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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CNET, INC.
SAVVYSEARCH LIMITED
AND
THE STOCKHOLDERS OF
SAVVYSEARCH LIMITED
OCTOBER 7, 1999
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TABLE OF CONTENTS
Page No.
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ARTICLE I THE MERGER....................................................................................... 1
SECTION 1.01. The Merger................................................................................. 1
SECTION 1.02. Closing; Closing Date; Effective Time...................................................... 1
SECTION 1.03. Effect of the Merger....................................................................... 2
SECTION 1.04. Certificate of Incorporation; Bylaws....................................................... 2
SECTION 1.05. Directors and Officers..................................................................... 2
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES............................................... 2
SECTION 2.01. Consideration; Conversion and Cancellation of Securities................................... 2
SECTION 2.02. Exchange and Surrender of Certificates..................................................... 3
SECTION 2.03 Other Consideration........................................................................ 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS............................... 4
SECTION 3.01. Organization and Qualification............................................................. 4
SECTION 3.02. Articles and Bylaws........................................................................ 4
SECTION 3.03. Capitalization............................................................................. 4
SECTION 3.04. Authority.................................................................................. 5
SECTION 3.05. Subsidiaries and Other Interests........................................................... 6
SECTION 3.06. Title to Assets............................................................................ 6
SECTION 3.07. Condition of Assets........................................................................ 6
SECTION 3.08. No Conflict; Required Filings and Consents................................................. 6
SECTION 3.09. Permits; Compliance........................................................................ 7
SECTION 3.10. Financial Statements....................................................................... 7
SECTION 3.11. Absence of Certain Changes or Events....................................................... 7
SECTION 3.12. No Undisclosed Liabilities................................................................. 8
SECTION 3.13. Absence of Litigation...................................................................... 8
SECTION 3.14. Taxes...................................................................................... 8
SECTION 3.15. Tax Matters................................................................................10
SECTION 3.16. Employee Matters...........................................................................10
SECTION 3.17. Brokers....................................................................................10
SECTION 3.18. Illegal Payments...........................................................................10
SECTION 3.19. Leased Properties..........................................................................10
SECTION 3.20. Certain Material Contracts.................................................................10
SECTION 3.21. Competing Interests........................................................................11
SECTION 3.22. Material Customers and Suppliers...........................................................11
SECTION 3.23. Intellectual Property......................................................................12
SECTION 3.24. Investor Representations...................................................................13
SECTION 3.25. Year 2000 Compliance.......................................................................13
SECTION 3.26. Insurance..................................................................................14
SECTION 3.27. Information Supplied.......................................................................14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER..........................................................14
SECTION 4.01. Organization and Qualification.............................................................14
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SECTION 4.02. Authority..................................................................................15
SECTION 4.03. No Conflict; Required Filings and Consents.................................................15
SECTION 4.04. SEC Documents..............................................................................15
SECTION 4.05. Financial Statements.......................................................................15
SECTION 4.06. Tax Matters................................................................................16
SECTION 4.07. Valid Issuance of Buyer Common Stock.......................................................16
ARTICLE V COVENANTS........................................................................................16
SECTION 5.01. Affirmative Covenants of the Company.......................................................16
SECTION 5.02. Negative Covenants of the Company..........................................................17
SECTION 5.03. Restrictive Covenant.......................................................................18
SECTION 5.04. Confidential Information...................................................................19
SECTION 5.05. Access and Information.....................................................................20
SECTION 5.06. Appropriate Action; Consents; Filings......................................................20
SECTION 5.07. Tax Treatment..............................................................................21
SECTION 5.08. Public Announcements.......................................................................21
SECTION 5.09. Fees, Expenses and Other Payments..........................................................21
SECTION 5.10. Employment and Consulting Agreements.......................................................22
SECTION 5.11. Company Financials.........................................................................22
SECTION 5.12. Technical Support..........................................................................22
ARTICLE VI CLOSING CONDITIONS...............................................................................22
SECTION 6.01. Conditions to Obligations of Buyer.........................................................22
SECTION 6.02. Conditions to Obligations of the Company and the Stockholders..............................24
ARTICLE VII INDEMNIFICATION..................................................................................25
SECTION 7.01. Indemnification of Buyer...................................................................25
SECTION 7.02. Survival...................................................................................25
SECTION 7.03. Notice.....................................................................................26
SECTION 7.04. Defense of Claims..........................................................................26
SECTION 7.05. Indemnity Holdback.........................................................................26
SECTION 7.06. Indemnity Payments Reduced by Insurance Proceeds...........................................27
SECTION 7.07. Exclusive Remedy...........................................................................27
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.............................................................27
SECTION 8.01. Termination................................................................................27
SECTION 8.02. Effect of Termination......................................................................28
SECTION 8.03. Amendment..................................................................................28
SECTION 8.04. Waiver.....................................................................................28
ARTICLE IX REGISTRATION RIGHTS..............................................................................29
SECTION 9.01. Registration Statement.....................................................................29
SECTION 9.02. Limitations on Sale........................................................................29
SECTION 9.03. Information................................................................................29
SECTION 9.04. Expenses...................................................................................29
SECTION 9.05. Indemnification............................................................................29
ARTICLE X GENERAL PROVISIONS...............................................................................30
SECTION 10.01. Notices....................................................................................30
SECTION 10.02. Certain Definitions........................................................................31
SECTION 10.03. Headings...................................................................................32
SECTION 10.04. Severability...............................................................................32
SECTION 10.05. Entire Agreement...........................................................................32
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SECTION 10.06. Assignment.................................................................................32
SECTION 10.07. Parties in Interest........................................................................33
SECTION 10.08. Specific Performance.......................................................................33
SECTION 10.09. Failure or Indulgence Not Waiver; Remedies Cumulative......................................33
SECTION 10.10. Further Assurances.........................................................................33
SECTION 10.11. Governing Law; Venue.......................................................................33
SECTION 10.12. Counterparts...............................................................................33
EXHIBITS:
Exhibit A Form of Employment Agreement
Exhibit B Form of Consulting Agreement
Exhibit C Form of Closing Certificate
Exhibit D Form of Legal Opinion of Company's Counsel
Exhibit E Form of Pledge Agreement
SCHEDULES:
3.03 Capitalization
3.06(a) Assets
3.10(a) Financial Statements
3.10(c) Operating Statistics
3.10(d) Accounts Receivable
3.11 Certain Changes or Events
3.12 Liabilities
3.13 Litigation
3.16 Employees
3.19 Leased Properties
3.20 Material Contracts
3.22 Material Customers and Suppliers
3.25 Year 2000 Compliance
3.26 Insurance
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of October 7, 1999 (this
"Agreement"), is by and among CNET, Inc., a Delaware corporation
("Buyer"), SavvySearch Limited, a Massachusetts corporation (the
"Company"), and each of the stockholders of the Company appearing on
the signature page hereto (the "Stockholders").
WHEREAS, Buyer and the Company have determined that the merger of the
Company with and into Buyer ("Merger"), with Buyer surviving, and conversion of
the issued and outstanding shares of the Company, no par value (the "Company
Common Stock") into the right to receive shares of common stock of Buyer, $.0001
par value (the "Buyer Common Stock"), on the terms and subject to the conditions
of this Agreement and in accordance with the Massachusetts Business Corporation
Law ("Massachusetts Law") and the General Corporation Law of the State of
Delaware ("Delaware Law") would be advantageous and beneficial to their
respective corporations and stockholders;
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization under the provisions of section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"); and
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. On the terms and subject to the
conditions set forth in this Agreement, and in accordance with applicable
federal and state law, at the Effective Time (as defined in Section 1.02), the
Company shall be merged with and into Buyer. As a result of the Merger, the
separate corporate existence of the Company shall cease and Buyer shall continue
as the surviving corporation of the Merger (the "Surviving Corporation").
Certain terms used in this Agreement (and not otherwise defined) are defined in
Section 10.02.
SECTION 1.02. Closing; Closing Date; Effective Time. Unless this
Agreement is terminated pursuant to Section 8.01, and subject to the
satisfaction or waiver of the conditions set forth in Article VI, the
consummation of the Merger and the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Buyer as soon
as practicable (but in any event within five business days) after the
satisfaction or waiver of the conditions set forth in Article VI, or at such
other date, time and place as Buyer and the Company may agree; provided, that
the conditions set forth in Article VI shall have been satisfied or waived at or
prior to such time. The date on which the Closing takes place is referred to
herein as the "Closing Date." As promptly as practicable on the Closing Date,
the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger with the Secretary of State of the
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State of Delaware, in such form as required by, and executed in accordance with
the relevant provisions of, Delaware Law (the date and time of such filing, or
such later date or time agreed upon by Buyer and the Company and set forth
therein, being the "Effective Time"). As promptly as practicable on the Closing
Date, the parties shall also file a certificate of merger with the Secretary of
State of the State of Massachusetts, in such form as required by, and executed
in accordance with the relevant provisions of, Massachusetts Law.
SECTION 1.03. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of
Massachusetts Law and Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges and powers of the Company and Buyer will vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
the Buyer shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.04. Certificate of Incorporation; Bylaws. At the
Effective Time, the Certificate of Incorporation and bylaws of Buyer, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and bylaws of the Surviving Corporation unless and until amended
as provided therein and pursuant to Delaware Law.
SECTION 1.05. Directors and Officers. The directors and officers of
Buyer immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation at the Effective Time, each to hold office
in accordance with the bylaws of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Consideration; Conversion and Cancellation of
Securities. At the Effective Time, by virtue of the Merger and without any
action on the part of Buyer, the Company or their respective stockholders:
(a) Subject to the other provisions of this Article II,
each share of Company Common Stock issued and outstanding immediately prior to
the Effective Time shall be converted into 307,489 shares of Buyer Common Stock
(the "Conversion Ratio"), which equals Seventeen Million Six Hundred Thousand
Dollars ($17,600,000) divided by $57.238 (the average closing price of the Buyer
Common Stock on the NASDAQ National Market, as reported in the West Coast
Edition of the Wall Street Journal, for the five trading days immediately prior
to (but not including) the Closing (the "Average Closing Price"), divided by
131,764, which is the number of outstanding shares of Company Common Stock
immediately prior to the Effective Time.
(b) All shares of Company Common Stock shall cease to be
outstanding and shall automatically be canceled and retired, and each
certificate previously evidencing the Company Common Stock outstanding
immediately prior to the Effective Time (the "Converted Shares") shall
thereafter represent the right to receive Buyer Common Stock in accordance with
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this Article II and in the proportions listed on Schedule 2. The Stockholders
shall cease to have any rights with respect to such Converted Shares except as
otherwise provided herein or by law. Certificates previously evidencing
Converted Shares shall be exchanged for Buyer Common Stock upon the surrender of
such certificates in accordance with the provisions of Section 2.02, without
interest.
SECTION 2.02. Exchange and Surrender of Certificates.
(a) Subject to the Indemnity Holdback as described in
Section 7.05, each Stockholder shall be entitled to receive, upon surrender to
Buyer or its transfer agent of certificates previously evidencing Converted
Shares, as soon as practicable after the Closing Date, a certificate
representing the Converted Shares so surrendered, registered in the name of such
Stockholder. Until so surrendered and exchanged, each certificate previously
evidencing Converted Shares shall represent solely the right to receive Buyer
Common Stock.
(b) All shares of Buyer Common Stock issued upon the
surrender for exchange of certificates previously representing Converted Shares
in accordance with the terms hereof (including any adjustments pursuant to
Section 2.02(c)) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such Converted Shares. At and after the Effective Time,
there shall be no further registration of transfers on the transfer books of the
Surviving Corporation of Company Common Stock that was outstanding immediately
prior to the Effective Time. If, after the Effective Time, certificates which
previously evidenced Converted Shares are presented to the Surviving Corporation
for any reason, they shall be canceled and exchanged as provided in this Article
II.
(c) No certificates or scrip evidencing fractional shares
of Buyer Common Stock shall be issued upon the surrender for exchange of
certificates, and such fractional share interests will not entitle the owner
thereof to any rights as a stockholder of Buyer. In lieu of any such fractional
shares, the number of shares of Buyer Common Stock issuable to any Stockholder
in connection with the Merger shall be rounded up to the nearest whole share.
(d) The Conversion Ratio shall be adjusted to reflect
fully the effect of any split, reverse split, dividend (including any dividend
or distribution of securities convertible into Buyer Common Stock or Company
Common Stock), reorganization, recapitalization or other like change with
respect to Buyer Common Stock or Company Common Stock occurring after the date
of this Agreement and prior to the Effective Time.
(e) Buyer shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any former
holder of Converted Shares such amounts as Buyer (or any affiliate thereof) is
required to deduct and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by Buyer, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the former holder of
the Converted Shares in respect of which such deduction and withholding was made
by Buyer.
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SECTION 2.03 Other Consideration. $4,400,000 (less amounts
necessary to pay any Company Expenses in excess of $10,000, amounts owed to
employees in excess of $10,000 owed to Chong-Min Hong, or trade payables in
excess of $10,000, as contemplated in Section 5.09, which amounts will be
identified by the Company at Closing) will be paid to the Stockholders at the
Closing in the proportions set forth on Schedule 2 by wire transfer of
immediately available funds (to accounts specified in writing by the
Stockholders or the Company to CNET at least two days prior to the Closing), for
a total consideration of $22,000,000 (the "Purchase Price").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE STOCKHOLDERS
Except as disclosed in a document dated as of the date of this
Agreement and delivered by the Company to Buyer prior to the execution and
delivery of this Agreement and referring to the representations and warranties
in this Agreement (the "Company Disclosure Schedule"), the Company and the
Stockholders hereby jointly and severally represent and warrant to Buyer that:
SECTION 3.01. Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Massachusetts, has all requisite power and authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary. The
Company is not required to be qualified to do business as a foreign corporation
in any jurisdiction. The Company does not operate under any assumed names.
SECTION 3.02. Articles and Bylaws. The Company has furnished to
Buyer true, complete and correct copies of its articles of organization and
bylaws, in each case as amended or restated. The Company is not in violation of
any of the provisions of its articles of organization or bylaws.
SECTION 3.03. Capitalization.
(a) The authorized capital of the Company consists of
200,000 shares of Company Common Stock, of which 131,764 shares are issued and
outstanding. All of the outstanding capital stock of the Company is held of
record and beneficially as indicated in Schedule 3.03, free and clear of all
security interests, liens, claims, pledges, agreements, charges, or other
encumbrances (a "Lien") of any nature whatsoever. All of the outstanding capital
stock of the Company is duly authorized, validly issued in compliance with all
applicable laws, and is fully paid and nonassessable and free of preemptive or
similar rights created by statute, the articles of organization or bylaws of the
Company or any other agreement to which the Company is a party or bound.
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(b) No shares of capital stock of the Company are
reserved for any purpose or held in treasury by the Company and, there are no
outstanding options, warrants, convertible or exchangeable securities or other
rights, agreements, arrangements or commitments of any character obligating the
Stockholders or the Company, directly or indirectly, to grant, issue, sell,
purchase, acquire or otherwise transfer or deliver any shares of capital stock
of the Company or other equity interest in, or any agreement, document,
instrument or obligation convertible or exchangeable therefore, the Company.
(c) Except as set forth on Schedule 3.03, there are no
obligations, contingent or otherwise, of the Company or the Stockholders to (i)
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or (ii) provide material funds to, or make any material investment in
(in the form of a loan, capital contribution or otherwise), or provide any
guarantee with respect to the obligations of, any other person. There are no
agreements, arrangements or commitments of any character (contingent or
otherwise) pursuant to which any person is or may be entitled to receive any
payment based on the revenues or earnings, or calculated in accordance
therewith, of the Company. There are no voting trusts, proxies or other
agreements or understandings to which the Company is a party or by which the
Company is bound with respect to the voting of any shares of capital stock of
the Company.
(d) The Company (i) does not directly or indirectly own,
(ii) has not agreed to purchase or otherwise acquire and (iii) does not hold any
interest convertible into or exchangeable or exercisable for the capital stock
(or equivalent equity interest) of any corporation, partnership, joint venture
or other business association or entity.
SECTION 3.04. Authority. The Company has all requisite corporate
power and authority to (i) execute and deliver this Agreement and all other
agreements, certificates and instruments to be executed by the Company in
connection with or pursuant to this Agreement (collectively, the "Company
Documents"); (ii) perform its obligations under the Company Documents and (iii)
to consummate the transactions contemplated by the Company Documents. The
Stockholders have the requisite legal capacity, power and authority to enter
into the Company Documents and to perform their respective obligations under the
Company Documents. The execution, delivery and performance of the Company
Documents by the Company and the Stockholders and the consummation by the
Company and the Stockholders of the transactions contemplated by the Company
Documents, as applicable, have been duly authorized by all necessary action, and
no other proceedings on the part of the Company or the Stockholders are
necessary to authorize the Company Documents or to consummate the transactions
contemplated hereby. This Agreement has been, and at the Closing the other
Company Documents will be, duly executed and delivered by the Company and the
Stockholders. This Agreement is, and, upon execution and delivery by the Company
and the Stockholders, as applicable, at the Closing each of the other Company
Documents will be, a legal, valid and binding obligation of the Company and the
Stockholders enforceable against the Company and the Stockholders in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting the enforcement of creditors' rights generally and subject to general
principles of equity (regardless of whether enforcement is sought in a
proceeding of law or in equity).
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SECTION 3.05. Subsidiaries and Other Interests. The Company has no
subsidiaries and does not own any equity or debt interest or any form of
proprietary interest in any individual, corporation, partnership, Governmental
Entity (as defined in Section 3.08) or other entity, or any obligation, right or
option to acquire any such interest.
SECTION 3.06. Title to Assets.
(a) Set forth in Schedule 3.06(a) is a complete list of
all tangible assets of the Stockholders or the Company used in or associated
with the business of the Company (the "Business").
(b) The Company has good and marketable title to all of
the assets it purports to own, and owns all of such assets free and clear of any
Liabilities (as defined in Section 3.12) and any Liens, other than (i) statutory
liens securing current taxes and other obligations that are not yet delinquent
and (ii) minor imperfections of title and encumbrances that do not materially
detract from or interfere with the present use or value of such properties. The
Company holds a valid leasehold interest in all of the leased assets of the
Company.
SECTION 3.07. Condition of Assets. All of the assets of the
Company, including any assets held under leases or licenses, are in good
condition and repair, ordinary wear and tear excepted, and are in good working
order and have been properly and regularly maintained.
SECTION 3.08. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the
Company and the Stockholders does not, and the consummation of the transactions
contemplated hereby will not (i) conflict with or violate the articles of
organization or bylaws, in each case as amended or restated, of the Company,
(ii) conflict with or violate any federal, state, foreign or local law, statute,
ordinance, rule, regulation, order, judgment, or decree (collectively, "Laws")
applicable to the Company or the Stockholders or by which any of their
properties or assets is bound or subject or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or require payment or consent under,
or result in the creation of any Lien or encumbrance on any of the properties or
assets of the Company pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or the Stockholders is a party or by or to which the
Company or the Stockholders or any of their properties or assets is bound or
subject. The Board of Directors of the Company has taken or caused to be taken
all actions necessary under Massachusetts Law, including approving the
transactions contemplated by this Agreement and taking appropriate actions under
Massachusetts Law or any other applicable stockholder protection laws, to ensure
that any restrictions on business combinations or the owning or voting of the
capital stock of the Company do not, and will not, apply with respect to or as a
result of the transactions contemplated by this Agreement.
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(b) The execution and delivery of this Agreement by the
Company and the Stockholders does not, and consummation of the transactions
contemplated hereby will not, require the Company and the Stockholders to obtain
any consent, license, permit, approval, waiver, authorization or order of, or to
make any filing with or notification to, any governmental or regulatory
authority, domestic or foreign (each individually, a "Governmental Entity", and
collectively, "Governmental Entities"), except for the filing and recordation of
appropriate merger documents as required by Massachusetts Law and Delaware Law.
SECTION 3.09. Permits; Compliance. The Company has all material
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted. The Company and its assets and operations are currently and have at
all times been in compliance with all Laws applicable to the Company and its
operations or by or to which any of its assets is bound or subject, including
without limitation all Laws related to environmental protection, employee
benefits, labor and employment and occupational health and safety. The Company
has not received from any Governmental Entity any written notification with
respect to possible violations of Laws.
SECTION 3.10. Financial Statements.
(a) Schedule 3.10(a) includes (i) the unaudited balance
sheet data of the Company as of September 15, 1999, and the unaudited statements
of profit and loss statement and cash flows for the period beginning on January
1, 1999 and ending on September 15, 1999 of the Company. These financial
statements have been prepared from the books and records of the Company, which
accurately and fairly reflect the transactions of, acquisitions and dispositions
of assets by, and incurrence of Liabilities by the Company.
(c) Schedule 3.10(c) sets forth certain statistics
concerning the operation of the Company, which are accurate (subject to the
margins of error indicated on such schedule for certain of such statistics).
(d) All accounts receivable reflected in the Latest
Balance Sheet or generated since the Latest Balance Sheet Date arose in the
ordinary course of business and, except as set forth on Schedule 3.10 (d), are
fully collectible in the ordinary course of business, without resort to
litigation, at the face amount thereof less any reserve reflected in the Latest
Balance Sheet, and will not be subject to counterclaim, set-off or other
reduction.
SECTION 3.11. Absence of Certain Changes or Events. Except as set
forth on Schedule 3.11, since the Latest Balance Sheet Date, the Company has
conducted the Business only in the ordinary course and in a manner consistent
with past practice and there has not been: (a) any damage, destruction or loss
(whether or not covered by insurance) with respect to any material assets of the
Company; (b) any change by the Company in its accounting methods, principles or
practices; (c) any declaration, setting aside or payment of any dividends or
distributions in respect of the shares of the capital stock of the Company or
any redemption,
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purchase or other acquisition by the Company of any of its securities; (d) any
increase in the benefits under, or the establishment or amendment of, any bonus,
insurance, severance, deferred compensation, pension, retirement, profit sharing
or other employee benefit plan, or any increase in the compensation payable or
to become payable to directors, officers or employees of the Company, except for
annual bonuses or merit increases in salaries or wages in the ordinary course of
business and consistent with past practice; (e) any payment or other transfer of
assets by the Company to any Stockholder, other than compensation payments in
the ordinary course of business and consistent with past practice; (f) any
revaluation by the Company of any of its assets, including the writing down or
off of notes or accounts receivable, other than in the ordinary course of
business and consistent with past practices; (g) any entry by the Company into
any commitment or transaction material to the Company including, without
limitation, incurring or agreeing to incur capital expenditures in excess of
$10,000; (h) any incurrence of indebtedness for borrowed money other than trade
payables incurred in the ordinary course of business; (i) the termination of
employment (whether voluntary or involuntary) of any officer or key employee of
the Company; or (j) any change, occurrence or circumstance having or reasonably
likely to have, individually or in the aggregate, a material adverse effect on
the Business or on the operations, assets, financial condition, results of
operations or prospects of the Company.
SECTION 3.12. No Undisclosed Liabilities. The Company does not have
any direct or indirect debts, liabilities or obligations, whether known or
unknown, absolute, accrued, contingent or otherwise ("Liabilities"), except (a)
Liabilities fully reflected in the Latest Balance Sheet and related financial
statement notations; (b) accounts payable and Liabilities incurred in the
ordinary course of business and consistent with past practice since the Latest
Balance Sheet Date; (c) obligations to be performed in the ordinary course of
business, consistent with past practice, under the Material Contracts (as
defined in Section 3.20) or under agreements not required to be disclosed
pursuant to Section 3.20; and (d) Liabilities described in Schedule 3.12. The
Company does not and will not have any obligations for compensation, fees,
reimbursements, severance costs, vacation pay or sick leave associated with any
contractor, director, advisor, agent or employee of the Company and derived from
services performed before the Effective Time, other than obligations that are
satisfied prior to the Effective Time.
SECTION 3.13. Absence of Litigation. Except as set forth on
Schedule 3.13, there is no claim, action, suit, litigation, proceeding,
arbitration or investigation of any kind, at law or in equity (including actions
or proceedings seeking injunctive relief), pending or, to the Company's
knowledge, threatened against the Company or any assets or rights of the
Company. The Company is not subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or, continuing
investigation by, any Governmental Entity, or any judgment, order, writ,
injunction, decree or award of any Government Entity or arbitrator, including,
without limitation, cease-and-desist or other orders.
SECTION 3.14. Taxes.
(a) All returns and reports ("Tax Returns") of or with
respect to any Tax which are required to be filed on or before the Closing Date
(taking into account extensions of filing dates) by or with respect to the
Company have been or will be duly and timely filed. Each
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such Tax Return is or will be true, correct and complete in all respects. All
Taxes which have become or will become due with respect to the period covered by
each such Tax Return have been or will be timely paid in full, other than any
taxes for which adequate reserves have been established on the Latest Balance
Sheet. All withholding tax requirements imposed on or with respect to the
Company have been or will be satisfied in full in all respects. No penalty,
interest or other charge is or will become due with respect to the late filing
of any such Tax Return or late payment of any such Tax.
(b) The Company has not waived any statutes of
limitations in respect of Taxes.
(c) The Company has not agreed to (1) any extension of
time with respect to the due date for the filing of any Tax Return of or with
respect to the Company or (2) any extension of time for the assessment,
collection or payment of any Tax of or with respect to the Company.
(d) The Company has previously delivered to Buyer true
and complete copies of each written tax allocation or sharing agreement and a
true and complete description of each unwritten tax allocation or sharing
arrangement affecting the Company, if any.
(e) There are no pending audits, actions, proceedings,
disputes or claims or, to the knowledge of the Company and the Stockholders,
investigations, with respect to or against the Company for or with respect to
any Taxes of the Company. No Tax assessment, deficiency or adjustment has been
assessed or proposed with respect to any Tax Return of or with respect to the
Company, either (1) claimed or raised by a taxing authority in a writing
received by the Company or (2) as to which any Stockholder has actual knowledge.
(f) Except for statutory liens for current Taxes not yet
due, no liens for Taxes exist upon the assets of any of the Company.
(g) The Surviving Corporation will not be required to
include any amount in income for any taxable period beginning after the Closing
Date as a result of a change in accounting method by the Company for any taxable
period ending on or before the Closing Date or pursuant to any agreement by the
Company with any tax authority with respect to any such taxable period.
(h) None of the property of the Company is held in an
arrangement for which partnership Tax Returns are being filed, and the Company
does not own any interest in any controlled foreign corporation (as defined in
section 957 of the Code), passive foreign investment company (as defined in
section 1296 of the Code) or other entity the income of which is required to be
included in the income of the Company.
(i) The Company has never been subject to taxes in any
jurisdiction outside the United States.
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(j) The Company has had in effect since its corporate
inception a valid, binding, timely filed election to be taxed pursuant to
Subchapter S of the Code and is not liable for any federal income taxes as a "C"
corporation.
SECTION 3.15. Tax Matters. Neither the Company nor the Stockholders
or other affiliates of the Company or the Stockholders has taken or agreed to
take any action that would prevent the Merger from constituting a reorganization
qualifying under the provisions of section 368(a) of the Code.
SECTION 3.16. Employee Matters. Set forth on Schedule 3.16 is a
complete list of all current employees of the Company, including date of
employment, current title and compensation, and date and amount of last increase
in compensation. The Company has no collective bargaining, union or labor
agreements, contracts or other arrangements with any group of employees, labor
union or employee representative and to the knowledge of the Company there are
no organization efforts currently being made or threatened by or on behalf of
any labor union with respect to employees of the Company. The Company has not
experienced, and the Company does not know or have reasonable grounds to know of
any basis for, any strike, material labor trouble, work stoppage, slow down or
other interference with or impairment of the Business. The Company has never
engaged any contractors or consultants, other than people who are now employees
of the Company. Each of the shareholders and employees of the Company has signed
a confidentiality agreement in the form previously provided to Buyer.
SECTION 3.17. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
SECTION 3.18. Illegal Payments. Neither the Company, the
Stockholders nor any of the their agents or other representatives, or any
affiliate or, to the best knowledge of the Company and the Stockholders,
immediate family member of any of the foregoing has (a) used any funds of the
Company for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity; (b) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (c) made any other unlawful payment.
SECTION 3.19. Leased Properties. Schedule 3.19 sets forth a
description (including the street address) of all real property leased by the
Company (the "Leased Properties"). No premises other than the Leased Properties
are used in the Business.
SECTION 3.20. Certain Material Contracts.
(a) Schedule 3.20 lists each agreement and arrangement
(whether written or oral and including all amendments thereto) to which the
Company is a party or a beneficiary or by which the Company is bound that is
material, directly or indirectly, to the Business (collectively, the "Material
Contracts"), including without limitation (i) any licensing, advertising,
promotion,
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consulting or services agreements pursuant to which the Company earns revenue in
excess of $5,000; (ii) any licensing, supply, or services agreements pursuant
which the Company is entitled or obligated to acquire any assets or services
from any person with aggregate payments in excess of $5,000; (iii) any insurance
policies; (iv) any employment, consulting, non-competition, separation,
collective bargaining, union or labor agreements or arrangements; (v) any
agreement evidencing, securing, guarantying or otherwise relating to any
indebtedness for which the Company has any Liability; (vi) any agreement with or
for the benefit of any Stockholder or any affiliate or family member thereof
(which agreements are specifically identified as such in Schedule 3.20); (vii)
any real property leases or any capital or operating leases or conditional sales
agreements relating to vehicles or equipment; and (viii) any other agreement or
arrangement pursuant to which the Company could be required to make or be
entitled to receive aggregate payments in excess of $10,000. Schedule 3.20 lists
all trade payables outstanding on the date hereof.
(b) The Company has performed in all material respects
all of its obligations under each Material Contract and there exists no breach
or default (or event that with notice or lapse of time would constitute a breach
or default) under any Material Contract on the part of the Company or, to the
Company's knowledge, on the part of any other party thereto, under any Material
Contract.
(c) Each Material Contract is valid, binding and in full
force and effect and enforceable in accordance with its respective terms. There
has been no termination or, to the Company's knowledge, threatened termination
or notice of default under any Material Contract. The Company has delivered to
Buyer a copy of each written Material Contract and a written summary of the
material terms of each oral Material Contract.
(d) Each Material Contract will be automatically
transferred from the Company to Buyer upon Closing without any party to a
Material Contract providing prior written consent to such transfer and such
transfer will not result in any party to a Material Contract having the right to
terminate any Material Contract.
SECTION 3.21. Competing Interests. None of the Stockholders, the
Company, nor any director, officer, agent or employee of the Company (a) owns,
directly or indirectly, an interest in any entity that is a competitor, customer
or supplier of the Company or that otherwise has material business dealings with
the Company or (b) is a party to, or otherwise has any direct or indirect
interest opposed to the Company under, any Material Agreement or other business
relationship or arrangement material to the Company, provided that the foregoing
will not apply to any investment in publicly traded securities constituting less
than 1% of the outstanding securities in such class. None of the Stockholders
nor the Company is a party to any non-competition, non-solicitation, exclusivity
or other similar agreement that would in any way restrict the business or
activities of the Company or Buyer.
SECTION 3.22. Material Customers and Suppliers. Set forth in
Schedule 3.22 is a complete list of each customer of the Company that accounted
for revenues of more than $10,000 during the year ended December 31, 1998 (the
"Material Customers"), indicating the amount of
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revenues attributable to each Material Customer during the year ended December
31, 1998 and during the interim period ending on the Latest Balance Sheet Date.
Also set forth in Schedule 3.22 is a complete list of the Company's five largest
suppliers (the "Material Suppliers") by dollar volume of supplied goods and/or
services. Except as set forth in Schedule 3.22, none of the Material Customers
or Material Suppliers has threatened to, or notified the Company or any of the
Sellers of any intention to, terminate or materially alter its relationship with
the Company, and there has been no material dispute with a Material Customer or
Material Supplier since January 1, 1998.
SECTION 3.23. Intellectual Property.
(a) For purposes of this Agreement, "Intellectual
Property" means all (i) patents, copyrights and copyrightable works, trademarks,
service marks, trade names, service names, brand names, logos, trade dress,
Internet domain names and all goodwill symbolized thereby and appurtenant
thereto; (ii) trade secrets, inventions, technology, know-how, proprietary
information, research material, specifications, surveys, designs, drawings and
processes; (iii) computer software and related documentation, including without
limitation operating software, network software, firmware, middleware, design
software, design tools, management information systems, systems documentation
and instructions, databases and the tangible objects in which the foregoing
rights are embodied (collectively, "Software"); (iv) artwork, photographs,
editorial copy and materials, formats and designs, including without limitation
all content currently or previously displayed through Internet sites operated by
the Company; (v) customer, partner, prospect and marketing lists, market
research data, sales data and traffic and user data; (vi) registrations,
applications, recordings, common law rights, "moral" rights of authors, licenses
(to or from the Company) and other agreements relating to any of the foregoing;
(vii) rights to obtain renewals, reissues, extensions, continuations, divisions
or equivalent extensions of legal protection pertaining to the foregoing; and
(viii) claims, causes of action or other rights at law or in equity arising out
of or relating to any infringement, misappropriation, distortion, dilution or
other unauthorized use or conduct in derogation of the foregoing occurring prior
to the Closing.
(b) There are no registrations or applications for
registration of any Intellectual Property or any licenses (to or from the
Company) with respect to any registered Intellectual Property.
(c) The Company owns or has the right to use pursuant to
Material Contracts all Intellectual Property used by the Company in connection
with or necessary to the operation of the Business, without infringing on or
otherwise acting adversely to the rights or claimed rights of any person. The
Company is not obligated to pay any royalty or other consideration to any person
in connection with the use of any such Intellectual Property.
(d) No claim has been asserted against the Company to the
effect that the use of any Intellectual Property by the Company infringes the
rights of any person. To the Company's knowledge, no other person is currently
infringing upon the rights of the Company with respect to the Company's
Intellectual Property.
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(e) The Intellectual Property owned by the Company as of
the Closing is sufficient as of the Closing Date for the uses of the Business.
The Company has obtained all licenses, royalties and consents necessary to
enable Buyer to use the Intellectual Property after the Closing in the manner
contemplated by this Agreement.
SECTION 3.24. Investor Representations.
(a) Each of the Stockholders understand that the Buyer
Common Stock to be issued to them in the Merger will constitute "restricted
securities" under the Securities Act of 1933, as amended (the "Securities Act").
Consequently, the Stockholders will be able to resell such Buyer Common Stock
only (i) pursuant to an effective registration statement covering such resale or
(ii) pursuant to an exemption from registration, such as the exemption provided
under rule 144 under the Securities Act ("Rule 144").
(b) Each of the Stockholders (i) has a preexisting
personal or business relationship with the Company and (ii) by reason of the
Stockholder's business or financial experience or the business or financial
experience of the Stockholder's professional advisors who are unaffiliated with
and who are not compensated by Buyer or any affiliate or selling agent of Buyer,
directly or indirectly, could be reasonably assumed to have the capacity to
protect such Stockholder's interests in connection with this Agreement.
(c) Each of the Stockholders acknowledge receipt of the
SEC Documents (as defined in Section 4.04) and acknowledge that they have been
given the opportunity to ask questions of representatives of Buyer and to
receive reasonable additional information to the extent requested in connection
with their evaluation of an investment in the Buyer Common Stock.
(d) Each of the Stockholders acknowledge that the Buyer
Common Stock will bear a restrictive legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS, AND THE HOLDER HEREOF CANNOT MAKE ANY SALE,
ASSIGNMENT, OR OTHER TRANSFER OF SUCH SECURITIES WITHOUT REGISTRATION
UNDER OR EXEMPTION FROM SUCH ACTS AND LAWS. THE ISSUER MAY REQUIRE
EVIDENCE OF SUCH REGISTRATION OR EXEMPTION PRIOR TO ANY SUCH TRANSFER."
SECTION 3.25. Year 2000 Compliance. All hardware, firmware,
software and computer systems produced by the Company or employed by the Company
(whether leased, owned or otherwise) in the conduct of its business and the
provision of its services are, or will be by the Closing, Year 2000 Compliant
(as defined below) and shall continue to function in accordance with their
intended purpose without material error or material interruption as a result of
the transition to the year 2000. Schedule 3.25 includes a reasonable estimate of
the additional
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costs, if any, that the Company will incur to become Year 2000 Compliant. As
used herein, "Year 2000 Compliant" means, with respect to any entity, that the
hardware, firmware, software and computer systems of such entity (i) will
completely and accurately address, produce, store and calculate data involving
dates before, on and after January 1, 2000 and will not produce abnormally
ending or incorrect results involving such dates as used in any forward or
regression dated based functions; and (ii) will provide that date-related
functionalities and data fields include the indication of century and millennium
and will perform calculations that involve a four-digit year.
SECTION 3.26. Insurance. Set forth in Schedule 3.26 is a complete
and accurate list of all primary, excess and umbrella policies, bonds and other
forms of insurance currently owned or held by or on behalf of and/or providing
insurance coverage to the Company and its businesses, properties and assets (and
its directors, officers, salespersons, agents or employees). All such policies
are in full force and effect. The Company has not received a notice of default
under any such policy and has not received written notice of any pending or
threatened termination or cancellation, coverage limitation or reduction, or
material premium increase with respect to any such policy. Schedule 3.26 also
sets forth a complete and accurate summary of all of the self-insurance coverage
provided by the Company. No letters of credit have been posted and no cash has
been restricted to support any reserves for insurance. The Company's insurance
policies are issued by insurers of recognized responsibility and insure the
Company, the Business, and the Company's properties and assets against such
losses and risks, and in such amounts, as are customary in the case of
corporations of established reputation engaged in the same or similar businesses
and similarly situated.
SECTION 3.27. Information Supplied. Without limiting any of the
representations and warranties contained herein, no written representation or
written warranty of the Company or the Stockholders and no statement by the
Company or the Stockholders contained in the Schedules to this Agreement
contains any untrue statement of material fact, or omits to state a material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which such statements were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company and the
Stockholders that:
SECTION 4.01. Organization and Qualification. Buyer is a
corporation duly organized, validly existing and in good standing under Delaware
Law and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being conducted
and is duly qualified and in good standing to do business in each jurisdiction
in which the nature of the business conducted by it or the ownership or leasing
of its properties makes such qualification necessary, except where the failure
to be so qualified would not have a material adverse effect on Buyer.
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SECTION 4.02. Authority. Buyer has all requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Buyer and the consummation by Buyer of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action and no other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Buyer and constitutes the legal, valid and binding obligation of Buyer,
enforceable against it in accordance with its terms.
SECTION 4.03. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Buyer
does not, and the consummation of the transactions contemplated hereby will not
(i) conflict with or violate the certificate of incorporation or bylaws, in each
case as amended or restated, of Buyer, (ii) conflict with or violate any Laws
applicable to Buyer or by which any of its properties or assets is bound or
subject, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Buyer is a party or by or
to which Buyer or any of its properties is bound or subject.
(b) The execution and delivery of this Agreement by Buyer
does not, and the consummation of the transactions contemplated hereby will not,
require Buyer to obtain any consent, license, permit, approval, waiver,
authorization or order of, or to make any filing with or notification to, any
Governmental Entities, except for the filing and recordation of appropriate
merger documents as required by Massachusetts Law or Delaware Law and except for
any required filings under or related to federal or state securities laws or
regulations.
SECTION 4.04. SEC Documents. Buyer has filed all forms, reports and
documents required to be filed by Buyer with the SEC as of the date hereof and
Buyer has delivered to the Company and each of the Stockholders a true and
complete copy of Buyer's Annual Report on Form 10-K/A for the year ended
December 31, 1998, its quarterly reports on Form 10-Q for the quarters ended
March 31, 1999 and June 30, 1999, and its definitive proxy statement for its
annual meeting of stockholders held in 1999 (together, the "SEC Documents"). As
of their respective dates, the SEC Documents complied in all material respects
with the applicable requirements of the Exchange Act and the rules and
regulations of the SEC thereunder, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
SECTION 4.05. Financial Statements. The financial statements of
Buyer, including the notes thereto, included in the SEC Documents (the "Buyer
Financial Statements") present fairly, in all material respects, the
consolidated financial position of Buyer as of their respective dates and the
results of Buyer's operations and cash flows for the respective periods,
complied as to form in all material respects with generally accepted accounting
principles and with the published rules and regulations of the SEC with respect
thereto, and have been prepared in
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accordance with GAAP applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto). The Buyer Financial Statements fairly present the consolidated
financial condition and operating results of Buyer and its subsidiaries at the
dates and during the periods indicated therein (subject, in the case of
unaudited statements, to normal, recurring year-end adjustments). There has been
no material change in Buyer accounting policies except as described in the notes
to the Buyer Financial Statements.
SECTION 4.06. Tax Matters. Neither Buyer nor, to the knowledge of
Buyer, any of its affiliates has taken or agreed to take any action that would
prevent the Merger from constituting a reorganization qualifying under the
provisions of section 368(a) of the Code.
SECTION 4.07. Valid Issuance of Buyer Common Stock. The shares of
Buyer Common Stock to be issued pursuant to the Merger have been duly authorized
and reserved for issuance and, when issued in accordance with the terms of this
Agreement will be validly issued, fully paid, and non-assessable and not subject
to any preemptive rights and issued in compliance with all applicable federal or
state securities laws. The authorized, issued and outstanding capitalization of
Buyer is as set forth in the SEC Documents as of the dates of the financial
statements or other information included in the SEC Documents.
SECTION 4.08. Capitalization. The authorized capital stock of the
Buyer consists of 400,000,000 shares of Buyer Common Stock, of which 73,091,571
were outstanding as of September 30, 1999, and 5,000,000 shares of preferred
stock, of which none are outstanding.
ARTICLE V
COVENANTS
SECTION 5.01. Affirmative Covenants of the Company. The Company
hereby covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by Buyer,
the Company will:
(a) operate the Business only in the usual and ordinary
course consistent with past practices;
(b) use commercially reasonable efforts to preserve
substantially intact its business organization, maintain its Material Contracts,
and Intellectual Property and other material rights, retain the services of its
respective officers and key employees and maintain its relationships with its
material customers and suppliers;
(c) maintain and keep its assets in as good repair and
condition as at present, ordinary wear and tear excepted;
(d) maintain and keep in full force and effect insurance
comparable in amount and scope of coverage to that currently in effect;
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(e) terminate all employees and contractors and pay all
amounts owed to any employee, contractor, advisor or director, withhold all
taxes, and satisfy all obligations with respect to such termination; and
(f) from the date of this Agreement and to the Effective
Time, promptly supplement or amend the Schedules to this Agreement with respect
to any matter that arises or that is required to be set forth or listed in the
Schedules or is necessary to complete or correct any information in the
Schedules; provided, that for purposes of determining the rights and obligations
of the parties hereunder (other than the obligation of the Company under this
Section 5.01(e)), any such supplemental or amended disclosure will not be deemed
to have been disclosed to Buyer unless Buyer otherwise expressly consents in
writing.
SECTION 5.02. Negative Covenants of the Company. Except as
expressly contemplated by this Agreement or otherwise consented to in writing by
Buyer, from the date of this Agreement until the Effective Time, the Company
will not do any of the following:
(a) amend or otherwise modify any of the Material
Contracts;
(b) (i) effect any reorganization or recapitalization;
(ii) issue any capital stock or any option, warrant or similar agreement with
respect to its capital stock; (iii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock; or (iv) adopt or propose to adopt any amendments to its articles
of organization or bylaws;
(c) sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, any of its assets, except for dispositions of
inventories and of assets in the ordinary course of business and consistent with
past practice;
(d) settle or compromise any claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy;
(e) take any action that would result in a breach (as of
the Closing) of any of the representations and warranties set forth in
Section 3.11;
(f) pay or agree to pay any dividend, distribution, or
other payment to the Stockholders;
(g) pay or agree to pay any bonus, incentive
compensation, or similar payment to any of its employees or increase the
compensation of the Stockholders or any other employee;
(h) make any expenditure or commitment except in the
ordinary course of business consistent with past practice; or
(i) agree in writing or otherwise to do any of the
foregoing.
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SECTION 5.03. Restrictive Covenant. Each of Daniel Dreilinger and
Chong-Min Hong (collectively, the "Majority Stockholders") acknowledge that he
was a beneficial owner of the goodwill of the Company. In consideration of the
purchase of each of the Majority Stockholder's stock in the Company and the
delivery of Confidential Information to the Majority Stockholders, each of the
Majority Stockholders hereby agrees that, for a period of (x) in the case of
Daniel Dreilinger, three years from the Closing Date and (y) in the case of
Chong-Min Hong, one year from the Closing Date, he will not (except in the
course of performing authorized duties as an employee of Buyer), directly or
indirectly, either as an employee, partner, owner, director, adviser or employee
or in any other capacity:
(a) engage in (I) any business or enterprise that
competes with the Company, including but not limited to any internet-related or
e-commerce business or any search company (collectively, a "Competing Business")
in any location or in any language, or (ii) the creation of content or
complementary services for, or the sale of advertising for, such a Competing
Business in any location; provided, however, that this Section 5.03(a) shall not
restrict Chong-Min Hong from providing consulting services as part of his
position as a consultant with McKinsey & Company.
(b) directly or indirectly solicit or attempt to solicit
any customer or potential customer of Buyer to purchase advertising or other
goods or services that are competitive with those offered by Buyer from any
person or entity other than Buyer; or
(c) recruit or solicit for employment any person who is,
or within the twelve month period preceding the date of such activity was, an
employee of Buyer.
Notwithstanding the foregoing, each of the Majority Stockholders may
own, directly or indirectly, solely as an investment, up to one percent (1%) of
any class of publicly traded securities of any entity that owns a Competing
Business.
(d) Should any of the Majority Stockholders violate
paragraph (a) above, each of the Majority Stockholders and Buyer agree that any
financial benefits whatsoever (including salary, fees, or stock or other
securities) received by the Majority Stockholders from the Competing Business
for a period of twelve (12) months after the commencement of participation in
such Competing Business shall be turned over to Buyer.
(e) Each of the Majority Stockholders represent to Buyer
that he is willing and able to engage in businesses that are not Competing
Businesses hereunder and that enforcement of the restrictions set forth in this
Section 5.03 would not be unduly burdensome to him. Buyer and each of the
Majority Stockholders acknowledge and agree that the restrictions set forth this
Section 5.03 are reasonable as to time, geographic area and scope of activity
and do not impose a greater restraint than is necessary to protect the
legitimate business interests of Buyer. Each of the Majority Stockholders
acknowledge that Buyer has an international presence and a global market and
therefore has need of a worldwide geographic restriction.
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(f) Should any of the Majority Stockholders violate
paragraph (b) above, each of the Majority Stockholders and Buyer agree that all
of the revenues from such customer collected by or owed to the Majority
Stockholders, or any entity for which the Majority Stockholders are employed or
in any way associated with, shall be turned over to Buyer for a period of twelve
(12) months after the date of the solicitation.
(g) Should any of the Majority Stockholders violate
paragraph (c) above, each of the Majority Stockholders and Buyer agree that the
Majority Stockholders shall pay to Buyer an amount equal to the salary paid by
Buyer to such person during the twelve (12) month period ending on the
termination date of such person's employment with Buyer.
If the provisions of this Section 5.03 are found by a court of
competent jurisdiction to contain limitations as to time, geographic area or
scope of activity that are not reasonable or not necessary to protect the
legitimate business interests of Buyer, then such court is hereby directed to
reform such provisions to the minimum extent necessary to cause the limitations
contained therein as to time, geographical area and scope of activity to be
reasonable and to impose a restraint that is not greater than necessary to
protect the legitimate business interests of Buyer.
SECTION 5.04. Confidential Information.
(a) The assets of the Company include certain
commercially valuable technical and non-technical confidential or proprietary
information of the Company (collectively, "Confidential Information").
Confidential Information means all information used by the Company in connection
with operating its business that is not generally known to others in similar
areas of business, including without limitation (i) source code and
documentation for computer software and any other trade secrets, software, work
product, processes, analyses and know-how related to the architecture and
operation of the Company's business or the submission, collection or
organization of its contents; (ii) customer and prospect lists and other
marketing, advertising, pricing, strategic and business plans and information
related to the Company's business; and (iii) information concerning traffic at
the Company's Internet sites and financial information concerning the operation
of the Company's business.
(b) Each of the Stockholders acknowledge and agree that,
following the Closing, the Confidential Information will be the sole and
exclusive property of the Surviving Corporation. Following the Closing, the
Stockholders will not, directly or indirectly, use any Confidential Information
for his own benefit or disclose any Confidential Information to any person
(except in the course of performing authorized duties for Buyer or the Surviving
Corporation). At Buyer's request after the Closing, the Stockholders will
promptly deliver to Buyer or the Surviving Corporation all documents, computer
disks and other computer storage devices, computer printouts, manuals and other
papers and materials (including all copies thereof in whatever form) containing
or incorporating any Confidential Information that are in his possession or
under his control.
(c) Notwithstanding anything herein to the contrary, no
Stockholder shall have any obligation to protect, and or liability shall accrue
hereunder with respect to any information to the extent that (i) such
information has been made or becomes publicly available
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other than as a result of acts by the Stockholder in violation of this Agreement
or (ii) such information is disclosed to the Stockholder by a third party who is
not under any confidentiality obligation to the Company.
SECTION 5.05. Access and Information.
(a) The Company shall (i) afford to Buyer and its
officers, directors, employees, accountants, consultants, legal counsel, agents
and other representatives (collectively, the "Buyer Representatives") reasonable
access at reasonable times, upon reasonable prior notice, to the officers,
employees, agents, properties, offices and other facilities of the Company and
to the books and records thereof, (ii) furnish promptly to Buyer and the Buyer
Representatives such information concerning the business, properties, contracts,
records and personnel of the Company (including, without limitation, financial,
operating and other data and information) as may be reasonably requested, from
time to time, by Buyer, and (iii) authorize Buyer to contact and obtain relevant
information from the Company's accountants, material customers and suppliers and
any governmental agencies having dealings with the Company.
(b) No investigation by the parties hereto made
heretofore or hereafter shall affect the representations and warranties of the
parties which are herein contained and each such representation and warranty
shall survive such investigation.
SECTION 5.06. Appropriate Action; Consents; Filings.
(a) Each of Buyer, the Stockholders and the Company shall
use (and shall cause each of their respective subsidiaries to use, as
applicable) all reasonable efforts to (i) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary, proper or
advisable under applicable Law or otherwise to consummate and make effective the
transactions contemplated by this Agreement, and (ii) obtain from any
Governmental Entities or other third parties any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or made by
Buyer or the Company or any of their subsidiaries or affiliates, as applicable,
in connection with the authorization, execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, including, without
limitation, the Merger. The Stockholders, the Company and Buyer shall furnish
all information required for any application or other filing to be made pursuant
to the rules and regulations of any applicable Law in connection with the
transactions contemplated by this Agreement.
(b) Each of Buyer, the Stockholders and the Company shall
give (or shall cause their respective subsidiaries and affiliates, as
applicable, to give) any notices to third parties, and use (and cause their
respective subsidiaries and affiliates, as applicable, to use) all reasonable
efforts to obtain any third party consents (i) necessary, proper or advisable to
consummate the transactions contemplated by this Agreement or (ii) otherwise
required under any Material Contracts, or other agreements in connection with,
or in order to allow the Company to continue to be entitled to the benefits
thereof following, the consummation of the transactions contemplated hereby. In
the event that any party shall fail to obtain any third party consent
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described above and the parties agree to consummate the Merger without such
consent, such party shall use commercially reasonable efforts, and shall take
any such actions reasonably requested by the other parties, to limit the adverse
effect upon the Company and Buyer, their respective subsidiaries, and their
respective businesses resulting, or which could reasonably be expected to result
after the Effective Time, from the failure to obtain such consent.
SECTION 5.07. Tax Treatment.
(a) Each party hereto shall use all reasonable efforts to
cause the Merger to qualify, and shall not take, and shall use all reasonable
efforts to prevent any affiliate of such party from taking, any actions which
could prevent the Merger from qualifying as a reorganization under the
provisions of section 368(a) of the Code, which Tax Returns shall be prepared
consistently with the Company's past tax accounting practices.
(b) The Stockholders shall prepare or cause to be
prepared and file or cause to be filed all income Tax Returns of the Company for
all periods ending on or prior to the Closing Date that are filed after the
Closing Date, which income Tax Returns shall be prepared consistently with the
Company's past tax accounting practices.
(c) Buyer and the Stockholders shall cooperate fully, as
and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this agreement and any audit or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other party's request) the provision of records and information
reasonably relevant to any such audit or other proceeding, as well as making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Buyer and the
Stockholders agree to retain all books and records with respect to Tax matters
pertinent to the Company for any taxable period beginning before the Closing
Date until the expiration of the statute of limitations (and, to the extent
notified by the other party, any extensions thereof) of the respective taxable
periods.
SECTION 5.08. Public Announcements. Prior to the Closing, the
Company and each of the Stockholders will not issue a press release or make any
statement to the general public concerning such transaction or the absence
thereof without the express prior written consent of Buyer and Buyer will not
issue a press release or make any statement to the general public concerning
such transaction or the absence thereof without the express prior written
consent of the Company; provided, however, that Buyer may issue a press release
or make any statement to the general public concerning such transaction or the
absence thereof without the express prior written consent of the Company as, in
the advice of Buyer's counsel, is required by law. Upon Closing, Buyer will
issue a press release and shall provide Daniel Dreilinger with a copy of such
release and shall give Mr.
Dreilinger reasonable opportunity to comment in advance of issuance.
SECTION 5.09. Fees, Expenses and Other Payments. Buyer will pay all
transaction costs and expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and consultants to
a party hereto and its affiliates) incurred by the
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Company and the Stockholders in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement and the
transactions contemplated hereby (collectively, "Company Expenses"), up to a
maximum amount of Ten Thousand Dollars ($10,000) (the "Maximum Amount"). The
Stockholders will cause all Company Expenses to be billed to the Stockholders'
representative, Daniel Dreilinger, and paid directly by the Stockholders. The
Stockholders will present to Buyer a schedule setting forth all of the Company
Expenses and Buyer shall pay for such expenses directly or reimburse the
Stockholders for Company Expenses up to the Maximum Amount. Except as provided
for in the immediately preceding sentence, neither the Company nor CNET shall
receive, or be liable for, any invoices or statements for any Company Expenses.
Any Company Expenses in excess of the Maximum Amount will be paid by the
Stockholders. Any trade payables, including salary or other employment expenses
and legal expenses, in excess of $10,000 at the Closing Date will be paid by the
Stockholders through a pro rata reduction in the cash to be paid to the
Stockholders in the Merger. Buyer further agrees to pay $10,000 toward the
Company's obligations under the Company's Employment Agreement with Chong-Min
Hong.
SECTION 5.10. Employment and Consulting Agreements. At the Closing,
the Surviving Corporation will enter into an employment agreement with Daniel
Dreilinger in substantially the form of Exhibit A attached hereto (the
"Employment Agreement") and a Consulting Agreement with Sean Dreilinger in
substantially the form of Exhibit B hereto (the "Consulting Agreement").
SECTION 5.11. Company Financials. The Stockholders acknowledge that
the Buyer may be required to file the Company's financial statements with the
U.S. Securities and Exchange Commission and the Stockholders agree to use
commercially reasonable efforts to assist Buyer in obtaining any necessary
consents and take any other necessary actions to permit Buyer to make such
filings.
SECTION 5.12. Technical Support. The Stockholders acknowledge and
agree that Daniel Dreilinger will be primarily responsible for supporting the
Company's web sites listed on Schedule 3.06(a) hereto after the Effective Time;
provided, however, that Buyer will assist him with any increased traffic
resulting from the Merger and the integration of the Company's operations with
those of Buyer.
ARTICLE VI
CLOSING CONDITIONS
SECTION 6.01. Conditions to Obligations of Buyer. The obligations
of Buyer to effect the Merger and the other transactions contemplated hereby are
also subject to the satisfaction at or prior to the Closing Date of the
following conditions, any or all of which may be waived in writing by Buyer, in
whole or in part:
(a) Each of the representations and warranties of the
Company and the Stockholders contained in this Agreement shall be true and
correct in all material respects as of the Closing Date as though made on and as
of the Closing Date (except to the extent such
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representations and warranties specifically relate to an earlier date, in which
case such representations and warranties shall be true and correct in all
material respects as of such earlier date). Buyer shall have received a
certificate signed by the President of the Company, dated the Closing Date, to
such effect.
(b) Each of the Company and the Stockholders shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or prior to
the Closing Date. Buyer shall have received a certificate signed by the
President of the Company, dated the Closing Date, to such effect.
(c) Since the Latest Balance Sheet Date, there has not
occurred any material adverse change in the condition (financial or otherwise),
results of operations, business, site traffic, prospects, assets or Liabilities
of the Company.
(d) Buyer shall have received a closing certificate
signed by the President of the Company substantially in the form of Exhibit C
attached hereto.
(e) No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
which has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger (an "Order"); and no such Governmental Entity or
third party shall have initiated or threatened to initiate any proceeding
seeking an Order.
(f) Counsel to the Company shall have delivered to Buyer
its written opinion substantially in the form of Exhibit D attached hereto.
(g) Each of the Company and the Stockholders shall have
obtained each consent and approval necessary in order that the transactions
contemplated hereby do not constitute a material breach or violation of, or
result in a right of termination or acceleration of any encumbrance on any
material portion of the Company's properties or assets, any Material Contract,
material arrangement or understanding.
(h) The total Liabilities of the Company of the type that
would be reflected in a balance sheet of the Company prepared as of the Closing
Date in accordance with generally accepted accounting principles shall not
exceed $10,000.
(i) All proceedings taken by the Company and all
instruments executed and delivered by the Company and the Stockholders, as
applicable, on or prior to the Closing Date in connection with the transactions
herein contemplated shall be reasonably satisfactory in form and substance to
Buyer.
(j) Buyer has completed its due diligence investigation
of the Company, including legal, operational, financial and technical matters,
and the results of such investigation are satisfactory to Buyer in its sole
discretion.
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(k) Buyer's Board of Directors has approved the execution
and delivery of this Agreement, the Merger and the transactions contemplated
hereby.
(l) Daniel Dreilinger shall have delivered to Buyer the
executed Employment Agreement.
(m) Sean Dreilinger shall have delivered to Buyer the
executed Consulting Agreement.
(n) Each of the Stockholders shall have delivered to
Buyer an executed pledge agreement substantially in the form of Exhibit E
attached hereto (the "Pledge Agreement").
(o) All employees of the Company shall have been
terminated prior to the Effective Time and all Company liabilities and expenses
related to all employees, contractors and directors shall have been satisfied in
full by the Company prior to the Effective Time, and the Company shall have
received a written release from all employees or contractors of all potential
claims against the Company resulting from services performed prior to the
Effective Time
SECTION 6.02. Conditions to Obligations of the Company and the
Stockholders. The obligation of the Company and the Stockholders to effect the
Merger and the other transactions contemplated hereby is also subject to the
satisfaction at or prior to the Closing Date of the following conditions, any or
all of which may be waived in writing by the Company and the Stockholders, in
whole or in part:
(a) Each of the representations and warranties of Buyer
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date as though made on and as of the Closing Date (except to
the extent such representations and warranties specifically relate to an earlier
date, in which case such representations and warranties shall be true and
correct in all material respects as of such earlier date).
(b) Buyer shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing Date.
(c) No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Order which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger; and no such Governmental Entity or third
party shall have initiated or threatened to initiate any proceeding seeking an
Order.
(d) All proceedings taken by Buyer and all instruments
executed and delivered by Buyer on or prior to the Closing Date in connection
with the transactions herein contemplated shall be reasonably satisfactory in
form and substance to the Company.
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ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Indemnification of Buyer. Notwithstanding any
investigation by Buyer or the Buyer Representatives, the Stockholders will
indemnify and hold Buyer, its subsidiaries and their respective affiliates,
directors, officers, employees and agents (collectively, the "Buyer Indemnified
Parties") harmless from any and all Liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all court costs and
reasonable attorneys' fees (collectively, "Losses"), that any Buyer Indemnified
Party may suffer or incur as a result of or relating to:
(a) the breach of any representation or warranty made by
the Company or the Stockholders in this Agreement or pursuant hereto or any
allegation by a third party that, if true, would constitute such a breach; or
(b) the breach of any covenant or agreement of the
Company or the Stockholders under this Agreement or any allegation by a third
party that, if true, would constitute such a breach;
in each case regardless of whether the Buyer was aware of such breach at the
Effective Time, provided that, except with respect to the breach or the alleged
breach of the representations and warranties set forth in Sections 3.03 and
3.06, for which the limitation contained in (ii) below shall not apply, (i) the
Buyer Indemnified Parties will not be entitled to indemnification under
paragraph (a) of this Section 7.01 unless the aggregate amount of all Losses for
which indemnification is sought by the Buyer Indemnified Parties pursuant to
such paragraph exceeds $50,000, in which case the Buyer Indemnified Parties will
be entitled to indemnification for the full amount of all such Losses; and (ii)
the Buyer Indemnified Parties will not be entitled to indemnification under
paragraph (a) of this Section 7.01 in an aggregate amount exceeding the Purchase
Price. Notwithstanding the foregoing, with respect to any event described in (a)
above that is caused by the issuance of a patent after the date of Closing, the
Company and the Stockholders shall only have liability under this Section 7.01
(i) if such patent is issued on or prior to the first anniversary of the Closing
and (ii) up to a maximum amount of $5,000,000. Any claim for indemnification
under this Section 7.01 will first be satisfied through the return to Buyer of
the Pledged Shares (defined below) having a value (as determined pursuant to the
Pledge Agreement) equal to the amount of such claim.
SECTION 7.02. Survival. The representations and warranties set
forth in Sections 3.01, 3.03, and 3.09 shall survive indefinitely and the
representations set forth in Sections 3.14 and 3.15 shall survive until the
expiration of the relevant statute of limitations. All other representations and
warranties shall terminate eighteen months following the Closing Date. The
respective obligations of the parties hereto pursuant to any Section which, by
its terms, relates to post-termination rights or obligations, shall survive the
Closing and any termination of this Agreement. The Buyer Indemnified Parties'
rights to indemnification under paragraph (a) or (b) of Section 7.01 will
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated and shall continue in full force and effect for the
period during
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which the applicable representation or warranty survives pursuant to this
Section 7.02; provided however, that all rights to indemnification in respect of
any claim asserted or made within such period shall continue until the final
disposition of such claim.
SECTION 7.03. Notice. The Buyer Indemnified Parties entitled to
receive indemnification under this Article VII agree to give prompt written
notice to the Stockholders upon the occurrence of any indemnifiable Loss or the
assertion of any claim or the commencement of any action or proceeding in
respect of which such a Loss may reasonably be expected to occur (a "Claim"),
but the Buyer Indemnified Parties' failure to give such notice will not affect
their rights to indemnification under this Article VII, except to the extent
that the Stockholders are materially prejudiced thereby. Such written notice
will include a reference to the event or events forming the basis of such Loss
or Claim and the amount involved, unless such amount is uncertain or contingent,
in which event the Buyer Indemnified Parties will give a later written notice
when the amount becomes fixed.
SECTION 7.04. Defense of Claims. The Stockholders may elect to
assume and control the defense of any Claim, including the employment of counsel
reasonably satisfactory to the Buyer Indemnified Parties and the payment of
expenses related thereto, if (a) the Stockholders acknowledge their obligation
to indemnify the Buyer Indemnified Parties for any Losses resulting from such
Claim and provide reasonable evidence to the Buyer Indemnified Parties of their
financial ability to satisfy such obligation; (b) the Claim does not seek to
impose any liability or obligation on the Buyer Indemnified Parties other than
for money damages; and (c) the Claim does not relate to the Buyer Indemnified
Parties' relationship with their customers or employees. If such conditions are
satisfied and the Stockholders elect to assume and control the defense of a
Claim, then (i) the Stockholders will not be liable for any settlement of such
Claim effected without the consent of the Stockholders, which consent will not
be unreasonably withheld; (ii) the Stockholders may settle such Claim without
the consent of the Buyer Indemnified Parties; and (iii) the Buyer Indemnified
Parties may employ separate counsel and participate in the defense thereof, but
the Buyer Indemnified Parties will be responsible for the fees and expenses of
such counsel unless (A) the Stockholders have failed to adequately assume the
defense of such Claim or to employ counsel with respect thereto or (B) a
conflict of interest exists between the interests of the Buyer Indemnified
Parties and the interests represented by the Stockholders that requires
representation by separate counsel, in which case the fees and expenses of such
separate counsel will be paid by the Stockholders. If such conditions are not
satisfied, the Buyer Indemnified Parties may assume and control the defense of
the Claim; provided that the Buyer Indemnified Parties may not settle any such
Claim without the consent of the Stockholders, which consent will not be
unreasonably withheld, and further provided that the Stockholders are given a
reasonable opportunity to participate in such defense (at the Stockholders'
expense).
SECTION 7.05. Indemnity Holdback. As security for the
indemnification obligations hereunder, at the Effective Time, each of the
Stockholders will pledge to Buyer an amount of shares set forth on Schedule 2
(the "Pledged Shares"), pursuant to the terms of the Pledge Agreement.
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SECTION 7.06. Indemnity Payments Reduced by Insurance Proceeds. Any
indemnity payment payable pursuant to this Agreement shall be decreased to the
extent of any insurance proceeds actually received by the Buyer Indemnified
Party; provided that nothing in this paragraph shall impose any obligation on
any party to seek or otherwise actively pursue the recovery of any insurance
proceeds.
SECTION 7.07. Exclusive Remedy. Buyer acknowledges and agrees that,
from and after the Closing, its sole and exclusive remedy with respect to any
and all claims for money damages against the other party relating to the subject
matter of this Agreement shall be pursuant to the indemnification provisions set
forth in this Article VII or as otherwise provided hereunder, including as
provided in Section 5.03. In furtherance of the foregoing, Buyer hereby waives,
from and after the Closing, to the fullest extent permitted under applicable
law, any and all rights, claims and causes of action (other than claims of, or
causes of action arising from fraud or claims for injunctive or other equitable
relief)) it may have against the Company or the Stockholders relating to the
subject matter of this Agreement arising under or based upon any federal, state
or local statute, law, ordinance, rule or regulation or otherwise. Buyer further
acknowledges and agrees that, other than the representations and warranties of
Company and the Stockholders specifically contained in this Agreement and the
instruments and/or certificates delivered at Closing, there are no
representations or warranties of the Company, any Stockholder, or any other
person or entity either expressed or implied with respect to the assets or the
Company.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any
time prior to the Effective Time, as follows:
(a) by mutual consent of Buyer and the Company;
(b) by Buyer, upon a breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall be untrue,
in either case such that the conditions set forth in Sections 6.01(a) or (b)
would be incapable of being satisfied by October 18, 1999 (the "Termination
Date"); provided that, in any case, a willful breach shall be deemed to cause
such conditions to be incapable of being satisfied for purposes of this Section
8.01(b);
(c) by the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of Buyer set forth in this
Agreement, or if any representation or warranty of Buyer shall be untrue, in
either case such that the conditions set forth in Sections 6.02(a) or (b) would
be incapable of being satisfied by the Termination Date; provided that, in any
case, a willful material breach shall be deemed to cause such conditions to be
incapable of being satisfied for purposes of this Section 8.01(c);
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(d) by either Buyer or the Company, if there shall be any
Order that is final and nonappealable preventing the consummation of the Merger,
except if the party relying on such Order to terminate this Agreement has not
complied with its obligations under Section 5.06 of this Agreement;
(e) by either Buyer or the Company, if the Merger shall
not have been consummated before the Termination Date.
The right of any party hereto to terminate this Agreement pursuant to this
Section 8.01 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers, directors,
representatives or agents, whether prior to or after the execution of this
Agreement.
SECTION 8.02. Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 8.01, this Agreement shall
forthwith become void, there shall be no liability on the part of the parties to
the other parties and all rights and obligations of any party hereto shall
cease, except that nothing herein shall relieve any party of any liability for
any breach of such party's representations, warranties, covenants or agreements
contained in this Agreement.
SECTION 8.03. Amendment. This Agreement may not be amended except
by an instrument in writing signed by each of the parties hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time,
Buyer, on the one hand, and the Company, on the other hand, may (a) extend the
time for the performance of any of the obligations or other acts of the other
party hereto, (b) waive any inaccuracies in the representations and warranties
of the other party contained herein or in any document delivered pursuant hereto
and (c) waive compliance by the other party with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party to be bound thereby.
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ARTICLE IX
REGISTRATION RIGHTS
SECTION 9.01. Registration Statement. Within thirty (30) days of
the Closing Date, Buyer will prepare and file with the SEC, pursuant to the
Securities Act, a registration statement on Form S-3 (the "Registration
Statement") covering the resale of 20% of the Buyer Common Stock issued to the
Stockholders in the Merger in the proportions set forth on Schedule 2
(collectively, the "Registered Shares") in a continuous offering. Buyer will use
commercially reasonable efforts to cause the Registration Statement to become
effective as soon as practicable thereafter and to remain effective until the
earlier of (i) the date that all of the Registered Shares have been sold by the
Stockholders or (ii) the first anniversary of the Closing. The Stockholders will
not sell any Registered Shares under the Registration Statement unless, at the
time of sale, the Registration Statement (and the most recently filed post
effective amendment thereto, if any) has been declared effective. The period of
time during which the Registration Statement is effective is referred to as the
"Registration Period."
SECTION 9.02. Limitations on Sale. Each of the Stockholders will
notify Buyer two business days prior to selling any Registered Shares pursuant
to the Registration Statement. If, upon receipt of such a notice, Buyer
certifies to the Stockholder in writing that the sale of any Registered Shares
would require Buyer to make a disclosure that would be impracticable or
detrimental to Buyer, then the Stockholder will refrain from selling any
Registered Shares pursuant to the Registration Statement for the period of time
requested by Buyer (a "Blackout Period"). Buyer may impose no more than four
Blackout Periods, which may not exceed 60 calendar days each and may not exceed
180 calendar days in the aggregate. Buyer will use reasonable efforts to
minimize the time period during which the Stockholders are required to refrain
from selling under this paragraph. In addition, additional Blackout Periods
shall automatically be in effect from two weeks prior to the end of each of
Buyer's fiscal quarters until the date Buyer releases its earnings for such
quarter.
SECTION 9.03. Information. The Stockholders will furnish to Buyer,
at Buyer's reasonable request, such information regarding the ownership of
Registered Shares by the Stockholders and the intended method of disposition
thereof as is required in connection with the preparation of a registration
statement covering the Registered Shares.
SECTION 9.04. Expenses. Buyer will bear all expenses arising or
incurred in connection with any registration of the Registered Shares hereunder,
including without limitation registration fees, printing expenses and Buyer's
accounting and legal fees and expenses; provided that the Stockholders will bear
the expense of any underwriting fees, discounts or commissions applicable to
their sale of the Registered Shares and the fees and expenses of any separate
legal counsel or accounting firm engaged by the Stockholders.
SECTION 9.05. Indemnification.
(a) Buyer agrees to indemnify the Stockholders and each
underwriter and selling broker of the Registered Shares registered hereunder and
their respective officers and
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directors and each person or entity, if any, who controls any of the foregoing
within the meaning of Section 15 of the Securities Act and their respective
successors against all Losses from third party claims arising out of or relating
to any untrue statement (or alleged untrue statement) of a material fact
contained in the Registration Statement or any prospectus included therein or
incident thereto or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and agrees to reimburse the Stockholders and such other
persons for any legal and other expenses reasonably incurred by them in
connection with investigating or defending any claim or action related to such a
Loss; provided, however, that Buyer will not be liable in any such case if and
to the extent that (i) such statement or omission was made in reliance upon
information (including, without limitation, written negative responses to
inquiries) furnished to Buyer in writing by the Stockholders expressly for use
in the Registration Statement or such a prospectus or (ii) the Stockholders fail
to deliver or cause to be delivered a copy of the final prospectus relating to
such offering (as then amended or supplemented) to the person asserting such
claim and such final prospectus would have cured the defect giving rise to such
Loss.
(b) The Stockholders will indemnify Buyer and the
respective officers and directors and each person or entity, if any, who
controls any of the foregoing within the meaning of Section 15 of the Securities
Act and their respective successors against all Losses from third party claims
arising out of or relating to any untrue statement (or alleged untrue statement)
of a material fact contained in the Registration Statement or any prospectus
included therein or incident thereto or any omission (or alleged omission) to
state therein a material fact required to be stated or necessary to make the
statements therein not misleading, and will reimburse Buyer and such other
persons for any legal and any other expenses reasonably incurred by them in
connection with investigating or defending any claim or action related to such a
Loss; provided, however, that this subparagraph (b) shall apply only in the case
of and to the extent specified in clauses (i) and (ii) of the preceding
paragraph.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to any of the two preceding paragraphs, the
indemnified and indemnifying parties shall comply with the notice and defense of
claims provisions of Sections 7.03 and 7.04 with respect to such proceeding.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Notices. All notices and other communications given
or made pursuant hereto shall be in writing and shall be deemed to have been
duly given upon receipt, if delivered personally or by overnight delivery
service or if mailed by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like changes of address) or sent by
electronic transmission:
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(a) If to Buyer, to:
CNET, Inc.
150 Chestnut Street
San Francisco, California 94111
Attention: Douglas N. Woodrum
Facsimile: (415) 395-9205
with a copy to:
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attention: R. Clayton Mulford
Facsimile: (214) 939-5849
(b) If to the Stockholders, to:
77 Russell Road
Wellesley, Massachusetts 02482
Facsimile: (781) 237-1021
Attention: Daniel Dreilinger
with a copy to:
Foley, Hoag, & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Peter W. Coogan
Facsimile: (617) 832-7000
SECTION 10.02. Certain Definitions. For the purposes of this
Agreement, the term:
(a) "affiliate" means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned person.
(b) "business day" means any day other than a day on
which banks in the State of Delaware are authorized or obligated to be closed.
(c) "control" (including the terms "controlled,"
"controlled by," and "under common control with") means the possession, directly
or indirectly, or as trustee or executor, of the power to direct or cause the
direction of the management or policies of a person, whether through the
ownership of equity or as trustee or executor, by contract or credit arrangement
or otherwise.
(d) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
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(e) "knowledge" of or "known" by a person, with respect
to any matter in question, means (i) in the case of the Company, if any director
or executive officer of the Company has actual knowledge of such matter or would
have knowledge of such matter following due inquiry, and (ii) in the case of
Buyer, if any director or executive officer of Buyer has actual knowledge of
such matter or would have knowledge of such matter following due inquiry.
(f) "person" means an individual, corporation,
partnership, association, trust, unincorporated organization, other entity or
group (as used in Section 13(d) of the Exchange Act).
(g) "Securities Act" means the Securities Act of 1933, as
amended.
(h) "Tax" or "Taxes" means any and all taxes, charges,
fees, levies, assessments, duties or other amounts payable to any federal,
state, local or foreign taxing authority or agency, including, without
limitation, (i) income, franchise, profits, gross receipts, minimum, alternative
minimum, estimated, ad valorem, value added, sales, use, service, real or
personal property, capital stock, license, payroll, withholding, disability,
employment, social security, workers compensation, unemployment compensation,
utility, severance, excise, stamp, windfall profits, transfer and gains taxes,
(ii) customs, duties, imposts, charges, levies or other similar assessments of
any kind, and (iii) interest, penalties and additions to tax imposed with
respect thereto.
SECTION 10.03. Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement Section references herein are, unless the
context otherwise requires, references to sections of this Agreement.
SECTION 10.04. 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
materially 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 an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 10.05. Entire Agreement. This Agreement (together with the
Exhibits and the Schedules to this Agreement) constitutes the entire agreement
of the parties, and supersede all prior agreements and undertakings, both
written and oral, among the parties or between any of them, with respect to the
subject matter hereof.
SECTION 10.06. Assignment. This Agreement shall not be assigned by
operation of law or otherwise.
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SECTION 10.07. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, 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, except as expressly provided herein.
SECTION 10.08. Specific Performance. The parties hereby acknowledge
and agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder.
SECTION 10.09. Failure or Indulgence Not Waiver; Remedies
Cumulative. No failure or delay on the part of any party hereto in the exercise
of any right hereunder shall impair such right or be construed to be a waiver
of, or acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and remedies
existing under this Agreement are cumulative to, and not exclusive to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 10.10. Further Assurances. Each party hereto agrees to
execute any and all documents and to perform such other acts as may be necessary
or expedient to further the purposes of this Agreement and the transactions
contemplated hereby.
SECTION 10.11. Governing Law; Venue. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW AND EXCEPT TO THE EXTENT THAT MASSACHUSETTS LAW
MANDATORILY PROVIDES WITH RESPECT TO THE MERGER. THE PARTIES AGREE THAT VENUE
FOR ANY ACTION BROUGHT TO ENFORCE THIS AGREEMENT SHALL BE A COURT OF COMPETENT
JURISDICTION IN SAN FRANCISCO, CALIFORNIA.
SECTION 10.12. Counterparts. This Agreement may be executed in
multiple counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
CNET, INC.
By: /s/ DOUGLAS N. WOODRUM
-------------------------------------
Name: Douglas N. Woodrum
Title: Chief Financial Officer
SAVVYSEARCH LIMITED
By: /s/ DANIEL DREILINGER
-------------------------------------
Name: Daniel Dreilinger
Title: President and Treasurer
STOCKHOLDERS:
/s/ DANIEL DREILINGER
-----------------------------------------
Daniel Dreilinger
/s/ SEAN DREILINGER
-----------------------------------------
Sean Dreilinger
/s/ CHONG-MIN HONG
-----------------------------------------
Chong-Min Hong
/s/ CHARLES DREILINGER
-----------------------------------------
Charles Dreilinger
/s/ ROBERT T. CARROLL
-----------------------------------------
Robert T. Carroll
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