's
respective properties occupied, owned or held under lease or the nature of the
business conducted by ShopNow and the Purchaser, respectively, makes such
qualification or licensing necessary, except where the failure to be so
qualified would not have a material adverse effect on the business or financial
condition of ShopNow or the Purchaser. All the issued and outstanding shares of
capital stock of the Purchaser are held of record and beneficially by ShopNow.
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3.2 ENFORCEABILITY
All corporate action on the part of ShopNow and the Purchaser and their
respective officers, directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement and the Operative
Documents, the consummation of the Merger, and the performance of all their
respective obligations under this Agreement and the Operative Documents has been
taken. This Agreement and each of the Operative Documents has been duly executed
and delivered by each of ShopNow and the Purchaser, as applicable, and this
Agreement and each of the Operative Documents is a legal, valid and binding
obligation of each of ShopNow and the Purchaser, as applicable, enforceable
against each of them in accordance with its terms.
3.3 SECURITIES
The Closing Shares to be issued pursuant to this Agreement have been,
duly authorized for issuance, and such Closing Shares, when issued and delivered
to the Shareholders pursuant to this Agreement, shall be validly issued, fully
paid and nonassessable.
3.4 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICTS WITH INSTRUMENTS
The execution, delivery and performance of this Agreement and the
Operative Documents by the Purchaser and ShopNow, as applicable, and the
consummation by them of the transactions contemplated hereby and thereby will
not
(a) constitute a violation (with or without the giving of notice or lapse
of time, or both) of any provision of law or any judgment, decree, order,
regulation or rule of any court or other governmental authority applicable to
ShopNow or the Purchaser;
(b) require any consent, approval or authorization of, or declaration,
filing or registration with, any Person, except (i) compliance with applicable
securities laws and (ii) the filing of all documents necessary to consummate the
Merger with the Washington Secretary and the California Secretary;
(c) conflict with or result in a breach of or constitute a default under
any provision of the Articles of Incorporation or Bylaws of ShopNow or the
Purchaser.
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3.5 BROKERS OR FINDERS
Neither ShopNow nor the Purchaser has incurred, and neither ShopNow nor
the Purchaser will incur, directly or indirectly, as a result of any action
taken by or on behalf of ShopNow or the Purchaser, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with the Merger, this Agreement or any transaction contemplated hereby that
would result in a claim against the Company or the Shareholders.
3.6 SEC DOCUMENTS
ShopNow has made available to the Shareholders true and complete copies
of its final prospectus dated September 28, 1999 (the "PROSPECTUS"), the
Prospectus supplement dated October 15, 1999 (the "PROSPECTUS SUPPLEMENT") and
the press release dated October 14, 1999 with respect to certain financial
results for the quarter ended September 30, 1999 (collectively, the "SEC
DOCUMENTS"). As of their respective filing dates, each of the Prospectus and the
Prospectus Supplement complied in all material respects with the requirements of
the Securities Act of 1933, as amended (the "SECURITIES ACT") and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
3.7 INFORMATION SUPPLIED BY SHOPNOW
None of the information supplied by ShopNow for inclusion in the
Shareholder Materials, including the SEC Documents, at the date on which such
information was supplied contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not materially misleading; provided, however, that ShopNow makes
no representations or warranties regarding information furnished by or related
to the Shareholders or the Company.
3.8 FULL DISCLOSURE
No information furnished by ShopNow or the Purchaser to the Company or
its representatives in connection with this Agreement or the Operative Documents
(including the SEC Documents) contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements so
made or information so delivered not misleading.
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ARTICLE IV - DELIVERIES
4.1 DELIVERIES BY THE COMPANY AND THE SHAREHOLDERS
On the Closing Date, the Company and the Principal Shareholders shall
deliver to ShopNow and the Purchaser:
(a) the opinion letter of Morrison & Foerster LLP, counsel for the
Company and the Shareholders, dated the Closing Date in substantially the form
attached hereto as EXHIBIT 4.1(a);
(b) a certificate of the California Secretary to the effect that the
Company is a corporation in good standing under the laws of the state of
California;
(c) a certificate of the President and the Chief Financial Officer of the
Company, dated the Closing Date, in form and substance reasonably satisfactory
to ShopNow, (i) certifying that the conditions to the obligations of ShopNow and
the Purchaser in Sections 4A.1 and 4A.2 have been fulfilled and (ii) verifying
the accuracy of the information contained in the Merger Consideration
Spreadsheet (as defined below) and the Option Consideration Spreadsheet (as
defined below);
(d) a certificate of the Secretary of the Company, in form and substance
reasonably satisfactory to ShopNow, as to the authenticity and effectiveness of
the actions of the Board of Director of the Company and the Shareholders
authorizing the Merger and the transactions contemplated by this Agreement and
the Operative Documents (copies of (i) the Company's Articles of Incorporation,
certified by the California Secretary, (ii) the Company's Bylaws, certified by
the Secretary of the Company, and (iii) the resolutions of the Board of
Directors of the Company relating to the transactions contemplated by this
Agreement and the Operative Documents shall be attached to such certificate);
(e) a Foreign Investment in Real Property Tax Act Affidavit in the form
attached hereto as EXHIBIT 4.(1)(e).
(f) an executed ShopNow standard California Form of Intellectual Property
Agreement (Confidentiality, Invention Assignment, Nonraiding and Noncompetition)
from each of the employees of the Company who have been offered and have
accepted employment with ShopNow (which form is attached as EXHIBIT 4.1(f) to
this Agreement);
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(g) stock powers endorsed in blank from each Principal Shareholder and
other such documentation as ShopNow may reasonably prescribe to carry out the
purposes of Article V;
(h) the Investor Questionnaire in the form attached hereto as
EXHIBIT 4.1(h) fully completed and duly executed by each of the Shareholders;
(i) written consents to the Merger or waivers, as applicable, from each
of the parties (other than the Company) to those agreements, leases, notes or
other documents listed on SCHEDULE 2.10.1 to the Company Disclosure Memorandum,
which consents or waivers, as the case may be, shall be reasonably satisfactory
in all respects to ShopNow;
(j) a spreadsheet in a form reasonably acceptable to ShopNow detailing
the number of shares of Company Common Stock held by each Shareholder, the
amount of ShopNow Common Stock to be received by each such Shareholder at the
Effective Time and with respect to each Principal Shareholder, the number of
Indemnification Shares to be held pursuant to the Holdback (the "MERGER
CONSIDERATION SPREADSHEET");
(k) a spreadsheet in a form reasonably acceptable to ShopNow detailing
with respect to each Option the number of shares of Company Capital Stock
subject to such Option and the exercise price thereof, the number of shares of
ShopNow Common Stock that will be subject to such Option and the exercise price
thereof after the assumption of such Option by ShopNow pursuant to Section
1.6.1(e) and the vesting schedule with respect to such Option (the "OPTION
CONSIDERATION SPREADSHEET").
(l) copies of the resignations, effective as of the Effective Time, of
all the directors and officers of the Company;
(m) employment agreements, substantially in the form of EXHIBIT 4.1(m)
hereto, duly executed by each of Farid Tabibzadeh and Shahab Emrani (the
"EMPLOYMENT AGREEMENTS");
(n) a receipt and release in form and substance reasonably satisfactory
to ShopNow, duly executed by Farid Tabibzadeh, with respect to the repayment of
the Shareholder Indebtedness;
(o) executed Inventions Agreements or Amended Employee Agreements, as
applicable, duly executed by each of the Participating Developers;
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(p) evidence in a form satisfactory to ShopNow of the termination of the
Company's Investors' Rights Agreement among the Company and certain of its
Shareholders;
(q) evidence in a form satisfactory to ShopNow of the amendment of all
previously executed agreements in the form of the SpeedyClick, Corp. Employment
Policy and Agreement with the Company's current employees to provide that all
such employees are employees "at will;" and
(r) an agreement in form and substance acceptable to ShopNow, duly
executed by Fortin, to deliver promptly after the Closing Date notarized
Registrant Name Change Agreements with respect to the transfer of those domain
names that are identified on Schedule 2.14.11 of the Company Disclosure
Memorandum as domain names that are registered in Jay Fortin's name.
4.2 DELIVERIES BY SHOPNOW AND THE PURCHASER
On the Closing Date, ShopNow and the Purchaser shall deliver to the
Company and the Principal Shareholders:
(a) the opinion letter of Perkins Coie LLP, counsel for ShopNow and the
Purchaser, dated the Closing Date in the form attached hereto as EXHIBIT 4.2(a);
(b) a certificate of the Washington Secretary to the effect that ShopNow
is a corporation validly existing and duly authorized to transact business in
the corporate form under the laws of the state of Washington;
(c) a certificate of the Washington Secretary to the effect that the
Purchaser is a corporation validly existing and duly authorized to transact
business in the corporate form under the laws of the state of Washington;
(d) a certificate of an officer of ShopNow, in form and substance
reasonably satisfactory to the Company, certifying that the conditions to the
obligations of the Company and the Principal Shareholders in Sections 4B.1 and
4B.2 have been fulfilled;
(e) a certificate or certificates of the Secretary of ShopNow and
Purchaser, respectively, in form and substance reasonably satisfactory to the
Company, as to the authenticity and effectiveness of the actions of the Board of
Directors of ShopNow and the Purchaser, respectively, and the sole shareholder
of Purchaser, authorizing the Merger and the transactions contemplated by this
Agreement and the Operative Documents (copies of the resolutions of the Board of
Directors of ShopNow and
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Purchaser relating to the transactions contemplated by this Agreement and the
Transaction Documents shall be attached to such certificate or certificates);
(f) The Employment Agreements, duly executed by ShopNow;
(g) an executed exchange agent agreement between ShopNow and Continental
with respect to the Closing Shares in a form reasonably satisfactory to the
Company;
(h) the repayment of the Shareholder Indebtedness to Farid Tabibzadeh by
check or wire transfer of immediately available funds; and
(i) an application for listing of additional shares with respect to the
listing of the Closing Shares on the Nasdaq Stock Market's National Market, duly
executed by ShopNow.
ARTICLE IVA - CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF SHOPNOW AND THE PURCHASER
The obligations of ShopNow and the Purchaser to perform and observe the
covenants, agreements and conditions hereof to be performed and observed by them
at or before the Closing shall be subject to the satisfaction of the following
conditions, which may be expressly waived only in writing signed by ShopNow and
the Purchaser:
4A.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company and the Principal
Shareholders contained herein (including applicable Exhibits or Schedules to the
Company Disclosure Memorandum) and in the Operative Documents shall have been
true and correct in all material respects when made and, except (a) for changes
contemplated by this Agreement and the Operative Documents and (b) to the extent
that such representations and warranties speak as of an earlier date, shall be
true and correct in all material respects as of the Closing Date, as though made
on that date.
4A.2 PERFORMANCE OF AGREEMENTS; DELIVERIES
Each of the Company and the Principal Shareholders shall have performed
in all material respects all obligations and agreements, made all deliveries
contemplated by Section 4.1, and complied with all covenants contained in this
Agreement or any Operative Document to be performed and complied with by him,
her or it at or prior to the Closing.
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4A.3 COMPLIANCE WITH LAWS
The effectiveness of the Merger and the performance by ShopNow, the
Purchaser, the Company and the Principal Shareholders of their respective
obligations pursuant to this Agreement and the Operative Documents shall be
legally permitted by all laws and regulations to which ShopNow, the Purchaser,
the Company and the Principal Shareholders are subject.
4A.4 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect that
enjoins, restrains, conditions or prohibits consummation of this Agreement or
any Operative Document, and no litigation, investigation or administrative
proceeding shall be pending or threatened that would enjoin, restrain, condition
or prevent consummation of this Agreement or any Operative Document.
ARTICLE IVB - CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF THE COMPANY AND THE PRINCIPAL
SHAREHOLDERS
The obligations of the Company and the Principal Shareholders to perform
and observe the covenants, agreements and conditions hereof to be performed and
observed by them at or before the Closing shall be subject to the satisfaction
of the following conditions, which may be expressly waived only in writing
signed by the Company and the Principal Shareholders:
4B.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of ShopNow and the Purchaser contained
herein (including applicable Exhibits or Schedules to the Company Disclosure
Memorandum) and in the Operative Documents shall have been true and correct in
all material respects when made and, except (a) for changes contemplated by this
Agreement and the Operative Documents and (b) to the extent that such
representations and warranties speak as of an earlier date, shall be true and
correct in all material respects as of the Closing Date, as though made on that
date.
4B.2 PERFORMANCE OF AGREEMENTS; DELIVERIES
Each of ShopNow and the Purchaser shall have performed in all material
respects all obligations and agreements, made all deliveries contemplated by
Section 4.2, and complied with all covenants contained in this Agreement or any
Operative
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Document to be performed and complied with by him, her or it at or prior to the
Closing.
4B.3 COMPLIANCE WITH LAWS
The effectiveness of the Merger and the performance by ShopNow, the
Purchaser, the Company and the Principal Shareholders of their respective
obligations pursuant to this Agreement and the Operative Documents shall be
legally permitted by all laws and regulations to which ShopNow, the Purchaser,
the Company and the Principal Shareholders are subject.
4B.4 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect that
enjoins, restrains, conditions or prohibits consummation of this Agreement or
any Operative Document, and no litigation, investigation or administrative
proceeding shall be pending or threatened that would enjoin, restrain, condition
or prevent consummation of this Agreement or any Operative Document.
ARTICLE IVC - COVENANTS
Between the date of this Agreement and the Effective Time, the parties
covenant and agree as set forth in this Article IVC:
4C.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER
Unless ShopNow shall otherwise agree in writing, the Company and the
Principal Shareholders covenant and agree to conduct the Company's business
between the date of this Agreement and the Effective Time in and only in, and
the Company and the Principal Shareholders shall not take any action except in,
the ordinary course of business and in a manner consistent with past practice
and in accordance with applicable law; and each of the Company and the Principal
Shareholders shall use his, her or its best efforts to preserve intact the
business organization of the Company, to keep available the services of the
current officers, employees and consultants of the Company and to preserve the
current relationships of the Company with, and the goodwill of, customers,
suppliers and other Persons with which the Company has significant business
relations.
4C.2. NO ALTERNATIVE TRANSACTIONS
Unless this Agreement shall have been terminated in accordance with its
terms, neither the Company nor the Principal Shareholders shall, directly or
indirectly,
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through any officer, director, agent or otherwise, solicit, initiate or
encourage the submission of any proposal or offer from any Person relating to
any acquisition or purchase of all or (other than in the ordinary course of
business) any material portion of the assets of, or any equity interest in, the
Company or any business combination with the Company, or participate in any
negotiations regarding, or furnish to any other Person any information with
respect to, or otherwise cooperate or negotiate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
Person to do or seek any of the foregoing. The Company shall notify ShopNow
promptly if any such proposal or offer, or any inquiry or contact with any
Person with respect thereto, is made and shall, in any such notice to ShopNow,
indicate in reasonable detail the identity of the Person making such proposal,
offer, inquiry or contact and the terms and conditions of such proposal, offer,
inquiry or contact. The Company agrees not to release any third party from, or
waive any provision of, any confidentiality or standstill (e.g., agreement not
to invest in or seek change of control of the Company) agreement to which the
Company is a party.
4C.3 NOTIFICATION OF CERTAIN MATTERS
Each party shall give prompt notice to the other parties of (a) the
occurrence or nonoccurrence of any event that would be reasonably likely to
cause any representation or warranty made by such party contained in this
Agreement to be untrue or inaccurate in any material respect and (b) any
material failure by such party to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 4C.3 shall not
limit or otherwise affect the remedies available to the parties hereunder.
4C.4 FURTHER ACTION; COMMERCIALLY REASONABLE EFFORTS
Upon the terms and subject to the conditions hereof, each of the parties
hereto shall use commercially reasonable efforts to take, or cause to be taken,
all appropriate action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated hereby, including, without limitation,
using commercially reasonable efforts to obtain all waivers, licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and parties to contracts with the Company as are necessary for the
consummation of the transactions contemplated hereby and to fulfill the
conditions to the Merger.
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4C.5 LIMITATION ON SALES OF COMPANY COMMON STOCK
Except as contemplated by this Agreement, each Principal Shareholder
covenants and agrees not to sell, assign, transfer, pledge, encumber or
otherwise dispose of any of his or its shares of Company Common Stock.
ARTICLE V - SURVIVAL AND INDEMNIFICATION
5.1 SURVIVAL
All representations and warranties contained in this Agreement or in the
Operative Documents or in any certificate delivered pursuant hereto or thereto
shall survive until the first anniversary of the Effective Time (the "SURVIVAL
PERIOD"), and shall not be deemed waived or otherwise affected by any
investigation made or any knowledge acquired with respect thereto, or by any
notice delivered pursuant to Section 5.4; provided, however, that any claim
relating to fraud shall survive the Effective Time indefinitely. The covenants
and agreements contained in this Agreement shall survive and continue until all
obligations with respect thereto shall have been performed or satisfied or shall
have been terminated in accordance with their terms. Notwithstanding the
foregoing, any representation or warranty in respect of which indemnity may be
sought pursuant to this Agreement shall survive until the time which it would
otherwise terminate if a Claim Notice (as defined in Section 5.5) shall have
been delivered to the Shareholder Representative prior to such time.
5.2 INDEMNIFICATION BY THE SHAREHOLDERS
Subject to the limitations set forth in this Article V, the Principal
Shareholders jointly and severally shall indemnify and hold ShopNow and its
officers, directors and affiliates (the "SHOPNOW INDEMNIFIED PARTIES") harmless
from and against, and shall reimburse the ShopNow Indemnified Parties for, any
and all loss, obligation, deficiency, damage, claim liability, cost and expense
(including, without limitation, the amount of any settlement entered into
pursuant hereto, and all reasonable legal fees and other expenses) ("LOSSES")
arising out of (i) any inaccuracy or misrepresentation in, or breach of, any
representation or warranty made by the Company or any Shareholder in this
Agreement or in any Operative Document or in any certificate delivered pursuant
hereto or thereto; (ii) any failure by the Company or the Shareholders to
perform or comply, in whole or in part, with any covenant or agreement in this
Agreement or in any Operative Document; (iii) any claim by any third party
arising out of the Company's operation of the Company's business or the
ownership, use or distribution of the Company's assets on or before the
Effective Time; (iv) any liability for Taxes resulting from the transactions
contemplated by this
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Agreement, including without limitation, transfer, sales, use, excise,
conveyance and similar taxes, excluding any Taxes resulting from a reassessment
of Real Property or Personal Property occurring as a result of the Merger; or
(v) any claims by the Company's trade creditors relating to the Company's
obligations existing on or prior to, or arising with respect to the period
ending on, the Effective Date, other than trade payables arising in the ordinary
course of business.
5.3 INDEMNIFICATION BY SHOPNOW
ShopNow shall indemnify and hold the Shareholders, the Company and the
Company's officers, directors and affiliates (the "COMPANY INDEMNIFIED PARTIES"
and, together with the ShopNow Indemnified Parties, the "INDEMNIFIED PARTIES")
harmless from and against, and shall reimburse the Company Indemnified Parties
for, any and all Losses arising out of or in connection with (a) any inaccuracy
in, or misrepresentation or breach of, any representation or warranty made by
ShopNow or the Purchaser in this Agreement or in any Operative Document or in
any certificate delivered pursuant hereto or thereto and (b) any failure by
ShopNow or the Purchaser to perform or comply, in whole or in part, with any
covenant or agreement in this Agreement or in any Operative Document.
5.4 THRESHOLD AND LIMITATIONS
(a) The Indemnified Parties shall be not be entitled to receive any
indemnification payment with respect to any claims for indemnification under
this Article V ("CLAIMS") until the aggregate Losses for which such Indemnified
Parties would be otherwise entitled to receive indemnification exceed (i) in the
case of Losses arising out of the matters described in subsections (i), (ii),
(iv) or (v) of Section 5.3, $50,000 or (ii) in the case of Losses arising out of
the matters described in subsection (iii) of Section 5.3, $150,000 (each, where
applicable, the "THRESHOLD"); provided, however, that once such aggregate Losses
exceed the Threshold, such Indemnified Parties shall be entitled to
indemnification for the aggregate amount of all Losses without regard to the
Threshold.
(b) Except for Losses based on fraud, the aggregate total liability of
the Principal Shareholders pursuant to this Article V shall be limited to
$50,000,000.
(c) An indemnifying party shall not be obligated to defend and hold
harmless an Indemnified Party, or otherwise be liable to such party, with
respect to any claims made by the Indemnified Party after the expiration of the
Survival Period or other applicable time limitation described in Section 5.1,
except that indemnity may be sought after the expiration of the Survival Period
or other applicable time limitation if
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a Claim Notice (as defined in Section 5.5(a)) shall have been delivered to the
Shareholder Representative prior to the expiration of such time period.
(d) Except for Losses based on fraud, the obligation of the Principal
Shareholders to indemnify the ShopNow Indemnified Parties under this Article V
shall be the sole and exclusive remedy of the ShopNow Indemnified Parties under
this Agreement against the Principal Shareholders.
5.5 PROCEDURE FOR INDEMNIFICATION
(a) The Indemnified Party shall give written notice (the "CLAIM NOTICE")
of any Claim to the indemnifying party as promptly as practicable, but in any
event: (i) if such Claim relates to the assertion against an Indemnified Party
of any claim by a third party (a "THIRD PARTY CLAIM"), within 30 days after the
assertion of such Third Party Claim, or (ii) if such Claim is not in respect of
a Third Party Claim, within 30 days after the discovery of facts upon which the
Indemnified Party intends to base a Claim for indemnification pursuant to
Article V hereof; provided, however, that the failure or delay to so notify the
indemnifying party shall not relieve the indemnifying party of any obligation or
liability that the indemnifying party may have to the Indemnified Party except
to the extent that the indemnifying party demonstrates that the indemnifying
parties' ability to defend or resolve such Claim is adversely affected thereby.
Any such Claim Notice shall describe the facts and circumstances on which the
asserted Claim for indemnification is based, the amount thereof if then
ascertainable and, if not then ascertainable, the estimated maximum amount
thereof, and the provisions in the Agreement on which the Claim is based.
(b) (i) Subject to the rights of or duties to any insurer or other third
party having potential liability therefor, the indemnifying party shall have the
right, upon written notice given to the Indemnified Party within 30 days after
receipt of the notice from the Indemnified Party of any Third Party Claim, to
assume the defense or handling of such Third Party Claim, at the indemnifying
party's sole expense, in which case the provisions of Section 5.5(b)(ii) hereof
shall govern.
(ii) The indemnifying party shall select counsel reasonably
acceptable to the Indemnified Party in connection with conducting the defense or
handling of such Third Party Claim, and the indemnifying party shall defend or
handle the same in consultation with the Indemnified Party and shall keep the
Indemnified Party timely apprised of the status of such Third Party Claim. The
indemnifying party shall not, without the prior written consent of the
Indemnified Party, agree to a settlement of any Third Party Claim, unless (A)
the settlement provides an unconditional release and discharge of the
Indemnified Party and the Indemnified Party is reasonably satisfied
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with such discharge and release and (B) the Indemnified Party shall not have
reasonably objected to any such settlement on the ground that the circumstances
surrounding the settlement could result in an adverse impact on the business,
operations, assets, liabilities (absolute, accrued, contingent or otherwise),
condition (financial or otherwise) or prospects of the Indemnified Party. The
Indemnified Party shall cooperate with the indemnifying party and shall be
entitled to participate in the defense or handling of such Third Party Claim
with its own counsel and at its own expense.
(c) (i) If the indemnifying party does not give written notice to the
Indemnified Party within 30 days after receipt of the notice from the
Indemnified Party of any Third Party Claim of the indemnifying party's election
to assume the defense or handling of such Third Party Claim, the provisions of
Section 5.5(c)(ii) hereof shall govern.
(ii) The Indemnified Party may, at the indemnifying party's
expense (which shall be paid from time to time by the indemnifying party as such
expenses are incurred by the Indemnified Party), select counsel in connection
with conducting the defense or handling of such Third Party Claim and defend or
handle such Third Party Claim in such manner as it may deem appropriate;
provided, however, that the Indemnified Party shall keep the indemnifying party
timely apprised of the status of such Third Party Claim and shall not settle
such Third Party Claim without the prior written consent of the indemnifying
party, which consent shall not be unreasonably withheld. If the Indemnified
Party defends or handles such Third Party Claim, the indemnifying party shall
cooperate with the Indemnified Party and shall be entitled to participate in the
defense or handling of such Third Party Claim with its own counsel and at its
own expense.
5.6 HOLDBACK
5.6.1 PLEDGE
The Indemnification Shares (which shall include for purposes of this
Section 5.6 any distributions accrued or made thereon after the date of this
Agreement, the net proceeds of any sale of the Indemnification Shares and any
other securities or property which may be issued after the date hereof in
exchange for the Indemnification Shares in any merger or recapitalization or
similar transaction involving ShopNow) shall be deemed as of the Effective Time
to be pledged by the Principal Shareholders to, and certificates representing
the Indemnification Shares shall be held by, ShopNow or any successor thereto
pursuant to this Agreement. So long as any Indemnification Shares are held by
ShopNow hereunder, ShopNow shall have, and the Principal Shareholders
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hereby grant, effective as of the Effective Time, a perfected, first-priority
security interest in such Indemnification Shares to secure payment of amounts
payable by the Principal Shareholders in respect of claims under this Article V.
In connection therewith, each Principal Shareholder shall execute and deliver
such instruments as ShopNow may from time to time reasonably request for the
purpose of evidencing and perfecting such security interest.
5.6.2 HOLDBACK RELEASE
ShopNow shall hold the Indemnification Shares in accordance with this
Agreement and shall transfer the Indemnification Shares only as follows:
(a) Indemnification Shares shall be retransferred to ShopNow in respect
of a Claim made by ShopNow, or transferred to a ShopNow Indemnified Party in
respect of a claim made by such Indemnified Party, under this Article V when,
and to the extent, authorized under Section 5.6.3 below.
(b) On the first anniversary of the Closing Date (the "HOLDBACK RELEASE
DATE"), the Indemnification Shares shall be released to the Principal
Shareholders PRO RATA in accordance with their percentage interest in the
Indemnification Shares; provided, however, that no Indemnification Shares shall
be released to any Principal Shareholder who has not previously surrendered all
of such Principal Shareholder's certificates representing Company Common Stock
in accordance with Section 1.6.2. Notwithstanding the foregoing, the number of
Indemnification Shares to be released on the Holdback Release Date shall be
reduced by the number of Closing Shares (i) subject to a pending Claim Notice
for which the Response Period (as defined below) has not yet expired, (ii)
retransferred to ShopNow or transferred by ShopNow to a ShopNow Indemnified
Party in satisfaction of a Claim made prior to the Release Date or (iii) held in
reserve pending resolution of an ShopNow Open Claim (as defined below) in
respect of a Claim Notice delivered prior to the Holdback Release Date.
(c) After the Holdback Release Date, when a final determination is made
with respect to any ShopNow Open Claim, the number of Indemnification Shares
transferable to any ShopNow Indemnified Party shall be transferred to the
ShopNow Indemnified Party from the Claim Reserve Amount for such ShopNow Open
Claim, and the Indemnification Shares included in such Claim Reserve Amount
remaining after such transfer shall be released to the Principal Shareholders
PRO RATA in accordance with their percentage interest in the Indemnification
Shares to be released; provided, however, that no Indemnification Shares shall
be released to any Principal Shareholder who has not previously surrendered all
of such Principal Shareholder's certificates representing Company Common Stock
in accordance with Section 1.6.2.
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5.6.3 CLAIMS PROCEDURE
The procedure for payment from the Indemnification Shares of
indemnification amounts to which ShopNow or other ShopNow Indemnified Parties
may become entitled under this Article V shall be as follows:
(a) From time to time as ShopNow determines that it or another ShopNow
Indemnified Party is entitled to an indemnification payment from the
Indemnification Shares for a Claim under this Article V, ShopNow shall give a
Claim Notice to the Shareholder Representative in accordance with Section 5.5.
(b) If ShopNow has not received from the Shareholder Representative
within 30 business days after notice of such Claim is delivered (the "RESPONSE
PERIOD") a written objection to a Claim stating the facts and circumstances on
which the objection is based, the Claim stated in such Claim Notice shall be
conclusively deemed to be approved by the Principal Shareholders and ShopNow
shall promptly thereafter transfer to the ShopNow Indemnified Party from the
Indemnification Shares an amount of Indemnification Shares equal in value to the
amount of such Claim. The Indemnification Shares to be transferred shall be
determined by dividing the amount of the Claim by the Base Price and shall be
rounded to the nearest whole share, with .5 being rounded up.
(c) If, within the Response Period, ShopNow shall have received from the
Shareholder Representative a written objection to the claim specifying the
nature of and grounds for such objection, then such Claim shall be deemed to be
a "SHOPNOW OPEN CLAIM," and ShopNow shall reserve within the Indemnification
Shares a number of shares equal in value to the amount of such ShopNow Open
Claim (which amount designated for each ShopNow Open Claim is referred to herein
as the "CLAIM RESERVE AMOUNT"). The number of Indemnification Shares to be
reserved shall be determined by dividing the amount of the ShopNow Open Claim by
the Base Price and shall be rounded to the nearest whole share, with .5 rounded
up.
(d) Indemnification Shares within the Claim Reserve Amount for each
ShopNow Open Claim shall be transferred by ShopNow only in accordance with
either (i) a mutual agreement between ShopNow and the Shareholder Representative
which shall be memorialized in writing or (ii) a court order from any competent
court having jurisdiction over the parties under Section 6.12 or a final and
binding arbitration decision pertaining to the ShopNow Open Claim.
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5.6.4 VOTING; DISPOSITION
Until retransferred to ShopNow or transferred to an Indemnified Party in
accordance with the provisions of this Article V, the Indemnification Shares
shall be held of record by the Principal Shareholders for all purposes
(including federal income tax purposes), and the Principal Shareholders shall
have full right to vote the Indemnification Shares on all matters coming before
the shareholders of ShopNow. No interest in the Indemnification Shares may be
sold or transferred to any third party prior to any distribution of the
Indemnification Shares pursuant to Section 5.6.3(b) or (c).
5.6.5 MERGER OR RECAPITALIZATION
In the event of any merger or recapitalization or similar transaction
involving ShopNow prior to the time when all Indemnification Shares have been
transferred or released in accordance with the terms of this Section 5.6, such
Indemnification Shares shall be converted or exchanged in accordance with such
transaction in the same manner as other ShopNow Common Stock, and any securities
or property issued in conversion or exchange thereof shall then be included
within the definition of Indemnification Shares and shall otherwise become
subject to this Agreement in lieu of such shares of ShopNow Common Stock.
5.6.6 TAXATION OF DIVIDENDS
For federal and state income tax purposes, any dividends or other
distributions with respect to the Indemnification Shares shall be income of the
Principal Shareholders.
5.7 SPECIFIC PERFORMANCE
Each of the parties acknowledges and agrees that the other parties hereto
would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the parties hereto agrees that the other
parties hereto shall be entitled to an injunction to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof (including the indemnification provisions hereof) in
any competent court having jurisdiction over the parties, in addition to any
other remedy to which they may be entitled at law or in equity.
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ARTICLE VA - TERMINATION
5A.1 TERMINATION
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time (notwithstanding any approval of this Agreement
by the Shareholders):
(a) by mutual written consent of the Company and ShopNow;
(b) by either the Company or ShopNow, if the Merger has not been
consummated by December 31, 1999; provided, however, that the right to terminate
this Agreement under this subsection (b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before such
date;
(c) by either the Company or ShopNow, if there shall be any law or
regulation that makes consummation of the Merger illegal or if any judgment,
injunction, order or decree enjoining ShopNow, the Purchaser, the Company or the
Shareholders from consummating the Merger is entered and such judgment,
injunction, order or decree shall become final and nonappealable; provided,
however, that the party seeking to terminate this Agreement pursuant to this
subsection (c) shall have used all reasonable efforts to remove such judgment,
injunction, order or decree;
(d) by the Company, in the event of a material breach by ShopNow or the
Purchaser of any representation, warranty or agreement contained herein that has
not been cured or is not curable by December 31, 1999;
(e) by ShopNow, in the event of a material breach by the Company or any
Principal Shareholder of any representation, warranty or agreement contained
herein that has not been cured or is not curable by December 31, 1999.
5A.2 EFFECT OF TERMINATION
In the event of the termination of this Agreement pursuant to Section
5A.1 hereof, there shall be no further obligation on the part of any party
hereto, except that nothing herein shall relieve any party from liability for
any willful breach hereof.
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ARTICLE VI - GENERAL
6.1 FURTHER ACTION; REASONABLE BEST EFFORTS; DOMAIN NAME TRANSFER
(a) In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement or the
Operative Documents, each party to this Agreement shall use commercially
reasonable efforts to promptly take such action. After the Closing, each party
hereto, at the request of and without any further cost or expense to the other
parties, will take any further actions reasonably necessary or desirable to
carry out the purposes of this Agreement or any Operative Document, to vest in
the Surviving Corporation full title to all properties, assets and rights of the
Company and to effect the issuance of the Closing Shares to the Shareholders
pursuant to the terms and conditions hereof.
(b) The Company hereby agrees (a) to deliver to the Surviving Corporation
as soon as practicable and in no event later than thirty days after the Closing
Date, Registrant Name Change Agreements, duly executed by each of Jay Fortin,
SCS Services and speedyclick.net, as applicable, and in each case properly
notarized and in form and content reasonably satisfactory to ShopNow, with
respect to the transfer to the Surviving Corporation of the registration of
those domain names that are identified on Schedule 2.14.11 to the Company
Disclosure Memorandum as domain names registered to parties other than the
Company, and (b) to take any and all actions reasonably requested by ShopNow as
may be necessary to effectuate the assignment and transfer of such domain names.
6.2 PUBLICITY
No party hereto shall issue any press release or otherwise make any
statements to any third party with respect to this Agreement or the transactions
contemplated hereby other than the issuance by ShopNow of a press release
announcing this Agreement and the transactions contemplated hereby, the
solicitation by the Company of shareholder consents to the Merger, or as
required by law.
6.3 NONCOMPETITION AGREEMENT
In consideration for $10,000 of the Closing Cash issuable to each of
Farid Tabibzadeh and Shahab Emrani (the "Employee Shareholders") pursuant to
Section 1.6.1, each Employee Shareholder agrees that, for a period of twelve
months after the date on which such Employee Shareholder's employment with
ShopNow ends (the "Employment Termination Date"), such Employee Shareholder will
not, directly or indirectly: (a) sell, market or propose to sell or market
products or services that compete or will compete with ShopNow's then existing
or reasonably anticipated
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products or services ("Competing Products or Services") in any county in the
state of California, in any state in the United States or anywhere throughout
the world, (b) design or develop Competing Products or Services, (c) work for or
with, or provide services or information to, any person or entity that (i)
sells, markets or proposes to sell or market Competing Products or Services in
any geographic area where ShopNow's products or services are then marketed, or
(ii) is designing or developing Competing Products or Services, or (d) solicit,
acquire, provide services to, or conduct any competing business from or with any
ShopNow customer (as defined below) with whom such Employee Shareholder had
substantial contact on ShopNow's behalf within twelve (12) months before his
employment by ShopNow ended. For purposes of this paragraph, "SHOPNOW CUSTOMERS"
shall include those corporations, organizations, facilities, and individuals to
whom ShopNow was providing products or services, or had proposals outstanding
for the provision of products or services, within twelve months before the
Employment Termination Date.
6.4 AMENDMENT
This Agreement may not be amended except by an instrument in writing
signed by ShopNow, the Company and the Shareholder Representative; provided,
however, that no amendment may be made that would reduce the amount or change
the type of consideration into which the Company Common Stock is to be converted
upon consummation of the Merger without the approval of Shareholders holding a
majority of the shares of Company Common Stock.
6.5 WAIVER
At any time prior to the Effective Time, any party hereto may (a) extend
the time for the performance of any obligation or other act of any other party
hereto, (b) waive any inaccuracy in the representations and warranties contained
herein or in any document delivered pursuant hereto, or (c) waive compliance
with any agreement or condition contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the party
or parties to be bound thereby.
6.6 TAX MATTERS - COMPANY AND SHAREHOLDERS
Unless otherwise required by law, the parties hereto shall treat the
Merger as a reorganization under Section 368 of the Code for all Tax reporting
purposes; provided, however, neither ShopNow nor the Purchaser makes any
representation or warranty with respect to, and expressly disclaims any
responsibility for, any Tax consequences to the Company or Shareholders arising
out of the structure or terms of this Agreement.
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6.7 EXPENSES
If the transactions contemplated by this Agreement are not consummated,
each party shall pay its own fees and expenses incident to the negotiation,
preparation and execution of this Agreement and the Operative Documents
(including legal and accounting fees and expenses); provided, however that the
attorneys' fees and expenses of the prevailing party in any action brought
hereunder shall be paid by the other party to such action. If the transactions
contemplated by this Agreement are consummated, ShopNow will pay the reasonable
fees and expenses of the Company and the Principal Shareholders incident to the
negotiation, preparation and execution of this Agreement and the Operative
Documents.
6.8 NOTICES
Any notice, request or demand desired or required to be given hereunder
shall be in writing given by personal delivery, confirmed facsimile transmission
or overnight courier service, in each case addressed as respectively set forth
below or to such other address as any party shall have previously designated by
such a notice. The effective date of any notice, request or demand shall be the
date of personal delivery, the date on which successful facsimile transmission
is confirmed or the date actually delivered by a reputable overnight courier
service, as the case may be, in each case properly addressed as provided herein
and with all charges prepaid.
TO SHOPNOW OR THE PURCHASER:
ShopNow.com Inc.
411 First Avenue South, Suite 200 North
Seattle, Washington 98101
Fax: (206) 223-2324
Attention: Alan D. Koslow
with a copy to:
Perkins Coie LLP
1201 Third Avenue, 48th Floor
Seattle, Washington 98101-3099
Fax: (206) 583-8500
Attention: Stephen M. Graham
Alan C. Smith
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TO THE COMPANY:
SpeedyClick, Corp.
111 North Jackson Street #200
Glendale, California 91206
Fax: (818) 552-2301
Attention: Farid Tabibzadeh
TO THE SHAREHOLDER REPRESENTATIVE:
Farid Tabibzadeh
345 Pioneer Drive
1002 West
Glendale, California 91203
in the case of either the Company or the Shareholder Representative, with
a copy to:
Morrison and Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, California 90013
Fax: (213) 892-5454
Attention: Marc B. Leh
6.9 SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the fullest extent possible.
6.10 ENTIRE AGREEMENT
This Agreement, the Operative Documents and that certain Non-Disclosure
Agreement dated on or about October 1, 1999 constitute the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersede all prior
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agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and thereof (including, without
limitation, the Letter of Intent, dated October 12, 1999 among the parties).
6.11 ASSIGNMENT
This Agreement shall not be assigned by operation of law or otherwise;
provided, however, that the Purchaser's rights and obligations may be assigned
to and assumed by ShopNow or any other corporation wholly owned (directly or
through intermediate wholly owned subsidiaries) by ShopNow.
6.12 PARTIES IN INTEREST
This Agreement shall be binding upon and inure solely to the benefit of
the parties hereto and their respective successors heirs, legal representatives
and permitted assigns, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
6.13 GOVERNING LAW; VENUE
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California applicable to contracts executed in and to
be performed in that state.
6.14 HEADINGS
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
6.15 COUNTERPARTS
This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
6.16 WAIVER OF JURY TRIAL
Each of ShopNow, the Company, the Purchaser and each Principal
Shareholder hereby irrevocably waives all right to trial by jury in any action,
proceeding or
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counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to this Agreement, the transactions contemplated hereby or the actions
of such parties in the negotiation, administration, performance and enforcement
hereof.
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IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement and Plan of Merger as of the date and year first above written.
SHOPNOW.COM INC.
By /s/ Alan Koslow
------------------------------
Its Executive Vice President
------------------------------
RACER ACQUISITION, INC.
By /s/ Alan Koslow
------------------------------
Its Executive Vice President
------------------------------
SPEEDYCLICK, CORP.
By /s/ Farid Tabibzadeh
------------------------------
Its President
------------------------------
SHAREHOLDERS
/s/ Farid Tabibzadeh
---------------------------------
Farid Tabibzadeh
/s/ Majid Tabibzadeh
---------------------------------
Majid Tabibzadeh
/s/ Shahab Emrani
---------------------------------
Shahab Emrani