EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered into as of
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this 2nd day of August, 2000, by and among LifeMinders, Inc., a Delaware
corporation ("LifeMinders"), SRNI Acquisition Corp., a Delaware corporation and
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wholly-owned subsidiary of LifeMinders ("Acquisition Corp."), Smartray Network,
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Inc., a Delaware corporation (the "Company"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), ▇▇▇▇
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Tyler ("Tyler"), ▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇", each of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇▇ are
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referred to herein as a "Founder" and together, the "Founders") and each of the
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other stockholders of the Company who is a signatory to this Agreement on the
date hereof, or who subsequently becomes a signatory by executing the signature
page attached as Addendum A, other than the Founders (collectively, the "Other
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Stockholders" and together with the Founders, the "Stockholders"). LifeMinders,
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Acquisition Corp., the Company and the Stockholders as they become signatories
to this Agreement are referred to collectively herein as the "Parties" and
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individually as a "Party."
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WHEREAS, the Parties hereto desire to consummate a merger (the "Merger")
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whereby Acquisition Corp. will be merged with and into the Company and the
Company will be the surviving corporation in the Merger, upon the terms and
subject to the conditions of this Agreement and in accordance with the Delaware
General Corporation Law, as amended (the "DGCL"); and
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WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
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NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
ARTICLE I
MERGER; MERGER CONSIDERATION; EFFECTIVE TIME
1.1 Merger.
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(a) Subject to the terms and conditions of this Agreement, including
without limitation the provisions of Section 6.6(f), and the DGCL, at the
Effective Time, Acquisition Corp. and the Company shall consummate the Merger in
which (i) Acquisition Corp. shall be merged with and into the Company and the
separate corporate existence of Acquisition Corp. shall thereupon cease, (ii)
the Company shall be the successor or surviving corporation in the Merger and
shall continue to be governed by the laws of the State of Delaware, and (iii)
the separate corporate existence of the Company with all of its corporate
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger. The corporation surviving the Merger is sometimes hereinafter
referred to as the "Surviving Corporation." The Merger shall have the effects
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set forth in the DGCL.
(b) On the Closing Date, subject to the terms and conditions of this
Agreement, Acquisition Corp. and the Company shall (i) cause to be executed a
Certificate of Merger in the form required by the DGCL (the "Certificate of
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Merger"), and (ii) cause the Certificate of Merger to be filed with the
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Secretary of State of the State of Delaware as provided in the DGCL. The Merger
shall become effective at (i) such time as the Certificate of Merger has been
duly filed with the Secretary of the State of Delaware or (ii) such other time
as is agreed upon by the Stockholders' Representative and LifeMinders and
specified in the Certificate of Merger. Such time is hereinafter referred to as
the "Effective Time."
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1.2 Merger Consideration; Conversion or Cancellation of Company Common
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Shares.
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(a) Subject to adjustment pursuant to 1.6, the total consideration
payable in the Merger (the "Merger Consideration") to the holders of shares of
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the Company's capital stock (including, but not limited to, common stock, par
value $0.001 per share ("Company Common Stock"), Series A Convertible Preferred
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Stock, par value $0.001 per share ("Company Series A Stock"), Series B
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Convertible Preferred Stock, par value $0.001 per share ("Company Series B
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Stock"), warrants and any other right of any kind to purchase shares of the
Company's capital stock (excluding the Company Stock Options (as defined in
Section 1.3(a)); collectively, the "Company Capital Stock"), shall consist of:
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(i) cash in the amount of One Million Dollars ($1,000,000)
(the "Merger Cash");
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(ii) that number of shares (the "Merger Stock") of LifeMinders'
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common stock, par value $0.01 per share ("LifeMinders Common Stock"), that is
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equal to the quotient of (A) Thirty Five Million Dollars ($35,000,000) divided
by (B) $27.95 (the "Merger Price"); and
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(iii) any Additional Pledge Shares (as defined below) issuable
pursuant to Section 1.2(b) below.
(b) The Merger Consideration has been calculated based on the
assumption that the difference between the current assets and current
liabilities ("Net Working Capital") of the Company as of the Closing Date, is
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negative $2,120,000 less any (i) accruals, not to exceed $50,000, for a post-
Closing audit and (ii) costs associated with terminating contracts at the
request of LifeMinders (the "Target Net Working Capital"). If the Net Working
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Capital on the Closing Date is greater than or less than the Target Net Working
Capital, with such difference exceeding $50,000, then the Merger Stock shall be
subject to adjustment as set forth in this Section 1.2(b). The Company shall,
on the Closing Date, deliver a balance sheet as of the Closing Date (the
"Closing Balance Sheet"). Set forth on Schedule 1.2(b) is a projected Closing
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Balance Sheet (the "Projected Closing Balance Sheet"). The Closing Balance
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Sheet shall be mutually prepared by the Company and LifeMinders in accordance
with GAAP, consistent with the Projected Closing Balance Sheet and the Company's
past accounting practices (except as otherwise requested by LifeMinders). If
the Net Working Capital reflected on the Closing Balance Sheet ("Closing Net
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Working Capital") is less than the Target Net Working Capital by more than
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$50,000 (e.g., negative $2,171,000), then the number of shares comprising the
Merger Stock shall be reduced by the quotient of (x) the Target Net Working
Capital minus the Closing Net
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Working Capital divided by (y) the Merger Price. If the Company's Closing Net
Working Capital is greater than the Target Net Working Capital by more than
$50,000 (e.g., negative $2,069,000), then the number of shares comprising the
Merger Stock shall be increased by the quotient of (x) the Company's Closing Net
Working Capital minus the Target Net Working Capital divided by (y) the Merger
Price. The Closing Balance Sheet shall be subject to review within forty-five
(45) days after the Closing Date by an accounting firm of national repute,
selected by LifeMinders and the Stockholders' Representative (as defined in
Section 6.11), if either Party so requests. To the extent that such post-Closing
review indicates that the Closing Net Working Capital reflected on the Closing
Balance Sheet was understated by more than $50,000, then LifeMinders shall add
to the Pledged Assets a number of shares of LifeMinders Common Stock equal to
the quotient of (x) the entire amount of such understatement divided by (y) the
Merger Price ("Additional Pledge Shares"). To the extent that such post-Closing
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review indicates that the Closing Net Working Capital reflected on the Closing
Balance Sheet was overstated by more than $50,000, then LifeMinders shall be
entitled to receive from the Pledged Assets a number of shares of LifeMinders
Common Stock equal to the quotient of (a) the entire amount of such
overstatement divided by (b) the Merger Price.
(c) At the Effective Time, by virtue of the Merger and without any
action by the Parties, or the holders of any of the following securities, (i)
each share of Company Common Stock, Company Series A Stock and Company Series B
Stock issued and outstanding immediately prior to the Effective Time (other than
any shares of Company Common Stock to be canceled pursuant to Section 1.2(d)
hereof and other than Dissenting Shares under Section 1.6 below) shall be
canceled and shall be converted automatically into the right to receive
immediately the Pro Rata Share of the Merger Cash and the Pro Rata Share of the
Merger Stock and, if applicable, the Additional Pledge Shares, as adjusted
pursuant to Section 1.2(b) and (ii) each outstanding share of common stock, par
value $.001 per share, of Acquisition Corp. shall be converted into one share of
common stock of the Surviving Corporation of the Merger, as such shares of
common stock are constituted immediately following the Effective Time. For
purposes hereof, "Pro Rata Share" means the percentage determined by dividing
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the number one by the total number of issued and outstanding shares of Company
Common Stock, Company Series A Stock and Company Series B Stock.
(d) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by any direct or indirect
wholly-owned subsidiary of the Company immediately prior to the Effective Time
shall be cancelled without any conversion thereof and no payment or distribution
shall be made with respect thereto.
(e) The exchange ratio pursuant to which any shares of Company
Capital Stock are to be exchanged for LifeMinders Common Stock shall be adjusted
to reflect fully the effect of any stock split, reverse split, stock dividend
(including any dividend or distribution of securities convertible into
LifeMinders Common Stock or Company Common Stock), reorganization,
recapitalization or other like change with respect to LifeMinders Common Stock
or Company Common Stock occurring prior to the Effective Time.
(f) No certificates representing fractional shares of LifeMinders
Common Stock shall be issued upon surrender of any shares of Company Capital
Stock. In lieu of any fractional shares of LifeMinders Common
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Stock, the number of shares of LifeMinders Common Stock that any holder of
Company Capital Stock is entitled to receive shall be rounded up or down to the
nearest whole number (after aggregating all such fractional shares for a
particular holder).
(g) No transfers of shares of Company Common Stock shall be made on
the stock transfer books of the Company after the date of this Agreement, and
each Stockholder agrees not to transfer any shares of Company Common Stock after
the date of this Agreement and before the Closing Date.
1.3 Options.
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(a) All outstanding options granted under the Company's Stock Option
and Restricted Stock Purchase Plan (the "Company Option Plan") or otherwise as
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of the Effective Time and set forth on Schedule 1.3(a) (each a "Company Stock
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Option") shall be assumed by LifeMinders in the manner provided for in this
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Section 1.3. At the Effective Time, any options to acquire shares of Company
Capital Stock not set forth on Schedule 1.3(a) shall be cancelled without any
conversion thereof and no payment or distribution shall be made with respect
thereto.
(b) Each Company Stock Option, whether or not vested or presently
exercisable, shall be assumed by LifeMinders and shall constitute an option to
acquire a number of shares of LifeMinders Common Stock (rounded down to the
nearest whole share) equal to the quotient of (x) the number of shares of
Company Common Stock subject to such Option divided by (y) 10.18 (as adjusted to
reflect any adjustment to the Merger Consideration pursuant to Section 1.2(b)),
at an exercise price per share equal to the product of (x) the exercise price
per share of Company Common Stock subject to such option in effect immediately
prior to the Effective Time times (y) 10.18 (as adjusted to reflect any
adjustment to the Merger Consideration pursuant to Section 1.2(b)), provided,
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that, if this calculation results in an aggregate exercise price that requires
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the payment of a fraction of a cent at the time of exercise of options for one
or more shares (with the exercise price considered in the aggregate for all
options being exercised, then the aggregate exercise price for all such shares
shall be further adjusted upwards to the nearest whole cent). Any Company Stock
Options outstanding on the date hereof and assumed by LifeMinders hereunder that
are not exercisable on or before the Effective Time shall be subject to a
vesting schedule that provides for (x) one third (1/3) of such shares to be
exercisable on the date that is six (6) months after the holder thereof has
accepted employment with LifeMinders and relocated to the Herndon, Virginia area
(the "Relocation Date"), or such earlier date as LifeMinders may, in its sole
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discretion, determine is appropriate, and (y) the remaining two thirds (2/3) of
such shares shall be exercisable on the first anniversary of the Relocation
Date, or such earlier date as LifeMinders may, in its sole discretion, determine
is appropriate; unless such vesting schedule is less favorable to the holder
than the vesting schedule in effect prior to the Effective Time, in which case
the vesting schedule in effect prior to the Effective Time shall apply.
Notwithstanding the foregoing, in the case of any Company Stock Option to which
Section 421 of the Code applies by reason of its qualification under Section 422
or Section 423 of the Code ("Qualified Stock Options"), the exercise price, the
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number of shares purchasable pursuant to such Qualified Stock Option and the
terms and conditions of exercise of such Qualified Stock Option shall be
determined in order to comply with Section 424 of the Code.
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1.4 Pledged Assets.
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(a) As partial collateral security for the payment of any
indemnification obligations pursuant to Article IX, the Stockholders shall, and
by execution hereof do hereby transfer, pledge and assign to LifeMinders, for
the benefit of LifeMinders, a security interest in the following assets (the
"Pledged Assets"):
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(i) five percent (5%) of the Merger Stock comprising each such
Stockholder's Pro Rata Share of the Merger Stock, plus each such Stockholder's
Pro Rata Share of the Additional Pledge Shares, and the certificates and
instruments, if any, representing or evidencing all of the foregoing;
(ii) all securities hereafter delivered to such person with
respect to or in substitution for such person's Pledged Assets set forth in
foregoing clause (i), all certificates and instruments representing or
evidencing such securities and other property at any time received, receivable
or otherwise distributed in exchange for any or all thereof; and
(iii) all non-cash proceeds of all of the foregoing property
and, subject to paragraph (c) below, all rights, titles, interests, privileges
and preferences appertaining or incident to the foregoing property.
(b) Each certificate, if any, evidencing Pledged Assets shall be
delivered to LifeMinders directly by the transfer agent, such certificate
bearing no restrictive or cautionary legend other than those imprinted by the
transfer agent at LifeMinders' request. Each Stockholder shall, at the Closing,
deliver to LifeMinders, for each such certificate, a stock power duly signed in
blank by him or it.
(c) Unless and until the Pledged Assets are applied to satisfy any
indemnification obligation pursuant to Article IX, and in accordance with the
procedures set forth therein, the Pledged Assets shall be property of the
Stockholders and each of them shall be entitled to retain any cash proceeds
from, and exercise any voting powers incident to, their respective Pledged
Assets.
(d) The Pledged Assets shall be available to satisfy (x) any post-
Closing adjustment to the Merger Consideration pursuant to Section 1.2(b) and
(y) any indemnification obligations pursuant to Article IX for a period of one
(1) year following the Effective Time (the "Release Date"). Promptly following
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the Release Date, LifeMinders shall return or cause to be returned to the
Stockholders the Pledged Assets, less Pledged Assets having an aggregate value
equal to the amount of (i) any post-Closing adjustment to the Merger
Consideration pursuant to Section 1.2(b), (ii) any pending claim for
indemnification made by any Indemnified Party (as defined in Article IX), and
(iii) any amounts finally determined to be owed in respect of indemnification
obligations pursuant to Article IX. For purposes of the preceding sentence and
Article IX, each share of LifeMinders Common Stock held as Pledged Assets shall
be valued at the Merger Price.
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1.5 Surviving Corporation.
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(a) From and after the Effective Time, the Certificate of
Incorporation of the Surviving Corporation shall be amended in its entirety to
read as the certificate of incorporation of Acquisition Corp.; provided, that,
the name of the Surviving Corporation shall be SmartRay Network, Inc., until
thereafter amended as provided therein and under the DGCL.
(b) From and after the Effective Time, the Bylaws of Acquisition
Corp., as in effect immediately prior to the Effective Time, shall be the Bylaws
of the Surviving Corporation.
(c) The directors and officers of the Surviving Corporation from and
after the Effective Time shall be as set forth on Schedule 1.5(c), until their
successors have been duly elected, appointed or qualified or until their earlier
death, resignation or removal in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
Section 1.6 Dissenting Shares.
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(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock held by a holder who has exercised such
holder's appraisal rights in accordance with Section 262 of the DGCL and who, as
of the Effective Time, has not effectively withdrawn or lost such appraisal
rights ("Dissenting Shares"), shall not be converted into or represent a right
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to receive LifeMinders Common Stock pursuant to Section 1.2(c), but the holder
of the Dissenting Shares shall only be entitled to such rights as are granted by
Section 262 of the DGCL.
(b) Notwithstanding the provisions of Section 1.6(a), if any holder
of shares of Company Capital Stock who demands his appraisal rights with respect
to such shares shall effectively withdraw or lose (through failure to perfect or
otherwise) his rights to receive payment for the fair market value of such
shares under the DGCL, then, as of the later of the Effective Time or the
occurrence of such event, such holder's shares shall automatically be converted
into and represent only the right to receive the Merger Consideration as
provided in Section 1.2, without interest, upon surrender of the certificate or
certificates representing such shares; provided that if such holder effectively
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withdraws or loses his right to receive payment for the fair market value of
such shares after the Effective Time, then, at such time LifeMinders shall be
entitled to receive such holder's pro rata portion of the Pledged Assets.
ARTICLE II
CLOSING
2.1 Time and Place of the Closing. The closing of the transactions
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contemplated by this Agreement (the "Closing") shall take place at the offices
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of ▇▇▇▇ ▇▇▇▇▇▇▇ in Tysons Corner, Virginia, as soon as practicable following the
satisfaction or waiver or the conditions set forth in Articles VII and VIII
hereof and in any event within three (3) business days thereafter, or such other
date as LifeMinders and the Company may mutually determine (the "Closing Date").
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
The Company and each of the Stockholders, jointly and severally (to the
extent set forth in Article IX), represent and warrant to LifeMinders, as of the
date hereof and as of the Closing Date, as follows, except as set forth in the
Company Disclosure Schedule. The Company Disclosure Schedule shall be arranged
in paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article III, and the disclosure on any Schedule shall be deemed to cross-
reference to the other numbered or lettered paragraphs to which the
representation and warranty with respect to which the disclosure is made is
reasonably related on the face of such disclosure without reference to extrinsic
documentation to any objective third party reviewing such disclosure. Moreover,
no disclosure made on the Company Disclosure Schedule, by the fact of its
disclosure, shall be deemed to acknowledge that disclosure of such information
is required under this Article III. For purposes of this Agreement, the phrase
"to the Company's knowledge" or words of similar import shall mean (a) the
actual knowledge of the officers and directors of the Company and (b) the
knowledge that any Person identified in clause (a) would have obtained in the
reasonably prudent exercise of his or her duties as an officer or director of
the Company.
3.1 Organization and Corporate Power. The Company is a corporation, duly
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organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business and in good standing in each
jurisdiction where the character or location of its assets or its properties
owned, leased or operated by it, or the nature of its activities makes
qualification necessary. All such jurisdictions in which the Company is
qualified are set forth on Schedule 3.1. The Company has full corporate power
and authority and all material licenses, permits and authorizations necessary to
own and operate its properties and to carry on its business as now conducted and
as presently proposed to be conducted. The copies of the Company's Certificate
of Incorporation and Bylaws, which have been furnished to LifeMinders, reflect
all amendments made thereto at any time prior to the date of this Agreement and
are correct and complete. The minute books containing the records of meetings of
the stockholders and Board of Directors which have been furnished to LifeMinders
are correct and complete in all material respects. The stock certificate books
and the stock record books of the Company which have been furnished to
LifeMinders are correct and complete. The Company is not in default under, or in
violation of, any material provision of its Certificate of Incorporation or
Bylaws.
3.2 Authority for Agreement. The Board of Directors and stockholders of
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the Company holding at least sixty percent (60%) of the Company Capital Stock
have approved this Agreement and the transactions contemplated hereby, and have
authorized the execution and delivery and performance hereof. The Company has
full corporate power, authority and legal right to enter into this Agreement and
the other documents contemplated hereby to which the Company is a party and to
consummate the transactions contemplated hereby. No other corporate proceedings
on the part of the Company are necessary to approve and authorize the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, other than stockholder approval and the filing of the
Certificate of Merger as required by the DGCL. This Agreement is a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the
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enforcement of creditors' rights in general. Stockholders owning or controlling
shares of the Company Capital Stock representing sufficient voting power to
approve the Merger and the consummation of the transactions contemplated hereby
in accordance with the DGCL have executed this Agreement.
3.3 No Violation to Result. Except as set forth on Schedule 3.3, the
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execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby and the fulfillment of the terms hereof:
(i) are not in violation or breach of, do not conflict with or constitute a
default under, and shall not accelerate or permit the acceleration of the
performance required by, any of the terms of the Certificate of Incorporation or
Bylaws of the Company or any note, debt instrument, security agreement or
mortgage, or any other contract or agreement, written or oral, to which either
the Company is a party or by which the Company is bound; (ii) shall not be an
event which, after notice or lapse of time or both, will result in any such
violation, breach, conflict, default, or acceleration; (iii) shall not result in
a violation under any law, judgment, decree, order, rule, regulation, permit or
other legal requirement of any Governmental Authority applicable to the Company;
and (iv) shall not result in the creation or imposition of any Lien, possibility
of Lien, or restriction in favor of any third Person upon the Company Capital
Stock or any of the properties or assets of the Company. Other than as set forth
on Schedule 3.3, no notice to, filing with, or consent of, any Person is
necessary for the consummation by the Company of the transactions contemplated
by this Agreement.
3.4 Capitalization. Schedule 3.4 sets forth, as of the date hereof: (i)
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the number of authorized shares of each class of Company Capital Stock; (ii) the
number of issued and outstanding shares of each class of Company Capital Stock;
(iii) the number of shares of each class which are reserved for issuance upon
exercise of options or warrants or upon conversion of convertible securities;
(iv) the names of all holders of issued and outstanding shares of each class of
Company Capital Stock, together with the number of such shares owned and/or
controlled by each such holder and the percentage of the issued and outstanding
shares of each class of Company Capital Stock which such holder owns or
controls; and (v) the number of shares of each class, if any, which are held in
treasury. All of the issued and outstanding shares of Company Capital Stock:
(a) have been duly authorized and validly issued, and are fully paid and non-
assessable; (b) were issued or transferred in compliance with all applicable
state and federal laws; and (c) were issued in compliance with any preemptive
rights or rights of first refusal. All shares of Company Capital Stock to be
issued prior to Closing pursuant to options, warrants or convertible securities,
will be, when issued: (x) duly authorized, validly issued, fully paid and non-
assessable; (y) issued in compliance with all applicable state and federal laws;
and (z) issued in compliance with any preemptive rights or rights of first
refusal imposed by or through the Company. No preemptive rights or rights of
first refusal imposed by or through the Company exist with respect to the shares
of Company Capital Stock, and no such rights arise by virtue of or in connection
with the transactions contemplated hereby; and, to the extent permitted by law,
the Stockholders have waived (or hereby waive) any and all such preemptive
rights and rights of first refusal. Except as set forth on Schedule 3.4, there
are no outstanding or authorized rights, options, warrants, convertible
securities, subscription rights, conversion rights, exchange rights or other
agreements or commitments of any kind that could require the Company or the
Stockholders to issue or sell any shares of Company Common Stock (or securities
convertible into or exchangeable for shares of Company Common Stock) and no such
rights or commitments of any kind arise by virtue of or in connection with the
transactions contemplated hereby. There is no
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outstanding stock appreciation, phantom stock, profit participation or other
similar rights with respect to the Company. There are no proxies, voting rights,
stockholders agreements or other agreements or understandings with respect to
the voting or transfer of Company Capital Stock to which the Company is a party
or, to the Company's knowledge, to which any stockholder of the Company is a
party. The Company is not obligated to redeem or otherwise acquire any of the
outstanding shares of Company Capital Stock.
3.5 Financial Statements. Schedule 3.5 includes true, complete and correct
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copies of the unaudited compiled interim balance sheet of the Company (the
"Current Balance Sheet") as of June 30, 2000 (the "Balance Sheet Date") and
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unaudited statements of income, cash flow and retained earnings of the Company
for the six-month period then ended (together with the Current Balance Sheet,
the "Financial Statements"). Each of the Financial Statements (including in all
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cases the notes thereto, if any) is accurate and complete, is consistent with
the Company's books and records (which, in turn, are accurate and complete),
presents fairly in all material respects the Company's financial condition and
results of operations as of the times and for the periods referred to therein,
and has been prepared in accordance with GAAP, except for the absence of notes.
The Current Balance Sheet presents fairly the financial condition of the Company
as of the dates indicated thereon, and each of the statements of income, cash
flows and retained earnings included in the Financial Statements presents fairly
the results of its operations for the periods indicated thereon. During the
periods covered by the Financial Statements and since the Balance Sheet Date,
there has been no material change in the Company's accounting policies. There
are no material, special or non-recurring items of income or expense during the
periods covered by the Financial Statements and the balance sheets included in
the Financial Statements do not reflect any write-up or revaluation increasing
the book value of any assets, except as specifically disclosed in the notes
thereto. There have been no transactions involving the business of the Company
which properly, in accordance with GAAP, should have been set forth in the
Financial Statements and which have not been accurately so set forth.
3.6 Liabilities. Except as disclosed on Schedule 3.6, there are no
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Liabilities of the Company, other than: (i) those Liabilities reflected on the
Current Balance Sheet and not previously paid or discharged; and (ii) those
Liabilities incurred after the Balance Sheet Date arising in the ordinary course
of business and consistent with past practice (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law) and none
of which is more than $50,000 in amount. The Company is not a guarantor or
otherwise liable for any Liabilities of any other Person other than endorsements
for collection in the ordinary course of business.
3.7 Adverse Changes. Except as set forth on Schedule 3.7, since the
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Balance Sheet Date, the Company has not:
(a) suffered a Material Adverse Effect or suffered any theft, damage,
destruction, or casualty loss in excess of $50,000, individually or in the
aggregate, to its assets (whether or not covered by insurance) or suffered any
destruction of the Company's books and records;
(b) redeemed or repurchased, directly or indirectly, any shares of
Company Capital Stock or other equity security or declared, set aside or paid
any dividends or made any other distributions (whether in cash or in kind) with
respect to any shares of Company Capital
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Stock or other equity securities, or warrants, options or other rights to
acquire shares of Company Capital Stock or other equity securities of the
Company;
(c) issued, sold or transferred any notes, bonds or other debt
securities, any equity securities, any securities convertible, exchangeable or
exercisable into shares of Company Capital Stock or other equity securities of
the Company;
(d) borrowed any amount or incurred or become subject to any
Liabilities, except Liabilities incurred in the ordinary course of business;
(e) discharged or satisfied any Lien or paid any Liability, except
Liabilities incurred in the ordinary course of business, or prepaid any amount
of Liabilities for borrowed money;
(f) subjected any portion of its properties or assets to any Lien,
other than Permitted Liens (as defined in Section 3.12(c));
(g) sold, leased, assigned or transferred a portion of its tangible
or intangible assets (including Intellectual Property (as defined herein)), or
canceled (without fair consideration) any material debts or claims owing to it
or held by it, or disclosed any confidential information (other than pursuant to
agreements requiring the disclosure to maintain the confidentiality of
preserving all rights of the Company in such confidential information);
(h) suffered any extraordinary losses or waived any rights of
material value, whether or not in the ordinary course of business;
(i) entered into, amended or terminated any Material Contract (as
defined herein) or taken any other action or entered into any other transaction
other than in the ordinary course of business;
(j) entered into any other material transaction, whether or not in
the ordinary course of business, or materially changed any business practice
(except as expressly contemplated by this Agreement);
(k) made any other change in employment terms for any of its
directors, officers and employees outside the ordinary course of business and
inconsistent with past practice (except as expressly contemplated by this
Agreement or as otherwise requested by LifeMinders);
(l) conducted its cash management customs and practices other than in
the ordinary course of business (including, without limitation, with respect to
maintenance of working capital balances, collection of accounts receivable and
payment of accounts payable);
(m) made any capital expenditures that aggregate in excess of
$50,000;
(n) made any loans or advances to, or guarantees for the benefit of,
any Persons;
-10-
(o) made any payment to any Affiliate of the Company or any
Stockholder other than regular salaries; or
(p) committed or agreed to any of the foregoing actions set forth in
(a) through (o) above.
3.8 Employee Benefit Plans.
----------------------
(a) All employee benefit plans, programs, policies and arrangements
(whether formal or informal, written or unwritten, and whether for the benefit
of a single individual or more than one individual) maintained or contributed to
(whether currently or previously) by the Company or any employee leasing
organization (only with respect to a leased employee or co-employee of the
Company) for the benefit of any current or former employee (or leased employee
or co-employee) of the Company or in which such employees are entitled to
participate or with respect to which the Company has or reasonably could be
expected to have any Liability are listed on Schedule 3.8 (the "Benefit Plans").
-------------
With respect to each Benefit Plan, true, correct and complete copies of all of
the following documents, if applicable, have been delivered or made available to
LifeMinders: all plan documents and amendments thereto; all stock option
agreements; all written descriptions of any oral plans or policies; all trust
agreements; all annuity contracts, insurance policies or contracts and service
agreements; the most recent IRS opinion letter; the most recent summary plan
description; and copies of the nondiscrimination (including Section 415) testing
for the last 3 years or such shorter period as the plan was in existence'.
Notwithstanding any provision of this Agreement to the contrary, any
representation or warranty of the Company with respect to any Benefit Plan
maintained for employees, co-employees or leased employees pursuant to a
relationship between the Company and any employee leasing organization or words
of similar import shall be limited solely to Benefit Plans to the extent that
they include and cover such employees, co-employees and leased employees.
(b) Each Benefit Plan and the administration thereof complies, and
has at all times complied, with the terms of such Benefit Plan and with the
requirements of all applicable law, including, without limitation, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code. Each
-----
Benefit Plan intended to qualify under Section 401(a) of the Code so qualifies,
each trust that forms a part of any such Benefit Plan or trust or other entity
that is intended to be a voluntary employees' beneficiary association is exempt
from taxation under Section 501(a) of the Code, and no such trust or other
entity is liable for any tax under Section 511 of the Code. Each Benefit Plan
and related trust agreement and annuity contract is valid, binding, enforceable
and in full force and effect, and the Company has no plan or commitment (whether
legally binding or not) to modify any Benefit Plan (except to the extent
disclosed in the documents delivered to LifeMinders and except as necessary to
conform the Benefit Plan to changes in applicable laws). For purposes of this
Agreement, "ERISA Affiliate" shall mean any person (as defined in Section 3(9)
of ERISA) that is or has been a member of any group of persons described in
Section 414(b), (c), (m) or (o) of the Code, including, without limitation, the
Company or any Affiliate of the Company or, with respect to employees leased by
the Company and co-employees of the Company, any employer leasing organization.
Company and its ERISA Affiliates have never maintained or contributed to, and do
not now, and have never had, any liability under (or with respect to) a pension
plan which is a tax qualified "defined
-11-
benefit pension plan" (as defined in Section 3(35) of ERISA) or, except as
disclosed in Schedule 3.8(c), a tax qualified "defined contribution plan" (as
defined in Section 3(34) of ERISA) ("DC Plans"), whether or not terminated.
Neither the Company, nor any ERISA Affiliate has incurred any Liability for any
Tax imposed under Sections 4971 through 4980B of the Code or civil liability
under Sections 502(i) or (l) of ERISA. No Benefit Plan is a "multiemployer plan"
within the meaning of Section 3(37) of ERISA. No Benefit Plan provides health or
death benefit coverage to any employee or his spouse or dependents beyond the
termination of an employee's employment, except as required by Part 6 of Title I
of ERISA or Section 4980B of the Code. The Company has no Liability (whether
actual, contingent or otherwise) with respect to any employee benefit plan,
program, policy or arrangement sponsored, maintained or contributed to by the
Company or an ERISA Affiliate.
(c) No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) have been brought
against or with respect to any Benefit Plan, and, to the knowledge of the
Company, no suit, action or other litigation is threatened by, against, or
relating to any Benefit Plan and the Company does not have any knowledge of any
fact that could form the basis for any such suit, action or litigation. No
"prohibited transaction" within the meaning of Sections 406 or 407 of ERISA or
Section 4975 of the Code or any breach of fiduciary responsibility under ERISA
that could subject the Company to tax or other Liability has occurred. No
Benefit Plan is presently under audit or examination by the IRS, the Department
of Labor, or any other Governmental Authority, and no matters are pending with
respect to any Benefit Plan under the IRS Employee Plans Compliance Resolution
System. All contributions to Benefit Plans that were required to be made under
such Benefit Plans have been made as of the Balance Sheet Date, and all benefits
accrued under any unfunded Benefit Plan have been paid, accrued or otherwise
adequately reserved in accordance with GAAP. Except as set forth in Schedule
3.8, no Benefit Plan contains any term or provision or is subject to any law
that would prohibit the transactions contemplated by this Agreement, or that
would give rise to the vesting or acceleration of benefits, or to payments,
Liabilities or funding obligations as a result of the execution of this
Agreement or the transactions contemplated by this Agreement, except to the
extent that full vesting is required under any tax-qualified Benefit Plan under
Section 411 of the Code.
3.9 Employee Matters.
----------------
(a) Schedule 3.9(a) contains a complete and correct list of all
employees, leased employees and co-employees of the Company and their respective
titles as of the date hereof, the current compensation paid or payable to each
such employee, the date and amount of such employee's most recent salary
increase, the date of employment of each such employee and the accrued vacation
time and sick leave of each such employee as of June 30, 2000. Except as set
forth on Schedule 3.9(a), (i) the terms of employment or engagement of all
directors, officers, employees, agents, consultants and professional advisers of
the Company are such that their employment or engagement may be terminated upon
not more than two (2) weeks' notice given at any time and without liability for
payment of compensation or damages, and (ii) there are no severance payments
which are or could become payable by the Company to any director, officer or
other employee of the Company under the terms of any oral or written agreement
or commitment or any law or Company practice.
-12-
(b) Neither the Company nor any ERISA Affiliate is bound by or
subject to any arrangement with any labor union. No employees of the Company or
any ERISA Affiliate are or ever have been represented by any labor union or
covered by any collective bargaining agreement while employed by the Company or
such ERISA Affiliate and, to the Company's knowledge, no campaign to establish
such representation is in progress. There is no pending or, to the Company's
knowledge, threatened labor dispute involving the Company and any group of their
employees nor has the Company experienced any material labor interruptions. The
Company is and has been in material compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment, and wages and hours, including without limitation any such laws
regarding employment documentation, minimum wage and hours, workers'
compensation, family and medical leave, the Immigration Reform and Control Act,
and occupational safety and health requirements, and the Company has not, to its
knowledge, engaged in any unfair labor practice. To the Company's knowledge, all
Persons classified by the Company as independent contractors do satisfy and have
satisfied the requirements of law to be so classified and the Company has fully
and accurately reported their compensation on IRS Forms 1099 when required to do
so.
(c) Except as set forth on Schedule 3.9(c), to the knowledge of the
Company, no executive, key employee, group of employees, consultant or
independent contractor of the Company has any plans to terminate his, her or its
employment or relationship as a consultant or an independent contractor with the
Company. With respect to any leased employee or co-employee, the hiring of any
such employee by the Company will not be subject to any liability to any third
party, including, but not limited to, any professional employer organization,
leasing organization or other employee contracting organization (collectively
"PEO"), except as disclosed on the Current Balance Sheet or as may have been
---
waived by such PEO. The Company may terminate its participation in any Benefit
Plans sponsored or maintained by any PEO without liability.
3.10 Taxes
-----
(a) Tax Returns Filed and Taxes Paid. The Company has filed all Tax
--------------------------------
Returns it was required to file on a timely basis. All such Tax Returns are
correct and complete in all respects. All Taxes required to have been paid by
the Company (whether or not shown on any Tax Return) have been paid on a timely
basis. No claim has ever been made by a Governmental Authority in a jurisdiction
where the Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. The Company has not requested or obtained any
extension of time within which to file any Tax Return, which Tax Return has not
since been filed. There are no Liens on any of the assets of the Company that
arose in connection with any failure (or alleged failure) to pay any Tax.
(b) Withholding Taxes. The Company has complied in all respects with
-----------------
all applicable laws, rules and regulations relating to withholding Taxes,
including, without limitation, the withholding and reporting requirements under
Sections 1441 through 1464, 3401 through 3406, and 6041 through 6048 of the
Code, as well as any similar provisions under any other laws, and has, within
the time and manner prescribed by law, withheld from employee wages and paid
over to the proper Governmental Authority all amounts required to have been so
withheld and paid.
-13-
(c) Tax Assessments, Audits, Proceedings, Rulings and Closing
---------------------------------------------------------
Agreements. There are no existing circumstances which reasonably may be expected
----------
to result in the assertion of any claim for Taxes against the Company by any
Governmental Authority with respect to any period for which Tax Returns have
been filed or Tax is required to have been paid. There is no audit or other
proceeding presently pending or threatened with regard to any Tax or Tax Return
of the Company. The Company has not received a written ruling from a
Governmental Authority relating to any Tax or entered into a written agreement
with a Governmental Authority relating to any Tax if such ruling or agreement
could have a continuing effect with respect to any taxable period for which the
Company has not filed a Tax Return.
(d) Statute of Limitations. The Company has not waived any statute
----------------------
of limitations with respect to any Tax or Tax Return or agreed to any extension
of time with respect to a Tax assessment or deficiency, which has continuing
effect.
(e) Collapsible Corporations. The Company has not filed any consent
------------------------
or entered into any agreement under Section 341(f) of the Code with respect to
any of its assets.
(f) Golden Parachute Payments. Within the meaning of Section 280G of
-------------------------
the Code, the Company has not made any payments, is not obligated to make any
payments, and is not a party to any contract, agreement, plan or arrangement
(other than arrangements entered into pursuant to this Agreement) requiring it
to make payments to any person that would be excess parachute payments by reason
of the consummation of the transactions contemplated by this Agreement, and the
Company is not a party to any contract or agreement (other than contracts or
agreement entered into pursuant to this Agreement) that will have continuing
effect after the Closing Date that under certain circumstances could require any
payment (or be deemed to give rise to any payment) that would be a parachute
payment.
(g) Change of Accounting Method. The Company has not made or agreed
---------------------------
to make, and is not required to make, any change in method or accounting of the
Company which would require the Company to make an adjustment to its income
pursuant to Section 481(a) of the Code (or any similar provision); and neither
is there any application pending with any Governmental Authority requesting
permission for the Company to make any change in any accounting method, nor has
the Company received any notice that a Governmental Authority proposes to
require a change in method of accounting.
(h) Liability for Third Party Taxes. The Company is not and has not
-------------------------------
been a party to any Tax allocation, Tax sharing or similar agreement or
arrangement. The Company (i) has not been a member of an Affiliated Group filing
a consolidated federal income Tax Return, and (ii) has no Liability for Taxes
owing by any other Person, including, without limitation (A) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local, or
foreign law), (B) as a transferee or successor, or (C) by contract.
(i) Deferred Tax Liability; Installment Sale. The Company has not
----------------------------------------
taken any action not in accordance with past practice that would have the effect
of deferring a measure of Tax (including by not limited to income, sales, gross
receipts, or payroll) from a period (or portion thereof) ending on or prior to
the Closing Date to a period (or portion thereof) beginning after the Closing
Date. The Company has no deferred income or Tax Liability arising out of any
-14-
transaction, including without limitation, any (i) intercompany transaction (as
defined in Treasury Regulation Section 1.1502-13), or (ii) the disposal of any
property in a transaction accounted for under the installment method pursuant to
Section 453 of the Code except to the extent adequately reserved for in its
Current Balance Sheet.
(j) Disclosure of Tax Documents. The Company has made available to
---------------------------
LifeMinders complete and accurate copies of such of the following materials as
LifeMinders has requested: (i) all Tax Returns filed by the Company, (ii) all
examination reports relating to Taxes of the Company, and (iii) all statements
of Taxes assessed against or agreed to by the Company, (iv) all written rulings
the Company has received from any Governmental Authority relating to any Tax,
(v) all written agreements the Company has entered into with any Governmental
Authority relating to any Tax. Schedule 3.10 identifies all of the Tax Returns,
and taxable period covered by such returns, which the Company has filed, and
identifies those Tax Returns or periods that have been audited or are currently
the subject of an audit by a Governmental Authority.
(k) Real Property Holding Corporation. The Company has never been a
---------------------------------
United States real property holding corporation within the meaning of Code
Section 897(c)(2).
(l) Tax Exempt Use Property. No property of the Company is "tax
-----------------------
exempt use property" within the meaning of Section 168 of the Code.
3.11 Subsidiaries. The Company has no debt, equity or other investment or
------------
interest in any Person or any joint venture or strategic alliance with any
Person. The Company has no commitments to contribute to the capital of, make
loans to, or share losses of, any Person.
3.12 Property.
--------
(a) The Company owns no real property. Schedule 3.12(a) sets forth
an accurate and complete list of all real property leased by the Company
(collectively, the "Facilities"). True, complete and correct copies of all real
property leases have been delivered to LifeMinders. There have been no
improvements to, construction on, work done at, and/or services or material
supplied to, the Facilities or any part or parts thereof for which the Company
is responsible and for which payment in full has not been made and which may
reasonably be expected to give rise to mechanic's liens or other Lien. All
leases set forth on Schedule 3.12(a) are in full force and effect and constitute
valid and binding agreements of the Company and, to the knowledge of the
Company, the other parties thereto in accordance with their respective terms.
(b) Schedule 3.12(b) sets forth an accurate list of all owned and
leased personal property included on the Current Balance Sheet and all other
personal property owned or leased by the Company, with an individual book value
in excess of $5,000 (i) as of the Balance Sheet Date, or (ii) acquired since the
Balance Sheet Date, including an indication as to which assets are currently
owned, or were formerly owned, by any current or former stockholders or
Affiliates of the Company. True, complete and correct copies of all personal
property leases and leases for equipment have been delivered to LifeMinders. All
of the vehicles and other material machinery and equipment listed on Schedule
3.12(b) are in good working order and condition, ordinary wear and tear
excepted. All fixed assets used by the Company that are material to the
-15-
operation of its business are either owned by the Company or leased under an
agreement listed on Schedule 3.12(b).
(c) The Company has good and valid title to its assets, free and
clear of any and all Liens and defects in title, other than (i) statutory Liens
for taxes and assessments or governmental charges or levies not at the time due;
(ii) liens in respect of pledges or deposits under workers' compensation laws or
similar legislation, carriers' warehousemen's, mechanics', laborers' and
materialmen's and similar liens, if the obligations secured by such liens are
not then delinquent; and (iii) liens reflected in the financial statements (all
said laws and encumbrances described in clauses (i) through (iii) being referred
to collectively as "Permitted Liens").
---------------
3.13 Contracts.
---------
(a) Schedule 3.13 constitutes an accurate and complete list of each
note, bond, mortgage, contract, license, commitment, indenture, agreement or
other arrangement in effect as of the date of this Agreement to which the
Company is a party: (i) with a dealer, broker, sales agency, advertising agency
or other Person engaged in sales or promotional activities; (ii) which requires
aggregate payments by or to the Company or involves an unperformed commitment or
services having a value in excess of $50,000; (iii) pursuant to which Company
has made or will make loans or advances, or has or will incur debts or become a
guarantor or surety or pledged its credit on or otherwise become responsible
with respect to any undertaking of another; (iv) which are indentures, credit
agreements, loan agreements, notes, mortgages, security agreements, leases of
real property or personal property and agreements for financing; (v) involving a
partnership, or joint venture or other cooperative undertaking which is not
terminable by the Company on less than thirty (30) days' notice without penalty
or the requirement to pay any fees or money; (vi) involving restrictions imposed
upon the Company or its employees or business with respect to the geographical
area of operations or scope or type of business of the Company; (vii) which are
powers of attorney or agency agreements or written arrangements with any Person,
in any case, pursuant to which such Person is granted the authority to act for
or on behalf of the Company or any Founder; (viii) with respect to which the
requirements for performance extend beyond one (1) year from the date of this
Agreement; (ix) which give warranties with respect to the products or services
of the Company that differ in any material respect from the warranties set forth
in any agreement contained on Schedule 3.13; (x) which relates to the employment
of any Person; (xi) which are consulting and professional advisor agreements;
(xii) which cannot be terminated without penalty or payment on ninety (90) days'
(or less) notice; (xiii) with any of its Affiliates; (xiv) with any Government;
and (xv) which relates to the Company's business not made in the ordinary course
of business which are to be performed at or after the date of this Agreement
(together, the "Material Contracts").
------------------
(b) To the knowledge of the Company, no Material Contract has been
breached or canceled by any party thereto, and the Company has no knowledge of
any anticipated breach by any other party to any Material Contract. The Company
has performed all the obligations required to be performed by it in connection
with the Material Contracts and is not in default under or in breach of any
Material Contract, and no event has occurred which with the passage of time or
the giving of notice or both would result in a default or breach thereunder. The
Company does not have a present expectation or intention of not fully performing
any obligation pursuant to any Material Contract. Each Material Contract is
legal, valid, binding, en-
-16-
forceable and in full force and effect and shall continue as such following the
consummation of the transactions contemplated hereby.
(c) The Company has provided LifeMinders, or made available to
LifeMinders, with a true and correct copy of all written Material Contracts
which are required to be disclosed on Schedule 3.13, in each case together with
all amendments, waivers or other written modifications thereto (all of which are
disclosed on Schedule 3.13). Except as set forth on Schedule 3.13(c), no consent
is required, and no change of control provisions are triggered, with respect to
any of the Material Contracts in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.
3.14 Litigation. There is no litigation, suit, legal proceeding, legal
----------
action, claim, demand or governmental investigation, at law or in equity,
pending against the Company or, to the knowledge of the Company, threatened
against or affecting the Company before any court, Governmental Authority or
arbitration tribunal. The Company has not received any formal, written opinion
of counsel to the effect that the Company is reasonably likely to be exposed
from a legal standpoint to any Liability which would reasonably be expected to
result in a Material Adverse Effect. To the knowledge of the Company, there are
no facts that would reasonably be likely to result in any such litigation, suit,
proceeding, action, claim or investigation. The Company is not subject to or in
default with respect to any notice, order, writ, injunction or decree of any
court, agency, authority or arbitration tribunal.
3.15 Compliance with Laws. The Company has complied and is currently in
--------------------
compliance with all laws, regulations, rules, orders, permits, judgments,
decrees and other requirements imposed by any Governmental Authority applicable
to it, its properties or the operation of its business. The Company has not
received any notice or citation for noncompliance with any of the foregoing, and
there exists no condition, situation or circumstances nor has there existed such
a condition, situation or circumstance, which, after notice or lapse of time, or
both, would reasonably be expected to constitute noncompliance with or give rise
to future Liability with regard to any of the foregoing. The Company has all
licenses, permits, approvals, qualifications or the like, from any Government or
Governmental Authority necessary for the conduct of its business, all such items
are in full force and effect and are set forth on Schedule 3.15 and none of such
items will be affected in any way by the consummation of the Merger.
3.16 Government Contracts. The Company has never entered into any
--------------------
Contracts with the Government or any Governmental Authority.
3.17 Environmental and Safety Matters.
--------------------------------
(a) (i) The Company has complied and is in compliance with all
Environmental and Safety Requirements (including without limitation all permits
and licenses required thereunder); (ii) has received no oral or written notice
of any violation of, or any investigative, corrective or remedial obligation
under any Environmental and Safety Requirements; and (iii) has not released,
disposed of or transported or arranged for the disposal of any hazardous
substance in a manner that has given or would give rise to any investigative,
corrective or remedial obligation under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the
------
Resource Conservation and Recovery Act, as amended,
-17-
or any other Environmental and Safety Requirements; except in each case any such
noncompliance, violation or obligation that would not have a Material Adverse
Effect. Neither this Agreement nor the consummation of the transactions
contemplated hereby will result in any obligations for site investigation or
cleanup, or notification to or consent of Governmental Authority, or third
parties, pursuant to any so-called "transaction-triggered" or "responsible
property transfer" Environmental and Safety Requirements.
(b) For purposes of this Agreement, the term "Environmental and
Safety Requirements" shall mean all applicable federal, state, local and foreign
statutes, regulations, ordinances, provisions having the force or effect of law,
judicial and administrative orders and determinations and common law, in each
case concerning public health and safety, worker health and safety and pollution
or protection of the environment (including, without limitation, all those
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, Release, threatened Release, control or cleanup of any hazardous or
otherwise regulated materials, substances or wastes, chemical substances or
mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise or
radiation); and "Release" shall have the meaning set forth in CERCLA.
(c) This Section 3.17 contains the sole and exclusive
representations and warranties of the Company with respect to any environmental,
health or safety matters, including without limitation, those arising under any
Environmental and Safety Requirements.
3.18 Insurance. Schedule 3.18 lists and briefly describes each insurance
---------
policy maintained by or on behalf of the Company with respect to its directors,
officers, employees, properties, assets and business. The Company has provided,
or made available, copies to LifeMinders of all such insurance policies. All of
such insurance policies are in full force and effect, and the Company is not and
has never been in default with respect to its obligations under any such
insurance policies and the Company has never been denied insurance coverage. The
Company does not know of any threatened termination of, or material premium
increase with respect to, any of such policies. Except as set forth on Schedule
3.18, the Company does not have any self-insurance or co-insurance programs, and
the reserves set forth on the Current Balance Sheet are adequate to cover all
anticipated Liabilities with respect to any such self-insurance or co-insurance
programs.
3.19 Intellectual Property.
---------------------
(a) The Company has title to and ownership of (or adequate valid
written licenses for) all patents, trademarks, service marks, trade names, works
of authorship, copyrights, information, know-how, trade secrets, proprietary
rights and processes used in its business as now conducted (the "Intellectual
------------
Property"), free and clear of any Liens or other rights or claims of others,
--------
except for Intellectual Property designated as not owned by the Company ("Third
-----
Party Intellectual Property") on Schedule 3.19. Schedule 3.19 contains a
---------------------------
complete description of all Intellectual Property, including all Third Party
Intellectual Property other than off-the-shelf software or shareware, with a
description of the agreements, licenses and other instruments ("Third Party
-----------
Licenses") by which Company acquired rights in such Third Party Intellectual
--------
Property. No action, suit, proceeding or, to the Company's knowledge,
investigation with respect to the
-18-
Intellectual Property and/or the Third Party Intellectual Property (as it
relates to the Company) has ever been instituted, is pending or, to the
Company's knowledge, is threatened against the Company. To the Company's
knowledge, none of the Intellectual Property owned and/or used by the Company
interferes with, infringes upon, or otherwise violates the rights of others
(except that no representation is made with respect to any unpublished patents
pending), or is being interfered with or infringed upon by others, or is subject
to any outstanding order, decree or judgment. Except as set forth on Schedule
3.19, there are no royalty, commission or similar arrangements owing by the
Company with respect to any Intellectual Property, and no licenses or agreements
pertaining to any of the Intellectual Property or products or methods of the
Company's business (other than licenses for off-the-shelf software or
shareware). The licenses and each of the agreements set forth on Schedule 3.19
is in full force and effect and is not in breach or default by the Company; and
to the Company's knowledge, no condition (including, without limitation, the
execution and consummation of this Agreement, except that no representation is
made with respect to the effect on any such agreement resulting from any
conflicting agreement or arrangement to which LifeMinders or the Acquisition
Corp. may be a party) exists which, by the giving of notice or the passage of
time would cause any such agreement or license to be in breach or default or
otherwise be terminable. Except as set forth on Schedule 3.19, all items of
Intellectual Property that are designated on Schedule 3.19 as registered are
properly registered and are in good standing and enforceable under applicable
law. The Company has used its commercially reasonable efforts to enforce its
trade secrets protection program and, to the knowledge of Company, there has
been no violation of such program or any confidentiality or nondisclosure
agreement relating to the Intellectual Property.
(b) No third party has claimed or, to the Company's knowledge, has
reason to claim, that any person employed by or acting as a consultant to the
Company has (i) violated or, may be violating any of the terms or conditions of
his employment, noncompetition or nondisclosure agreement with such third party,
(ii) disclosed or may be disclosing or utilized or may be utilizing any trade
secret or proprietary information or documentation of such third party, or (iii)
interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. No third party has
requested information from the Company, which suggests that such a claim might
be contemplated. To the Company's knowledge, no person employed by or acting as
a consultant to the Company has employed or proposes to employ any trade secret
or any information or documentation proprietary to any former employer and, to
the Company's knowledge, no other person employed by or acting as a consultant
to the Company has violated any confidential relationship which such person may
have had with any third party, in connection with the development, manufacture
or sale of any product or proposed product or the development or sale of any
service or proposed service of the Company, and the Company knows of no reason
to believe there will be any such employment or violation. None of the execution
or delivery of this Agreement, or the carrying on of the business of the Company
as officers, employees or agents by any officer, director or key employee of the
Company, or the conduct of the business of the Company, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of or constitute a default under any contract, covenant or instrument
under which any such person is obligated.
3.20 Accounts Receivable. All of the notes and accounts receivable (both
-------------------
billed and unbilled) of the Company are good and valid receivables (subject to
no counterclaims or offset) and shall be fully collectable within ninety (90)
days after the Closing Date. There are no indi-
-19-
vidual accounts receivable of the Company that are over $50,000 and ninety (90)
days past due, except as set forth on Schedule 3.20. No Person has any Lien on
such receivables or any part thereof, and no agreement for deduction, free
goods, discount or other deferred price or quantity adjustment shall have been
made with respect to any such receivables.
3.21 Suppliers and Customers.
-----------------------
(a) No supplier to the Company has terminated or, to the Company's
knowledge, threatened to terminate, its relationship with the Company or has
during the last twelve (12) months decreased or limited, or, to the Company's
knowledge, threatened to decrease or limit, its services, supplies or materials
to the Company, except in the ordinary course of business. Except as set forth
on Schedule 3.21(a), no supplier is a sole source of supply of any good or
service to the Company. The Company does not have any knowledge that any of the
suppliers intends to terminate or otherwise modify adversely to the Company its
relationship with the Company or to decrease or limit its services, supplies or
materials to the Company.
(b) Schedule 3.21(b) attached hereto accurately sets forth a list of
the top ten (10) customers of the Company by revenue for the twelve (12)-month
period ended June 30, 2000 (each, a "Significant Customer"). The Company knows
--------------------
of no written or oral communication, fact, event or action which exists or has
occurred which would indicate that any Significant Customer or any other
customer of the Company shall stop, materially decrease the rate of, or
otherwise change the terms or conditions for, buying services or any materials
or products from the Company (whether as a result of the transaction
contemplated hereby or otherwise).
3.22 Related Party Transactions. Except as set forth on Schedule 3.22, no
--------------------------
officer, director, employee, stockholder or Affiliate of the Company or any
individual related by blood, marriage or adoption to any such individual or any
entity in which any such Person or individual owns any beneficial interest, is a
party to any agreement, contract, commitment or transaction with the Company or
has any interests in any property used by the Company.
3.23 Brokers. Except as set forth on Schedule 3.23, no Person has or will
-------
have, as a result of the transactions contemplated by this Agreement, any right,
interest or claim against or upon the Company or any Stockholder for any
commission, fee or other compensation payable as a finder or broker because or
any act or omission by the Company or the Stockholders.
3.24 Bank Accounts; Powers of Attorney. Schedule 3.24 sets forth a true,
---------------------------------
correct and complete list of the names and locations of all banks and other
financial institutions at which the Company maintains an account or safe deposit
box, the names of all Persons authorized to withdraw therefrom or have access
thereto and the names of all Persons holding powers of attorney from the
Company.
3.25 Disclosure. No representation or warranty by the Company or the
----------
Founders contained in this Agreement, and no representation, warranty or
statement contained in any document delivered pursuant to this Agreement
contains or will contain any untrue statement of fact or omits or will omit to
state any material fact necessary to make any statement herein or therein not
misleading. There is no fact that has not been disclosed to LifeMinders of which
the Com-
-20-
pany or any Founder has knowledge that has a Material Adverse Effect or could
reasonably be anticipated to have a Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
As a material inducement to LifeMinders to enter into this Agreement, each
Stockholder represents and warrants, severally and not jointly, to LifeMinders,
as of the date hereof and as of the Closing Date, that, with respect to himself
or itself:
4.1 Authorization of Transactions. Each Stockholder has full power,
-----------------------------
authority and legal capacity to enter into this Agreement and the other
documents contemplated hereby to which such Stockholder is a party and to
consummate the transactions contemplated hereunder. This Agreement and the other
documents contemplated hereby to which such Stockholder is a party are legal,
valid and binding obligations of such Stockholder enforceable against such
Stockholder in accordance with their respective terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights in general.
4.2 No Violation to Result. The execution, delivery and performance by
----------------------
such Stockholder of this Agreement and the other documents contemplated hereby
and the consummation of the transactions contemplated hereby and the fulfillment
of the terms hereof: (i) shall not result in a violation under any law,
judgment, decree, order, rule, regulation, permit or other legal requirement of
any Governmental Authority, applicable to such Stockholder; and (ii) shall not
result in the creation or imposition of any Lien upon the shares of Company
Capital Stock in favor of any Person. Except as set forth on Schedule 4.2, no
notice to, filing with or consent of any Person is required for the execution,
delivery and performance by such Stockholder of this Agreement and the other
documents contemplated hereby to which such Stockholder is a party, nor the
consummation by the Stockholder of the transactions contemplated hereby or
thereby.
4.3 Shares. The Stockholders are the sole holders of the issued and
------
outstanding shares of Company Capital Stock, and each of the Stockholders holds
of record and beneficially owns the shares of Company Capital Stock as are set
forth on Schedule 3.4 free and clear of any Taxes, hypothecation, assignment,
deposit arrangement, Lien, preference, priority or other security agreement,
warrant, attachment, right of first refusal, preemptive right, conversion, put,
call or other restriction on transfer (other than restrictions imposed by
federal and state securities laws), or preferential arrangement of any kind or
nature whatsoever. Following the Effective Time, the Stockholders will no longer
have any rights in and to the Company Capital Stock. There are no proxies,
voting rights, stockholders agreements or other agreements or understandings
with respect to the voting or transfer of the Company Capital Stock to which
such Stockholder is a party.
4.4 LifeMinders Information.
-----------------------
(a) LifeMinders has made available to the stockholders of the
Company, during the course of this transaction, the opportunity to ask questions
of and receive answers from
-21-
any of the officers or managers of LifeMinders concerning LifeMinders and the
LifeMinders Common Stock, and to obtain any documents or additional information
necessary to verify the information provided to the stockholders of the Company
or otherwise relative to the financial data and business of LifeMinders, to the
extent that such parties possessed such information or could acquire it without
unreasonable effort or expense. Each Stockholder acknowledges receiving copies
of the documents listed on Schedule 4.4 hereto.
(b) Each Stockholder agrees and acknowledges that neither
LifeMinders nor its Affiliates, agents or representatives makes, or has made in
any meeting, presentation or discussion, any representation or warranties
relating to LifeMinders, the LifeMinders Common Stock, the business and
financial condition of LifeMinders or otherwise in connection with the
transactions contemplated hereby other than those expressly set forth herein.
Each Stockholder acknowledges and agrees that any cost estimates, projections or
other predictions, any data, any financial information or any memoranda or other
materials are not and shall not be deemed to be or to include representations or
warranties of LifeMinders. Other than as set forth herein, no person has been
authorized by LifeMinders to make any representation or warranty relating to
LifeMinders or its business in connection with the transactions contemplated
hereby and, if made, each Stockholder further agrees that he or she has not
relied upon any such representations, warranties or other information relating
to LifeMinders, the LifeMinders Common Stock, the business and financial
condition of LifeMinders or otherwise in connection with the transactions
contemplated hereby (whether oral or written).
(c) Each Stockholder acknowledges and agrees that any cost
estimates, projections or other predictions, data, financial information,
memoranda or presentations in connection with the transactions contemplated
herein may contain forward-looking statements which involve risks and
uncertainties, and that actual results could differ materially from those
presented. Neither LifeMinders, its Affiliates, agents or representatives makes,
or has made, either herein or otherwise, any representation or warranty with
respect to any such forward-looking statements.
(d) Except as set forth on Schedule 4.4(d), each of the Stockholders
is an "accredited investor" as such term is defined in Regulation D promulgated
under the Act and sophisticated in financial matters and able to evaluate the
risks and benefits of an investment in shares of LifeMinders Common Stock
received in connection with the Merger.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF LIFEMINDERS
AND ACQUISITION CORP
Each of LifeMinders and Acquisition Corp. jointly and severally represent
and warrant to the Company and Stockholders, as of the date hereof and as of the
Closing Date, as follows:
5.1 Organization. Each of LifeMinders and Acquisition Corp is a
------------
corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware and is qualified to do business and in good
standing in each jurisdiction where the character or location
-22-
of the assets or properties owned, leased or operated by it or the nature of its
activities makes such qualification necessary.
5.2 Authority for Agreement. Each of LifeMinders and Acquisition Corp.
-----------------------
has full corporate power, authority and legal right to enter into this Agreement
and to consummate the transactions contemplated hereby. No other corporate
proceedings on the part of either LifeMinders or Acquisition Corp. are necessary
to approve and authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of LifeMinders and Acquisition Corp. and is
a legal, valid and binding obligation of each of LifeMinders and Acquisition
Corp., enforceable against each of LifeMinders and Acquisition Corp. in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights in general.
5.3 No Violation to Result. The execution, delivery and performance of
----------------------
this Agreement and the consummation of the transactions contemplated hereby and
the fulfillment of the terms hereof: (i) are not in violation or breach of, do
not conflict with or constitute a default under, and will not accelerate or
permit the acceleration of the performance required by, any of the terms of the
Certificate of Incorporation or Bylaws of LifeMinders or any note, debt
instrument, security agreement or mortgage, or any other contract or agreement,
written or oral, to which either LifeMinders is a party or by which LifeMinders
is bound; (ii) shall not be an event which, after notice or lapse of time or
both, will result in any such violation, breach, conflict, default, or
acceleration; (iii) shall not result in violation under any law, judgment,
decree, order, rule, regulation or other legal requirement of any Governmental
Authority applicable to LifeMinders; and (iv) shall not result in the creation
or imposition of any Lien, possibility of Lien, or restriction in favor of any
third Person upon any of the properties or assets of LifeMinders, other than
Permitted Liens. No notice to, filing with, or consent of, any Person is
necessary for the consummation by LifeMinders of the transactions contemplated
by this Agreement.
5.4 SEC Reports. LifeMinders has heretofore delivered, or made available,
-----------
to the Company and stockholders of the Company complete (except in certain cases
for listed exhibits which are available upon request) and correct copies of each
form, report, schedule, registration statement, definitive proxy statement and
other document (together with all amendments thereof and supplements thereto)
filed by LifeMinders with the U.S. Securities and Exchange Commission (the
"SEC") since September 24, 1999 (collectively, the "Public Filings"). As of
--- --------------
their respective effective dates, the Public Filings (i) complied as to form in
all material respects with the Securities Act of 1933, as amended (the "1933
----
Act") or the Securities Exchange Act of 1934, as amended (the "1934 Act"), as
--- --------
the case may be, and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. LifeMinders has made all Public Filings with the SEC
that it is has been required to make under the 1933 Act and the ▇▇▇▇ ▇▇▇.
5.5 LifeMinders Shares. The LifeMinders' Common Stock to be issued to as
------------------
Merger Stock or Additional Pledge Shares under this Agreement when issued in
accordance herewith will be duly authorized, validly issued, fully paid and
nonassessable and free and clear of any
-23-
Liens, encumbrances or preemptive or similar rights other than the Lien created
pursuant to Section 1.4 hereof.
5.6 Securities Laws Compliance. The LifeMinders' Common Stock to be
--------------------------
issued as Merger Stock or Additional Pledge Shares under this Agreement will be
free of any restrictions on transfer other than the restrictions on transfer
contained in this Agreement and under state and Federal securities laws.
Assuming (x) the delivery of an investment letter in substantially the form of
Exhibit A hereto by each stockholder of the Company (whether or not a party
---------
hereto), (y) the accuracy of the information contained in each such letter and
(z) the timely filing of a Form D with the SEC (which filing will be timely
made), the LifeMinders' Common Stock to be issued as Merger Stock or Additional
Pledge Shares under this Agreement will have been issued under a valid exemption
from registration under applicable Federal and state securities laws.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Properties and Records. The Company shall afford to the
--------------------------------
officers, employees, attorneys, accountants and other authorized representatives
of LifeMinders, reasonable access during normal business hours to all of the
Company's assets, properties, books and records and employees in order to afford
LifeMinders as full an opportunity of review, examination and investigation as
it shall reasonably request of the affairs of the Company, and LifeMinders shall
be permitted to make extracts from, or take copies of, such books, records
(including the stock record and minute books) or other documentation as may be
reasonably necessary. The Company shall furnish or cause to be furnished to
LifeMinders such reasonable financial and operating data and other information
about the Company, as it is presently being conducted, as it has been conducted
in the past and as it is proposed to be conducted in the future, and properties
and assets which any of the respective officers, employees, attorneys,
accountants or other authorized representatives of LifeMinders may reasonably
request; provided, that, LifeMinders and its agents shall not unreasonably
-------- ----
interfere with the operations of the Company. No information or knowledge
obtained in any investigation pursuant to this Section 6.1 shall affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the transactions
contemplated by this Agreement.
6.2 Interim Covenants of the Company and the Founders. From the date of
-------------------------------------------------
this Agreement until the earlier of the Closing Date or the date this Agreement
is terminated pursuant to Section 11.1, except to the extent expressly permitted
by this Agreement or otherwise consented to by an instrument in writing signed
by LifeMinders or as otherwise set forth in Schedule 6.2, the Company and the
Founders shall: (i) use commercially reasonable efforts to keep the Company
organization intact and shall not take or permit to be taken or do or suffer to
be done anything other than in the ordinary course of its business as the same
is presently being conducted; (ii) use commercially reasonable efforts to keep
available the services of their directors, officers, employees and agents and
maintain the Facilities in good condition; (iii) perform their obligations under
the Material Contracts; and (iv) maintain the goodwill and reputation associated
with the Company. Without limiting the generality of the foregoing, the Company
and the Founders shall not:
-24-
(a) issue any shares of Company Capital Stock (except upon the
exercise of outstanding warrants or Company Stock Options) or rights to acquire
Company Capital Stock;
(b) purchase, sell, lease or dispose of or make any contract for the
purchase, sale, lease or disposition of or make subject to a security interest
or any other Lien, other than Permitted Liens, any of their properties or
assets, other than in the ordinary and usual course of its business, consistent
with the representations and warranties contained herein, and not in breach of
any of the provisions of this Section 6.2, in each case for a consideration at
least equal to the fair value of such property or asset;
(c) except as consistent with past compensation practices in the
ordinary course of business, grant any salary increase to, or increase the draw
of, any of their officers, directors, employees or agents, or enter into any
new, or amend or alter any existing, employment, bonus, incentive compensation,
deferred compensation, profit sharing, retirement, pension, stock option, group
insurance, death benefit or other fringe benefit plan, trust agreement or other
similar or dissimilar arrangement, or any employment or consulting agreement;
provided, that, the Company may grant options to acquire up to 1,822,552 shares
-------- ----
of Company Common Stock (the "Additional Company Stock Options") to certain
-------------------------------
employees identified on Schedule 6.2(b), in the amounts shown thereon, with an
exercise price equal to the quotient of (x) the fair market value for
LifeMinders Common Stock on the date of grant divided by (y) 10.18 (as adjusted
to reflect any adjustments to the Merger Consideration pursuant to Section
1.2(b)), and subject to a vesting schedule that provides for one quarter (1/4)
of such shares to become exercisable on the first anniversary of the grant date
and one thirty-sixth (1/36) of the remaining shares to become exercisable on the
first day of each month thereafter;
(d) incur any bank indebtedness or borrowings, whether or not in the
ordinary course of its business, or issue any commercial paper, other than the
debt evidenced by the Promissory Note dated as of July 28, 2000, attached hereto
as Exhibit D (the "Company Note");
------------
(e) enter into any leases of real property;
(f) enter into any material leases of equipment and machinery;
(g) enter into any contract (i) which would be required to be listed
on Schedule 3.13 had it been entered into prior to the date hereof, or (ii) in
which any Affiliate of the Company or the Founders has any beneficial interest,
other than agreements to pay bonuses that are included on the Closing Balance
Sheet and which do not, in the aggregate, exceed $930,000;
(h) redeem, purchase or otherwise acquire, directly or indirectly,
any shares of Company Capital Stock or debt securities or any option, warrant or
other right to purchase or acquire any such shares, or declare or pay any
dividend or other distribution (whether in cash, stock or other property) with
respect to such capital stock;
(i) create, incur or assume any liability or indebtedness, except
for borrowings under the Company Note or otherwise in the ordinary course of
business consistent with past practices; or postpone or defer the creation,
incurrence, or assumption of any liability or indebtedness that would otherwise
be created, incurred or assumed in the ordinary course of business absent the
execution of this Agreement;
-25-
(j) pay or apply any of their assets to the direct or indirect
payment, discharge, satisfaction or reduction of any amount, directly or
indirectly, to or for the benefit of the Stockholders or any Affiliate thereof;
and
(k) take any action, fail to take any action or enter into any
agreement or understanding that causes the Company or the Founders to be in
breach or violation of any of the representations or warranties made in Articles
III and IV hereof.
6.3 Publicity. LifeMinders and the Founders shall mutually determine the
---------
form and substance of any press release related to this Agreement or the
transactions contemplated hereby, and shall consult with each other as to the
form and substance of other public disclosures related thereto; provided,
--------
however, that nothing contained herein shall prohibit any Party hereto from
-------
making any disclosure required by applicable laws or regulations, after notice
to the other Party with the opportunity to comment to the extent that delay of
the disclosure is permitted under such laws or regulations.
6.4 No Solicitation. Neither the Company, the Founders, nor any agent,
---------------
officer, director or any representative thereof, shall, during the period
commencing on the date of this Agreement and ending with the earlier to occur of
the Closing or the termination of this Agreement in accordance with its terms,
directly or indirectly, (a) solicit, encourage or initiate the submission of
proposals or offers from any person or entity for, (b) participate in any
discussions pertaining to, or (c) furnish any information to any person or
entity, other than LifeMinders, relating to, any acquisition or purchase of all
or a material amount of the assets of, or any equity interest in, the Company or
a merger, consolidation or business combination involving the Company. If the
Company or any of the Founders receives any unsolicited offer or proposal
relating to any of the above, the Company or the Founders shall immediately
notify LifeMinders thereof, including the identity of the party making such
offer or proposal and the specific terms of such offer or proposal.
6.5 Notification of Certain Matters. The Company and the Founders shall
-------------------------------
give prompt notice to LifeMinders of (a) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be reasonably likely to
cause any representation or warranty of the Company or the Stockholders
contained herein to be untrue or inaccurate in any material respect at or prior
to the Closing and (b) any material failure of the Company or the Stockholders
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by the Company or the Stockholders hereunder. The delivery of
any notice pursuant to this Section 6.5 shall not, without the express written
consent of LifeMinders, be deemed to (x) modify the representations or
warranties hereunder of the Company or the Stockholders, (y) modify the
conditions set forth in Article VII or (z) limit or otherwise affect the
remedies available hereunder to LifeMinders. LifeMinders will promptly advise
the Company in writing of (x) any event occurring subsequent to the date of this
Agreement which would render any representation or warranty of LifeMinders
contained in this Agreement, if made on or as of the date of such event or the
Effective Time, untrue or inaccurate in any material respect at or prior to the
Closing, (y) any material failure of the Company or the Stockholders to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by the Company or the Stockholders hereunder. The delivery of any
notice pursuant to this Section 6.5 shall not, without the express written
consent of the Stockholders' Representative, be deemed to (x) modify the
-26-
representations or warranties hereunder of LifeMinders or Acquisition Corp., (y)
modify the conditions set forth in Article VIII or (z) limit or otherwise affect
the remedies available hereunder to the Stockholders.
6.6 Tax Matters.
(a) Transfer Taxes, etc. All transfer, documentary, sales, use,
-------------------
stamp, registration and other similar Taxes and fees (including any penalties
and interest thereon, together "Transfer Taxes") incurred by the Stockholders in
connection with this Agreement shall be paid by the Stockholders when due. The
Stockholders shall, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such Transfer Taxes. If required by
applicable law, LifeMinders shall, and shall cause its Affiliates to, join in
the execution of any such Tax Returns and other documentation.
(b) Tax Payments. The Stockholders shall be liable for any and all
------------
Taxes of the Company attributable to any taxable period or portion thereof
ending on or before the Closing Date to the extent that such Taxes (i) are not
reflected in the reserve for Taxes (other than any reserve for deferred Taxes
established to reflect timing differences between book and tax income) shown on
the Current Balance Sheet and (ii) are not taken into account in determining Net
Working Capital for purposes of Section 1.2(b) of this Agreement ("Pre-Closing
Taxes"), provided, however, that the Stockholders shall not bear any liability
with respect to Pre-Closing Taxes that may be asserted in connection with
relocation bonuses payable to employees of the Company who accept employment
with LifeMinders. Pre-Closing Taxes payable after the Closing Date shall be paid
by LifeMinders on behalf of the Company. In the case of a taxable period
beginning before and ending after the Closing Date, the Taxes attributable to
the portion of such period ending on the Closing Date shall be computed as if
the taxable period ended on the Closing Date were a separate taxable period,
except that any Taxes imposed on the ownership of real, personal or intangible
property shall be allocated pro rata on a daily basis, between the portions of
the period ending on and ending after the Closing Date. Any credits relating to
a taxable period that begins before and ends after the Closing Date shall be
taken into account as though the relevant taxable period ended on the Closing
Date. All determinations necessary to give effect to the foregoing allocations
shall be made in a manner consistent with prior practice of the Company.
(c) Cooperation Regarding Tax Matters. LifeMinders, the Company and
---------------------------------
the Founders shall cooperate fully, as and to the extent reasonably requested by
the other Party, in connection with the filing of Tax Returns of the Company and
any audit, litigation or other proceeding with respect to Taxes of the Company.
Such cooperation shall include the retention and (upon the other Party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. The Company and the Founders agree (i) to
retain all books and records with respect to Tax matters and pertinent to the
Company relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent notified by
LifeMinders or the Founders any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with any
taxing authority, and (ii) to give the other Party reasonable written notice
prior to transferring, destroying or discarding any such
-27-
books and records and, if the other Party so requests, the Company or the
Founders, as the case may be, shall allow the other Party to take possession of
such books and records.
(d) Tax Proceedings. LifeMinders shall give prompt notice to the
---------------
Founders of the assertion of any claim, or the commencement of any suit, action
or proceeding with respect to any Tax liability of the Company for which the
Founders are responsible under this Agreement. The Founders may, at their own
expense, participate in and, upon notice to LifeMinders, assume the defense of
any such suit, action or proceeding; provided, that, (i) the Founders' counsel
is reasonably acceptable to LifeMinders, (ii) the Founders shall thereafter
consult with LifeMinders upon LifeMinders' reasonable request for such
consultation from time to time with respect to such suit, action or proceeding
and (iii) the Founders shall not, without LifeMinders' consent, agree to any
settlement with respect to any Tax if such settlement could adversely affect any
Tax liability of LifeMinders, the Company (but only with respect to any taxable
period (or portion thereof) beginning after the Closing Date) or any other
Affiliate of LifeMinders. If the Founders assume such defense, LifeMinders shall
have the right (but not the duty) to participate in the defense thereof and to
employ counsel, at its own expense, separate from the counsel employed by the
Founders. The Founders shall be liable for the fees and expenses of counsel
employed by LifeMinders for any period during which the Founders have not
assumed the defense thereof.
(e) Independent Tax Advice. Each Party represents that it is being
----------------------
advised independently as to the Tax consequences of the transactions
contemplated hereby and is not relying on any representation or statements made
by any other Party as to such Tax consequences (as distinguished from
representations and warranties regarding factual matters relevant to the
determination of such Tax consequences).
(f) Plan of Reorganization. Each Party acknowledges and agrees that
----------------------
(i) it intends the Merger to constitute a reorganization within the meaning of
Section 368(a) of the Code, (ii) to the extent permissible by law, each will
report the Merger as such a reorganization in any and all Tax Returns filed by
it, and (iii) the Parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
Treasury Regulations. Neither LifeMinders nor Acquisition Corp. has any present
plan or intention to take any action after the Effective Time, or cause the
Surviving Corporation to take any action after the Effective Time which would
cause the Merger to fail to qualify as a reorganization within the meaning of
the Code. LifeMinders has no present plan or intention to cause the Company to
issue additional shares of its stock after the Merger that would result in
LifeMinders losing "control" of the Surviving Corporation within the meaning of
Section 368(c) of the Code. Neither LifeMinders nor any person related to
LifeMinders within the meaning of Treasury Regulation Section 1.368-1(e)(3) is
obligated, or has any present plan or intention, to reacquire any of the
LifeMinders Common Stock issued in the Merger, except as (A) expressly provided
in this Agreement, (B) expressly provided in any escrow agreement or similar
agreement executed in connection with this Agreement, or (C) as may occur
pursuant to LifeMinders' stock repurchase program. LifeMinders has no present
plan or intention to: (A) liquidate the Company; (B) merge the Company into
another corporation; (C) cause the Company to sell or otherwise dispose of any
assets, except for dispositions made in the ordinary course of business and
dispositions described in Treasury Regulation Section 1.368-2(k)(2); or (D) sell
or otherwise dispose of any of the Company Shares acquired in the Merger, except
for dispositions described in Treasury Regulation Section 1.368-2(k)(2).
Notwithstanding the foregoing, each Party agrees to take all
-28-
actions within such Party's control necessary to qualify the Merger as a tax-
free reorganization under Section 368(a) of the Code including, if necessary,
effecting the transactions contemplated hereby as a forward triangular merger
pursuant to which Acquisition Corp. will merge with the Company and remain as
the Surviving Corporation.
(g) The Company shall terminate its sponsorship, participation in
and contributions to all DC Plans (as defined in Section 3.8(b)) prior to the
Effective Time and shall, to the extent permitted under the Code, terminate such
plans and take all actions necessary to make distributions to all participants
of such plans. To the extent such plan distributions are prohibited under the
Code as a result of the transactions contemplated by this Agreement, LifeMinders
may, in its sole discretion, take such actions as may be necessary to transfer
the assets and liabilities of such DC Plans to such successor plans as it deems
appropriate.
6.7 Litigation Support. In the event and for so long as any Party actively
------------------
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Company, each of the other Parties will, on a reasonable basis,
cooperate with such Person or its counsel in the contest or defense, make
available their personnel, and provide such testimony and reasonable access to
their books and records during normal business hours as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (except to the extent the contesting or defending
Party is entitled to indemnification therefor under Article IX below).
6.8 Reasonable Efforts. Each of the Parties hereto agrees to use all
------------------
reasonable efforts promptly to take, or cause to be taken, all actions and do or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulation to (a) obtain all consents, approvals or actions of, make
all filings with and give all notices to Governmental Authorities or any other
public or private third parties required of LifeMinders, the Company or the
Stockholders to consummate the Merger and the other matters contemplated hereby,
(b) provide such other information and communications to such Governmental
Authorities or other public or private third parties as the other Party or such
Governmental Authorities or other public or private third parties may reasonably
request in connection therewith, and (c) consummate and make effective the
transactions contemplated by this Agreement including the satisfaction of all
conditions hereto. Each Stockholder covenants and agrees to vote all of the
shares of Company Capital Stock owned or controlled by such Stockholder for the
approval of the Merger and the consummation of the transaction contemplated
hereby. The Company and the Founders shall use all reasonable efforts to satisfy
the conditions set forth in Section 7.10. The Company shall promptly contact
each stockholder and use its reasonable best efforts to have each of them enter
into this Agreement and approve the Merger as contemplated herein. The Company
shall keep LifeMinders reasonably apprised as stockholders of the Company become
Parties to this Agreement and shall, at Closing, provide LifeMinders with signed
execution originals of the signature pages evidencing the foregoing.
6.9 Further Assurances. Following the Closing, each of the Parties shall,
------------------
from time to time, execute and deliver such additional instruments, documents,
conveyances or assurances and
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take such other actions as shall be reasonably necessary, or otherwise
reasonably requested by LifeMinders, the Company or the Stockholders, as the
case may be, to confirm and assure the rights and obligations provided for in
this Agreement and render effective the consummation of the transactions
contemplated hereby.
6.10 LifeMinders Common Stock.
------------------------
(a) When the stockholders of the Company receive shares of
LifeMinders Common Stock pursuant to Section 1.2 hereof, the transfer agent for
LifeMinders shall have been instructed to place a legend in substantially the
following form on each certificate representing shares of LifeMinders Common
Stock issued pursuant to this Agreement:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act") or the applicable securities laws of any state, but
have been issued in reliance upon exemptions from registration
contained in the Securities Act and applicable state securities law.
No sale, offer to sell or other transfer of the securities
represented by this certificate may be made unless a registration
statement under the Securities Act and any applicable state
securities laws is in effect with respect the securities, or an
exemption from the registration provisions thereof is then in fact
applicable."
In addition, the transfer agent shall place on each certificate, whether
registered or not, any legend required by the blue sky laws of any state to the
extent such laws are applicable to the stock represented by such certificate.
(b) If (but without any obligation to do so) LifeMinders proposes to
register any securities under the Securities Act either for its own account or
the account of any selling security holders (other than pursuant to (i) a
registration statement on Form S-4 or S-8 or any successor forms, or (ii) a
registration on any form that does not permit secondary sales), it shall give
notice to the Stockholders' Representative of its intention at least fifteen
(15) days in advance of the filing of any registration statement with respect
thereto. Upon the written request of the Stockholders given within ten (10) days
after receipt of such notice, LifeMinders, at its own expense, shall use
commercially reasonable efforts to include in such registration, and in any
underwriting involved therein, shares of Merger Stock (including LifeMinders
Common Stock that constitute Pledged Assets) and Additional Pledge Shares, if
any (the "Registrable Securities"), included in such request. If a managing
----------------------
underwriter with respect to an underwritten offering requests that the number of
shares of Registrable Securities to be offered by the Stockholders be reduced
because in the judgment of the managing underwriter the marketing of the
offering would be adversely affected, then the number of shares of such
Registrable Securities shall be reduced, pro rata, among all holders of
--- ----
Registrable Securities based on the number of shares for which registration has
been requested, by such amount as the managing underwriter may determine so as
to not to affect adversely the marketing of the proposed offering, which reduced
number of Registrable Securities shall be included in the offering.
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(c) If, on February 1, 2001, there shall remain unregistered any
Registrable Securities, then LifeMinders shall file a registration statement
under the Securities Act covering such shares on or before February 15, 2001,
and thereafter effect all such registrations, qualifications and compliances
(including, without limitation, obtaining appropriate qualifications under
applicable state securities or "blue sky" laws and compliance with any other
applicable governmental requirements or regulations) as any holder may
reasonably request and that would permit or facilitate the sale of all
Registrable Securities (provided that LifeMinders shall not be required in
connection therewith to qualify to do business or to file a general consent to
service of process in any such state or jurisdiction), in each case so that such
registration statement and all other such registrations, qualifications and
compliances may become effective as soon as practicable after filing, provided,
--------
that LifeMinders may delay filing or suspend the effectiveness of such
----
registration statement for a period of up to ninety (90) days if (x) there
exists material nonpublic information about LifeMinders that would be required
to be disclosed in such registration statement pursuant to Federal securities
laws and (y) the Board of Directors of LifeMinders determines in good faith that
it would not be in the best interests of LifeMinders and its stockholders to
disclose such information in such registration statement, provided that
LifeMinders use commercially reasonable efforts to minimize the period of such
delay. Any registration of Registrable Securities contemplated by this Section
6.10(c) shall be conducted in accordance with the procedures and conditions set
forth on Schedule 6.10(c).
(d) The Merger Stock and any Additional Pledge Shares received by
the Founders will be subject to the following restrictions on transfer, in
addition to all applicable restrictions on transfer imposed by Federal and state
securities laws:
(i) No such shares shall be sold, disposed of, or otherwise
transferred prior to the date that is one hundred and eighty (180) days after
the Closing Date; and
(ii) On each of the 180th day, the 270th day, the 360th day and
the 450th day following the Closing Date, the restrictions set forth in clause
(i) above shall lapse with respect to twenty-five percent (25%) of the shares of
each Founder, with all such restrictions having lapsed on the 450th day
following the Closing Date;
provided, however, that such restrictions shall be revised to be at least as
-------- -------
favorable to the Founders as any similar restrictions placed on stockholders of
companies purchased or otherwise acquired by LifeMinders after the date hereof
and, upon the consummation of a Change of Control, all restrictions imposed on
the Founders with respect to the Merger Stock issuable to them upon the Merger
shall immediately lapse and be of no further force or effect. For purposes of
this Section, a "Change of Control" shall mean any merger or consolidation or
like transaction in which (i) LifeMinders is a constituent party or (ii) a
subsidiary of LifeMinders is a constituent party and LifeMinders issues shares
of its capital stock pursuant to such merger or consolidation (except any such
merger or consolidation involving LifeMinders or a subsidiary in which the
holders of capital stock of LifeMinders immediately prior to such merger or
consolidation continue to hold immediately following such merger or
consolidation at least 50% by voting power of the capital stock of (A) the
surviving or resulting corporation or (B) if the surviving or resulting
corporation is a wholly owned subsidiary of another corporation immediately
following such merger or consolidation, the parent corporation of such surviving
or resulting corporation), or other change of control transaction which results
in the exchange of outstanding shares of
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LifeMinders for securities or other consideration issued or paid or caused to be
issued or paid by an entity or affiliate thereof (other than a merger to
reincorporate LifeMinders in a different jurisdiction) in which the shareholders
of LifeMinders do not continue to hold a greater than fifty percent (50%)
interest in the successor entity, a transaction or a series of related
transactions that results in the transfer of more than fifty percent (50%) of
the voting power of LifeMinders, or any sale of all or substantially all the
assets of LifeMinders.
LifeMinders shall instruct its transfer agent to place a legend in
substantially the following form on each certificate representing shares of
LifeMinders Common Stock issued as Merger Stock pursuant to this Agreement:
"The securities represented by this certificate are subject to
restrictions on transfer as set forth in that certain Agreement and
Plan of Merger dated August 2, 2000. A copy of such agreement is on
file at the principal offices of the Company."
(e) Prior to the first anniversary of the Closing Date, each
Stockholder shall provide LifeMinders with forty-five (45) days' prior written
notice before such Stockholder shall complete any sales of more than fifty
thousand (50,000) shares of Merger Stock in any three (3) month period.
(f) LifeMinders shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of LifeMinders Common Stock for
delivery upon exercise of the Company Stock Options assumed in accordance with
Section 1.3. Within thirty (30) days following the Closing Date, LifeMinders
shall file a registration statement on Form S-8 (or any successor form) or
another appropriate form with respect to shares of LifeMinders Common Stock
subject to such Company Stock Options, and maintain such registration statement
and the current status of the prospectus or prospectuses contained therein for
so long as such Company Stock Options remain outstanding shall reserve for
issuance a sufficient number of shares.
6.11. Stockholders' Representative.
----------------------------
(a) Each holder of Company Capital Stock, by signing this Agreement,
designates Tyler to be the Stockholders' Representative for purposes of this
Agreement. The Stockholders shall be bound by any and all actions taken by the
Stockholders' Representative on their behalf.
(b) LifeMinders shall be entitled to rely upon any communications or
writings given or executed by the Stockholders' Representative. All notices to
be sent to the Stockholders pursuant to this Agreement may be addressed to the
Stockholders' Representative and any notices so sent shall be deemed notice to
all of the Stockholders hereunder. The Stockholders hereby consent and agree
that the Stockholders' Representative is authorized to accept notice on behalf
of the Stockholders pursuant thereto.
(c) The Stockholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Stockholder, with full
power in his name and one his behalf to act according to the terms of this
Agreement in the absolute discretion of the Stockhold-
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ers' Representative; and in general to do all things and to perform all acts
including, without limitation, executing, delivering and/or amending all
agreements, certificates, receipts, instructions and other instruments
contemplated by or deemed advisable in connection with this Agreement. This
power of attorney and all authority hereby conferred is granted subject to the
interest of the Stockholders hereunder and in consideration of the mutual
covenants and agreements made herein, and shall be irrevocable and shall not be
terminated by any act of any Stockholder, by operation of law, whether by such
Stockholder's death or any other event.
(d) The Stockholders shall severally and pro rata, in accordance with
their pro rata portion, of the Merger Consideration, indemnify and hold harmless
the Stockholders' Representative from and against any loss, liability or expense
incurred without gross negligence or bad faith on the part of the Stockholders'
Representative and arising out of or in connection with the acceptance or
administration of their duties hereunder under this Agreement.
6.12 Exercise of Convertible Securities. Each Stockholder covenants and
----------------------------------
agrees to exercise (either for cash or on a cashless basis to the extent
permitted by such instruments) any warrants, stock options or any other rights
to acquire Company Capital Stock, other than Company Stock Options, prior to the
Effective Time.
6.13 Director and Officer Liability. For six (6) years after the Effective
------------------------------
Time, LifeMinders shall cause the Surviving Corporation to maintain in effect,
to the extent available, directors' and officers' liability insurance (either
pursuant to LifeMinders' existing directors' and officers' liability insurance
policy or a separate directors' and officers' liability insurance policy, at
LifeMinders option) covering those persons who are currently covered by the
Company's directors' and officers' liability insurance policy, with respect to
acts or omissions occurring on or prior to the Effective Time, on terms that are
similar to those applicable under the directors' and officers' liability
insurance policy currently maintained by the Company; provided, however, that in
no event shall LifeMinders or the Surviving Corporation be required to expend
more than $5,000 for coverage for any one year.
6.14 Agreement to Vote Shares and Grant Proxy. At every meeting of the
----------------------------------------
stockholders of the Company called with respect to any of the following, and on
every action or approval by written consent of the stockholders of the Company
with respect to any of the following, the Stockholder agrees to vote the shares
of Company Capital Stock held by it in favor of approval of the Merger Agreement
and the Merger and any matter that could reasonably be expected to facilitate
the Merger. The Stockholder further agrees to use such Stockholder's reasonable
good faith efforts to cause the stockholders of the Company to approve the
Merger and the transactions and matters contemplated in connection therewith and
not, directly or indirectly, to solicit or encourage any offer from any party
concerning the possible disposition of all or any substantial portion of the
Company's business, assets or capital stock. In the event the Company's board
of directors does not call a meeting to approve the Merger, the Stockholder
agrees to take all action necessary to call a meeting to approve the Merger or
to approve the Merger by written consent. In order to effectuate the foregoing,
the Stockholder does hereby constitute and appoint LifeMinders, or any nominee
of LifeMinders, with full power of substitution, from the date hereof to the
Termination Date, as its true and lawful proxy, for and in its name, place and
stead, including the right to sign its name (as stockholder) to any consent,
certificate or other document relating to the Company that the law of the State
of Delaware may permit or require, for the sole
-33-
purpose of causing the shares of Company Capital Stock to be voted in the manner
contemplated by this Section 6.14; provided, however, that neither LifeMinders,
nor any nominee of LifeMinders, shall vote the shares of Company Capital Stock
for the conversion of shares of Company Preferred Stock into shares of Company
Common Stock. The parties acknowledge that the proxy provided for here is
irrevocable and coupled with an interest.
ARTICLE VII
CONDITIONS TO LIFEMINDERS' OBLIGATIONS
All obligations of LifeMinders under this Agreement are subject to the
fulfillment and satisfaction, prior to or at the time at which the Closing Date
is scheduled to occur, of each of the following conditions precedent, any one or
more of which may be waived by LifeMinders in writing:
7.1 Representations and Warranties. All of the representations and
------------------------------
warranties of the Company and the Stockholders contained in this Agreement
(without regard to any materiality exceptions or provisions therein) shall be
true, correct and complete in all material respects on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such date.
7.2 Performance. All of the terms, covenants, agreements and conditions of
-----------
this Agreement to be complied with, performed or satisfied by the Company or
Stockholders on or before the Closing Date shall have been duly complied with,
performed or satisfied in all material respects.
7.3 Litigation. No temporary restraining order, preliminary or permanent
----------
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint or provision challenging the transactions or
limiting or restricting the conduct or operation of the Company following the
transactions shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other Governmental Authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending.
There shall be no action, suit, claim or proceeding of any nature, pending or,
to the knowledge of the Parties, threatened, against LifeMinders, the Company or
the Stockholders, their respective properties or any of their officers or
directors, that could reasonably be expected to have a Material Adverse Effect.
7.4 Amendment to Company Stock Option Plan. The Board of Directors of the
--------------------------------------
Company shall have amended the Company Stock Option Plan to provide that the
Additional Company Stock Options (as defined on Schedule 6.2) will be subject to
the same terms and conditions as options granted under the LifeMinders' 1998
Stock Option Plan in the event of a merger, consolidation or other transaction
involving LifeMinders.
7.5 Consents. The Company shall have received the consents listed on
--------
Schedule 3.3. The Company shall have received a waiver or consent from (x) TIBCO
Financial Technology Inc. with respect to that certain Software License and
Support Agreement (the "TIBCO License"), dated September 10, 1999, and (y)
MicroTech Leasing Corp. with respect to that certain Master Lease Agreement,
dated September 8, 1999, each in a form reasonably satisfactory to
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LifeMinders; provided, that, the Company shall use its reasonable best efforts
-------- ----
to obtain an amendment to the TIBCO License that provides for termination by the
Company on thirty (30) days notice without penalty.
7.6 Governmental, Regulatory and Other Consents and Approvals. All
---------------------------------------------------------
consents, approvals and actions of, filings with and notices to, any
Governmental Authority or any other public or private third parties required of
the Stockholders or the Company to consummate the Closing and the other matters
contemplated hereby shall have been obtained or made.
7.7 [Intentionally omitted.]
7.8 Closing Deliveries. At the Closing, the Company and Stockholders, as
------------------
appropriate, shall perform and deliver the following, subject to waiver by
LifeMinders:
(a) each Stockholder shall deliver:
(i) the certificate(s) representing the shares of Company
Capital Stock (or affidavits of loss in lieu thereof) owned by him, all of which
shall be free and clear of any Lien, accompanied by stock powers duly endorsed
in blank or accompanied by duly executed instruments of transfer;
(ii) stock powers duly endorsed in blank representing such
Person's Pledged Assets; and
(iii) an investment letter in the form set forth as Exhibit A
---------
attached hereto executed by such Stockholder;
(b) each director of the Company shall deliver his or her respective
resignation as a director of the Company, which shall be effective as of the
Closing;
(c) each of the key employees listed on Schedule 7.8(c) as continuing
with the Company or LifeMinders after the Closing shall deliver either an
executed employment agreement in the form set forth as Exhibit B-1 attached
-----------
hereto, or an executed offer letter in the form set forth as Exhibit B-2
-----------
attached hereto;
(d) each holder of any Company Stock Options shall have executed and
delivered an option assumption agreement substantially in the form set forth as
Exhibit C attached hereto;
---------
(e) the Stockholders and all of the Company's officers, directors,
employees and Affiliates shall deliver evidence of repayment in full in
accordance with their terms all debts and other obligations, if any, owed to the
Company;
(f) the Company shall deliver:
(i) the Closing Balance Sheet;
-35-
(ii) the original books of account, minute books, minutes and
other records of all meetings of the Company;
(iii) the corporate seal of the Company and such other
documents, records, keys and other items as shall be necessary for the operation
of the business of the Company;
(iv) an officer's certificate stating that the representations
and warranties of the Company contained in this Agreement and in any certificate
delivered by the Company pursuant hereto shall be true in all material respects;
(v) a certificate of the Secretary of the Company, setting
forth the resolutions of the Board of Directors of the Company (or other
evidence reasonably satisfactory to LifeMinders) authorizing the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, and certifying that such resolutions have not been amended or rescinded
and are in full force and effect;
(vi) a good standing certificate for the Company from the
Secretary of State of the State of Delaware and from each state in which the
Company is qualified to do business;
(vii) certified charter documents of the Company, each dated as
of a date reasonably close to the Closing Date;
(viii) all consents, licenses, permits and approvals as set forth
on Schedule 3.3;
(ix) a properly executed Foreign Investment and Real Property
Tax Act of 1980 ("FIRPTA") Notification Letter, which states that shares of
------
Company Capital Stock do not constitute "United States real property interests"
under Section 897(c) of the Code, for purposes of satisfying LifeMinders'
obligations under Treasury Regulation Section 1.1445-2(c)(3) and a form of
notice to the Internal Revenue Service in accordance with the requirements of
Treasury Regulation Section 1.897-2(h)(2), along with written authorization for
LifeMinders to deliver such notice form to the Internal Revenue Service on
behalf of the Company upon the Closing of the Merger; and
(x) an opinion of counsel in form and substance reasonably
satisfactory to LifeMinders.
7.9 Exercise of Convertible Securities. All warrants, options and any
----------------------------------
other rights of any kind to purchase shares of Company Capital Stock (other than
the Company Stock Options) shall have been exercised and the holders thereof
shall have agreed to be bound by the terms and conditions of this Agreement as
Stockholders.
7.10 Stockholder Approval. Holders of at least 97% of the outstanding
--------------------
shares of Company Capital Stock entitled to vote to approve the Merger shall
have either voted to approve the Merger or not have elected to exercise any
appraisal rights applicable under the DGCL.
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ARTICLE VIII.
CONDITIONS TO THE COMPANY'S AND STOCKHOLDERS' OBLIGATIONS
All obligations of the Company and the Stockholders under this Agreement
are subject to the fulfillment and satisfaction, prior to or at the time at
which the Closing Date is scheduled to occur, of each of the following
conditions precedent, any one or more of which may be waived by the Company and
the Stockholders in writing:
8.1 Representations and Warranties. All of the representations and
------------------------------
warranties of LifeMinders contained in this Agreement (without regard to any
materiality exceptions or provisions therein) shall be true, correct and
complete in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date.
8.2 Performance. All of the terms, covenants, agreements and conditions of
-----------
this Agreement to be complied with, performed or satisfied by LifeMinders on or
before the Closing Date shall have been duly complied with, performed or
satisfied in all material respects.
8.3 Litigation. No temporary restraining order, preliminary or permanent
----------
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint or provision challenging the transactions or
limiting or restricting the conduct or operation of the Company following the
transactions shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other Governmental Authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending.
There shall be no action, suit, claim or proceeding of any nature pending or, to
the knowledge of the Parties, threatened, against LifeMinders, the Company or
the Stockholders, their respective properties, or any of their officers or
directors, that could reasonably be expected to have a Material Adverse Effect.
8.4 [Intentionally omitted.]
8.5 Closing Deliveries. At the Closing, LifeMinders shall perform and
------------------
deliver the following, subject to waiver by the Company or Stockholders:
(a) the Merger Cash payable to each Stockholder pursuant to Section
1.2 hereof, which payment shall be made by wire transfer of federal or other
immediately available funds to a bank account designated by such Stockholder;
(b) irrevocable directions to its transfer agent to issue to each
Stockholder certificates evidencing the number of shares of Merger Stock payable
to each Stockholder pursuant to Section 1.2 hereof and the Pledged Assets;
(c) executed employment agreements in the form set forth as Exhibit
-------
B-1 attached hereto, or an executed offer letter in the form set forth as
---
Exhibit B-2 attached hereto, to each of the key employees listed on Schedule
-----------
7.8(c);
(d) executed option assumption agreements, substantially in the form
set forth as Exhibit C attached hereto, to each holder of Company Stock Options;
---------
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(e) an officer's certificate stating that the representations and
warranties of LifeMinders contained in this Agreement and in any certificate
delivered by LifeMinders pursuant hereto shall be true in all material respects;
and
(f) an opinion of counsel in form and substance reasonably
satisfactory to the Company.
ARTICLE IX.
INDEMNITY
9.1 General Indemnification. Subject to the limitations set forth in this
-----------------------
Article IX, each Stockholder (individually, an "Indemnifying Party" and
------------------
collectively, the "Indemnifying Parties"), covenants and agrees to indemnify,
--------------------
defend, protect and hold harmless LifeMinders and its respective officers,
directors, employees, stockholders, assigns, successors and Affiliates
(individually, an "Indemnified Party" and collectively, the "Indemnified
----------------- -----------
Parties") from, against and in respect of all Liabilities, losses, claims,
damages, punitive damages, causes of actions, lawsuits, administrative
proceedings (including informal proceedings), investigations, audits, demands,
assessments, adjustments, judgments, settlement payments, deficiencies,
penalties, fines, Taxes, interest (including interest from the date of such
damages) and costs and expenses (including, without limitation, reasonable
attorneys' fees and disbursements of every kind, nature and description)
(collectively, "Damages") suffered, sustained, incurred or paid by the
-------
Indemnified Parties, in any action or proceeding between any or all of the
Stockholders and the Indemnified Parties or between the Indemnified Parties and
a third party, in connection with, resulting from or arising out of, directly or
indirectly:
(a) the inaccuracy of any representation or the breach of any
warranty of the Company or any Stockholder set forth herein; and
(b) the nonfulfillment of any covenant (other than the covenants set
forth in Article X) or agreement on the part of any of the Company or
Stockholders set forth in this Agreement.
9.2 Indemnification Procedures. All claims or demands for indemnification
--------------------------
under this Article IX ("Claims") shall be asserted and resolved as follows:
------
(a) In the event an Indemnified Party has a Claim against the
Indemnifying Parties hereunder which does not involve a Claim being asserted
against or sought to be collected by a third party, the Indemnified Party shall
promptly send a Claim Notice (as defined in Section 9.2(b)) with respect to such
Claim to the Stockholders' Representative, whose actions and decisions shall be
binding upon the Indemnifying Parties. If the Stockholders' Representative does
not notify the Indemnified Party within the Notice Period (as defined in Section
9.2(b)) that the Indemnifying Parties dispute such Claim, the amount of such
Claim shall be conclusively deemed a liability of the Indemnifying Parties. In
case the Stockholders' Representative shall object in writing to any Claim made
in accordance with this Section 9.2(a), the Indemnified Party shall have fifteen
(15) days to respond in a written statement to the objection of the
Stockholders' Representative. If after such fifteen (15)-day period there
remains a dispute as to any Claims, the
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Parties shall attempt in good faith for thirty (30) days to agree upon the
rights of the respective Parties with respect to each of such Claims. If the
Parties should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both Parties.
(b) In the event that any Claim for which the Indemnifying Parties
would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party, the Indemnified Party shall have fifteen
(15) days to notify the Stockholders' Representative of such Claim, specifying
the nature of such Claim and the amount or the estimated amount thereof to the
extent then feasible (which estimate shall not be conclusive of the final amount
of such Claim) (the "Claim Notice"). The Stockholders' Representative shall
------------
have thirty (30) days from the receipt of the Claim Notice (the "Notice Period")
-------------
to notify the Indemnified Party (i) whether or not the Indemnifying Parties
dispute liability to the Indemnified Party hereunder with respect to such Claim
and (ii) if the Indemnifying Parties do not dispute such liability, whether or
not the they desire, at their sole cost and expense, to defend against such
Claim. In the event that the Stockholders' Representative notifies the
Indemnified Party within the Notice Period that the Indemnifying Parties do not
dispute their obligation to indemnify hereunder and desire to defend the
Indemnified Party against such Claim and except as hereinafter provided, the
Stockholders' Representative shall have the right to defend by appropriate
proceedings, which proceedings shall be promptly settled or prosecuted by the
Stockholders' Representative to a final conclusion; provided, that, unless the
-------- ----
Indemnified Party otherwise agrees in writing, the Stockholders' Representative
may not settle any matter (in whole or in part) unless such settlement includes
a complete and unconditional release of the Indemnified Party. If the
Indemnified Party desires to participate in, but not control, any such defense
or settlement, the Indemnified Party may do so at the Indemnified Party's sole
cost and expense. If the Indemnifying Parties elect not to defend the
Indemnified Party against such Claim, whether by failure of the Stockholders'
Representative to give the Indemnified Party timely notice as provided above or
otherwise, then the Indemnified Party, may settle or defend against any such
Claim in the Indemnified Party's sole discretion and the Indemnified Party shall
be entitled to recover from the Indemnifying Parties the amount of any
settlement or judgment and, on an ongoing basis, all indemnifiable costs and
expenses of the Indemnified Party with respect thereto.
(c) Notwithstanding the provisions of Section 9.2(b), if at any time,
in the reasonable opinion of the Indemnified Party, notice of which shall be
given in writing to the Stockholders' Representative, any such Claim seeks
relief which could have a Material Adverse Effect on any Indemnified Party, the
Indemnified Party shall have the right to control or assume (as the case may be)
the defense of any such Claim and the amount of any judgment or settlement and
the reasonable costs and expenses of defense shall be included as part of the
indemnification obligations of the Indemnifying Parties hereunder. If the
Indemnified Party should elect to exercise such right, the Stockholders'
Representative shall have the right to participate in, but not control, the
defense of such claim or demand at the sole cost and expense of the Indemnifying
Parties.
(d) The Indemnifying Parties hereby waive any right to make a claim
against LifeMinders or the Company for contribution or indemnification for any
Damages asserted against them pursuant to this Article IX or otherwise.
(e) The Indemnified Party's failure to give reasonably prompt notice
to the Stockholders' Representative of any actual, threatened or possible claim
or demand which may
-39-
give rise to a right of indemnification hereunder shall not relieve the
Indemnifying Parties of any Liability which they may have to the Indemnified
Party unless the failure to give such notice materially and adversely affected
the ability of the Indemnifying Party to defend such Claim.
(f) Each Indemnifying Party shall be given the opportunity to elect,
pursuant to its shareholder representation letter, whether it wishes to have the
option to satisfy any obligations under this Article IX that may become due in
excess of the Pledged Assets either by (i) delivering shares of LifeMinders
Common Stock valued at the Merger Price, whether or not such shares are pledged
pursuant to Section 1.4, (ii) paying cash or other immediately available funds
or (iii) a combination of the foregoing.
9.3 Limitation. The Indemnifying Parties shall not be liable to the
----------
Indemnified Parties with respect to any Claim arising from or relating to
breaches of representations, warranties and covenants hereunder unless the
aggregate amount of all Damages exceeds $500,000 (the "Indemnification
Threshold"), in which case the Indemnifying Parties shall be liable for, and the
Indemnified Parties shall be entitled to collect, all such Damages without
regard to the Indemnification Threshold; provided, that, such limitation shall
-------- ----
not apply to (i) any adjustment to the Merger Stock pursuant to Section 1.2(b),
(ii) Damages arising out of any breaches of the covenants of the Company or
Stockholders set forth herein or any representations made in Sections 3.4, 3.10
or 4.3 or (iii) Damages arising out of claims of fraud. Until the first
anniversary of the Closing Date, (x) the aggregate amount of the Indemnifying
Parties' liability under this Article IX shall not exceed fifty percent (50%) of
the Merger Consideration, with the Merger Stock valued at the Merger Price, and
(y) any liability shall be satisfied first from the Pledged Assets. After the
first anniversary of the Closing Date, the aggregate amount of the Indemnifying
Parties' liability under this Article IX shall not exceed ten percent (10%) of
the Merger Consideration, with the Merger Stock valued at the Merger Price. Each
Indemnifying Party shall only be liable to an Indemnified Party for its
proportionate share (based on relative ownership of Company Capital Stock) of
any Damages hereunder, subject to the aggregate limitations set forth in the
preceding sentences. For purposes of the indemnity in this Article IX, all
representations and warranties contained in Article III are made without any
limitations as to materiality or dollar thresholds.
9.4 Survival of Representations, Warranties, and Covenants. Except as
------------------------------------------------------
otherwise expressly provided herein, the representations, warranties and
covenants made by the Company and/or the Stockholders in or pursuant to this
Agreement or in any document delivered pursuant hereto, and the corresponding
obligation to indemnify the Indemnified Parties hereunder, shall survive the
Closing and remain in effect until, and expire on, the second anniversary of the
Closing Date; provided, that, the representations and warranties contained in
-------- ----
Sections 3.4, 3.8, 3.10 and 4.3, and the covenants contained in Section 6.6, and
the indemnification obligations therefor, shall survive the Closing and
terminate on the date that is six (6) months after the expiration of the longest
applicable federal or state statute of limitations (including extensions
thereof); and provided further, that, any such period shall be extended until
-------- -------
the final resolution of Claims pending as of the relevant dates described in
this Section 9.4 (provide, that, no new or added claims may be brought during
such extension period). The representations, warranties and covenants made by
LifeMinders and Acquisition Corp. in or pursuant to this Agreement or in any
document delivered pursuant hereto, shall survive the Closing and remain in
effect until, and expire on, the second anniversary of the Closing Date.
-40-
9.5 Sole and Exclusive Remedy. This Article IX contains the sole and
-------------------------
exclusive remedies and provisions for any Claims under this Agreement, except
that the foregoing limitation shall not apply to claims for Damages arising from
breaches of the covenants in Article X or with respect to Damages arising from
fraud or a willful breach of a covenant.
9.6 Waiver, Release and Discharge. Effective upon the Closing, each
-----------------------------
Stockholder hereby irrevocably waives, releases and discharges the Company from
any and all Liabilities and obligations to such Person of any kind or nature
whatsoever, whether in his capacity as a Stockholder hereunder, an officer or
director of the Company or otherwise (including, without limitation, in respect
of rights of contribution or indemnification arising on or before the Closing
Date), in each case whether absolute or contingent, liquidated or unliquidated,
known or unknown, and whether arising hereunder or under any other agreement or
understanding or otherwise at law or equity, and no Stockholder shall seek to
recover any amounts in connection therewith or thereunder from the Company,
except for claims with respect to signing bonuses referenced in Section 6.2(g).
ARTICLE X.
COVENANT NOT TO COMPETE
10.1 Prohibited Activities.
---------------------
(a) For the period commencing with Closing and ending on the second
(2nd) anniversary of the Closing (the "Restricted Period"), no Founder, nor any
-----------------
of his Affiliates, shall, for any reason whatsoever, directly or indirectly, for
himself or on behalf of or in conjunction with any other Person:
(i) engage as a stockholder, officer, director, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, in any business which competes with the
LifeMinders' or the Company's Business; for purposes of this Section 10.1(a)(i),
"LifeMinders' Business" shall mean an online direct marketing company that
provides personalized information, or content, and advertisements via e-mail to
a community of members and the "Company's Business" shall mean a mobile media
network that uses an event-driven, server-based platform to deliver personalized
advertising, content, and commerce information to desktop browsers and email and
a wide variety of wireless devices, including mobile phones, alphanumeric
pagers, and wireless personal digital assistants (PDAs); provided, however, no
-------- -------
Founder or Affiliate shall be precluded from the ownership of securities of
corporations that are listed on a national securities exchange or traded in the
national over-the-counter market in an amount that shall not exceed one percent
(1%) of the outstanding shares of any such corporation;
(ii) employ, or call upon for the purpose or with the intent of
enticing away from or out of the employ of LifeMinders or its Affiliates, any
Person who is at that time, or was within six (6) months prior to that time, an
employee of LifeMinders or its Affiliates; or
-41-
(iii) call upon any Person who is at that time, or has been
within six (6) months prior to that time, a customer of LifeMinders or its
Affiliates for the purpose of soliciting or selling products or services in
competition with LifeMinders or its Affiliates; or
(iv) publish any statement or make any statement (under any
circumstances reasonably likely to become public) explicitly critical of
LifeMinders or its Affiliates, or reasonably likely to adversely affect or
otherwise malign the reputation of LifeMinders or its Affiliates.
(b) The Parties intend that the covenants contained in this Section
10.1 shall be deemed to be a series of separate covenants, one for each county
in each state of the United States and, except for geographic coverage, each
such separate covenant shall be identified in terms to the covenant contained in
this Section 10.1.
10.2 Confidentiality.
---------------
(a) Each Stockholder, and each of their Affiliates, shall (i) treat
and hold as confidential any information concerning the business and affairs of
LifeMinders and the Company that is (x) not already generally available to the
public through no act or failure to act by such Stockholder or Affiliate, (y)
was already known by such Stockholder or Affiliate at the time of receipt as
evidenced by its competent written records, or (z) was provided to the Company
or such Stockholder by a third party, as a matter of right and without
restriction on disclosure (the "Confidential Information"), (ii) not disclose,
------------------------
transfer, transmit or use any of the Confidential Information except in
connection with this Agreement or in performance of their obligations, if any,
to the Company as employees or directors or as otherwise directed by the
Company, and (iii) deliver promptly to LifeMinders, at the request and option of
LifeMinders, all tangible embodiments (and all copies) of the Confidential
Information which are in his possession or under his control. Each Stockholder
hereby acknowledges that such Confidential Information constitutes proprietary
and trade secret information of LifeMinders and the Company, as the case may be.
(b) In the event that any Stockholder is requested or required (by
oral question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, such Person shall notify LifeMinders
promptly of the request or requirement so that LifeMinders may seek an
appropriate protective order or waive compliance with the provisions of this
Section 10.2. If, in the absence of a protective order or the receipt of a
waiver hereunder, any Stockholder is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or other Government
official or agency, such Person may disclose the Confidential Information to the
tribunal; provided, that, such Person shall provide reasonable cooperation to
-------- ----
LifeMinders so that LifeMinder may obtain, at its request and expense, an order
or other assurance that confidential treatment shall be accorded to such portion
of the Confidential Information required to be disclosed as LifeMinders shall
designate.
10.3 Damages. Because of the difficulty of measuring economic losses to
-------
LifeMinders and its Affiliates as a result of a breach of the foregoing
covenant, and because of the immediate and irreparable damage that could be
caused to LifeMinders and its Affiliates for which it would
-42-
have no other adequate remedy, each of the Stockholders agrees that the
foregoing covenant may be enforced by LifeMinders in the event of breach by such
Stockholder, in addition to, but not in lieu of, any other available remedies,
by injunctions and restraining orders and other equitable remedies.
10.4 Reasonable Restraint. It is agreed by the Parties that the foregoing
--------------------
covenants in this Article X impose a reasonable restraint on the Stockholders in
light of the activities and business of LifeMinders and its Affiliates on the
date of the execution of this Agreement and the current plans of LifeMinders and
its Affiliates.
10.5 Independent Covenant. All of the covenants in this Article X shall be
--------------------
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Stockholder against
LifeMinders, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by LifeMinders of such covenants. It is
understood by the Parties hereto that the covenants contained in this Article X
are essential elements of this Agreement and that, but for the agreement of the
Stockholders to comply with such covenants, LifeMinders would not have agreed to
enter into this Agreement. The Stockholders and LifeMinders have independently
consulted with their respective counsel and have been advised concerning the
reasonableness and propriety of such covenants with specific regard to the
nature of the business conducted by LifeMinders. The Stockholders hereby agree
that all covenants contained in this Article X are reasonable and valid and
waive all defenses to the strict enforcement hereof by LifeMinders. Moreover, in
the event any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth are unreasonable, then it is the
intention of the Parties that such restrictions be enforced to the fullest
extent which the court deems reasonable, and the Agreement shall thereby be
reformed. The covenants contained in this Article X shall not be affected by any
breach of any other provision hereof by any Party hereto and shall have no
effect if the transactions contemplated by this Agreement are not performed.
ARTICLE XI.
TERMINATION
11.1 Termination.
-----------
(a) This Agreement may, by notice given on or prior to the Closing
Date, in the manner hereinafter provided, be terminated and abandoned at any
time prior to the Closing Date:
(i) by the Stockholders' Representative if there has been a
material misrepresentation or a material default or breach by LifeMinders with
respect to its representations in this Agreement or in any ancillary document or
the due and timely performance of any of LifeMinders' covenants and agreements
contained in this Agreement or in any ancillary document, and such
misrepresentation, default or breach (if capable of cure) shall not have been
cured within thirty (30) days after receipt by LifeMinders of notice specifying
particularly such misrepresentation, default or breach;
-43-
(ii) by LifeMinders if there has been a material
misrepresentation or a material default or breach by the Company or Stockholders
with respect to any of their representations in this Agreement or in any
ancillary document or the due and timely performance of the Company or
Stockholders covenants and agreements contained in this Agreement or in any
ancillary document, and such misrepresentation, default or breach (if capable of
cure) shall not have been cured within thirty (30) days after receipt by the
Company of notice specifying particularly such misrepresentation, default or
breach;
(iii) by mutual agreement of the Company, Stockholders and
LifeMinders;
(iv) by either the Company or LifeMinders if the Closing shall
not have occurred on or before September 15, 2000; provided, that, the Party
-------- ----
seeking to terminate this Agreement shall not because of its breach or violation
of any representation, warranty or covenant contained herein, have caused the
Closing not to have occurred on or before such date; or
(v) by the Company or the Stockholders, on the one hand, or by
LifeMinders, on the other hand, if there shall be a final nonappealable order of
a federal or state court in effect preventing the consummation of the
transactions contemplated by this Agreement; or there shall be any action taken,
or any statute, rule, regulation or order enacted, promulgated or issued or
deemed applicable to the transactions by any governmental entity which would
make the consummation of the transactions illegal.
(b) In the event this Agreement is terminated pursuant to Section
11.1(a), all further obligations of the parties hereunder shall terminate,
except for the obligations set forth in Sections 10.2 and 13.8, and except that
nothing in this Section 11.1(b) shall relieve any Party hereto of any liability
for breach of this Agreement.
ARTICLE XII
DEFINITIONS
12.1 Defined Terms. As used herein, the terms defined below shall have the
-------------
following meanings. Any of these terms, unless the context otherwise requires,
may be used in the singular or plural depending on the reference:
"Affiliate" shall mean as to any Party, any Person which directly or
---------
indirectly is in control of, is controlled by, or is under common control with,
such Party, including any Person who would be treated as a member of a
controlled group under Section 414 of the Code and any officer or director of
such Party. For purposes of this definition, an entity shall be deemed to be
"controlled by" a Person if the Person possesses, directly or indirectly, power
either to (i) vote ten percent (10%) or more of the securities (including
convertible securities) having ordinary voting power or (ii) direct or cause the
direction of the management or policies of such entity whether by contract or
otherwise; and, as to a Party who is a natural person, such person's spouse,
parents, siblings and lineal descendants. For the avoidance of doubt, from and
after the Closing, LifeMinders' Affiliates shall include without limitation the
Company.
-▇▇-
"▇▇▇▇" ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ generally accepted accounting
----
principles, consistently applied.
"Government" shall mean any agency or instrumentality of the United
----------
States or any state or territory or subdivision thereof and any agency or
instrumentality of any of the foregoing.
"Governmental Authority" shall mean any court, tribunal, arbitrator,
----------------------
authority, agency, commission, official or other instrumentality of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision.
"Liabilities" shall mean any direct or indirect liability,
-----------
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether fixed or unfixed, whether ▇▇▇▇▇▇ or inchoate, whether
liquidated or unliquidated, and whether due or to become due), including,
without limitation, any liability for Taxes.
"Lien" shall mean any claim, lien, pledge, option, charge, easement,
----
security interest, right-of-way, encumbrance, mortgage or other right.
"Material Adverse Effect" shall mean a material adverse effect on (i)
-----------------------
the assets (taken as a whole), the business or the financial condition of the
Company or (ii) the right or ability to consummate the transactions contemplated
hereby.
"Person" shall mean an individual, a partnership, a limited liability
------
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a Governmental Authority.
"Taxes" shall mean any federal, state, county, local, or foreign
-----
taxes, charges, fees, levies, duties, assessments, forfeiture or payment
obligations (including, without limitation, any obligation under unclaimed
property or escheat laws), or charge of any kind whatsoever including, without
limitation, all income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), capital stock, franchise, profits,
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax, customs duty, fee, or assessment, including
any interest, penalty, or addition thereto, whether disputed or not; and "Tax"
---
shall mean any of the foregoing Taxes.
"Tax Return" means any return, declaration, report, claim for refund,
----------
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
-45-
ARTICLE XIII
MISCELLANEOUS
13.1 Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the Company and the Stockholders and their respective
successors and assigns; provided, however, that the Company and Stockholders may
-------- -------
not make any assignment of this Agreement or any interest herein without the
prior written consent of LifeMinders, and provided further that LifeMinders may
-------- -------
not make any assignment of this Agreement or any interest herein prior to the
Closing. This Agreement or any of the severable rights and obligations inuring
to the benefit of or to be performed by LifeMinders hereunder may be assigned by
LifeMinders to a third party, in whole or in part, and to the extent so
assigned, the Company and Stockholders hereby recognize said assignee as the
party-in-interest with respect to the rights and obligations assigned and agrees
to look solely to said assignee for the purpose of conferring benefits, or
requiring performance of obligations, assigned to it by LifeMinders.
13.2 Governing Law. This Agreement shall in all respects be interpreted,
-------------
construed and governed by and in accordance with the laws of the State of
Delaware, without regard to its principles of conflicts of laws.
13.3 Specific Enforcement. All of the Parties hereto acknowledge that the
--------------------
Parties will be irreparably damaged in the event that this Agreement is not
specifically enforced. Upon a breach or threatened breach of the terms,
covenants or conditions of this Agreement by any of the Parties hereto, the
other Parties shall, in addition to all other remedies, be entitled to seek a
temporary or permanent injunction, without showing any actual damage, or a
decree for specific performance, in accordance with the provisions hereof.
13.4 Severability. Each section, subsection and lesser section of this
------------
Agreement constitutes a separate and distinct undertaking, covenant and/or
provision hereof. In the event that any provision of this Agreement shall
finally be determined to be unlawful, such provision shall be deemed severed
from this Agreement, but every other provision of this Agreement shall remain in
full force and effect.
13.5 Amendment. This Agreement may be amended, supplemented or modified, at
---------
any time before or after approval of matters presented in connection with the
Merger by the stockholders of the Company, but after any such stockholder
approval, no amendment shall be made which by law requires the further approval
of stockholders without obtaining such further approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
Parties hereto.
13.6 Waiver. Any Party hereto may to the extent permitted by applicable law
------
(i) extend the time for the performance of any of the obligations or other acts
of the other Parties hereto, (ii) waive any inaccuracies in the representations
and warranties of the other Parties hereto contained herein or in any document
delivered pursuant hereto or (iii) waive compliance with any of the agreements
of the other Parties hereto contained herein. No such extension or waiver shall
be effective unless set forth in a written instrument duly executed by or on
behalf of the Party extending the time of performance or waiving any such
inaccuracy or non-compliance. No waiver by any Party of any term of this
Agreement, in any one or more instances, shall be
-46-
deemed to be or construed as a waiver of the same or any other term of this
Agreement on any future occasion.
13.7 Notices. All notices, claims, certificates, requests, demands and
-------
other communications hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if sent by facsimile, nationally-
recognized overnight courier or certified mail, return receipt requested and
postage prepaid, addressed to such address as the party to whom notice is to be
given has furnished to the other party hereto in writing in accordance herewith.
Any such notice or communication shall be deemed to have been received (a) in
the case of personal delivery or delivery by facsimile, on the date of such
delivery, (b) in the case of nationally-recognized overnight courier, on the
next business day after the date when sent and (c) in the case of mailing, on
the third (3/rd/) business day following that on which the piece of mail
containing such communication is posted. All notices, claims, certificates,
requests, demands and other communications required or permitted to be given
hereunder shall be addressed as follows:
(a) If to LifeMinders:
LifeMinders, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Stockholders' Representative:
▇▇▇▇ ▇▇▇▇▇
c/o SmartRay Networks, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
-47-
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to any of the Founders, to them at:
c/o SmartRay Networks, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address or addresses as the Party addressed may from time to
time designate in writing pursuant to notice given in accordance with this
section.
13.8 Expenses. Except as otherwise provided in Article IX, all expenses of
--------
the Company and the Stockholders (including, without limitation, financial
advisory fees, legal fees and expenses, broker and finder fees, fees and
expenses of accountants) incurred by the Company or any Stockholder in
connection with the transactions contemplated hereby shall be borne by the
Company. All expenses of LifeMinders (including, without limitation, financial
advisory fees, legal fees and expenses, broker and finder fees, fees and
expenses of accountants) incurred by LifeMinders in connection with the
transactions contemplated hereby shall be borne by LifeMinders.
13.9 [Intentionally omitted.]
13.10 Complete Agreement. This Agreement embodies the complete agreement
------------------
and understanding among the Parties and supersedes and preempts any prior
understandings, agreements or representation by or among the Parties, written or
oral, which may have related to the subject matter herein; provided, that, if
--------------
this Agreement is terminated, the conditions of the Confidentiality Agreement
dated June 29, 2000, by and between LifeMinders and the Company shall survive
according to its terms.
13.11 Absence of Third Party Beneficiary Rights. No provision of this
-----------------------------------------
Agreement is intended, nor will be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, Affiliate, stockholder (except the Company's Stockholders), employee
or partner of any Party hereto or any other Person.
13.12 Mutual Drafting. This Agreement is the mutual product of the Parties,
---------------
and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of each of the Parties, and shall not be construed for
or against any Party hereto.
-48-
13.13 Gender. Unless the context clearly indicates otherwise, where
------
appropriate the singular shall include the plural and the masculine shall
include the feminine or neuter, and vice versa, to the extent necessary to give
---- -----
the terms defined herein and/or the terms otherwise used in this Agreement the
proper meanings.
13.14 Headings. The headings in this Agreement are intended solely for
--------
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
13.15 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute the same agreement. This Agreement and any document or schedule
required hereby may be executed by facsimile signature which shall be considered
legally binding for all purposes.
[Signatures page follows.]
-49-
IN WITNESS WHEREOF, each Party hereto has caused this Agreement to be
signed by its officer thereunto duly authorized as of the date first above
written.
LIFEMINDERS
LifeMinders, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
ACQUISITION CORP.
SRNI Acquisition Corp.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
COMPANY
Smartray Network, Inc.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and CEO
FOUNDERS
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------
▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------
▇▇▇▇▇ ▇▇▇▇▇▇
OTHER STOCKHOLDERS
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Associates, Managing Partner
-50-
/s/ MRW Smartray LLC
---------------------------------------------
MRW Smartray LLC
/s/ Connected Ventures LLC
---------------------------------------------
Connected Ventures LLC
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Revocable Trust
---------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Revocable Trust
/s/ Square Earth Ventures Fund, LLC
---------------------------------------------
Square Earth Ventures Fund, LLC
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ MIS-1, LP., LLP
---------------------------------------------
MIS-1, LP., LLP
-51-
/s/ International Tool & Machine Company Ltd.
---------------------------------------------
International Tool & Machine Company Ltd.
/s/ Verbena Servicos e Investimentos, S.A.
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Verbena Servicos e Investimentos, S.A.
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/s/ DLMH Holdings, LLC
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DLMH Holdings, LLC
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/s/ NP Ventures I LLC
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NP Ventures I LLC
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/s/ ▇▇▇▇▇▇▇ ▇. Rock, M.D.
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/s/ ▇▇▇▇▇▇ ▇. Scoffstall, Revocable Trust
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▇▇▇▇▇▇ ▇. Scoffstall, Revocable Trust
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/s/ ▇▇▇▇▇▇▇ ▇. Christoi
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/s/ /▇▇▇▇▇▇ ▇▇▇▇▇▇, Jnr.
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/s/ Panchin Limited
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Panchin Limited
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/s/ Quality InterConnect
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Quality InterConnect
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This First Amendment to the Agreement and Plan of Merger (this "Amendment")
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is entered into as of August 31, 2000 and is by and among LifeMinders, Inc., a
Delaware corporation ("LifeMinders"), SRNI Acquisition Corp., a Delaware
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corporation and wholly-owned subsidiary of LifeMinders ("Acquisition Corp.") and
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Smartray Network, Inc., a Delaware corporation (the "Company").
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WITNESSETH
WHEREAS, LifeMinders, Acquisition Corp., the Company and certain
stockholders of the Company are parties to that certain Agreement and Plan of
Merger entered into as of August 2, 2000 (the "Merger Agreement").
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WHEREAS, LifeMinders, Acquisition Corp. and the Company hereto wish to
amend the Merger Agreement as hereinafter set forth;
NOW, THEREFORE, on the terms and subject to the conditions herein set
forth, the Parties, intending to be bound, hereby agree as follows:
Section 1. Definitions. Unless otherwise indicated, capitalized
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terms used herein but not otherwise defined herein shall have the respective
meanings set forth in the Merger Agreement.
Section 2. Amendment of the Merger Agreement. The Merger Agreement
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is hereby amended as follows:
(a) Section 1.2(b) of the Merger Agreement is hereby deleted in its
entirety and replaced with the following:
"(b) The Merger Consideration has been calculated based on the assumption
that the difference between the current assets and current liabilities (the
"Net Working Capital") of the Company as of the Closing Date, is negative
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$2,425,673 (the "Target Net Working Capital"). If the Net Working Capital on
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the Closing Date (the "Closing Net Working Capital") is greater than or less
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than the Target Net Working Capital, with such difference exceeding $50,000,
then the Merger Stock shall be subject to adjustment as set forth in this
Section 1.2(b). The Company shall, on the Closing Date, deliver a balance
sheet as of the Closing Date (the "Closing Balance Sheet"). Set forth on
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Schedule 1.2(b) is a projected Closing Balance Sheet (the "Projected Closing
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Balance Sheet"). The Closing Balance Sheet shall be mutually prepared by the
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Company and LifeMinders in accordance with GAAP, consistent with the
Projected Closing Balance Sheet and the Company's past accounting practices
(except as otherwise requested by LifeMinders). The Closing Balance Sheet
shall be subject to review within forty-five (45) days after the Closing Date
by an accounting firm of national repute, selected by LifeMinders and the
Stockholders' Representative (as defined in
Section 6.11), if either Party so requests. To the extent that such
post-Closing review indicates that the Closing Net Working Capital was
greater than the Target Net Working Capital by more than $50,000, then
LifeMinders shall add to the Pledged Assets a number of shares of LifeMinders
Common Stock equal to the quotient of (x) the entire amount of such
difference between the Closing Net Working Capital and the Target Net Working
Capital divided by (y) the Merger Price ("Additional Pledge Shares"). To the
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extent that such post-Closing review indicates that the Closing Net Working
Capital was less than the Target Net Working Capital by more than $50,000,
then LifeMinders shall be entitled to receive from the Pledged Assets a
number of shares of LifeMinders Common Stock equal to the quotient of (a) the
entire amount of such difference between the Target Net Working Capital and
the Closing Net Working Capital divided by (b) the Merger Price."
(b) Sections 1.3(b) and 6.2(c) of the Merger Agreement are hereby
amended by deleting the amount "10.18" where it appears therein and replacing
that deleted number with the amount "10.184".
(c) Section 2.1 of the Merger Agreement is hereby amended by deleting
the words "The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of ▇▇▇▇ ▇▇▇▇▇▇▇ in Tysons Corner,
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Virginia," and replacing those deleted words with the words "The closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
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the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP in New York, New York,".
(d) Section 6.2(c) of the Merger Agreement is hereby amended by
deleting the amount "1,822,552" where it appears therein and replacing that
deleted amount with the amount "1,573,428".
(e) Section 6.2(d) of the Merger Agreement is hereby amended to read
as follows:
"(d) incur any bank indebtedness or borrowings, whether or not in
the ordinary course of its business, or issue any commercial
paper, other than the debt evidenced by the Amended and Restated
Promissory Note dated as of August 31, 2000, attached hereto as
Exhibit D (the "Company Note");".
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(f) Section 6.2(g) of the Merger Agreement is hereby amended by
deleting the amount "$930,000" where it appears therein and replacing that
deleted amount with the amount "$1,183,500".
(g) Section 8.5(a) of the Merger Agreement is hereby amended to read
as follows:
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"(a) the Merger Cash payable to each Stockholder pursuant to
Section 1.2 hereof, which payment shall be made by delivery of
check to such Stockholder or wire transfer of federal or other
immediately available funds to a bank account designated by such
Stockholder;".
(h) Schedules 3.3, 3.4, 3.6, 3.7, 3.9(c), 3.13, 3.22, 4.4, 4.4(d),
6.2(b) and 7.8(c) of the Merger Agreement are hereby amended and replaced by the
respective Schedules attached hereto.
Section 3. Waiver of Certain Closing Conditions. LifeMinders waives
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the conditions to Closing that the Company shall have obtained (x) a consent
pursuant to the Vendor Agreement for Level 1 Service, Last Sale Service and NQDS
with the Nasdaq Stock Market, Inc. and (y) an amendment to the TIBCO License.
Section 4. Effect. Except as amended hereby, the Merger Agreement
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shall remain in full force and effect in all respects.
Section 5. Counterparts. This Amendment may be executed in two or
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more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same agreement, it being understood
that all of the parties need not sign the same counterpart.
Section 6. Governing Law. THIS AMENDMENT, THE LEGAL RELATIONS BETWEEN
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THE PARTIES AND THE ADJUDICATION AND THE ENFORCEMENT THEREOF, SHALL BE GOVERNED
BY AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE
STATE OF DELAWARE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
[SIGNATURE PAGES FOLLOWS]
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IN WITNESS WHEREOF, each Party hereto has caused this Amendment to be
signed by its officer thereunto duly authorized as of the date first above
written.
LIFEMINDERS
LifeMinders, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
ACQUISITION CORP.
SRNI Acquisition Corp.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
COMPANY
SmartRay Network, Inc.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇
Title: President and CEO
STOCKHOLDERS' REPRESENTATIVE
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