EXHIBIT 10.10
AGREEMENT AND PLAN OF MERGER
AMONG
XOOM, INC.,
XOOM CHAT, INC.,
PARALOGIC CORPORATION,
AND
SHAREHOLDERS OF
PARALOGIC CORPORATION
March 10, 1998
TABLE OF CONTENTS
Page
ARTICLE I. THE MERGER..............................................................2
1.1 The Merger..................................................................2
1.2 The Effective Date..........................................................2
1.3 The Surviving Corporation...................................................3
1.4 Closing.....................................................................3
ARTICLE II. CONVERSION OF SHARES...................................................3
2.1 Effect on Common Stock......................................................3
2.2 Tax Withholding.............................................................3
2.3 Conversion of Shares........................................................3
2.4 The Merger Consideration....................................................4
2.5 Records Regarding Net PPN Advertising Revenues..............................4
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF MERGERCO............................5
3.1 Requisite Consents; Nonviolation............................................5
3.2 Due Organization of MergerCo; Authorizations................................5
3.3 Capitalization..............................................................5
3.4 Authority; Binding Nature of Agreements.....................................5
3.5 Subsidiaries etc............................................................6
3.6 Financial Statements........................................................6
3.7 No Material Changes.........................................................6
3.8 Undisclosed Liabilities.....................................................6
3.9 Governmental Authorizations; Compliance with Laws...........................7
3.10 Litigation..................................................................7
3.11 Employee Benefit Plans......................................................7
3.12 Patent, Trademark and Related Matters.......................................8
3.13 Real and Personal Property..................................................8
3.14 Insurance...................................................................8
3.15 Taxes.......................................................................8
3.16 Environmental Matters......................................................10
3.17 Contracts..................................................................11
3.18 Accounts Receivable........................................................12
3.19 Customers and Suppliers....................................................12
3.20 Bank Accounts..............................................................12
3.21 Title to Properties; Encumbrances..........................................12
3.22 Compensation of Employees..................................................12
3.23 Tax Status of Reorganization...............................................13
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS.....................................................13
4.1 Title to Common Shares...............................................13
4.2 Capacity.............................................................13
4.3 Confirmation of MergerCo's Representations and Warranties............13
4.4 Purchase Entirely For Own Account....................................14
4.5 Disclosure of Information............................................14
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND XOOM..................................................14
5.1 Due Incorporation; Requisite Power and Authority.....................14
5.2 Due Organization of XOOM and the Company.............................15
5.3 Requisite Consents; Nonviolation.....................................15
5.4 XOOM Stock...........................................................15
5.5 Capitalization.......................................................15
5.6 Financial Statements.................................................16
5.7 No Material Changes..................................................16
5.8 Undisclosed Liabilities..............................................16
5.9 Litigation...........................................................16
5.10 Patent, Trademark and Related Matters................................17
5.11 Contracts............................................................17
5.12 Registration Rights..................................................17
5.13 Related-Party Transactions...........................................17
5.14 Voting Agreements....................................................18
ARTICLE VI. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.......................18
ARTICLE VII. COVENANTS OF MERGERCO AND SHAREHOLDERS..........................18
7.1 Access and Investigation.............................................18
7.2 Operation of Business................................................18
7.3 Final Tax Returns....................................................18
7.4 Taxes on PSC Share Dividends.........................................19
7.5 Federal Income Tax Reporting.........................................19
7.6 No Negotiation.......................................................19
ARTICLE VIII. COVENANTS OF XOOM..............................................19
8.1 Tax Free Reorganization..............................................19
ARTICLE IX. CLOSING CONDITIONS OF XOOM AND THE COMPANY.......................20
9.1 Accuracy of Representations and Warranties...........................20
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9.2 Asset Purchase Agreement..................................... 20
9.3 Release Agreement............................................ 20
9.4 License Agreement............................................ 20
9.5 Software Agreement Amendment................................. 20
ARTICLE X. CLOSING CONDITIONS OF THE SHAREHOLDERS AND MERGERCO.... 20
10.1 Employment Agreement......................................... 20
10.2 Voting Agreement............................................. 21
10.3 Agreement regarding use of ▇▇▇▇▇▇▇.▇▇▇ Domain Name........... 21
10.4 Representations and Warranties............................... 21
ARTICLE XI. FURTHER ASSURANCES....................................... 21
ARTICLE XII. INDEMNIFICATION......................................... 21
12.1 Indemnification by the Shareholders.......................... 21
12.2 Indemnification by the Company and XOOM...................... 22
12.3 Notification of Claims....................................... 22
12.4 Resolution of Claims......................................... 22
12.5 Arbitration.................................................. 23
12.6 Indemnification Threshold.................................... 23
12.7 Limitation of Liability; Exclusive Remedy.................... 23
ARTICLE XIII. RESTRICTIONS ON XOOM COMMON SHARES..................... 24
13.1 Right of First Refusal/Transfer Restrictions................. 24
13.2 Lock-Up Agreement............................................ 25
ARTICLE XIV. MISCELLANEOUS........................................... 26
14.1 Expenses..................................................... 26
14.2 Entire Agreement............................................. 26
14.3 Press Releases and Public Announcements...................... 26
14.4 Counterparts................................................. 26
14.5 Descriptive Headings......................................... 26
14.6 Notices...................................................... 26
14.7 Choice of Law................................................ 27
14.8 Binding Effect; Benefits..................................... 27
14.9 Assignability................................................ 27
14.10 Waiver and Amendment......................................... 27
14.11 Attorneys' Fees.............................................. 27
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AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of March 10,
1998 is entered into by and among XOOM Chat Inc., a California corporation (the
"Company"), XOOM, Inc., a Delaware corporation ("XOOM"), Paralogic Corporation,
a California corporation ("MergerCo"), and the shareholders of MergerCo whose
names are listed on Exhibit A hereto (each such person hereinafter referred to
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as a "Shareholder," and collectively, the "Shareholders").
RECITALS
A. The respective Boards of Directors of each of the Company, XOOM and
MergerCo believe it is in the best interests of their respective companies and
shareholders that the Company and MergerCo combine into a single company through
the statutory merger of MergerCo with and into the Company with the Company as
the surviving corporation (the "Merger") and, in furtherance thereof, have
approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding shares of
common stock of MergerCo shall be exchanged for the Merger Consideration
consisting of common shares of XOOM and the right to receive certain cash
distributions (as more fully defined below).
C. The parties to the Agreement intend that the Merger qualify as a
"reorganization," within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that MergerCo, the Company and XOOM
will each be a "party to a reorganization," within the meaning of Section 368(b)
of the Code, with respect to the Merger.
AGREEMENT
In consideration of the agreements, provisions and covenants set forth
below, MergerCo and the Shareholders, and the Company and XOOM hereby agree as
follows:
ARTICLE I.
THE MERGER
1.1 THE MERGER.
Subject to the terms and conditions of this Agreement, on the Effective
Date (as defined below), MergerCo shall be merged with and into the Company and
the Company shall be the surviving corporation (the "Surviving Corporation") in
such Merger and the separate existence of MergerCo shall thereupon cease. The
Merger shall have the effects set forth in the General Corporation Law of the
State of California. Without limiting the generality of the foregoing, on the
Effective Date, all of the property, rights, privileges, powers and franchises
of the Company and MergerCo shall vest in the Surviving Corporation.
1.2 THE EFFECTIVE DATE.
The Merger shall become effective when a properly executed Agreement of
Merger and such other documents as may be required are duly filed with the
Secretary of State of the State of California, which filings shall be as soon as
practicable after the Closing, or at such other time as the parties may agree
and may provide in the Agreement of Merger and such other documents (the
"Effective Date").
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1.3 THE SURVIVING CORPORATION.
The Articles of Incorporation and Bylaws of the Company shall be the
Articles of Incorporation and Bylaws of the Surviving Corporation, each until
duly amended. The directors and officers of the Company on the Effective Date
shall be the directors and officers of the Surviving Corporation and shall hold
office from the Effective Date until their respective successors are duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation, or as otherwise provided by law.
1.4 CLOSING.
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at 10:00 a.m. local time, at the offices of ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ on March
13, 1998, or at such other time, date and place as the parties may mutually
agree (the "Closing Date").
ARTICLE II.
CONVERSION OF SHARES
2.1 EFFECT ON COMMON STOCK.
By virtue of the Merger and without any action on the part of MergerCo, the
Company or the Shareholders, on the Effective Date, each share of MergerCo's
common stock issued and outstanding immediately prior to the Effective Date will
be canceled and extinguished and be converted automatically into the right to
receive a portion of the Merger Consideration (as defined below).
2.2 TAX WITHHOLDING.
The right of any Shareholder to receive any cash payment as part of the
Merger Consideration, as provided herein, shall be subject to and reduced by the
amount of any required tax withholding obligation. To the extent that the
Company or XOOM withholds taxes from payments to Shareholders, it shall provide
each such Shareholder with documentary evidence of any amounts so withheld and
information as to the basis therefor.
2.3 CONVERSION OF SHARES.
On the Effective Date, by virtue of the Merger and without any action on
the part of the holders thereof, each common share of MergerCo that is issued
and outstanding immediately prior to the Effective Date shall be converted into
the right to receive such number of common shares of XOOM as set forth in
Schedule 2.3 to be provided at the Closing, such that the Shareholders shall
receive in the aggregate 9.85% of the sum of, as of the Closing, (i) all of the
issued and outstanding shares of capital stock of XOOM, and (ii) all of the
vested and unexercised options to purchase shares of XOOM common stock.
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2.4 THE MERGER CONSIDERATION.
The Shareholders shall be entitled to receive the following consideration
for their shares of MergerCo (in the aggregate, the "Merger Consideration"):
(a) On the Effective Date, provided the Shareholders have delivered to
XOOM all of the certificates evidencing their shares of MergerCo, together with
duly executed stock powers executed in blank, each Shareholder shall receive a
certificate evidencing the number of common shares, rounded down to the nearest
whole number, of XOOM to which each Shareholder is entitled pursuant to Section
2.3; and
(b) The Shareholders shall receive in the aggregate an amount, to be
distributed pro rata to the number of shares issued to such Shareholder in
the Merger, pursuant to Section 2.3, equal to:
(i) at the Closing, $30,000;
(ii) an amount payable monthly as set forth herein equal to 25% of
the sum of (A) XOOM's advertising (advertising sales less agency discounts and
third-party sales commissions) revenues generated from the Paralogic Parachat
Personal Network, and (B) the fair market value less applicable taxes of in-kind
compensation in connection with the sale or other provision of Paralogic
Parachat Personal Network advertisements other than such revenues from
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(1) house advertisements for XOOM products or services, (2) non-cash advertising
exchanges or (3) an aggregate dollar amount received by XOOM or the Company from
third party sellers of on-line advertisements in connection with advertising
exchanges, net any amounts paid by XOOM or the Company to such sellers for on-
line advertisements (collectively, "Net PPN Advertising Revenues") only to the
extent invoiced and actually collected (or with respect to in-kind services
other than described in (b)(ii)(1)(2) or (3), actually received) during the
eighteen consecutive full months after the Closing; provided, however, that the
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amount of the monthly payment pursuant to this Section 2.3(b)(ii) shall
not be less than $30,000 (including, for purposes of the first such payment, the
$30,000 payment pursuant to Section 2.4(b)(i)), regardless of XOOM's Net
Advertising Revenues in such months. Payments pursuant to this Section
2.4(b)(ii) shall commence on or before the fifteenth business day of the second
full month after the Closing Date and shall be made on or before the fifteenth
business day of each consecutive month thereafter, with a final payment on or
before the fifteenth day of the nineteenth full month after the Closing Date;
provided, however, that the aggregate of payments pursuant to Sections
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2.4(b)(i) and (ii) shall not, in any event, exceed $1.4 million.
2.5 RECORDS REGARDING NET PPN ADVERTISING REVENUES.
XOOM shall maintain, until two (2) years after expiration of this
Agreement, all such books, records and accounts as necessary to permit
computation of and accounting for amounts payable under this Section 2.4 for the
then-current year and the preceding two (2) years. XOOM grants to Shareholders
the right to audit, have audited, examine, and have examined such books, records
and accounts during XOOM's normal business hours no more than once per year upon
no less than thirty (30) days written notice to verify the accuracy of the
reports and payments made to Shareholders hereunder. In the event it is
determined that XOOM underpaid amounts due under this Agreement by more than ten
percent (10%), XOOM shall reimburse Shareholders for all costs incurred in
connection with the audit.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF MERGERCO
Except as set forth in the Disclosure Schedule attached hereto provided by
MergerCo (the "MergerCo Disclosure Schedule"), the parts of which are numbered
to correspond to the section numbers of this Agreement, MergerCo hereby
represents and warrants to the Company and XOOM as of the Date hereof and as of
the Closing Date, as follows:
3.1 REQUISITE CONSENTS; NONVIOLATION.
The execution and delivery of this Agreement by MergerCo and the
Shareholders and the consummation of the transactions contemplated by this
Agreement will not (a) except as set forth in this Agreement, require the
consent, approval or authorization of any governmental person or entity (except
such approvals or filings as may be required to comply with applicable state
securities laws), (b) violate or conflict with the provisions of the Articles of
Incorporation or Bylaws of MergerCo, or (c) constitute a default under, violate
or conflict with any material contract, note, lease or mortgage to which
MergerCo or any Shareholder is a party or by which MergerCo or any Shareholder
is bound or to which MergerCo or any of its properties or any Shareholder or any
of his or her properties is subject.
3.2 DUE ORGANIZATION OF MERGERCO; AUTHORIZATIONS.
MergerCo (a) has been duly organized and is validly existing and in good
standing as a corporation under the laws of the State of California, (b) is duly
qualified to do business in and is in good standing under the laws of every
jurisdiction where it is required to be so qualified, except where the failure
to be so qualified will not materially adversely affect its business, financial
condition or results of operations, and (c) has all requisite corporate power
and authority to own or lease and to operate its properties and carry on its
business.
3.3 CAPITALIZATION.
The authorized capital stock of MergerCo consists of 1,000,000 shares of
common stock, of which 5,250 shares of common stock are issued and outstanding.
All of the issued and outstanding shares of common stock have been duly
authorized and validly issued and are fully paid and nonassessable. Other than
the common stock, MergerCo does not have outstanding any other voting or equity
securities or interests. Except as set forth in the MergerCo Disclosure
Schedule, MergerCo has no outstanding obligations, understandings or commitments
regarding the issuance of any additional shares of its stock, voting or equity
securities or interests or other securities, or any options, rights, warrants or
securities exercisable for or convertible into such shares, securities or
interests. There are no preemptive rights in respect of the common shares of
MergerCo.
3.4 AUTHORITY; BINDING NATURE OF AGREEMENTS.
MergerCo has the power and authority to enter into and to perform its
obligations under this Agreement, and the execution, delivery and performance by
MergerCo of this Agreement has been duly authorized by all necessary action on
the part of MergerCo and its shareholders, board of directors and officers.
This Agreement constitutes the legal, valid and binding obligation of MergerCo
enforceable against MergerCo in accordance with its terms.
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3.5 SUBSIDIARIES ETC.
MergerCo does not own or control any equity interest in any corporation,
partnership, joint venture or other legal entity.
3.6 FINANCIAL STATEMENTS.
(a) MergerCo has delivered to the Company the following financial
statements and notes (collectively, the "Financial Statements"), which are
attached to Part 3.6(a) of the MergerCo Disclosure Schedule:
(i) the unaudited balance sheets of MergerCo as of December 31, 1996
and December 31, 1997, and the related unaudited statements of operations,
changes in shareholder's equity and cash flows of MergerCo for the fiscal years
ended December 31, 1996 and December 31, 1997 together with the notes thereto;
and
(ii) the unaudited balance sheet of MergerCo as of January 31, 1998
(the "Unaudited Interim Balance Sheet"), and the related unaudited statements of
operations, changes in shareholder's equity and cash flows of MergerCo, together
with the notes thereto.
(b) All of the Financial Statements are accurate and complete in all
material respects, and the dollar amount of each line item included in the
Financial Statements is accurate in all material respects. The financial
statements and notes referred to in Section 3.6(a) are in accordance with the
books and records of MergerCo and present fairly the financial position of
MergerCo as of the respective dates thereof and the results of operations,
changes in shareholders' equity and cash flows of MergerCo for the periods
covered thereby.
(c) Except as set forth in the MergerCo Disclosure Schedule, MergerCo
has no liabilities except those reflected or reserved against in the Unaudited
Interim Balance Sheet and current liabilities incurred by MergerCo in the
ordinary course of business since the date of the Unaudited Interim Balance
Sheet
3.7 NO MATERIAL CHANGES.
Except as otherwise set forth in the MergerCo Disclosure Schedule, since
January 31, 1998 there has not been (a) any damage, destruction or loss (whether
or not covered by insurance) materially and adversely affecting the business,
financial condition or results of operations of MergerCo; (b) any labor dispute
materially and adversely affecting the business, financial condition or results
of operations of MergerCo; (c) any disposition of any capital asset of MergerCo
having a net book value in excess of $15,000; (d) any discharge or satisfaction
of any obligation or liability of MergerCo other than in the ordinary course of
business; or (e) any material adverse change in the business, financial
condition or results of operations of MergerCo.
3.8 UNDISCLOSED LIABILITIES.
MergerCo has no liabilities or obligations (whether absolute, contingent or
otherwise) which are material to MergerCo, except for (a) those reflected,
reserved against or otherwise disclosed in the Financial Statements or the notes
thereto and not heretofore paid or discharged, (b) those disclosed in the
Disclosure Schedule, or (c) those incurred in, or as a result of, the ordinary
course of business of MergerCo since the date of the Unaudited Interim Balance
Sheet.
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3.9 GOVERNMENTAL AUTHORIZATIONS; COMPLIANCE WITH LAWS.
MergerCo has all material governmental licenses, permits, approvals and
other governmental authorizations necessary to permit the operation of the
business of MergerCo, as presently conducted. MergerCo is in compliance with
all applicable laws, regulations, orders, judgments and decrees, except where
the failure to be in such compliance would not have a material adverse effect on
the business, financial condition or results of operations of MergerCo.
3.10 LITIGATION.
Except as set forth in the MergerCo Disclosure Schedule, there is no
pending or threatened action, suit, arbitration proceeding or investigation in
any court or before any governmental commission or agency against MergerCo which
would have a material adverse effect upon the business, financial condition or
results of operations of MergerCo. There is no order, judgment or decree of any
court or governmental authority or agency which specifically applies to MergerCo
which would have a material adverse effect on the business, financial condition
or results of operations of MergerCo.
3.11 EMPLOYEE BENEFIT PLANS.
As used herein, the term "Employee Benefit Plan" means an "employee pension
benefit plan" as defined in Section 3(2)(A) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and an "employee welfare benefit
plan" as defined in Section 3(l) of ERISA. The term "Qualified Plan" means a
pension, profit sharing or stock bonus plan described in Section 401 of the
Code. MergerCo, which, for purposes hereof shall include any of its
subsidiaries or any organization which, together with MergerCo and/or any such
subsidiary, would be treated as a "single employer" within the meaning of
Section 414(b) or (c) of the Code, maintains or contributes to (or has any
obligation to contribute to) no Employee Benefit Plan other than those listed in
the MergerCo Disclosure Schedule (the "Listed Plans").
(a) Each Listed Plan is, and at all times while maintained by MergerCo has
been, operated in compliance, in all material respects, with all applicable law,
including provisions of ERISA (including the regulations thereunder), which are
applicable to Listed Plan;
(b) Each Listed Plan which is a Qualified Plan complies in form and is,
and at all times while maintained by MergerCo has been, operated in compliance
in all material respects with the provisions of the Internal Revenue Code
(including the regulations thereunder) which are applicable to such Listed Plan;
(c) No Listed Plan which is subject to the minimum funding standards of
Section 412 of the Code or Section 302 of ERISA has an "accumulated funding
deficiency" as described in such sections, or has obtained a waiver of any
minimum funding standard or an extension of any amortization period under
Section 412 of the Code or Section 303 or 304 of ERISA;
(d) MergerCo has received no communication from the United States
Department of Labor stating that any Listed Plan is in violation of ERISA or the
regulations thereunder, and neither MergerCo nor any other "disqualified person"
or "party in interest" (as defined in Section 4975(e)(2) of the Code and Section
3(14) of ERISA, respectively) has engaged in any transactions in connection with
any Listed Plan that could reasonably be expected to result in the imposition of
a penalty pursuant to Section 502 of ERISA, damages pursuant to Section 409 of
ERISA or a tax pursuant to Section 4975 of the Code;
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(e) Each Listed Plan which is a Qualified Plan has received a favorable
determination letter from the Internal Revenue Service, and MergerCo has
received no communication from the Internal Revenue Service indicating that any
Listed Plan which is intended to be a Qualified Plan is no longer a Qualified
Plan;
(f) There is no litigation, claim or action pending or asserted by or
against any Listed Plan, or threatened with respect to any Listed Plan (other
than routine claims for benefits payable in the ordinary course, and appeals of
denied claims);
(g) No Listed Plan is covered by Title IV of ERISA; and
(h) No Listed Plan provides for post-employment or retiree welfare
benefits, except (i) benefit coverage mandated by applicable law, including
(without limitation) coverage provided pursuant to Section 4980B of the Code, or
(ii) benefits (including life insurance policies), the full cost of which are
borne by current or former employees of MergerCo (or the employees'
beneficiaries).
3.12 PATENT, TRADEMARK AND RELATED MATTERS.
All of the material patents, registered trademarks, service marks and trade
names owned by MergerCo and all material license agreements in which MergerCo is
the licensee, at the date of this Agreement are listed in the MergerCo
Disclosure Schedule. Except to the extent, if any, set forth in the MergerCo
Disclosure Schedule, such patents, trademarks, service marks, trade names and
licenses (collectively, the "Intellectual Property") are, to the Company's
Knowledge, valid and in full force and are adequate to permit MergerCo to
conduct its business as presently conducted, except to the extent that such
failure to be valid and in full force would not have a material adverse effect
on the business, financial condition or results of operations of MergerCo.
MergerCo has received no written notice of any event, inquiry or investigation
threatening the validity of the Intellectual Property.
3.13 REAL AND PERSONAL PROPERTY.
The MergerCo Disclosure Schedule contains a list of all real and personal
property owned or leased by MergerCo as of the date hereof having, in the case
of leased property, an annual lease obligation in excess of $10,000 or, in the
case of owned property, a book value in excess of $15,000. All such property is
owned in fee or held under valid leases. There is not under any of such leases
any existing material default on the part of MergerCo nor any facts that would,
with the passage of time, constitute such a material default.
3.14 INSURANCE.
The MergerCo Disclosure Schedule lists all material insurance policies in
force with respect to MergerCo, its employees and its directors.
3.15 TAXES.
(a) Definitions. For purposes of this Agreement, the following
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definitions shall apply:
(i) "Tax" or "Taxes" shall mean all taxes, however denominated,
including any interest, penalties or other additions to tax that may become
payable in respect thereof, imposed by any federal, territorial, state, local or
foreign government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the generality of the
foregoing, all income or profits taxes (including, but not limited to, federal
income taxes and state income taxes), payroll and employee withholding taxes,
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unemployment insurance, social security taxes, sales and use taxes, ad valorem
taxes, excise taxes, franchise taxes, gross receipts taxes, business license
taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation, Pension Benefit
Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
MergerCo is required to pay, withhold or collect.
(ii) "Tax Returns" shall mean all reports, estimates, declarations of
estimated tax, information statements and returns relating to, or required to be
filed in connection with, any Taxes, including information returns or reports
with respect to backup withholding and other payments to third parties.
(b) Tax Returns Filed and Taxes Paid. All Tax Returns required to be filed
--------------------------------
by or on behalf of MergerCo have been duly filed on a timely basis and such Tax
Returns are true, complete and correct. MergerCo has set aside adequate reserves
for the payment of all Taxes due for fiscal 1997. All Taxes shown to be payable
on the Tax Returns or on subsequent assessments with respect thereto have been
paid in full on a timely basis, and no other Taxes are payable by MergerCo with
respect to items or periods covered by such Returns (whether or not shown on or
reportable on such Tax Returns). MergerCo has withheld and paid over all Taxes
required to have been withheld and paid over, and complied with all information
reporting and backup withholding requirements, including maintenance of required
records with respect thereto, in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third party. There are no
liens on any of the assets of MergerCo with respect to Taxes, other than liens
for Taxes not yet due and payable or for Taxes that MergerCo is contesting in
good faith through appropriate proceedings and for which appropriate reserves
have been established.
(c) Tax Returns Furnished. For all periods ending on and after December 31,
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beginning with the year in which MergerCo was formed, MergerCo has made
available to the Company true and complete copies of (i) relevant portions of
income tax audit reports, statements of deficiencies, closing or other
agreements received by MergerCo or on behalf of MergerCo relating to Taxes, and
(ii) all separate federal and state income or franchise tax returns for
MergerCo.
(d) Tax Reserves. The amount of MergerCo's liability for unpaid Taxes for
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all periods covered by the Financial Statements does not, in the aggregate,
exceed the amount of the current liability accruals for Taxes (excluding
reserves for deferred Taxes) as such accruals are reflected in the Financial
Statements, and the amount of MergerCo's liability for unpaid Taxes for all
periods ending on or before the Closing Date shall not, in the aggregate, exceed
such accruals.
(e) Tax Deficiencies; Audits; Statutes of Limitations. Except as set forth
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in the MergerCo Disclosure Schedule, no deficiencies have been asserted with
respect to Taxes of MergerCo. MergerCo is neither a party to any action or
proceeding for assessment or collection of Taxes, nor has such event been
asserted or threatened against MergerCo or any of its assets. No waiver or
extension of any statute of limitations is in effect with respect to Taxes or
Tax Returns of MergerCo. Except as set forth in the MergerCo Disclosure
Schedule, the Tax Returns of MergerCo have never been audited by a government or
taxing authority, nor is any such audit in process, pending or threatened.
MergerCo has disclosed on its federal income tax returns all positions taken
therein that could give rise to a substantial understatement penalty within the
meaning of Section 6662 of the Code.
(f) No Consolidated Group. Except as disclosed in the MergerCo Disclosure
---------------------
Schedule, MergerCo has not been included in any "consolidated," "unitary"
or "combined group Tax Return provided for under the
9
law of the United States, any foreign jurisdiction or any state or locality with
respect to Taxes for any taxable period for which the statute of limitations has
not expired.
(g) No Tax Sharing. There are no tax sharing, allocation, indemnification
--------------
or similar agreements or arrangements in effect as between MergerCo or any
predecessor or affiliate thereof and any other party (including Shareholders and
any predecessor or affiliate thereof) under which the Company or MergerCo could
be liable for any Taxes of any party.
(h) Tax Elections and Special Tax Status. MergerCo is not nor has it been a
------------------------------------
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code and XOOM is not required to withhold tax on the
acquisition of MergerCo's common stock pursuant to Section 1445 of the Code.
MergerCo is not a "consenting corporation" under Section 341(f) of the Code.
MergerCo has not entered into any compensatory agreements with respect to the
performance of services which payment thereunder would result in a nondeductible
expense to the group pursuant to Section 280G of the Code or an excise tax to
the recipient of such payment pursuant to Section 4999 of the Code. MergerCo has
not participated in an international boycott as defined in Code Section 999.
MergerCo has not agreed, nor is it required to make, any adjustment under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise. MergerCo has no permanent establishment in any foreign country, as
defined in any applicable tax treaty or convention between the United States of
America and such foreign country, and MergerCo is not a party to any joint
venture, partnership, or other agreement, contract, or arrangement (either in
writing or verbally, formally or informally) which could be treated as a
partnership for federal income tax purposes. MergerCo is not an "S corporation,"
within the meaning of Section 1361(a) of the Code.
(i) Section 6038A Compliance. MergerCo has filed all reports and has created
------------------------
and/or retained all records required under Section 6038A of the Code with
respect to its ownership by and transactions with related parties. Each related
foreign person required to maintain records under Section 6038A with respect to
transactions between MergerCo and the related foreign person has maintained such
records. All documents that are required to be created and/or preserved by the
related foreign person with respect to transactions with MergerCo are either
maintained in the United States, or MergerCo is exempt from the record
maintenance requirements of Section 6038A with respect to such transactions
under Section 1.6038A-1 of the Treasury Regulations. MergerCo is not a party to
any record maintenance agreement with the Internal Revenue Service with respect
to Section 6038A of the Code. Each related foreign person that has engaged in
transactions with MergerCo has authorized MergerCo to act as its limited agent
solely for purposes of Sections 7602, 7603, and 7604 of the Code with respect to
any request by the Internal Revenue Service to examine records or produce
testimony related to any transaction with MergerCo, and each such authorization
remains in full force and effect.
3.16 ENVIRONMENTAL MATTERS.
(a) Definitions. For purposes of this Agreement, the following definitions
-----------
shall apply:
(i) "Hazardous Materials" shall mean any hazardous substance, pollutant,
-------------------
contaminant, flammable explosives, radioactive materials and hazardous, toxic or
dangerous wastes and any other chemicals, materials or substances which are
identified, defined or regulated pursuant to any Hazardous Materials Laws, or
the release, discharge or exposure to which is prohibited, limited to or
regulated by any federal, state or local government under Hazardous Materials
Laws and any petroleum, waste oil and petroleum by-products, asbestos
10
in any form, urea formaldehyde, and transformers or other equipment that contain
levels of polychlorinated biphenyls.
(ii) "Hazardous Materials Laws" shall mean any federal, state or local
------------------------
statute, law, rule, regulation, ordinance, code, binding policy or rule of
common law in effect and in each case as amended as of the Closing Date, and any
judicial or administrative interpretation thereof as of the Closing Date,
including any judicial or administrative order, consent decree or judgment,
relating to the protection of the environment, health, safety from the release
or disposal of Hazardous Materials, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. (S) 9601 et seq.; the Resource Conservation and Recovery
-- ----
Act, as amended, 42 U.S.C. (S) 9601 et seq.; the Federal Water Pollution Control
-- ----
Act, as amended, 33 U.S.C. (S) 1251 et seq.; the Toxic Substances Control Act,
-- ----
15 U.S.C. (S) 2601 et seq.; the Clean Air Act, 42 U.S.C. (S) 7401 et seq.; the
-- ---- -- ----
Safe Drinking Water Act, 42 U.S.C. (S) 300f et seq.; the Oil Pollution Act of
-- ----
1990, 33 U.S.C. (S) 2701 et seq.; and their state and local counterparts and
-- ----
equivalents.
(iii) "Environmental Claims" shall mean any and all administrative,
--------------------
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notice of noncompliance or violation, investigations or proceedings relating to
any Hazardous Materials Law or any permit issued under any such Law (hereafter
"Claims"), including without limitation (a) any and all Claims by governmental
or regulatory authorities for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Hazardous Materials Law,
and (b) any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or other environment from release or disposal of Hazardous
Materials.
(b) MergerCo is in compliance in all material respects with all Hazardous
Material Laws and the requirements of all environmental permits required
for the handling, use, storage and disposition of Hazardous Materials under
Hazardous Materials Laws that are applicable to MergerCo's operations as
presently conducted.
(c) There are no pending, or to the Knowledge of MergerCo, threatened
Environmental Claims against MergerCo or any property of MergerCo.
(d) There are no facts, circumstances, conditions or occurrences regarding
MergerCo, its operations or any property of MergerCo that could reasonably
be anticipated to form the basis of an Environmental Claim against
MergerCo.
3.17 CONTRACTS.
The MergerCo Disclosure Schedule contains a complete list of every material
contract of MergerCo which (i) is made with any officer, director or stockholder
of MergerCo, or with any affiliate or relative of any such officer, director or
stockholder, (ii) is a contract of employment, (iii) is made with any labor
union, or other labor organization, (iv) is a bank loan or other credit
agreement, (v) other than outstanding purchase orders, requires, individually,
annual payments of more than $10,000 or aggregate payments over the life of the
contract of more than $50,000, (vi) is for a remaining term of more than one
year and is not cancelable as to all its provisions upon 60 days or less notice
without payment of any material penalty, or (vii) is entered into other than in
the ordinary course of business. MergerCo has made or will promptly make
available to the Company upon request true copies of each contract so listed.
MergerCo and each of the other parties to the contracts set forth in the
MergerCo Disclosure Schedule have in all material respects performed all
material obligations
11
required to be performed by them under such contracts and no event has occurred
which would give any other party to any such contract the right to terminate or
otherwise fail to perform its obligations under the contracts.
3.18 ACCOUNTS RECEIVABLE.
Except to the extent set forth in the MergerCo Disclosure Schedule, the
accounts receivable of MergerCo reflected in the Unaudited Interim Balance Sheet
represent sales actually made in the ordinary course of business, and have been
properly reported, net of any reserves shown on the books of MergerCo, all in
accordance with the past practices of MergerCo, consistently applied.
3.19 CUSTOMERS AND SUPPLIERS.
(a) Part 3.19(a) of the MergerCo Disclosure Schedule lists the five
largest customers of MergerCo in the most recent full fiscal year. Except as
disclosed in the MergerCo Disclosure Schedule, since January 31, 1998, there has
been no material adverse change in the business relationship of MergerCo with
any such customer.
(b) Part 3.19(b) of the MergerCo Disclosure Schedule contains exemplars
of each of the forms of contracts executed by MergerCo's subscribers. Except as
set forth in the MergerCo Disclosure Schedule, all contracts with MergerCo's
subscribers have been made using such exemplars.
3.20 BANK ACCOUNTS.
The MergerCo Disclosure Schedule sets forth the names and locations of all
banks, trust companies, brokerage firms or other financial institutions at which
MergerCo maintains an account and the name of each person authorized to draw
thereon or make withdrawals therefrom.
3.21 TITLE TO PROPERTIES; ENCUMBRANCES.
Except as set forth in the MergerCo Disclosure Schedule, MergerCo has good
title to its material properties and assets (real and personal, tangible and
intangible) owned by it (and good leasehold title to the material properties and
assets leased by it), including, without limitation, the material properties and
assets reflected in the Financials, subject to no encumbrance, lien, charge or
other restriction of any kind or character ("Encumbrances"), except for (i)
Encumbrances reflected in the Unaudited Interim Balance Sheet, (ii) Encumbrances
for current taxes, assessments or governmental charges or levies on property not
yet due and delinquent, (iii) Encumbrances arising by operation of law, (iv)
easements, rights-of-way, restrictions and other similar Encumbrances previously
incurred in the ordinary course of business which, in respect of properties or
assets of MergerCo are not material and which, in the case of such Encumbrances
on the assets or properties of MergerCo, would not reasonably be expected to
materially detract from the value of any such properties or assets or materially
interfere with any present use of such properties or assets, and (v)
Encumbrances in existence on the Closing Date and described in the MergerCo
Disclosure Schedule.
3.22 COMPENSATION OF EMPLOYEES.
MergerCo has provided the Company with an accurate and complete list for
fiscal year 1997 showing (i) the names of all persons employed by MergerCo who
received more than $40,000 in 1997 cash compensation (including, without
limitation, salary, commission and bonus) and who are employed by MergerCo as of
the date hereof, and (ii) the present salary or hourly wage (including, without
limitation, salary,
12
commission and bonus) and fringe benefits (excluding Listed Plans set forth in
the MergerCo Disclosure Schedule), of each such person.
3.23 TAX STATUS OF REORGANIZATION.
(a) The liabilities of MergerCo, if any, to be assumed by the Company in
the Merger and the liabilities to which the transferred assets of MergerCo are
subject, if any, were incurred by MergerCo in the ordinary course of business.
(b) MergerCo and each of the Shareholders will pay any of its own
expenses incurred in connection with the Merger.
(c) There is no intercorporate indebtedness existing between the Company
and MergerCo that was issued, was acquired, or will be settled at a discount.
(d) The fair market value of the assets of MergerCo to be transferred to
the Company in the Merger will equal or exceed the sum of MergerCo's liabilities
assumed by the Company plus the amount of MergerCo's liabilities, if any, to
which the transferred assets are subject.
(e) MergerCo is not under the jurisdiction of a court in a "title 11 or
similar case," within the meaning of Section 368(a)(3)(A) of the Code.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Except as set forth in the MergerCo Disclosure Schedule, the Shareholders
hereby represent and warrant to the Company and XOOM as of the date hereof and
as of the Closing Date as follows:
4.1 TITLE TO COMMON SHARES.
Each Shareholder individually represents and warrants to the Company and
XOOM that he or she is the record and beneficial owner of the common stock being
conveyed by such Shareholder to the Company listed opposite the Shareholder's
name in the capitalization schedule attached hereto as Exhibit A, and
---------
Shareholder holds title to the common stock free and clear of all liens,
charges, encumbrances, security interests, restrictive agreements or
assessments.
4.2 CAPACITY.
Each Shareholder has the legal capacity to enter into and to perform his or
her obligations under this Agreement, and this Agreement constitutes the legal,
valid and binding obligation of each Shareholder, enforceable against each
Shareholder in accordance with its terms.
4.3 CONFIRMATION OF MERGERCO'S REPRESENTATIONS AND WARRANTIES.
The Shareholders represent and warrant, severally, but not jointly, that to
their Knowledge, except as set forth in the MergerCo Disclosure Schedule, the
representations and warranties of MergerCo in Article III are true and correct
as of the date hereof and as of the Closing Date. For purposes of this Article
IV, a Shareholder shall be deemed to have "Knowledge" of a particular fact or
other matter if (i) the Shareholder is actually aware
13
of such fact or other matter or (ii) had reason to know of such fact or matter.
MergerCo or Shareholder ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ shall be deemed to have Knowledge of
a particular fact or matter if any Shareholder has Knowledge of such fact or
matter.
4.4 PURCHASE ENTIRELY FOR OWN ACCOUNT.
This Agreement is made with each Shareholder in reliance upon each
Shareholder's representation, which by each Shareholder's execution of this
Agreement Shareholder hereby confirms, that the XOOM Stock to be received by
Shareholder will be acquired for investment for Shareholder's own account, not
as a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that Shareholder has no present intention of selling, granting
any participation in, or otherwise distributing the same. By executing this
Agreement, Shareholder further represents that he or she does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the XOOM Stock.
4.5 DISCLOSURE OF INFORMATION.
Each Shareholder believes he has received all the information he or she
considers necessary or appropriate for deciding whether to acquire the XOOM
Stock. Shareholder further represents that he or she has had an opportunity to
ask questions and receive answers from XOOM regarding the terms and conditions
of the offering of the XOOM Stock and the business, properties, prospects and
financial conditions of XOOM. Shareholder has arrived at an independent view
concerning the value of XOOM, recognizes that the purchase and sale of the XOOM
Stock is occurring in an arms' length transaction and is not relying upon any
statements by XOOM or the Company as to the value of XOOM.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND XOOM
The Company and XOOM hereby represent and warrant to MergerCo and the
Shareholders that to their Knowledge as of the date hereof and as of the
Closing, except as disclosed in the Disclosure Schedule provided by XOOM and
attached hereto, (the "XOOM Disclosure Schedule) (For the purposes of this
Article V, the Company and XOOM shall be deemed to have Knowledge of a
particular fact or matter if ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇▇▇▇▇ are
actually aware of such fact or matter or had reason to know of such fact or
matter):
5.1 DUE INCORPORATION; REQUISITE POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in good
standing as a corporation under the laws of California, and XOOM is a
corporation duly organized, validly existing and in good standing as a
corporation under the laws of the State of Delaware. The Company and XOOM have
all requisite power and authority to execute and deliver this Agreement and to
perform all transactions contemplated by this Agreement. The execution and
delivery of this Agreement by the Company and XOOM and the consummation of the
transactions contemplated by this Agreement have been duly authorized and
approved by all necessary corporate and shareholder action, and this Agreement
constitutes the valid and binding obligation of the Company and XOOM enforceable
in accordance with its terms.
14
5.2 DUE ORGANIZATION OF XOOM AND THE COMPANY.
XOOM and the Company (a) have been duly organized and are validly existing
and in good standing in their respective states of incorporation, (b) are duly
qualified to do business in and are in good standing under the laws of every
jurisdiction where they are required to be so qualified, except where the
failure to be so qualified will not materially adversely affect their business,
financial condition or results of operations, and (c) have all requisite
corporate power and authority to own or lease and to operate their properties
and carry on their business.
5.3 REQUISITE CONSENTS; NONVIOLATION.
The execution and delivery of this Agreement by the Company and XOOM do
not, and the performance of this Agreement by the Company and XOOM will not, (a)
violate or conflict with (i) the provisions of the Articles of Incorporation
(and with respect to XOOM, its Certificate of Incorporation) or Bylaws of the
Company and XOOM, (ii) any applicable law, rule or regulation or (iii) any
order, writ, injunction or decree by which the Company or XOOM is bound; (b)
except as set forth in this Agreement, require the consent, license, permit,
approval, authorization or other action by or with respect to, any governmental
person or entity (except such approvals, permits or filings as may be required
to comply with applicable state securities laws); or (c) constitute a default
under, violate or conflict with any material contract, note, lease or mortgage
to which XOOM or the Company is a party.
5.4 XOOM STOCK.
The XOOM Stock to be issued to the holders of MergerCo's common stock
pursuant to the Merger, when issued in connection with this Agreement, will be
duly authorized, validly issued, fully paid and nonassessable. Based on the
truth and accuracy of the Shareholders' representations set forth in Article IV
of this Agreement, such XOOM Stock will be exempt from the registration
requirements of the Securities Act of 1933 and will have been registered or
qualified (or are exempt) under all applicable state securities laws.
5.5 CAPITALIZATION.
(a) Prior to the two-for-one reverse common stock split planned by XOOM
before the Closing, the authorized capital stock of XOOM consists of twenty
million (20,000,000) shares of common stock, $.0001 par value per share, of
which, as of March 10, 1998, seventeen million, eight hundred thirty-four
thousand, eighty-three (17,834,083) shares have been issued and are outstanding,
and 1,000,000 shares of preferred stock, none of which has been issued or is
outstanding. Other than the common stock, XOOM does not have outstanding any
other voting or equity securities or interests. Except as set forth in the XOOM
Disclosure Schedule, XOOM has no outstanding obligations, understandings or
commitments regarding the issuance of any additional shares of its stock, voting
or equity securities or interests or other securities, or any options, rights,
warrants or securities exercisable for or convertible into such shares,
securities or interests. There are no preemptive rights in respect of the common
shares of XOOM. All issued and outstanding shares of XOOM's capital stock have
been duly authorized and validly issued, are fully paid and nonassessable .
(b) The authorized capital stock of the Company consists of ten thousand
(10,000) shares of common stock, no par value. All issued and outstanding shares
of the Company's capital stock have been duly authorized and validly issued, are
fully paid and nonassessable, and are owned by XOOM.
15
5.6 FINANCIAL STATEMENTS.
(a) Attached hereto as Part 5.6(a) of the XOOM Disclosure Schedule are the
following financial statements and notes (collectively, the "Financial
Statements") pertaining to XOOM:
(i) the unaudited balance sheets of XOOM as of December 31, 1996 and
December 31, 1997, and the related unaudited statements of operations, changes
in shareholder's equity and cash flows of XOOM for the fiscal years ended
December 31, 1996 and December 31, 1997 together with the notes thereto; and
(ii) the unaudited balance sheet of XOOM as of December 31, 1997 (the
"12/31/97 Balance Sheet"), and the related unaudited statements of operations,
changes in shareholder's equity and cash flows of XOOM, together with the notes
thereto.
(b) All of the Financial Statements are accurate and complete in all
material respects, and the dollar amount of each line item included in the
Financial Statements is accurate in all material respects. The financial
statements and notes referred to in Section 5.6(a) are in accordance with the
books and records of XOOM and present fairly the financial position of XOOM as
of the respective dates thereof and the results of operations, changes in
shareholders' equity and cash flows of XOOM for the periods covered thereby.
(c) Except as set forth in the XOOM Disclosure Schedule, XOOM has no
liabilities except those reflected or reserved against in the 12/31/97 Balance
Sheet and current liabilities incurred by XOOM in the ordinary course of
business since the date of the 12/31/97 Balance Sheet
5.7 NO MATERIAL CHANGES.
Except as otherwise set forth in the XOOM Disclosure Schedule, since
January 31, 1998 there has not been (a) any damage, destruction or loss (whether
or not covered by insurance) materially and adversely affecting the business,
financial condition or results of operations of XOOM; (b) any labor dispute
materially and adversely affecting the business, financial condition or results
of operations of XOOM; (c) any disposition of any capital asset of XOOM having a
net book value in excess of $15,000; (d) any discharge or satisfaction of any
obligation or liability of XOOM other than in the ordinary course of business;
or (e) any material adverse change in the business, financial condition or
results of operations of XOOM.
5.8 UNDISCLOSED LIABILITIES.
XOOM has no liabilities or obligations (whether absolute, contingent or
otherwise) which are material to XOOM, except for (a) those reflected, reserved
against or otherwise disclosed in the Financial Statements or the notes thereto
and not heretofore paid or discharged, (b) those disclosed in the XOOM
Disclosure Schedule, or (c) those incurred in, or as a result of, the ordinary
course of business of XOOM since the date of the 12/31/97 Balance Sheet.
5.9 LITIGATION.
Except as set forth in the XOOM Disclosure Schedule, there is no pending or
threatened action, suit, arbitration proceeding or investigation in any court or
before any governmental commission or agency against XOOM, which would have a
material adverse effect upon the business, financial condition or results of
operations of XOOM. There is no order, judgment or decree of any court or
governmental authority or agency
16
which specifically applies to XOOM which would have a material adverse effect on
the business, financial condition or results of operations of XOOM.
5.10 PATENT, TRADEMARK AND RELATED MATTERS.
All of the material patents, registered trademarks, service marks and trade
names owned by XOOM and all material license agreements in which XOOM is the
licensee, at the date of this Agreement are listed in the XOOM Disclosure
Schedule. Except to the extent, if any, set forth in the XOOM Disclosure
Schedule, such patents, trademarks, service marks, trade names and licenses
(collectively, the "Intellectual Property") are, to XOOM's Knowledge, valid and
in full force and are adequate to permit XOOM to conduct its business as
presently conducted, except to the extent that such failure to be valid and in
full force would not have a material adverse effect on the business, financial
condition or results of operations of XOOM, and XOOM has received no written
notice of any event, inquiry or investigation threatening the validity of the
Intellectual Property.
5.11 CONTRACTS.
The XOOM Disclosure Schedule contains a complete list of every material
contract of XOOM which (i) is made with any officer, director or stockholder of
XOOM, or with any affiliate or relative of any such officer, director or
stockholder, (ii) is a contract of employment, (iii) is made with any labor
union, or other labor organization, (iv) is a bank loan or other credit
agreement, (v) other than outstanding purchase orders, requires, individually,
annual payments of more than $10,000 or aggregate payments over the life of the
contract of more than $50,000, (vi) is for a remaining term of more than one
year and is not cancelable as to all its provisions upon 60 days or less notice
without payment of any material penalty, or (vii) is entered into other than in
the ordinary course of business. XOOM Disclosure Schedule has made or will
promptly make available to the Company upon request true copies of each contract
so listed. XOOM and each of the other parties to the contracts set forth in the
XOOM Disclosure Schedule have in all material respects performed all material
obligations required to be performed by them under such contracts and no event
has occurred which would give any other party to any such contract the right to
terminate or otherwise fail to perform its obligations under the contracts.
5.12 REGISTRATION RIGHTS.
XOOM is not under any contractual obligation to Register any of its
securities. The term "Register" refers to a registration effected by preparing
and filing a registration statement in compliance with the Securities Act of
1933, and the declaration or ordering of the effectiveness of such registration
statement.
5.13 RELATED-PARTY TRANSACTIONS.
No employee, officer, or director of XOOM or member of his or her immediate
family is indebted to XOOM, nor is XOOM indebted (or committed to make loans or
extend or guarantee credit) to any of them. To the best of XOOM's knowledge,
none of such persons has any direct or indirect ownership interest in any firm
or corporation with which XOOM is affiliated or with which XOOM has a business
relationship, or any firm or corporation that competes with XOOM, except that
employees, officers, or directors of XOOM and members of their immediate
families may own stock in publicly traded companies that may compete with XOOM.
No member of the immediate family of any officer or director of XOOM is directly
or indirectly interested in any material contract with XOOM.
17
5.14 VOTING AGREEMENTS.
Except for the Voting Agreement set forth in Section 10.2, in which XOOM's
shareholders will agree to vote their shares in favor of the election of ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇, among other things, none of the shareholders of
XOOM are parties to any voting agreement or any other agreement which would
require them to vote their shares in accordance with such agreement.
ARTICLE VI.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations, warranties and indemnities included or provided for in
this Agreement or in any schedule or certificate or other document delivered
pursuant to this Agreement will survive the Closing Date for a period of
eighteen months. No claim may be made by any party hereto under this article
unless written notice of the claim is given within that eighteen month period;
provided, however, that the foregoing limitation period will not apply to any
--------
fraudulent breach, representation or warranty actually known to any party before
the Closing Date.
ARTICLE VII.
COVENANTS OF MERGERCO AND SHAREHOLDERS
7.1 ACCESS AND INVESTIGATION.
MergerCo shall ensure that, at all times after the date hereof and prior to
the Closing (the "Pre-Closing Period") MergerCo shall provide XOOM and its
representatives with free and complete access to MergerCo's representatives,
personnel, premises and assets and to all existing books, records, Tax Returns,
work papers and other documents and information relating to MergerCo.
7.2 OPERATION OF BUSINESS.
MergerCo shall ensure that, during the Preclosing Period (a) MergerCo
conducts its operations exclusively in the ordinary course of business and in
the same manner as such operations have been conducted prior to the date of this
Agreement; (b) MergerCo preserves intact its current business organization,
keeps available the services of its current officers and employees and maintains
its relations and goodwill with all suppliers, customers, landlords, creditors,
licensors, licensees, employees and other persons having business relationships
with MergerCo.
7.3 FINAL TAX RETURNS.
The Shareholders shall cause MergerCo's accountants to prepare and MergerCo
to timely file and pay amounts owed with respect to all Income Tax Returns not
already filed for MergerCo for all tax periods ended or ending on or before the
Closing Date and shall cause their accountants to prepare on a pro forma basis
all tax returns for MergerCo for the interim period from December 31, 1997 until
the Closing ("Final Returns"). The Shareholders shall send a copy of all Final
Returns as to which they are responsible to the Company for its review and
comment and, if required, appropriate execution, at least three (3) days prior
to the filing thereof. Unless it determines in good faith that it is required
to do so by applicable tax laws, the Company shall not (without the prior
written consent of MergerCo, which consent shall not be unreasonably withheld),
cause the Company to amend any of the Final Returns or other Tax Returns for
which the Shareholders are responsible.
18
7.4 TAXES ON PSC Share Dividends.
The Stockholders shall pay and be fully liable for any taxes incurred by
MergerCo due to the dividend of Paralogic Software Corporation, a California
corporation ("PSC"), stock to the Shareholders prior to the Merger.
7.5 FEDERAL INCOME TAX REPORTING.
MergerCo and the Shareholders agree to report the Merger as a
"reorganization," within the meaning of Section 368(a) of the Code, but the
Shareholders shall not be liable for any adverse consequences suffered by XOOM
or the Company if the Merger fails to qualify as a reorganization.
7.6 NO NEGOTIATION.
MergerCo shall ensure that, during the Pre-Closing Period, neither MergerCo
nor any of its representatives directly or indirectly (i) solicits or encourages
the initiation of any inquiry, proposal or offer from any person relating to any
to acquisition of MergerCo or any of its assets or (ii) conducts any
negotiations relating to such acquisition.
ARTICLE VIII.
COVENANTS OF XOOM
8.1 TAX FREE REORGANIZATION.
(a) XOOM agrees to report the Merger as a reorganization within the meaning
of Section 368(a) of the Code.
(b) Prior to the Merger, XOOM will be in "control" of the Company within the
meaning of Section 368(c) of the Code.
(c) XOOM has no plan or intention to cause MergerCo to issue additional
shares of stock after the Merger, or take any other action, that would result in
XOOM losing Control of MergerCo.
(d) XOOM has no plan or intention to liquidate MergerCo; to merge MergerCo
with or into another corporation including XOOM affiliates; to sell, distribute
or otherwise dispose of the capital stock of MergerCo; or to cause MergerCo to
sell or otherwise dispose of any of its assets or of any of the assets acquired
from the Company except for dispositions made in the ordinary course of business
or payment of expenses incurred by MergerCo pursuant to the Merger.
(e) Following the Merger, the historic business of MergerCo will be continued
or a significant portion of MergerCo's historic business assets will be used in
a business.
(f) Following the Merger, XOOM and MergerCo will comply with the record-
keeping and information filing requirements of Section 1.368-3 of the Treasury
Regulations.
19
ARTICLE IX.
CLOSING CONDITIONS OF XOOM AND THE COMPANY
XOOM and the Company's obligations to effect the Closing and consummate the
Merger are subject to the satisfaction of each of the following conditions:
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Shareholders and MergerCo in this
Agreement shall have been true and correct as of the date of this Agreement and
shall be true and correct on and as of the Closing and each of the Shareholders
and MergerCo shall have performed all obligations in this Agreement required to
be performed or observed by them on or prior to the Closing.
9.2 ASSET PURCHASE AGREEMENT.
MergerCo shall have entered into an Asset Purchase Agreement with PSC in
substantially the form of Exhibit B hereto and the closing of the transactions
---------
described therein shall have occurred.
9.3 RELEASE AGREEMENT.
XOOM shall have received an executed Release Agreement from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
in substantially the form of Exhibit C hereto, effective as of the Closing,
---------
releasing MergerCo, PSC, the Company and XOOM from any liability or claims
described therein.
9.4 LICENSE AGREEMENT.
XOOM shall have received an executed License Agreement from PSC in
substantially the form of Exhibit D hereto pursuant to which XOOM obtains
---------
certain nonexclusive rights to use of the name "Paralogic" and related service
and trademarks.
9.5 SOFTWARE AGREEMENT AMENDMENT.
XOOM share have received an executed Amendment to the Software License
Agreement between MergerCo and XOOM in the form of Exhibit E to this Agreement.
---------
ARTICLE X.
CLOSING CONDITIONS OF THE SHAREHOLDERS AND MERGERCO
The Shareholders' and MergerCo's obligations to effect the Closing and
consummate the Merger are subject to the satisfaction of each of the following
conditions:
10.1 EMPLOYMENT AGREEMENT.
The Company shall have entered into an employment agreement, effective as
of the Closing, with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ on substantially the terms set forth in
Exhibit F hereto.
---------
20
10.2 VOTING AGREEMENT.
The shareholders of XOOM shall have entered into a Voting Agreement
substantially in the form of Exhibit G hereto requiring among other things, that
---------
XOOM's shareholders vote their common shares in such manner as to elect to
XOOM's Board of Directors one director designated by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ until
XOOM has completed either (i) a sale of all or substantially all of the assets
of XOOM, (ii) a merger of XOOM with or into another entity at the close of which
the shareholders of XOOM immediately prior to such merger own less than 50% of
the voting securities of the surviving entity, or (iii) an initial public
offering.
10.3 AGREEMENT REGARDING USE OF ▇▇▇▇▇▇▇.▇▇▇ DOMAIN NAME.
The Company shall have entered into an agreement in the form of Exhibit H
---------
hereto giving PSC the nonexclusive right to use the domain name ▇▇▇▇▇▇▇.▇▇▇ for
a period of 18 months following the Closing.
10.4 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company and XOOM in this
Agreement shall have been true and correct as of the Closing and each of the
Company and XOOM shall have performed all obligations in this Agreement required
to be performed or observed by them on or prior to the Closing.
ARTICLE XI.
FURTHER ASSURANCES
Each of the parties hereto agrees that it will, from time to time after the
date of the Agreement, execute and deliver such other certificates, documents
and instruments and take such other action as may be reasonably requested by the
other party to carry out the actions and transactions contemplated by this
Agreement, including the closing conditions described in Articles IX and X.
ARTICLE XII.
INDEMNIFICATION
12.1 INDEMNIFICATION BY THE SHAREHOLDERS
In the event any of the Shareholders (i) breaches or is deemed to have
breached any of their representations and warranties contained in Article IV
herein or (ii) fails to perform or comply with any of the covenants and
agreements set forth in this Agreement, provided that the Company or XOOM makes
a written claim for indemnification against any of the Shareholders pursuant to
Section 12.4 below, then such Shareholder agrees to indemnify the Company and
XOOM, and each of their directors, officers, shareholders, attorneys,
representatives and agents (except for such persons who are also Shareholders),
from and against any Losses incurred or paid by the Company or XOOM to the
extent such Losses arise or result from a breach by such Shareholder of any
representation and warranty contained in Article IV or a violation of any
covenant in this Agreement. "Losses" shall mean all damages, awards, judgments,
payments, diminutions in value, all interest thereon, costs and expenses of
investigating claims, lawsuits or arbitration and any appeal from any of the
foregoing and reasonable attorneys fees incurred in connection therewith.
21
12.2 INDEMNIFICATION BY THE COMPANY AND XOOM
In the event the Company or XOOM (i) breaches or is deemed to have breached
any of its representations and warranties contained in Article V herein or (ii)
fails to perform or comply with any of the covenants and agreements set forth in
this Agreement, provided that any of the Shareholders makes a written claim for
indemnification against the Company or XOOM pursuant to Section 12.4 below, then
the Company and XOOM agree to indemnify the Shareholders from and against any
Losses incurred or paid by the Shareholders to the extent such Losses arise or
result from a breach by the Company or XOOM of any representation and warranty
contained in Article V or a violation of any covenant in this Agreement.
"Losses" shall mean all damages, awards, judgments, payments, diminutions in
value, all interest thereon, costs and expenses of investigating claims,
lawsuits or arbitration and any appeal from any of the foregoing and reasonable
attorneys fees incurred in connection therewith.
12.3 NOTIFICATION OF CLAIMS
If any party or parties (the "Indemnified Party") reasonably believes that
it is entitled to indemnification hereunder, or otherwise receives notice of the
assertion or commencement of any third-party claim, action, or proceeding (a
"Third-Party Claim"), with respect to which such other party or parties (the
"Indemnifying Party") is obligated to provide indemnification pursuant to
Section 12.1 or 12.2 above, the Indemnified Party shall promptly give the
Indemnifying Party written notice of such claim for Indemnification (an
"Indemnity Claim"). Any claim for indemnification under this Section 12 must be
brought prior to the expiration of the survival period for the representation
and warranty as set forth in Article VI. The delivery of such notice of
Indemnity Claim ("Claim Notice") shall be a condition precedent to any liability
of the Indemnifying Party for indemnification hereunder. The Indemnifying Party
shall have twenty (20) days from the receipt of a Claim Notice (the "Notice
Period") to notify the Indemnified Party of whether or not the Indemnifying
Party disputes its liability to the Indemnified Party with respect to such
Indemnity Claim.
12.4 RESOLUTION OF CLAIMS
(a) With respect to any Indemnity Claim involving a Third-Party Claim,
following prompt notification of the Indemnifying Party, the Indemnified Party
shall proceed with the defense of such Third-Party Claim. During such defense
proceedings, the Indemnified Party shall keep the Indemnifying Party informed of
all material developments and events relating to the proceedings. The
Indemnifying Party shall have a right to be present at the negotiation, defense
and settlement of such Third-Party Claim. The Indemnified Party shall not agree
to any settlement of the Third-Party Claim without the consent of the
Indemnifying Party, which shall not be unreasonably withheld. Following entry of
judgment or settlement with respect to the Third-Party Claim, the liability of
the Indemnifying Party with respect to the Indemnity Claim shall be resolved as
provided in Section 12.5.
(b) with respect to any Indemnity Claim not involving a Third-Party
Claim, if the Indemnifying Party disputes its liability within the Notice
Period, the liability of the Indemnifying Party shall be resolved in accordance
with Section 12.5.
(c) In the event that an Indemnified Party makes an Indemnity Claim in
accordance with Section 12.3 and the Indemnifying Party does not dispute its
liability within the Notice Period, the amount of such Indemnity Claim shall be
conclusively deemed a liability of the Indemnifying Party.
22
12.5 ARBITRATION.
All disputes under this Section 12 shall be settled by arbitration in San
Francisco, California before a single arbitrator pursuant to the rules of the
American Arbitration Association. Arbitration may be commenced at any time by
any party hereto giving written notice to each other party to a dispute that
such dispute has been referred to arbitration under this Section 12.5. The
arbitrator shall be selected by the joint agreement of the Indemnifying Party
and Indemnified Party, but if they do not so agree within 20 days after the date
of the notice referred to above, the selection shall be made pursuant to the
rules from the panels of arbitrators maintained by such Association. Any award
rendered by the arbitrator shall be conclusive and binding upon the parties
hereto; provided, however, that any such award shall be accompanied by a written
-------- -------
opinion of the arbitrator giving the reasons for the award. This provision for
arbitration shall be specifically enforceable by the parties and the decision of
the arbitrator in accordance herewith shall be final and binding and there shall
be no right to appeal therefrom. Each party shall pay its own expenses of
arbitration and the expenses of the arbitrator shall be equally shared;
provided, however, that if in the opinion of the arbitrator any claim for
-------- -------
indemnification or any defense or objection thereto was unreasonable, the
arbitrator may assess, as part of his award, all or any part of the arbitration
expenses of the other party (including reasonable attorneys' fees) and of the
arbitrator against the party raising such unreasonable claim, defense or
objection. To the extent that arbitration may not be legally permitted
hereunder and the parties to any dispute hereunder may not at the time of such
dispute mutually agree to submit such dispute to arbitration, any party may
commence a civil action in a court of appropriate jurisdiction to solve disputes
hereunder. Nothing contained in this Section 12.5 shall prevent the parties
from settling any dispute by mutual agreement at any time.
12.6 INDEMNIFICATION THRESHOLD
Notwithstanding anything to the contrary herein, in no event shall any
Shareholder, the Company or XOOM be liable to the other party under any
warranty, representation, indemnity or covenant made by such party in this
Agreement until the aggregate amount of liability of all claims thereunder
against such party exceeds fifty thousand ($50,000) (the "Threshold"), at which
point such party shall be liable for the full amount of liability for such
claims.
12.7 LIMITATION OF LIABILITY; EXCLUSIVE REMEDY
(a) Notwithstanding anything to the contrary herein, in no event shall
any Shareholder's obligation to indemnify the Company and/or XOOM exceed the
lesser of (A) the amount equal to such Shareholder's pro rata allocation of
$1,977,500, or (B) the sum of the fair market value of the XOOM common shares
received by such Shareholder together with such Shareholder's pro rata share of
any unpaid cash consideration set forth in Section 2.4. Any disputes regarding
the fair market value of the XOOM common shares shall be resolved in accordance
with Section 12.5.
(b) Notwithstanding anything to the contrary herein, in no event shall
the obligation of XOOM or the Company to indemnify the Shareholders exceed
$1.977,500 together with such Shareholder's pro rata share of any unpaid cash
consideration set forth in Section 2.4.
(c) The parties hereto acknowledge and agree that the foregoing
indemnification provisions in this Section 12 shall be the exclusive remedy of
the Company, XOOM, MergerCo and the Shareholders with respect to MergerCo, its
subsidiaries, and the transactions contemplated by this Agreement.
23
ARTICLE XIII.
RESTRICTIONS ON XOOM COMMON SHARES
13.1 RIGHT OF FIRST REFUSAL/TRANSFER RESTRICTIONS.
(a) Restrictions on Transfer. A Shareholder may not sell or engage in any
------------------------
transaction which will result in a change in the beneficial or record ownership
of any XOOM common shares ("Shares") issued to or held by Shareholder, including
without limitation a voluntary or involuntary sale, assignment, transfer,
pledge, hypothecation, encumbrance, disposal, loan, gift, attachment or levy (a
"Transfer"), except as provided in this Agreement, and any such Transfer of XOOM
common shares or attempted Transfer of XOOM common shares in contravention of
this Agreement shall be void and ineffective for any purpose and shall not
confer on any transferee or purported transferee any rights whatsoever.
(b) Right of First Refusal.
----------------------
(i) If, prior to an initial public offering of XOOM's securities or a
merger or sale of XOOM, a Shareholder proposes to Transfer (or is required by
operation of law or other involuntary transfer) any or all of the XOOM common
shares standing in Shareholder's name or owned by him, Shareholder shall first
offer such Shares to XOOM in accordance with the following provisions:
(A) Shareholder shall deliver a written notice (a "Notice") to XOOM
stating (A) Shareholder's bona fide intention to Transfer such Shares, (B) the
name and address of the proposed transferee, (C) the number of Shares to be
transferred, and (D) the purchase price per Share and terms of payment for which
Shareholder proposes to Transfer such Shares.
(B) Within 60 days after receipt of the Notice, XOOM or its designee
shall have the first right to purchase or obtain such Shares, upon the price and
terms of payment designated in the Notice. If the Notice provides for the
payment of non-cash consideration, XOOM at its option may pay the consideration
in cash equal to XOOM's good faith estimate of the present fair market value of
the non-cash consideration offered.
(C) If XOOM or its designee elects not to purchase or obtain all of the
Shares designated in the selling Shareholder's Notice, then the Shareholder may
Transfer the Shares referred to in the Notice to the proposed transferee,
providing such Transfer (i) is completed within 30 days after the expiration of
XOOM's right to purchase or obtain such Shares, (ii) is made at the price and
terms designated in the Notice, and (iii) the proposed transferee agrees to be
bound by the terms and provisions of this Article XIII and to become a party to
an agreement containing such provisions immediately upon receipt of such Shares.
If such Shares are not so transferred, the selling Shareholder must give notice
in accordance with this paragraph prior to any other or subsequent Transfer of
such Shares.
(ii) Notwithstanding Section 13.1(a), Shareholder may Transfer Shares: (A) to
the Shareholder's spouse, child, grandchild, parent, brother, or sister
("Immediate Family"), or to a trust established for the benefit of a member or
members of the Shareholder's Immediate Family, (B) to an Affiliate (as
hereinafter defined) or equity holder of the Shareholder, (C) to a person who is
a constituent partner of the Shareholder on the date hereof, or (D) to the
estate of any of the foregoing by gift, will or intestate succession; provided
that the Shareholder or his representative notifies XOOM of such Transfer not
less than 10 nor more than 90 days prior to the Transfer and that the proposed
transferee agrees to be bound by the terms and provisions of this Agreement and
to become a party to this Agreement immediately upon the receipt of such
24
Shares. "Affiliate" means, with respect to any person or entity, any person or
entity which controls, is controlled by, or is under common control with, such
person or entity, or any stockholder or other equity owner in a control
relationship with any of the foregoing. For this purpose the term "control"
shall mean the direct or indirect beneficial ownership of at least fifty percent
(50%) of the voting stock or interest in the income of such person or entity, or
such other relationship as, in fact, constitutes actual control.
(c) No Transfer to Competitors. Shareholder may not Transfer any Shares
--------------------------
to a competitor of XOOM, or to any stockholder, partner or other beneficial
holder of an equity ownership interest in a competitor, other than pursuant to a
merger, combination, or other transaction approved by the Board of Directors of
XOOM.
(d) Legend on Stock Certificates. Each certificate representing shares
----------------------------
owned of record or beneficially by a party to this Agreement shall be endorsed
with the following legends:
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AN AGREEMENT
BETWEEN XOOM, INC. (THE "COMPANY") AND THE HOLDER, PROVIDING FOR, AMONG
OTHER MATTERS, THE COMPANY'S RIGHT OF FIRST REFUSAL TO PURCHASE THE
SECURITIES REPRESENTED BY THIS CERTIFICATE. A COPY OF SUCH AGREEMENT IS ON
FILE AT THE PRINCIPAL BUSINESS OFFICE OF THE COMPANY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144 OR ITS SUCCESSOR RULE UNDER THE ACT, OR
THE COMPANY RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
EXEMPTIONS FROM SUCH REGISTRATION AND FROM THE PROVISIONS OF ANY APPLICABLE
STATE "BLUE SKY" LAWS ARE AVAILABLE.
Under no circumstances shall any Transfer of any Shares subject hereto be
valid until the proposed transferee thereof shall have executed and become a
party to the agreement described in Section 13.1(b)(i)(C) and thereby shall have
become subject to all of the provisions of this Article XIII; and
notwithstanding any other provisions of this Agreement, no such Transfer of any
kind shall in any event result in the non-applicability of the provisions hereof
at any time to any of the Shares subject hereto. The Shareholder understands
and acknowledges that the Company need not register a transfer of Shares, and
may instruct its transfer agent not to register a transfer of Shares, unless the
conditions specified in the foregoing last legend are satisfied.
(e) Acknowledgments. Shareholder acknowledges that other stockholders of
---------------
the Company may have restrictions on their stockholdings different than the
terms contained herein.
13.2 LOCK-UP AGREEMENT.
Shareholder, if requested by an underwriter of XOOM common shares or other
securities of XOOM, shall not sell or otherwise transfer or dispose of any XOOM
common shares held by the Shareholder during the 180-day period following the
effective date of a registration statement of XOOM filed under the Act or such
shorter period of time as the underwriter shall require, provided that all
officers and directors of XOOM who hold common stock (or other securities) of
XOOM enter into similar agreements. If requested by the underwriter,
Shareholder will reaffirm the agreement set forth in this Section 13.2 in a
separate writing in a form satisfactory to such underwriter. XOOM may impose
stop-transfer instructions with respect to such XOOM common shares subject to
the foregoing restriction until the end of said period.
25
ARTICLE XIV.
MISCELLANEOUS
14.1 EXPENSES.
The Company, MergerCo, and each Shareholder shall bear his, her or its own
expenses incurred in connection with the negotiation and consummation of the
transactions contemplated by this Agreement.
14.2 ENTIRE AGREEMENT.
This Agreement and the agreements referred to in Articles IX and X contain
the entire agreement of the parties hereto, and supersede any prior written or
oral agreements between them concerning the subject matter contained herein, or
therein. There are no representations, agreements, arrangements or
understandings, oral or written, between the parties to this Agreement, relating
to the subject matter contained in this Agreement and the agreements referred to
in Articles IX and X, which are not fully expressed herein or therein. The
schedules and each exhibit attached to this Agreement or delivered pursuant to
this Agreement are incorporated herein by this reference and constitute a part
of this Agreement.
14.3 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.
Prior to the Closing Date, none of the Company, Shareholders nor MergerCo
shall issue any press release or make any public announcement concerning the
matters set forth in this Agreement (other than as required by applicable
disclosure rules or regulations) without the consent of the other party. The
Company, Shareholders and MergerCo will cooperate to jointly prepare and issue
any press release which may be issued to announce the closing of the transaction
contemplated by this Agreement.
14.4 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
instrument.
14.5 DESCRIPTIVE HEADINGS.
The Article and Section headings in this Agreement are for convenience only
and shall not affect the meanings or construction of any provision of this
Agreement.
14.6 NOTICES.
Any notices required or permitted to be given under this Agreement shall be
in writing and shall be deemed sufficiently given on the date delivered
personally, or five (5) days after posting by registered or certified mail,
postage prepaid, addressed as follows:
If to the Company or XOOM: XOOM, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
26
With a copy to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇, Esq.
And if to Shareholders, to the address of each Shareholder set forth on the
signature page of this Agreement:
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Raj Aji, Esq.
or to such other address or addresses as a party shall have previously
designated by notice to the sender given in accordance with this section.
14.7 CHOICE OF LAW
This Agreement shall be construed in accordance with and governed by the
laws of the State of California.
14.8 BINDING EFFECT; BENEFITS
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer on any person other than
the parties or their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
14.9 ASSIGNABILITY
Neither this Agreement nor any of the parties' rights hereunder shall be
assignable by either party without the prior written consent of the other party
and any attempted assignment without such consent shall be void.
14.10 WAIVER AND AMENDMENT
Any term or provision of this Agreement may be waived at any time by the
party which is entitled to the benefits thereof. The waiver by any party of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach. The parties may, by mutual agreement in
writing, amend this Agreement in any respect.
14.11 ATTORNEYS' FEES.
In the event of any action or proceeding to enforce the terms and
conditions of this Agreement, the prevailing party shall be entitled to an award
of reasonable attorneys' and experts' fees and costs, in addition to such other
relief as may be granted.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first above written.
27
THE COMPANY:
XOOM Chat, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
XOOM:
XOOM, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Chairman of the Board
MERGERCO:
Paralogic Corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
President
THE SHAREHOLDERS:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Address: ▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
28
Exhibit A
PARALOGIC CAPITALIZATION SCHEDULE
1. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇: 5,000 common shares
2. ▇▇▇▇▇▇ ▇▇▇▇▇▇: 250 common shares
29
EXHIBIT B
ASSET PURCHASE AGREEMENT
30
PARALOGIC SOFTWARE CORPORATION
PARALOGIC CORPORATION
COMMON STOCK PURCHASE AGREEMENT
Dated as of February 23, 1998
Paralogic Software Corporation
Paralogic Corporation
Common Stock Purchase Agreement
This Common Stock Purchase Agreement (the "Agreement") is made as of this
23rd day of February, 1998 (the "Effective Date") by and between Paralogic
Software Corporation, a California corporation, with offices at ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Company") and Paralogic Corporation, a
California corporation, with offices at ▇▇▇▇ ▇▇▇▇▇▇▇. ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇ ("Paralogic").
BACKGROUND
In connection with the spin-off of Company from Paralogic, Paralogic
desires to transfer certain computer software and other assets to Company in
exchange for stock pursuant to the terms and conditions of this Agreement. It is
the understanding and intent of the parties for this transfer and exchange to
qualify as a transfer under Section 351 of the Internal Revenue Code.
AGREEMENT
1. Sale of Common Stock
1.1 Sale of Common Stock. Company hereby issues and sells to Paralogic an
--------------------
aggregate of twenty million (20,000,000) shares of the Company's Common Stock.
Company shall deliver to Paralogic a certificate registered in Paralogic's name
representing such number of shares within five (5) days of the Effective Date.
1.2 Restrictions on Transfer. In addition to any other limitation on
------------------------
transfer created by applicable securities laws, Paralogic shall not sell,
transfer, pledge, hypothecate, assign, encumber or dispose of any interest in
the Shares except in compliance with the provisions of this Section 1.2. Company
need not register a transfer of any Shares and may also instruct its transfer
agent to not register the transfer of Shares if the requirements specified in
this Section 1.2 are not satisfied.
(a) Standoff Agreement. Paralogic agrees, and shall require any and
------------------
all transferees of any or all of its Shares to also agree, in connection with
the Company's initial public offering of its equity securities, to not sell,
make any short sale of, loan, grant any option for the purchase of or otherwise
dispose of any Shares (other than those included in the registration, if any)
without the prior written consent of the Company or its underwriters, as the
case may be, for such period of time (not to exceed one hundred eighty (180)
days) from the effective date of such registration as may be requested by the
Company or such underwriters.
(b) Investment Representations. Paralogic shall require any and all
--------------------------
transferees of any or all of its Shares to deliver to Company the completed
Investment Representation Statement attached hereto as Exhibit E.
----------
1.3 Stock Certificate Legends. All certificates representing any of the
-------------------------
Shares subject to the provisions of this Agreement may have endorsed thereon the
following legends:
1
(a) "The shares represented by this certificate are subject to certain
restrictions upon transfer as set forth in an agreement between the corporation
and the registered holder, a copy of which is on file at the principal office of
the corporation."
(b) "These securities have not been registered under the Securities
Act of 1933, as amended. they may not be sold, offered for sale, pledged or
hypothecated in the absence of any effective registration statement as to the
securities under said act or an opinion of counsel satisfactory to the
corporation that such registration is not required."
(c) Any legend deemed advisable in light of any applicable state
securities laws.
2. Sale of Assets
2.1 Transfer. In consideration of the sale of stock above, Paralogic
--------
hereby irrevocably sells, conveys, transfers, assigns, sets over and delivers to
Company all of Paralogic's right, title and interest in and to the assets and
properties of Paralogic set forth below (collectively the "Assets'), free and
clear of all liens, pledges, charges, claims, security interests or other
encumbrances of any sort:
(a) the computer software set forth in Exhibit A attached hereto
----------
("Software") and all technical, design, development, installation, operation and
maintenance information concerning the Software, including without limitation
source code, source documentation, source listings and annotations, engineering
notebooks, test data and test results ("Documentation'); and
(b) all trade secrets, information, technology and know-how in the
possession of or known by Paralogic relating to the design, programming, and
maintenance of Internet "chat" products ("Know-How"); and
(c) all current and future worldwide patents and other patent rights,
copyrights, trade secrets, and other intellectual property rights, whether
registered or unregistered, including without limitation all applications,
substitutions, divisions, continuations, continuation-in-parts, renewals,
extensions and registrations with respect thereto ("Intellectual Property
Rights") in and to the Software, Documentation and Know-How; and
(d) all causes of action against any parties relating to any right,
including any Intellectual Property Right, with respect to or relating to the
Software, Documentation or Know-How, whether arising before or after the
Effective Date, including the right to bring suit for past infringement or
misappropriation of any Intellectual Property Right;
(e) the tradenames trade marks and service marks set forth in Exhibit
-------
B attached hereto, including all goodwill associated therewith, and all
--
intellectual property rights therein or related thereto, whether registered or
unregistered, including all trade ▇▇▇▇ rights and common law rights; and
-------
(f) certain accounts receivable as set forth in Exhibit F attached
----------
hereto.
2.2 Delivery of Assets; ▇▇▇▇ of Sale. On the Effective Date, or such
--------------------------------
other date as Paralogic and Company may agree, Paralogic shall deliver to
Company (i) all of the Assets which are in tangible form, including without
limitation Source Code copies of all Software, (ii) a duly executed ▇▇▇▇ of sale
for the Assets, in the form attached hereto as Exhibit C, and (iii) a duly
---------
executed assignment of accounts receivables, in the form attached hereto as
Exhibit F, all at the address for Company set forth above. As
---------
2
used herein, "Source Code" shall mean software in human-readable form, including
programmers' comments, data files and structures, header and include files,
macros, object libraries, programming tools not commercially available,
technical specifications, flowcharts and logic diagrams, schematics, annotations
and documentation reasonably required or necessary to enable an independent
third party programmer with reasonable programming skills to create, operate,
maintain, modify and improve the software without the help of any other person.
Data files containing Source Code must be in standard ASCII format and be
readable by a text editor.
2.3 No Assumption of Liabilities. Except as otherwise expressly set forth
----------------------------
herein, this Agreement does not transfer and Company does not assume and
expressly disclaims any and all costs, debts, claims, liabilities and
obligations of or relating to the ownership of the Assets or the operations of
Paralogic, whether prior to or after the Effective Date, and whether accrued,
absolute, contingent, matured, unmatured or otherwise. Without limiting the
foregoing, it is expressly agreed that Company shall not assume any liabilities
for employment, income, sales, property or other taxes incurred or accrued by
Paralogic, and it is further expressly agreed that Company shall not assume any
liabilities for third party claims of infringement of Intellectual Property
Rights with respect to any use or other exploitation of the Assets by Paralogic
or Paralogic's customers. Paralogic shall indemnify, defend and hold the Company
harmless from and against the entirety of any and all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues, penalties,
fines, costs, reasonable amounts paid in settlement, liabilities, obligations,
taxes, liens, losses, expenses, and fees, including court costs and reasonable
attorneys' fees and expenses incurred or suffered by Company or any of its
affiliates related to or arising out of any liabilities or obligations of
Paralogic.
2.4 Further Assurances. Paralogic hereby agrees that it will, at any time
------------------
and from time to time after the date hereof, upon the request of Company, its
successors or assigns, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, all such further acts, assignments,
conveyances and other assurances, documents and instruments of transfer as
Company or its successors or assigns may request for the assignment,
transferring, granting, conveying and confirming to Company or its successors or
assigns of the Assets, or for reducing to the possession of Company or its
successors or assigns all right, title and interest of Paralogic in or to any
and all of the Assets, including without limitation providing to Company such
support and cooperation as may be necessary to complete the transfer of the
Assets.
3. Assignment of Licenses
In consideration of the sale of stock above, Paralogic hereby assigns and
delegates to Company all of Paralogic's rights and obligations in and to all
agreements relating to the Software, Documentation or Know-How attached hereto
as Exhibit D to the extent permitted in such agreements, and Company thereby
----------
assumes and agrees to perform all obligations of Paralogic under such
agreements.
4. Confidentiality
Each of the parties hereto and their respective representatives will hold
in confidence any data and information obtained with respect to any other party,
or the business of any other party, from any representative, officer, director
or employee of such party, or from any books or records of such party in
connection with this Agreement or the transactions contemplated by this
Agreement, and shall not use such data and information or disclose the same to
others, except if such data or information is published
3
or is a matter of public knowledge or is required by any applicable law or
regulation to be disclosed. Following the Effective Date, to the maximum extent
permitted by applicable law, the confidential information relating to the Assets
shall at all times be and remain the sole and exclusive property of Company, and
Paralogic agrees to observe confidentiality with regard to same and to insure
that its employees and shareholders do the same. It is understood and agreed
that any party's remedies at law for a breach by another party of its
obligations under this Article 8 will be inadequate and that the non-breaching
party shall, in the event of any such breach, be entitled to equitable relief
(including without limitation, injunctive relief and specific performance) in
addition to all other remedies provided under this Agreement or available to the
non-breaching party at law. The obligations and rights of the parties under this
Section shall survive any expiration or termination of this Agreement for any
reason whatsoever. If this Agreement is terminated for any reason, all written
data and information obtained by any of the parties hereto from any other party
in this matter shall be returned to the relevant party and each party agrees to
use all reasonable efforts to keep confidential any information obtained by it
in this matter unless and until such information is ascertainable from public or
published information or trade sources or is otherwise a matter of public
knowledge.
5. Miscellaneous
5.1 Governing Law; Venue. This Agreement shall be governed by and
--------------------
construed in accordance with the substantive laws of the State of California
applicable to contracts between California residents entered into and to be
performed entirely within the State of California. Any action or proceeding
brought by either party against the other arising out of or related to this
Agreement shall be brought only in a state or federal court of competent
jurisdiction located in Los Angeles, California, and the parties hereby consent
to the in personam jurisdiction of said courts.
5.2 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party upon any breach or default of any other
party under this Agreement shall impair any such right, power or remedy of that
party nor shall it be construed to be a waiver of any such breach or default, or
an acquiescence therein, or of or in any similar breach or default thereunder
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of a
party of any breach or default under this Agreement, or any waiver on the part
of any holder of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise,
afforded to the parties hereunder shall be cumulative and not alternative.
5.3 Notices, Etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be effective upon hand
delivery by messenger or upon receipt by facsimile with a confirming copy sent
by first-class mail, postage prepaid, or five (5) days after deposit in the U.S.
postal system by certified or registered mail, return receipt requested, postage
prepaid:
If to Company:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
4
Raj Aji
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Paralogic:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or at such other address as the relevant party shall furnish to the other
parties in writing.
5.4 Severability. In case any provision of this Agreement shall be
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
5.5 Assignment. Paralogic shall not assign this Agreement without the
----------
prior written consent of Company. Such consent may be withheld in Company's sole
discretion.
5.6 Successors and Assigns. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
affiliates, subsidiaries, successors and assigns of the parties hereto.
5.7 Term of Agreement. This Agreement shall be perpetual and of unlimited
-----------------
term.
5.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable and all of which together shall
constitute one instrument.
5.9 Entire Agreement Amendment. This Agreement, along with all Exhibits,
--------------------------
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof and supersedes and revokes all other previous discussions,
understandings and agreements, whether oral or written, between the parties with
regard to the subject matter hereto. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), with the
written consent of Paralogic and Company.
In Witness Whereof, the parties below have executed this Agreement as of
the date first above written
Paralogic Software Corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Title:
Paralogic Corporation
5
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Title: President
[Signature Page to Common Stock Purchase Agreement]
6
Exhibit A
Software ASSETS
Parachat
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Web-based 100% Java chat server and client software including incomplete
features such as Message Boards and ParAde (advertisement delivery system for
ParaChat).
MuxSock
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Optimization module for ParaChat utilizing socket multiplexing to improve
scalability and performance.
EXHIBIT C
RELEASE AGREEMENT
(This exhibit has not been filed as it has been deemed immaterial to an
investment decision pursuant to the provisions of Item 601(b)(2) of Regulation
S-K. The Registrant agrees to furnish a copy of this exhibit to the Commission
upon request.)
EXHIBIT D
LICENSE AGREEMENT
("PARALOGIC")
(This exhibit has not been filed as it has been deemed immaterial to an
investment decision pursuant to the provisions of Item 601(b)(2) of Regulation
S-K. The Registrant agrees to furnish a copy of this exhibit to the Commission
upon request.)
EXHIBIT E
AMENDMENT OF SOFTWARE LICENSE AGREEMENT
(This exhibit has not been filed as it has been deemed immaterial to an
investment decision pursuant to the provisions of Item 601(b)(2) of Regulation
S-K. The Registrant agrees to furnish a copy of this exhibit to the Commission
upon request.)
EXHIBIT F
EMPLOYMENT AGREEMENT
(SEE EXHIBIT 10.7 TO REGISTRANT'S S-1)
EXHIBIT G
VOTING AGREEMENT
(This exhibit has not been filed as it has been deemed immaterial to an
investment decision pursuant to the provisions of Item 601(b)(2) of Regulation
S-K. The Registrant agrees to furnish a copy of this exhibit to the Commission
upon request.)
EXHIBIT H
DOMAIN NAME LICENSE AGREEMENT
(This exhibit has not been filed as it has been deemed immaterial to an
investment decision pursuant to the provisions of Item 601(b)(2) of Regulation
S-K. The Registrant agrees to furnish a copy of this exhibit to the Commission
upon request.)
MERGERCO DISCLOSURE SCHEDULE
(This exhibit has not been filed as it has been deemed immaterial to an
investment decision pursuant to the provisions of Item 601(b)(2) of Regulation
S-K. The Registrant agrees to furnish a copy of this exhibit to the Commission
upon request.)
XOOM DISCLOSURE SCHEDULE
(This exhibit has not been filed as it has been deemed immaterial to an
investment decision pursuant to the provisions of Item 601(b)(2) of Regulation
S-K. The Registrant agrees to furnish a copy of this exhibit to the Commission
upon request.)