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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
GO2NET, INC.
VA ACQUISITION CORP.
IQC CORPORATION
AND
THE EQUITYHOLDERS OF
IQC CORPORATION
DATED
MAY 13, 1999
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TABLE OF CONTENTS
ARTICLE I
THE MERGER.......................................................- 1 -
1.1 The Merger..............................................- 1 -
1.2 Effective Time..........................................- 2 -
1.3 Effect of the Merger....................................- 2 -
1.4 Articles of Incorporation; By-Laws..................... - 2 -
1.5 Directors and Officers..................................- 2 -
1.6 Additional Actions................................... ..- 3 -
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES..............................- 3 -
2.1 Merger Consideration....................................- 3 -
2.2 Conversion of Shares....................................- 3 -
2.3 Exchange of Certificates................................- 5 -
2.4 No Fractional Securities................................- 6 -
2.5 Stock Transfer Books....................................- 6 -
2.6 No Further Ownership Rights in Company Stock............- 6 -
2.7 Adjustment Event........................................- 6 -
2.8 Escrow..................................................- 6 -
2.9 Tax Consequences........................................- 7 -
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE EQUITYHOLDERS....................................- 7 -
3.1 Corporate Organization.........................- 7 -
3.2 Authorization...........................................- 8 -
3.3 Consents and Approvals; No Violations...................- 8 -
3.4 Capitalization..........................................- 9 -
3.5 Financial Statements; Business Information..............- 9 -
3.6 Absence of Undisclosed Liabilities.....................- 10 -
3.7 Absence of Certain Changes or Events...................- 10 -
3.8 Legal Proceedings, etc.................................- 11 -
3.9 Taxes..................................................- 11 -
3.10 Title to Properties and Related Matters.............. .- 12 -
3.11 Intellectual Property; Proprietary Rights; Employee
Restrictions........................................ ..- 13 -
3.12 Contracts........................................... ..- 15 -
3.13 Employees; Employee Benefits........................ ..- 17 -
3.14 Compliance with Applicable Law.........................- 19 -
3.15 Ability to Conduct the Business................... ....- 19 -
3.16 Major Customers........................................- 20 -
3.17 Consultants, Sales Representatives and Other Agents....- 20 -
3.18 Accounts Receivable....................................- 20 -
3.19 Insurance..............................................- 20 -
3.20 Bank Accounts; Powers of Attorney......................- 20 -
3.21 Minute Books, etc......................................- 21 -
3.22 Related Person Indebtedness and Contracts........... ..- 21 -
3.23 Brokers; Payments......................................- 21 -
3.24 Company Action.........................................- 21 -
3.25 Year 2000 Matters......................................- 22 -
3.26 Disclosure.............................................- 22 -
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE EQUITY.................................................. - 22 -
4.1 Authorization; etc.................................... - 22 -
4.2 Parent Common Stock....................................- 23 -
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION...................................- 25 -
5.1 Corporate Organization.................................- 25 -
5.2 Authorization..........................................- 26 -
5.3 Consents and Approvals; No Violations..................- 26 -
5.4 Capitalization.........................................- 27 -
5.5 SEC Reports and Financial Statements...................- 27 -
5.6 Litigation.............................................- 28 -
5.7 Compliance with Applicable Law.........................- 28 -
5.8 Brokers; Payments......................................- 29 -
5.9 Disclosure.............................................- 29 -
ARTICLE VI
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME.................- 29 -
6.1 Conduct of Business of the Company.....................- 29 -
6.2 Conduct of Business of Acquisition Corp................- 31 -
6.3 Conduct of Parent and Acquisition Corp.................- 31 -
6.4 Other Negotiations.....................................- 31 -
ARTICLE VII
ADDITIONAL AGREEMENTS...........................................- 31 -
7.1 Access to Properties and Records.......................- 31 -
7.2 Transfer of Shares.....................................- 32 -
7.3 Affiliates' Letters....................................- 32 -
7.4 Reasonable Efforts; etc................................- 32 -
7.5 Material Events........................................- 32 -
7.6 Fees and Expenses......................................- 32 -
7.7 Nasdaq National Market Listing.........................- 32 -
7.8 Tax Treatment..........................................- 33 -
ARTICLE VIII
COVENANTS OF CERTAIN SHAREHOLDERS...............................- 33 -
8.1 Representations and Agreements of Cubic Science, Inc...- 33 -
8.2 Non-competition........................................- 34 -
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF
THE PARENT AND ACQUISITION................................... ..- 34 -
9.1 Representations and Warranties True....................- 34 -
9.2 Performance............................................- 34 -
9.3 Affiliates' Letters....................................- 35 -
9.4 Absence of Litigation..................................- 35 -
9.5 Consents...............................................- 35 -
9.6 Additional Agreements..................................- 35 -
9.7 Delivery of Certificates for Cancellation..............- 36 -
9.8 Appraisal Rights.......................................- 36 -
9.9 Certificate of Merger..................................- 36 -
9.10 Payment of Indebtedness............................. ..- 36 -
9.11 Due Diligence......................................... - 36 -
9.12 Supporting Documents...................................- 36 -
ARTICLE X
CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY AND THE EQUITYHOLDERS...................................- 37 -
10.1 Representations and Warranties True....................- 37 -
10.2 Performance........................................... - 37 -
10.3 Absence of Litigation..................................- 37 -
10.4 Consents...............................................- 38 -
10.5 Additional Agreements..................................- 38 -
10.6 Certificates of Merger.................................- ▇▇ -
▇▇.▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Stock..........................- 38 -
10.8 Supporting Documents...................................- 38 -
ARTICLE XI
TERMINATION.....................................................- 39 -
11.1 Termination............................................- 39 -
11.2 Effect of Termination..................................- 40 -
ARTICLE XII
INDEMNIFICATION; SURVIVAL OF
REPRESENTATIONS AND WARRANTIES..................................- 40 -
12.1 Indemnity Obligations..................................- 40 -
12.2 Notification of Claims.................................- 40 -
12.3 Duration...............................................- 41 -
12.4 Escrow.................................................- 41 -
12.5 No Contribution........................................- 42 -
ARTICLE XIII
REGISTRATION RIGHTS.............................................- 42 -
13.1 Registrable Shares............................. .......- 42 -
13.2 Required Registration........................... ......- 43 -
13.3 Effectiveness; Suspension Right........................- 43 -
13.4 Expenses...............................................- 44 -
13.5 Indemnification........................................- 44 -
13.6 Procedures for Sale of Shares Under Registration
Statement..............................................- 46 -
13.7 Transferability of Registration Rights.................- 47 -
ARTICLE XIV
MISCELLANEOUS PROVISIONS........................................- 47 -
14.1 Amendment..............................................- 47 -
14.2 Waiver of Compliance...................................- 47 -
14.3 Notices................................................- 47 -
14.4 Assignment.............................................- 48 -
14.5 No Third Party Beneficiaries...........................- 49 -
14.6 Public Announcements...................................- 49 -
14.7 Counterparts...........................................- 49 -
14.8 Headings...............................................- 49 -
14.9 Entire Agreement.......................................- 49 -
14.10 Governing Law.........................................- 49 -
EXHIBITS
Exhibit A-1 Agreement of Merger (California)
Exhibit A-2 Certificate of Merger (Delaware)
Exhibit B Form of Letter of Transmittal
Exhibit C Escrow Agreement
Exhibit D Form of Affiliate Letter
Exhibit E-1 Form of Confidentiality and Employment-At-Will
Agreement for
Employees
Exhibit E-2 Form of Confidentiality and Employment-At-Will
Agreement for
Employees
Exhibit F Omitted
Exhibit G Omitted
Exhibit H Form of Option Agreement
Exhibit I Form of Assignment of Inventions and Confidentiality
Agreement
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of May 13, 1999 by and among
Go2Net, Inc., a corporation organized under the laws of the State of Delaware
(the "Parent"), VA Acquisition Corp., a corporation organized under the laws of
the State of Delaware and a wholly-owned subsidiary of the Parent ("Acquisition
Corp."), IQC Corporation, a corporation organized under the laws of the State of
California (the "Company"), and those shareholders (the "Shareholders") and
optionholders (the "Optionholders"), identified on the signature pages hereto,
who are collectively referred to herein as the "Equityholders."
WHEREAS, the respective Boards of Directors of the Parent, Acquisition
Corp. and the Company have approved the merger of Acquisition Corp. with and
into the Company (the "Merger"), pursuant to which the Company will be the
surviving corporation and the stockholders of the Company immediately prior to
such merger will be entitled to receive the consideration provided for in this
Agreement, all upon the terms and subject to the conditions set forth herein;
WHEREAS, it is intended that the Merger qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"); and
WHEREAS, as a condition and inducement to Parent's willingness to enter
into this Agreement, all of the Stockholders have, concurrently with the
execution of this Agreement, executed and delivered to Parent written consents
approving this Agreement, the Merger and the other transactions contemplated
hereby.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements set forth herein, and intending to be
legally bound hereby, the parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. (a) At the Effective Time (as defined in Section 1.2),
and subject to and upon the terms and conditions of this Agreement, the
California General Corporate Code (the "CGCL") and the Delaware General
Corporation Law (the "DGCL"), Acquisition Corp. shall be merged with and into
the Company, the separate corporate existence of Acquisition Corp. shall cease,
and the Company shall continue as the surviving corporation. The Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
(b) Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Article XI and subject to
the satisfaction or waiver of the conditions set forth in Articles IX and X, the
consummation of the Merger (the "Closing") will take place as promptly as
practicable (and in any event within two business days) after satisfaction or
waiver of the conditions set forth in Articles IX and X, at the offices of
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional Corporation, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, unless another date, time or place is agreed to in
writing by the Company and the Parent. Notwithstanding the foregoing, the
parties hereto acknowledge that the Closing is intended to take place via
facsimile. The date of such Closing is referred to herein as the "Closing Date."
1.2 Effective Time. As promptly as practicable after the satisfaction
or waiver of the conditions set forth in Articles IX and X, the parties hereto
shall cause the Merger to be consummated by filing agreements or certificates of
merger as contemplated by the CGCL and the DGCL in the forms of Exhibit A-1 and
A-2 hereto (collectively, the "Certificates of Merger"), together with any
required related certificates, with the Secretary of State of the State of
California and the Secretary of State of the State of Delaware, in such form as
required by, and executed in accordance with the relevant provisions of, the
CGCL and the DGCL (the time of such filings being the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificates of Merger and
the applicable provisions of the CGCL and the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of the Company and
Acquisition Corp. shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Acquisition Corp. shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; By-Laws.
(a) Articles of Incorporation. Unless otherwise determined by
the Parent prior to the Effective Time, at the Effective Time, the Articles of
Incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended in accordance with the CGCL and such Articles of
Incorporation.
(b) By-Laws. Unless otherwise determined by the Parent prior
to the Effective Time, the By-Laws of the Company, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation
until thereafter amended in accordance with the CGCL, the Articles of
Incorporation of the Surviving Corporation and such By-Laws.
1.5 Directors and Officers. The directors of Acquisition Corp.
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Acquisition Corp. immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
1.6 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other acts or things are necessary or
desirable to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, its right, title or interest in or to any of the rights, properties
or assets of Acquisition Corp. or the Company acquired or to be acquired by
reason of, or as a result of, the Merger, or otherwise to carry out the purposes
of this Agreement, the Surviving Corporation and its proper officers and
directors shall be authorized to execute and deliver, in the name and on behalf
of Acquisition Corp. or the Company, all such deeds, bills of sale, assignments
and assurances and to do, in the name and on behalf of Acquisition Corp. or the
Company, all such other acts and things necessary or desirable to vest, perfect
or confirm any and all right, title or interest in, to or under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out the
purposes of this Agreement.
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES
2.1 Merger Consideration. Except as set forth in Section 2.2(e) hereof,
the consideration payable in the Merger to holders of shares of the Company's
Common Stock, no par value ("Company Common Stock"), shall consist solely of
shares of the Common Stock, $.01 par value per share, of the Parent ("Parent
Common Stock"), such shares of Parent Common Stock to be issuable at the Closing
in accordance with the terms of this Agreement.
2.2 Conversion of Shares.
(a) Conversion of Shares. Each share of Company Common Stock
issued and outstanding as of the Effective Time (other than shares owned by
holders who have properly exercised their rights of appraisal within the meaning
of Chapter 13 of the CGCL ("Dissenting Shares")) shall, by virtue of the Merger
and without any action on the part of the holder thereof, automatically be
converted into that number of shares of Parent Common Stock as shall be obtained
by dividing (A) $20,000,000 (the "Merger Consideration") divided by the number
of Fully Diluted Shares (as hereinafter defined) by (B) the Closing Market Price
(as hereinafter defined), with the resulting quotient being referred to herein
as the "Exchange Ratio." "Fully Diluted Shares" shall be equal to the total
number of outstanding shares of Company Common Stock calculated on a fully
diluted, fully converted basis as though all convertible debt and equity
securities and options (whether vested or unvested) and warrants had been
converted or exercised. The Exchange Ratio shall not change as a result of
fluctuations in the market price of Parent Common Stock between the date of this
Agreement and the Effective Time. The aggregate number of shares of Parent
Common Stock issued pursuant to this Section 2.2(a) shall be referred to in this
Agreement as the "Merger Shares." For purposes of this Agreement, the
term "Closing Market Price" shall mean the average of the last quoted sale price
for shares of Parent Common Stock on The Nasdaq National Market for each of the
five trading days ending immediately prior to the Effective Time. Schedule 2.2
attached hereto sets forth (i) the Closing Market Price, (ii) the Exchange
Ratio, (iii) the aggregate number of Merger Shares and (iv) the aggregate number
of Option Shares (as defined below).
(b) Treasury Shares. Each share of Company Common Stock held
in the Company's treasury as of the Effective Time, if any, shall, by virtue of
the Merger, be canceled without payment of any consideration therefor.
(c) Stock Options. At the Effective Time, all outstanding
options to purchase shares of Company Common Stock (each a "Stock Option"),
whether vested or unvested, shall be deemed assumed by the Parent and deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Stock Option prior to the Effective Time (including terms
and conditions relating to such Stock Option's term, exercisability, vesting
schedule and status as an "incentive stock option" under Section 422 of the
Code), the number (rounded down to the nearest whole number) of shares of Parent
Common Stock equal to the aggregate of that number of shares of Parent Common
Stock (based on the Exchange Ratio) as the holder of such Stock Option would
have been entitled to receive pursuant to the Merger had such holder exercised
such Option in full immediately prior to the Effective Time (not taking into
account whether or not such Option was in fact exercisable). The exercise price
for such Stock Options shall be the price per share equal to (x) the aggregate
exercise price for Company Common Stock otherwise purchasable pursuant to such
Stock Option divided by (y) the number of shares of Parent Common Stock deemed
purchasable pursuant to such Stock Option (the exercise price per share, so
determined, being rounded up to the nearest full cent). No payment shall be made
for fractional shares. The aggregate number of shares of Parent Common Stock
issuable upon the exercise of Options assumed by Parent pursuant to this Section
2.2(c) shall be referred to in this Agreement as the "Option Shares." Any
adjustment to an incentive stock option made under this Section 2.2(c) shall
comply with Section 424(a) of the Code.
(d) Acquisition Corp. Shares. Each share of common stock, par
value $0.01 per share, of Acquisition Corp. issued and outstanding at the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, automatically be converted into one fully paid and
nonassessable share of common stock of the Surviving Corporation, as such shares
of common stock are constituted immediately following the Effective Time.
(e) Dissenting Shares. Any Dissenting Shares shall be
converted into the right to receive from the Surviving Corporation such
consideration as may be determined to be due with respect to each such
Dissenting Share pursuant to Chapter 13 of the CGCL; provided, however, Shares
that are Dissenting Shares at the Effective Time of the Merger and are held by a
holder who shall, after the Effective Time of the Merger, withdraw his demand
for appraisal or lose his right of appraisal as provided in the Chapter 13 of
the CGCL, shall be deemed to be converted, as of the Effective Time of the
Merger, into the right to receive such holder's pro rata
portion of the Merger Shares in accordance with the procedures specified in
Section 2.3. The Company shall give Parent (i) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
instruments served pursuant to Chapter 13 of the CGCL received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under Chapter 13 of the CGCL. The Company will not
voluntarily make any payment with respect to any demands for appraisal and will
not, except with the prior written consent of Parent, settle or offer to settle
any such demands. It is understood and agreed that the obligation to make any
payment under Chapter 13 of the CGCL shall be exclusively that of the Surviving
Corporation and that Parent shall be under no obligation to perform and
discharge any such obligation or to reimburse or make any contribution to the
capital of the Surviving Corporation to enable it to perform and discharge any
such obligation.
2.3 Exchange of Certificates.
(a) At the Closing, certificates (the "Certificates")
representing all of the issued and outstanding shares of Company Common Stock
shall be surrendered for cancellation and termination in the Merger. At the
Effective Time, each Certificate shall be canceled in exchange for a certificate
representing the number of whole shares of Parent Common Stock (other than the
Escrow Shares, as defined below) into which the Company Common Stock evidenced
by the Certificates so surrendered shall have been converted pursuant to Section
2.2(a) of this Agreement. Such certificates representing shares of Parent Common
Stock will be delivered to the Stockholders within ten business days after the
Closing. The surrender of Certificates shall be accompanied by duly completed
and executed Letters of Transmittal in the form of Exhibit B attached hereto.
Until surrendered, each outstanding Certificate which prior to the Effective
Time represented shares of Company Common Stock shall be deemed for all
corporate purposes to evidence ownership of the number of whole shares of Parent
Common Stock into which the shares of Company Common Stock have been converted
but shall, subject to applicable appraisal rights under the CGCL and Section
2.2(e), have no other rights. Subject to appraisal rights under the CGCL and
Section 2.2(e), from and after the Effective Time, the holders of shares of
Company Common Stock shall cease to have any rights in respect of such shares
and their rights shall be solely in respect of the Parent Common Stock into
which such shares of Company Common Stock have been converted.
(b) If any shares of Parent Common Stock are to be issued in
the name of a person other than the person in whose name the Certificate(s)
surrendered in exchange therefor is registered, it shall be a condition to the
issuance of such shares that (i) the Certificate(s) so surrendered shall be
transferable, and shall be properly assigned, endorsed or accompanied by
appropriate stock powers, (ii) such transfer shall otherwise be proper and (iii)
the person requesting such transfer shall pay Parent, or its exchange agent, any
transfer or other taxes payable by reason of the foregoing or establish to the
reasonable satisfaction of Parent that such taxes have been paid or are not
required to be paid. Notwithstanding the foregoing, neither Parent nor the
Company shall be liable to a holder of shares of Company Common Stock for
shares of Parent or the Company issuable to such holder pursuant to the
provisions of Section 2.2(a) of this Agreement that are delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(c) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, Parent shall issue in
exchange for such lost, stolen or destroyed Certificate the shares of Parent
Common Stock issuable in exchange therefor pursuant to the provisions of Section
2.2(a) of this Agreement. The Board of Directors of Parent may in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed Certificate to provide to Parent, at Parent's option,
either a performance bond or an indemnity agreement against any claim that may
be made against Parent with respect to the Certificate alleged to have been
lost, stolen or destroyed.
2.4 No Fractional Securities. No fractional shares of Parent Common
Stock shall be issuable by the Parent upon the conversion of shares of Company
Common Stock in the Merger pursuant to Section 2.2(a) hereof. In lieu of any
such fractional shares, each holder of Company Common Stock who would otherwise
have been entitled to receive a fraction of a share of Parent Common Stock shall
be entitled to receive instead an amount in cash equal to such fraction
multiplied by the Closing Market Price.
2.5 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers of Company Common Stock thereafter on the records of the Company.
2.6 No Further Ownership Rights in Company Stock. The Merger Shares
delivered upon the surrender for exchange of shares of Company Common Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates for shares of Company
Common Stock are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article II.
2.7 Adjustment Event. If, between the date hereof and the Effective
Time, the issued and outstanding shares of Parent Common Stock shall have been
combined, split, reclassified or otherwise changed into a different number of
shares or a different class of shares, an appropriate adjustment to the Exchange
Ratio shall be made to fully reflect such change in such manner as is reasonably
and mutually acceptable to the Parent and the Company.
2.8 Escrow. At the Effective Time, Parent will deposit in escrow on
behalf of the holders of Company Common Stock (pro rata as to each such holder)
certificates and option agreements representing ten percent (10%) of the sum of
the Merger Shares and Option Shares
(which shall reduce the Merger Shares and Option Shares otherwise issuable to
such holders of Company Common Stock (pro rata as to each such holder) under
Section 2.2(a)) registered in the name of US Bank Trust National Association, as
Escrow Agent (collectively, the "Escrow Deposit"). The Escrow Deposit shall be
held as security for the indemnification obligations under Article XI pursuant
to the provisions of an Escrow Agreement (the "Escrow Agreement") in the form of
Exhibit C attached hereto.
2.9 Tax Consequences. For Federal income tax purposes, the parties
intend that Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and that this Agreement shall constitute a "plan of
reorganization" within the meaning of Section 368(a) of the Code. Accordingly,
both prior to and after the Closing, each of the parties agrees that all of its
books and records shall be maintained and all federal, state and local income
tax returns and schedules thereto shall be filed in a manner consistent with the
Merger being qualified as a reverse triangular merger under Section 368(a)(2)(E)
of the Code. Each party shall provide to each other such information, reports,
returns or schedules as may be reasonably required to assist such party in
accounting for and reporting the Merger being so qualified.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE EQUITYHOLDERS
The Company and the Equityholders jointly and severally represent and
warrant to the Parent and Acquisition Corp. as set forth below, subject to the
exceptions set forth in the disclosure schedules attached hereto (the
"Disclosure Schedules"), the section numbers and letters of which correspond to
the section and subsection numbers and letters of this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, any
information disclosed in one section of the Disclosure Schedules shall, should
the existence of the information be relevant to any other section of the
Disclosure Schedules, be deemed to be disclosed in all sections of the
Disclosure Schedules, but only to the extent that the relevance of such
information to such other section is reasonably apparent in the section of the
Disclosure Schedules on which such information is disclosed. The disclosure of
any information shall not be deemed to constitute an acknowledgment that such
information is required to be disclosed in connection with the representations
and warranties made by the Company in this Agreement or that it is material, nor
shall such information be deemed to establish a standard of materiality.
3.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. The Company has no Subsidiaries (as that term is hereinafter
defined). The Company has all requisite corporate power and authority to own,
operate and lease the properties and assets it now owns, operates and leases and
to carry on its business as presently conducted. The Company is duly qualified
to transact business as a foreign corporation and is in good standing in the
jurisdictions set forth in Schedule 3.1, which are the only jurisdictions where
such qualification is required by reason of
the nature of the properties and assets currently owned, operated or leased by
it or the business currently conducted by it, except for such jurisdictions
where the failure to be so qualified would not have a Company Material Adverse
Effect (as defined below). The Company has previously delivered to the Parent
complete and correct copies of its Articles of Incorporation (certified by the
secretary of state of the jurisdiction in which it was formed as of a recent
date) and its ByLaws (certified by the Secretary of the Company as of a recent
date). Except as set forth in Schedule 3.1, neither the Company's Articles of
Incorporation nor its By-Laws have been amended since the date of certification
thereof, nor has any action been taken for the purpose of effecting any
amendment of such instrument. The term "Company Material Adverse Effect" means,
for purposes of this Agreement, any change, event or effect that is, or that
would be, materially adverse to the business, operations, assets, liabilities,
prospects, financial condition or results of operations of the Company.
3.2 Authorization. The Company has full corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly approved by the Board of
Directors and stockholders of the Company, and no other corporate action on the
part of the Company is necessary to approve and authorize the execution and
delivery of this Agreement or (subject to the filing of the Certificates of
Merger pursuant to the CGCL and the DGCL) the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding agreement of the Company,
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in law or in equity.
3.3 Consents and Approvals; No Violations. Subject to (a) the filing of
the Certificates of Merger with the Secretary of State of the State of
California and the Secretary of State of the State of Delaware and (b)
compliance with applicable federal and state securities laws, the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby will not: (i) violate or conflict with any provision of the Articles of
Incorporation or By-Laws of the Company, (ii) breach, violate or constitute an
event of default (or an event which with the lapse of time or the giving of
notice or both would constitute an event of default) under, give rise to any
right of termination, cancellation, modification or acceleration under, or
require any consent or the giving of any notice under, any note, bond,
indenture, mortgage, security agreement, lease, license, franchise, permit,
agreement or other instrument or obligation to which the Company is a party, or
by which the Company or any of its properties or assets may be bound, or result
in the creation of any lien, claim or encumbrance or other right of any third
party of any kind whatsoever upon the properties or assets of the Company
pursuant to the terms of any such instrument or obligation, other than any
breach, violation, default, termination, cancellation, modification or
acceleration which would not have a Company Material Adverse Effect, (iii)
violate or conflict with any law, statute, ordinance, code,
rule, regulation, judgment, order, writ, injunction, decree or other instrument
of any Federal, state, local or foreign court or governmental or regulatory
body, agency or authority applicable to the Company or by which any of its
properties or assets may be bound except for such violations and conflicts which
would not have a Company Material Adverse Effect or (iv) require, on the part of
the Company, any filing or registration with, or permit, license, exemption,
consent, authorization or approval of, or the giving of any notice to, any
governmental or regulatory body, agency or authority, other than any filing,
registration, permit, license, exemption, consent, authorization, approval or
notice which if not obtained would not have a Company Material Adverse Effect.
3.4 Capitalization.
(a) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock, of which 7,000,000 shares are issued
and outstanding. Schedule 3.4(a) sets forth a complete and correct list of the
record and beneficial ownership of the issued and outstanding shares of Company
Common Stock. All of the issued and outstanding shares of Company Common Stock
were duly authorized and validly issued and are fully paid and nonassessable,
and were not issued in violation of any preemptive rights or Federal or state
securities laws. Except as disclosed in Schedule 3.4(a) hereto, the Company has
never repurchased or redeemed any shares of its capital stock, and there are no
amounts owed or which may be owed to any person by the Company as a result of
any repurchase or redemption of shares of its capital stock. Except as disclosed
in Schedule 3.4(a) hereto, there are no agreements, arrangements or
understandings to which the Company is a party or by which it is bound to redeem
or repurchase any shares of its capital stock. Except as set forth in Schedule
3.4(a), there are no outstanding options, warrants or other rights to purchase,
or any securities convertible into or exchangeable for, shares of the capital
stock of the Company, and there are no agreements, arrangements or
understandings to which the Company is a party or by which it is bound pursuant
to which the Company is or may be required to issue additional shares of its
capital stock.
(b) The Company does not own, directly or indirectly, any
equity securities, or options, warrants or other rights to acquire equity
securities, or securities convertible into or exchangeable for equity
securities, of any other corporation, or any partnership interest in any general
or limited partnership or unincorporated joint venture (a "Subsidiary").
3.5 Financial Statements; Business Information. (a) Attached hereto as
Schedule 3.5(a) are (i) the unaudited balance sheets of the Company as of June
30, 1998 and the statements of income for the fiscal period then ended, and (ii)
the unaudited balance sheets of the Company as of March 31, 1999 and the
statements of income of the Company for the fiscal period then ended
(hereinafter collectively referred to as the "Financial Statements"). The
Financial Statements (i) have been prepared from the books and records of the
Company, (ii) have been prepared in accordance with generally accepted
accounting principles consistently applied during the periods covered thereby
except where non-compliance would not be material
in amount or effect, and (iii) present fairly in all material respects the
financial condition and results of operations of the Company as at the dates,
and for the periods, stated therein, except that the interim Financial
Statements are subject to normal year-end adjustments which will not be
individually or in the aggregate material in amount or effect and the Financial
Statements do not include footnotes.
(b) Schedule 3.5(b) attached hereto sets forth certain
statistics regarding the Company's business which are true and correct in all
material respects as of the dates stated in the Schedule. Without limiting the
materiality of any other representations, warranties and covenants of the
Company and the Equityholders contained herein, the Company and the
Equityholders specifically acknowledge that the accuracy of such statistics is
material to the Parent's decision to enter into the transactions contemplated by
this Agreement and to issue the Merger Shares.
(c) As of the Closing Date, the Company shall have cash on
hand in the amount of approximately $185,000.
3.6 Absence of Undisclosed Liabilities. Except (i) as set forth on
Schedule 3.6, (ii) as set forth or reserved against in the balance sheet of the
Company dated as of March 31, 1999, included in the Financial Statements (the
"Balance Sheet") and (iii) for obligations incurred since March 31, 1999 in the
ordinary course of business, which do not individually or in the aggregate
exceed $5,000, the Company does not have any material liabilities or obligations
of any nature, whether accrued, absolute, contingent or otherwise.
3.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 3.7, since December 31, 1998, the Company has carried on its business
in all material respects in the ordinary course and consistent with past
practice. Except as set forth on Schedule 3.7 hereto, since December 31, 1998,
the Company has not: (i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise) except in the ordinary course of
business and consistent with past practice; (ii) experienced any Company
Material Adverse Effect; (iii) made any change in accounting principal or
practice or in its method of applying any such principal or practice, (iv)
suffered any material damage, destruction or loss, whether or not covered by
insurance, affecting its properties, assets or business; (v) mortgaged, pledged
or subjected to any lien, charge or other encumbrance, or granted to third
parties any rights in, any of its assets, tangible or intangible; (vi) sold or
transferred any of its assets, except in the ordinary course of business and
consistent with past practice, or canceled or compromised any debts or waived
any claims or rights of a material nature; (vii) issued any additional shares of
capital stock or any rights, options or warrants to purchase, or securities
convertible into or exchangeable for, shares of its capital stock; (viii)
declared or paid any dividends on or made any distributions (however
characterized) in respect of shares of its capital stock; (ix) repurchased or
redeemed any shares of its capital stock; (x) granted any general or specific
increase in the compensation payable or to become payable to any of their
Employees (as that term is hereinafter defined) or any bonus or service award or
other like benefit, or instituted, increased, augmented
or improved any Benefit Plan (as that term is hereinafter defined); or (xi)
entered into any agreement to do any of the foregoing.
3.8 Legal Proceedings, etc. Except as set forth in Schedule 3.8, there
are no suits, actions, claims, proceedings (including, without limitation,
arbitral or administrative proceedings) or investigations pending or, to the
best knowledge of the Company or the Equityholders, threatened against the
Company or its properties, assets or business or, to the best knowledge of the
Company or the Equityholders, pending or threatened against any of the officers,
directors, employees, agents or consultants of the Company in connection with
the business of the Company. There are no such suits, actions, claims,
proceedings or investigations pending against the Company, or, to the best
knowledge of the Company or the Equityholders, threatened against the Company
challenging the validity or propriety of the transactions contemplated by this
Agreement. There is no judgment, order, injunction, decree or award (whether
issued by a court, an arbitrator or an administrative agency) to which the
Company is a party, or involving the Company's properties, assets or business,
which is unsatisfied or which requires continuing compliance therewith by the
Company.
3.9 Taxes.
(a) Except as set forth in Schedule 3.9, the Company has duly
and timely filed, all Tax returns and other filings in respect of Taxes (as that
term is hereinafter defined) required to be filed by it or prior to the date
hereof, and has in a timely manner paid all Taxes which are (or will be) due for
all periods ending on or before the date hereof, whether or not shown on such
returns, except to the extent the Company has established adequate reserves on
the Balance Sheet for such Taxes. All such Tax returns have been accurately and
completely prepared in all material respects in compliance with all laws, rules
and regulations.
(b) Except as set forth in Schedule 3.9 hereto, there are no
actions or proceedings currently pending or, to the best knowledge of the
Company or the Equityholders, threatened against the Company by any governmental
authority for the assessment or collection of Taxes, no claim for the assessment
or collection of Taxes has been asserted against the Company, and there are no
matters under discussion by the Company with any governmental authority
regarding claims for the assessment or collection of Taxes. Any Taxes that have
been claimed or imposed as a result of any examinations of any tax return of the
Company by any governmental authority are being contested in good faith and have
been disclosed in writing to the Parent. Except as set forth in Schedule 3.9,
there are no agreements or applications by the Company for an extension of time
for the assessment or payment of any Taxes nor any waiver of the statute of
limitations in respect of Taxes. There are no Tax liens on any of the assets of
the Company, except for liens for Taxes not yet due or payable.
(c) For purposes of this Agreement, the terms "Tax" and
"Taxes" shall mean and include any and all United States, state, local, foreign
or other income, sales, use, withholding, employment, payroll, social security,
property taxes and all other taxes of any kind,
deficiencies, fees or other governmental charges, including, without limitation,
any installment payment for taxes and contributions or other amounts determined
with respect to compensation paid to directors, officers, employees or
independent contractors from time to time imposed by or required to be paid to
any governmental authority (including penalties and additions to tax thereon,
penalties for failure to file a return or report, and interest on any of the
foregoing).
(d) There is no agreement, plan or arrangement covering any
employee or independent contractor or former employee or independent contractor
of the Company that, considered individually or considered collectively with any
other such agreement, plan or arrangement, will, or could reasonably be expected
to, give rise directly or indirectly to the payment of any amount that would not
be deductible pursuant to Section 280G of the Code or that would be subject to
an excise tax under Section 4999 of the Code.
(e) The Company is not and has never been a party to or bound
by any tax indemnity agreement, tax sharing agreement, tax allocation agreement
or similar agreement or arrangement and the Company does not have any liability
for Taxes of any person (other than the Company) under Treasury Regulation
1.1502-6 (or any similar provision of state, local or foreign law).
(f) The Company has withheld all amounts from its employees
and other persons required to be withheld under the tax, social security,
unemployment and other withholding provisions of all federal, state, local and
foreign laws.
3.10 Title to Properties and Related Matters. (a) Except as set forth
on Schedule 3.10(a), the Company has good and valid title to all personal
property, tangible or intangible, which the Company purports to own, including
the properties reflected on the Balance Sheet or acquired after the date thereof
(other than properties and assets sold or otherwise disposed of in the ordinary
course of business and consistent with past practice since March 31, 1999), free
and clear of any claims, liens, pledges, security interests or encumbrances of
any kind whatsoever (other than (i) purchase money security interests and common
law vendor's liens, in each case for goods purchased on open account in the
ordinary course of business and having a fair market value of less than $5,000
in each individual case), (ii) liens for Taxes not yet due and payable, and
(iii) such imperfections of title and encumbrances, if any, that are not
material in character, amount or extent and that do not materially detract from
the value, or materially interfere with the use of, the property subject thereto
or affected thereby. Collectively, such property and the Intellectual Property
Rights disclosed on Schedule 3.11 constitute all property, tangible or
intangible, necessary to conduct the Company's business as presently conducted
and as proposed to be conducted.
(b) The Company does not own any real property or any interest
in real property, except as set forth in Schedule 3.10(d).
(c) Schedule 3.10(c) sets forth a list, which is correct and
complete in all material respects, of all equipment, machinery, instruments,
vehicles, furniture, fixtures and other items of personal property currently
owned or leased by the Company with a book value as of March 31, 1999, in each
case of $5,000 or more. All such personal property is physically located in or
about one of the Company's places of business and is owned by the Company or is
leased by the Company under one of the leases set forth in Schedule 3.10(d).
Except as disclosed in Schedule 3.10(c), none of such personal property is
subject to any agreement or commitment for its use by any person other than the
Company. The maintenance and operation of such personal property has been in
material conformance with all applicable laws and regulations except for such
non-conformance as would not have a Company Material Adverse Effect. Except as
set forth on Schedule 3.10(c), there are no assets leased by the Company or
required for the operation of the business of the Company that are owned,
directly or indirectly, by any Related Person (as that term is hereinafter
defined in Section 3.22).
(d) Schedule 3.10(d) sets forth a complete and correct list of
all real property and personal property leases to which the Company is a party.
The Company has previously delivered to the Parent complete and correct copies
of each lease (and any amendments or supplements thereto) listed in Schedule
3.10(d). Except as set forth in Schedule 3.10(d), (i) each such lease is valid
and binding and in full force and effect; except to the extent that applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights may affect such validity or enforceability,
(ii) neither the Company nor (to the best knowledge of the Company or the
Equityholders) any other party is in default under any such lease, and no event
has occurred which constitutes, or with the lapse of time or the giving of
notice or both would constitute, a default by the Company or (to the best
knowledge of the Company or the Equityholders) a default by any other party
under such lease; (iii) to the best knowledge of the Company or the
Equityholders, there are no disputes or disagreements between the Company and
any other party with respect to any such lease; and (iv) there is no requirement
under any such lease that the Company either obtain the lessor's consent to, or
notify the lessor of, the consummation of the transactions contemplated by this
Agreement.
3.11 Intellectual Property; Proprietary Rights; Employee Restrictions.
(a) Set forth on Schedule 3.11 is a list of all registered copyrights, copyright
registrations and copyright applications, trademark registrations and
applications for registration, patents and patent applications, trademarks,
service marks, trade names, Internet domain names, source codes and object codes
used by the Company in the Company's business as presently conducted. The items
listed on Schedule 3.11, together with all other intellectual property rights
owned by the Company and used in connection with or contained in all versions of
the Company's World Wide Web sites (including, without limitation, ▇▇▇.▇▇▇.▇▇▇)
and all licenses, assignments and releases of intellectual property rights of
others in material works embodied in its products, any and all intellectual
property rights, licenses, databases, computer programs and other computer
software user interfaces, know-how, trade secrets, customer lists, proprietary
technology, processes and formulae, source code, object code, algorithms,
architecture, structure, display screens, layouts, development tools,
instructions, templates, marketing materials created by or on
behalf of the Company, inventions, trade dress, logos and designs are referred
to as "Intellectual Property Rights." All Intellectual Property Rights purported
to be owned by the Company which were developed, worked on or otherwise held by
any employee, officer, consultant or otherwise are owned free and clear by the
Company by operation of law or have been validly assigned to the Company. True
and correct copies of all such licenses, assignments and releases of
Intellectual Property Rights have been provided to Parent prior to the date
hereof, all of which are valid and binding agreements of the parties thereto
enforceable in accordance with their terms. All services provided to the Company
by non-employees in respect of the creation, modification or improvement of any
intellectual property asset of the Company (including, without limitation,
software, hardware, copyrightable works and the like) have been performed
pursuant to valid work-for-hire agreements with the Company, each of which is a
valid and binding agreement of the parties thereto, enforceable in accordance
with its terms. The Intellectual Property Rights are sufficient in all material
respects to carry on the business of the Company as presently conducted. The
Company has exclusive ownership of or license to use all Intellectual Property
Rights identified in Schedule 3.11 as owned or licensed by the Company or has
obtained any licenses, releases or assignments reasonably necessary to use all
third parties' Intellectual Property Rights in works embodied in the Company's
products. The present business activities or products of the Company (including,
without limitation, the operation of the Company's Web sites) do not infringe
any Intellectual Property Rights of others. Except as set forth in Schedule
3.11, the Company has not received any notice or other claim from any person
asserting that any of the Company's present activities infringe in any material
respect or may infringe any Intellectual Property Rights of such person.
The Company has the right to use all trade secrets, customer lists, log
files, hardware designs, programming processes, software and other information
required for or incident to its products or its business (including, without
limitation, the operation of its Web sites) as presently conducted in any
material respect and has no reason to believe that any of such information that
is provided to the Company by third parties will not continue to be provided to
the Company on the same terms and conditions as currently exist. The Company has
taken all reasonable measures to protect and preserve the security and
confidentiality of its trade secrets and other confidential information. To the
best knowledge of the Company and the Equityholders, all trade secrets and other
confidential information of the Company are not part of the public domain or
knowledge, nor, to the best knowledge of the Company and the Equityholders, have
they been misappropriated by any person having an obligation to maintain such
trade secrets or other confidential information in confidence for the Company.
To the best knowledge of the Company and the Equityholders, no employee or
consultant of the Company has used any trade secrets or other confidential
information of any other person in the course of their work for the Company.
The Company is the exclusive owner of all right, title and
interest in its Intellectual Property Rights as purported to be owned by the
Company, and to the Company's and the Equityholders' best knowledge, such
Intellectual Property Rights are valid and in full force and effect. No
university, government agency (whether federal or state) or other organization
which sponsored research and development conducted by the Company or has any
claim of right to or ownership of or other encumbrance upon the Intellectual
Property Rights of the Company. The Company is not aware of any infringement by
others of its copyrights or other Intellectual Property Rights in any of its
products, technology or services, or any violation of the confidentiality of any
of its proprietary information. To the Company's and the Equityholders' best
knowledge, the Company is not making unlawful use of any confidential
information or trade secrets of any past or present employees of the Company.
Except as set forth in Schedule 3.11, neither the Company nor,
to the best knowledge of the Company and the Equityholders, any of the Company's
Equityholders or employees, have any agreements or arrangements with current or
former employers of such Equityholders or employees relating to (i) confidential
information or trade secrets of such employers, or (ii) the assignment of rights
by such Equityholders or employees to any inventions, know-how or intellectual
property of any kind. The Company and the Equityholders have previously
delivered to Parent true and correct copies of each agreement listed on Schedule
3.11. No such Equityholders or employees are bound by any consulting agreement
relating to confidential information or trade secrets of another entity that are
being violated by such persons. The activities of the Company's employees on
behalf of the Company do not violate in any material respects any agreements or
arrangements known to the Company or any of the Equityholders which any such
employees or consultants have with former employers or any other entity to whom
such employees or consultants may have rendered consulting services.
(b) All information and content of the Company's World Wide
Web sites (other than information provided by users, customers and advertisers)
is accurate and complete in all material respects, except as set forth on
Schedule 3.11(b). The Company has all franchises, permits, licenses and other
rights and privileges reasonably necessary to permit it to own its property and
to conduct its business as it is presently conducted other than any franchises,
permits, licenses and other rights and privileges which if not held by the
Company would not have a Company Material Adverse Effect or result in a fine or
penalty in excess of $5,000 individually or in the aggregate.
(c) All Intellectual Property Rights used by the Company in
connection with its business, including all object and source code, created or
developed by Daqi (▇▇▇▇▇▇) Lu and/or Weihua (▇▇▇▇▇) Xu while students at the
California Institute of Technolgy (the "School"), are the sole and absolute
property of the Company and were developed on such students' own time, without
the use of the School's computers, technology or funding. The School has no
claim of right to or ownership of or other encumbrance upon such Intellectual
Property Rights developed by Daqi (▇▇▇▇▇▇) Lu and/or Weihua (▇▇▇▇▇) Xu.
3.12 Contracts. (a) Except as set forth in Schedule 3.12(a) (or in
Schedule 3.4, Schedule 3.10(d), Schedule 3.11, or Schedule 3.13(a)), the Company
is not a party to, or subject to:
(i) any contract, arrangement or understanding, or series of related
contracts, arrangements or understandings, which involves annual expenditures or
receipts by the Company of more than $1,000;
(ii) any note, indenture, credit facility, mortgage, security agreement or
other contract, arrangement or understanding relating to or evidencing
indebtedness for money borrowed or a security interest or mortgage in the assets
of the Company;
(iii) any guaranty issued by the Company;
(iv) any contract, arrangement or understanding relating to the
acquisition, issuance or transfer of any securities;
(v) any contract, arrangement or understanding relating to the acquisition,
transfer, distribution, use, development, sharing or license of any technology
or Intellectual Property Rights other than licenses granted in the ordinary
course of business with a term of less than one year;
(vi) any contract, arrangement or understanding granting to any person the
right to use any property or property right of the Company other than licenses
granted in the ordinary course of business with a term of less than one year;
(vii) any contract, arrangement or understanding restricting the Company's
or any Subsidiary's right to (A) engage in any business activity or compete with
any business, or (B) develop or distribute any technology;
(viii) any contract, arrangement or understanding relating to the
employment of, or the performance of services of, any employee, consultant or
independent contractor and pursuant to which the Company is required to pay more
than $1,000 per year;
(ix) any contract, arrangement or understanding with a Related Person (as
that term is hereinafter defined); or
(x) any outstanding offer, commitment or obligation to enter into any
contract or arrangement of the nature described in subsections (i) through (ix)
of this subsection 3.12(a).
(b) The Company has previously made available for inspection and copying to
the Parent complete and correct copies (or, in the case of oral contracts, a
complete and correct description) of each contract (and any amendments or
supplements thereto) listed on Schedule 3.12(a). Except as set forth in Schedule
3.12(b), (i) each contract listed in Schedule 3.12(a) is in full force and
effect; (ii) neither the Company nor (to the best knowledge of the Company or
the Equityholders) any other party is in default under any material contract,
and no event has occurred which constitutes, or with the lapse of time or the
giving of notice or both would constitute, a default by the Company or (to the
best knowledge of the Company or the Equityholders) a default by any other party
under such contract; (iii) to the best knowledge of the Company or the
Equityholders, there are no disputes or disagreements between the Company and
any other party with respect to any material contract; and (iv) each other party
to each material contract has consented or been given notice (or prior to the
Closing shall have consented or been given notice), where such consent or the
giving of such notice is necessary, sufficient that such contract shall remain
in full force and effect following the consummation of the transactions
contemplated by this Agreement without modification in the rights or obligations
of the Company thereunder.
(c) Except as set forth and described in Schedule 3.12(d), the Company has
not issued any warranty or any agreement or commitment to indemnify any person
other than in the ordinary course of business.
3.13 Employees; Employee Benefits.
(a) Schedule 3.13(a) sets forth the names of all current
employees of the Company (the "Employees") and such Employee's job title, the
location of employment of such Employee, such Employee's current salary, the
amount of any bonuses or other compensation paid since December 31, 1997 to such
Employee, the date of employment of such Employee and the accrued vacation time
of such Employee. Schedule 3.13(a) hereto sets forth a true and correct
statement of the liability, if any, of the Company for accrued but unused sick
pay. Except as set forth on Schedule 3.13(a), there are no outstanding loans
from the Company to any officer, director, employee, agent or consultant of the
Company, or to any other Related Person. Schedule 3.13(a) hereto sets forth a
complete and correct description of all severance policies of the Company.
Complete and correct copies of all written agreements with Employees and all
employment policies, and all amendments and supplements thereto, have previously
been delivered or made available to the Parent, and a list of all such
agreements and policies is set forth on Schedule 3.13(a). None of the Employees
has, to the best knowledge of the Company or the Equityholders, indicated a
desire to terminate his or her employment, or any intention to terminate his or
her employment upon a sale of, or business combination relating to, the Company
or in connection with the transactions contemplated by this Agreement. Except as
set forth on Schedule 3.13(a), since March 31, 1999, the Company has not (i)
increased the salary or other compensation payable or to become payable to or
for the benefit of any of the Employees, (ii) increased the term or tenure of
employment for any Employee, except in the ordinary course of business
consistent with past practice, (iii) increased the amounts payable to any of the
Employees upon the termination of any such person's employment or (iv) adopted,
increased, augmented or improved benefits granted to or for the benefit of any
of the Employees under any Benefit Plan.
(b) Except as disclosed on Schedule 3.13(b), the Company has
complied in all material respects with Title VII of the Civil Rights Act of
1964, as amended, the Age
Discrimination in Employment Act, as amended, the Fair Labor Standards Act, as
amended, the Immigration Reform and Control Act of 1986, and all applicable
laws, rules and regulations governing payment of minimum wages and overtime
rates, the withholding and payment of taxes from compensation, discriminatory
practices with respect to employment and discharge, or otherwise relating to the
conduct of employers with respect to Employees or potential employees, and there
have been no claims made or, to the best knowledge of the Company or the
Equityholders, threatened thereunder against the Company arising out of,
relating to or alleging any violation of any of the foregoing. Except as
disclosed in Schedule 3.13(b), there are no material controversies, strikes,
work stoppages, picketing or disputes pending or, to the best knowledge of the
Company or the Equityholders, threatened between the Company and any of the
Employees or Former Employees; no labor union or other collective bargaining
unit represents or has ever represented any of the Employees, including any
"leased employees" (within the meaning of Section 414(n) of the Code); no
organizational effort by any labor union or other collective bargaining unit
currently is under way or, to the best knowledge of the Company or the
Equityholders, threatened with respect to any Employees; and the consent of no
labor union or other collective bargaining unit is required to consummate the
transactions contemplated by this Agreement.
(c) Schedule 3.13(c) sets forth a list of each material
defined benefit and defined contribution plan, stock ownership plan, employment
or consulting agreement, executive compensation plan, bonus plan, incentive
compensation plan or arrangement, deferred compensation agreement or
arrangement, agreement with respect to temporary employees or "leased employees"
(within the meaning of Section 414(n) of the Code), vacation pay, sickness,
disability or death benefit plan (whether provided through insurance, on a
funded or unfunded basis or otherwise), employee stock option, stock
appreciation rights or stock purchase plan, severance pay plan, arrangement or
practice, employee relations policy, practice or arrangement, and each other
employee benefit plan, program or arrangement, including, without limitation,
each "employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which has been
maintained by the Company for the benefit of or relating to any of the Employees
or to any Former Employees or their dependents, survivors or beneficiaries,
whether or not legally binding, whether written or oral or whether express or
implied, all of which are hereinafter referred to as the "Benefit Plans."
(d) Except as set forth on Schedule 3.13(d), each Benefit Plan
which is an "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) and which is intended to meet the requirements of Section 401(a) of the
Code meets such requirements; the trust, if any, forming part of such plan is
exempt from U.S. federal income tax under Section 501(a) of the Code; a
favorable determination letter has been issued by the Internal Revenue Service
(the "IRS") with respect to each plan and trust and each amendment thereto; and
nothing has occurred since the date of such determination letter that would
adversely affect the qualification of such plan; no Benefit Plan is a "voluntary
employees beneficiary association" (within the meaning of section 501(c)(9) of
the Code) and there have been no other "welfare benefit funds" (within the
meaning of Section 419 of the Code) relating to Employees or Former Employees;
no event or
condition exists with respect to any Benefit Plan that could subject the Company
to any material Tax under Section 4980B of the Code. With respect to each
Benefit Plan, the Company has heretofore delivered or made available to the
Parent complete and correct copies of the following documents, where applicable
and to the extent available: (i) the most recent annual report (Form 5500
series), together with schedules, as required, filed with the IRS, and any
financial statements and opinion required by Section 103(a)(3) of ERISA, (ii)
the most recent determination letter issued by the IRS, (iii) the most recent
summary plan description and all modifications, as well as all other
descriptions distributed to Employees or set forth in any manuals or other
documents, (iv) the text of the Benefit Plan and of any trust, insurance or
annuity contracts maintained in connection therewith and (v) the most recent
actuarial report, if any, relating to the Benefit Plan.
(e) There is no agreement, plan or arrangement covering any
employee or independent contractor or former employee or independent contractor
of the Company that considered individually or considered collectively with any
other such agreement, plan or arrangement, will, or could reasonably be expected
to, give rise directly or indirectly to the payment of any amount as a result of
the Merger that would not be deductible pursuant to Section 280G of the Code or
that would be subject to an excise tax under Section 4999 of the Code.
3.14 Compliance with Applicable Law. The Company is not in violation in
any material respect of any applicable safety, health, environmental or other
law, statute, ordinance, code, rule, regulation, judgment, order, injunction,
writ or decree of any Federal, state, local or foreign court or governmental or
regulatory body, agency or authority having, asserting or claiming jurisdiction
over it or over any part of its business, operations, properties or assets,
except for any violation that would not have a Company Material Adverse Effect
or result in a fine or penalty in excess of $10,000 individually or in the
aggregate. The Company has not received any notice alleging any such violation,
nor to the best knowledge of the Company or any Equityholders, is there any
inquiry, investigation or proceedings relating thereto.
3.15 Ability to Conduct the Business. There is no agreement,
arrangement or understanding, nor any judgment, order, writ, injunction or
decree of any court or governmental or regulatory body, agency or authority
applicable to the Company or to which the Company is a party or by which it (or
any of its properties or assets) is bound, that will prevent the use by the
Surviving Corporation, after the Effective Time, of the properties and assets
owned by, the business conducted by or the services rendered by the Company on
the date hereof, in each case on substantially the same basis as the same are
used, owned, conducted or rendered on the date hereof. The Company has in force,
and is in compliance with, in all material respects, all material governmental
permits, licenses, exemptions, consents, authorizations and approvals used in or
required for the conduct of their business as presently conducted, all of which
shall continue in full force and effect, without requirement of any filing or
the giving of any notice and without modification thereof, following the
consummation of the transactions contemplated hereby. The Company has not
received any notice of, and to the best knowledge of the Company
or any Equityholder, there are no inquiries, proceedings or investigations
relating to or which could result in the revocation or modification of any such
permit, license, exemption, consent, authorization or approval.
3.16 Major Customers. Schedule 3.16 sets forth a complete and correct
list of the ten largest advertising customers of the Company, in terms of
revenue recognized in respect of such customers during the three (3) months
ended March 31, 1999, showing the amount of revenue recognized for each such
customer during such period. Except as set forth and described in Schedule 3.16,
to the best knowledge of the Company or any Equityholders, the Company has not
received any notice or other communication (written or oral) from any of the
customers listed in Schedule 3.16 hereto terminating or reducing in any material
respect, or setting forth an intention to terminate or reduce in the future, or
otherwise reflecting a material adverse change in, the business relationship
between such customer and the Company.
3.17 Consultants, Sales Representatives and Other Agents. Schedule 3.17
hereto sets forth a complete and correct list of the names and addresses of each
consultant, sales representative or other agent (other than any such person
performing solely clerical functions) currently engaged by the Company who is
not an employee of the Company, the commission rates or other compensation
applicable with respect to each such person and the amount of commissions or
other compensation earned by each such person for the year ended December 31,
1998. Complete and correct copies of all current agreements between the Company
and any such person have previously been delivered or made available by the
Company to the Parent.
3.18 Accounts Receivable. All accounts receivable of the Company
reflected on the Balance Sheets (i) arose from bona fide transactions in the
ordinary course of business and consistent with past practice, and (ii) except
as set forth on Schedule 3.18, are owned by the Company free and clear of any
claim, security interest, lien or other encumbrance, and (iii) are accurately
and fairly reflected on the Balance Sheets, or, with respect to accounts
receivable of the Company created after March 31, 1999, are accurately and
fairly reflected in the books and records of the Company. The reserves for bad
debts reflected on the Balance Sheets are adequate and were calculated in
accordance with generally accepted accounting principles consistent with past
practice.
3.19 Insurance. Schedule 3.19 hereto is a true and complete list of all
insurance policies carried by the Company with respect to its business, together
with, in respect of each such policy, the name of the insurer, the number of the
policy, the annual policy premium payable therefor, the limits of coverage, the
deductible amount (if any), the expiration date thereof and each pending claim
thereunder. Complete and correct copies of each certificate of insurance have
previously been delivered or made available by the Company to the Parent. All
such policies are in full force and effect. All premiums due thereon have been
paid in a timely manner.
3.20 Bank Accounts; Powers of Attorney. Schedule 3.20 sets forth a complete
and correct list showing:
(i) all bank accounts of the Company, together with, with respect to each
such account, the account number, the names of all signatories thereof, the
authorized powers of each such signatory and the approximate balance thereof on
the date of this Agreement; and
(ii) the names of all persons holding powers of attorney from the Company
and a summary statement of the terms thereof.
3.21 Minute Books, etc. The minute books, stock certificate book and
stock ledger of the Company are complete and correct in all material respects.
The minute books of the Company contain accurate and complete records of all
meetings or written consents to action of the Board of Directors and
stockholders of the Company and accurately reflect all corporate actions of the
Company which are required by law to be passed upon by the Board of Directors or
stockholders of the Company.
3.22 Related Person Indebtedness and Contracts. Schedule 3.22 sets
forth a complete and correct summary of all contracts, commitments, arrangements
and understandings not described elsewhere in this Agreement between the Company
and any of the following (collectively, "Related Persons"): (i) the
Equityholders; (ii) the spouses and children of any of the Equityholders
(collectively, "near relatives"); (iii) any trust for the benefit of any of the
Equityholders or any of their respective near relatives; or (iv) any
corporation, partnership, joint venture or other entity or enterprise owned or
controlled by any of the Equityholders or by any of their respective near
relatives. All amounts contributed by the Equityholders to the Company have been
treated as contributions to Company equity and have not been treated as, nor do
they constitute, indebtedness of the Company to its Equityholders.
3.23 Brokers; Payments. Except as set forth on Schedule 3.23, no
broker, investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or the Equityholders. The
Company has suspended or terminated, and has the legal right to terminate or
suspend, all negotiations and discussions of Acquisition Transactions (as
defined in Section 6.3) with parties other than Parent. No valid claim exists
against the Company or, based on any action by the Company, against the
Surviving Corporation or the Parent for payment of any "topping," "breakup" or
"bust-up" fee or any similar compensation or payment arrangement as a result of
the transactions contemplated hereby.
3.24 Company Action. The Board of Directors of the Company, by
unanimous written consent or at a meeting duly called and held, has (i)
determined that the Merger is fair and in the best interests of the Company and
its stockholders, (ii) approved the Merger and this Agreement
in accordance with the provisions of the CGCL, and (iii) directed that this
Agreement and the Merger be submitted to the Company stockholders for their
approval and resolved to recommend that the Company's stockholders vote in favor
of the approval of this Agreement and the Merger. The stockholders of the
Company have approved the Merger and this Agreement in accordance with the
provisions of the CGCL.
3.25 Year 2000 Matters. The management information systems (including
all computer hardware and software) owned, licensed or otherwise used by the
Company will not perform differently and experience any material malfunctions or
usage problems due to the change in the calendar year from 1999 to the year
2000, and with respect to any computer hardware or software licensed or
otherwise used by the Company which are supplied by third parties, the foregoing
representation is limited to the Company's best knowledge of the capabilities of
such hardware and software.
3.26 Disclosure. No representation or warranty by the Company or the
Equityholders contained in this Agreement and no statement contained, when
considered together as a whole, in any of the Disclosure Schedules delivered or
to be delivered pursuant to this Agreement by the Company contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary to make the statements contained therein, in light
of the circumstances under which they are made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE EQUITYHOLDERS
4.1 Authorization; etc. The Equityholders jointly and severally
represent and warrant to the Parent and Acquisition Corp. as follows:
(i) Each of the Equityholders is the sole and exclusive record and
beneficial owner of the shares or options to purchase shares of the Company's
capital stock set forth opposite his or her name in Schedule 3.4 hereto, free
and clear of any claims, liens, pledges, options, rights of first refusal or
other encumbrances or restrictions of any nature whatsoever (other than
restrictions on transfer imposed under applicable securities laws), and, except
as set forth on Schedule 3.4 hereto, there are no agreements, arrangements or
understandings to which such Equityholder is a party (other than this Agreement)
involving the purchase, sale or other acquisition or disposition of the shares
owned by such Equityholder; (ii) such Equityholder shall (A) concurrently with
such Equityholder's execution and delivery of this Agreement, execute and
deliver to Parent a written consent in which such Equityholder voted all shares
of capital stock owned by such Equityholder in favor of the Merger and the
adoption of this Agreement by the Company, (B) at the Effective Time, deliver or
cause to be delivered to the Parent certificates representing all shares of
Company Common Stock owned by such Equityholder, each such certificate to be
duly endorsed for transfer and free and clear of any claims, liens, pledges,
options, rights of first refusal or other encumbrances or restrictions of any
nature whatsoever
(other than restrictions imposed under applicable securities laws); (iii) such
Equityholder has all necessary legal capacity, right, power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and this Agreement constitutes a valid and binding
obligation of such Equityholder enforceable in accordance with its terms, except
to the extent that enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting the enforcement
of creditors, rights generally and by general principles of equity, regardless
of whether such enforceability is considered in a proceeding in law or in
equity; and (iv) the execution and delivery of this Agreement by such
Equityholder and the consummation of the transactions contemplated hereby will
not (A) violate or conflict with any provision of any partnership agreement or
other constitutional documents of any such Equityholder that is constituted as a
general or limited partnership, (B) breach, violate or constitute an event of
default (or an event which with the lapse of time or the giving of notice or
both would constitute an event of default) under, give rise to any right of
termination, cancellation, modification or acceleration under or require any
consent or the giving of any notice under, any note, bond, indenture, mortgage,
security agreement, lease, license, franchise, permit, agreement or other
instrument or obligation to which such Equityholder is a party, or by which such
Equityholder or the shares of Company Stock held by such Equityholder may be
bound, or result in the creation of any material lien, claim or encumbrance or
other right of any third party of any kind whatsoever upon the properties or
assets of such Equityholder pursuant to the terms of any such instrument or
obligation, which breach, violation or event of default would have a material
adverse effect on such Equityholder's ability to perform such Equityholder's
obligations hereunder, or (C) to such Equityholder's best knowledge, violate or
conflict with any law, statute, ordinance, code, rule, regulation, judgment,
order, writ, injunction, decree or other instrument of any court or governmental
or regulatory body, agency or authority applicable to such Equityholder or by
which such the shares of or options to purchase Company Stock held by such
Equityholder may be bound.
4.2 Parent Common Stock.
Each Stockholder acknowledges, represents and warrants to the Parent and
Acquisition Corp. as follows:
(i) Such Stockholder understands that the shares of Parent Common Stock to
be issued to such Stockholder in the Merger will not have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or any state
securities law by reason of specific exemptions under the provisions thereof
which depend in part upon the other representations and warranties made by the
Stockholder in this Agreement. Such Stockholder understands that the Parent is
relying upon the Stockholder's representation and warranties contained in this
Section 4.2 for the purpose of determining whether this transaction meets the
requirements for such exemptions.
(ii) Such Stockholder has such knowledge, skill and experience in business,
financial and investment matters so that the Stockholder is capable of
evaluating the
merits and risks of an investment in the Parent Common Stock pursuant to the
transactions contemplated by this Agreement or to the extent that the
Stockholder has deemed it appropriate to do so, the Stockholder has relied upon
appropriate professional advice regarding the tax, legal and financial merits
and consequences of an investment in Parent Common Stock pursuant to the
transactions contemplated by this Agreement.
(iii) Such Stockholder has made, either alone or together with the
Stockholder's advisors, such independent investigation of the Parent, its
management and related matters as the Stockholder deems to be, or such advisors
have advised to be, necessary or advisable in connection with an investment in
the Parent Common Stock through the transactions contemplated by this Agreement;
and the Stockholder and advisors have received all information and data that the
Stockholder and such advisors believe to be necessary in order to reach an
informed decision as to the advisability of an investment in the Parent Common
Stock pursuant to the transactions contemplated by this Agreement.
(iv) Such Stockholder has reviewed the Stockholder's financial condition
and commitments, alone and together with the Stockholder's advisors, and, based
on such review, the Stockholder is satisfied that (A) the Stockholder has
adequate means of providing for the Stockholder's financial needs and possible
contingencies and has assets or sources of income which, taken together, are
more than sufficient so that he could bear the risk of loss of the Stockholder's
entire investment in the Parent Common Stock, (B) the Stockholder has no present
or contemplated future need to dispose of all or any portion of the Parent
Common Stock to satisfy any existing or contemplated undertaking, need or
indebtedness, and (C) the Stockholder is capable of bearing the economic risk of
an investment in the Parent Common Stock for the indefinite future. Such
Stockholder shall furnish any additional information about the Stockholder
reasonably requested by the Parent to assure the compliance of this transaction
with applicable federal and state securities laws.
(v) Such Stockholder understands that the shares of the Parent Common Stock
to be received by the Stockholder in the transactions contemplated hereby will
be "restricted securities" under applicable federal securities laws and that the
Securities Act and the rules of the Securities and Exchange Commission (the
"SEC") promulgated thereunder provide in substance that the Stockholder may
dispose of such shares only pursuant to an effective registration statement
under the Securities Act or an exemption from registration if available. Such
Stockholder further understands that, except as provided in Article XII, the
Parent has no obligation or intention to register the sale of any of the shares
of the Parent Common stock to be received by the Stockholder in the transactions
contemplated hereby, or take any other action so as to permit sales pursuant to,
the Securities Act. Accordingly, except as provided in Article XIII, the
Stockholder understands that the Stockholder may dispose of such shares only in
transactions which are of a type exempt from registration under the Securities
Act, including (without limitation) a "private placement," in which event the
transferee will acquire such shares as "restricted securities" and subject to
the same limitations as in the hands of the Stockholder. Such Stockholder
further understands that applicable state securities laws may
impose additional constraints upon the sale of securities. As a consequence, the
Stockholder understands that the Stockholder may have to bear the economic risk
of an investment in the Parent Common Stock to be received by the Stockholder
pursuant to the transactions contemplated hereby for an indefinite period of
time.
(vi) Except as provided in Article XIII, such Stockholder is acquiring
shares of the Parent Common Stock pursuant to the transactions contemplated
hereby for investment only and not with a view to or intention of or in
connection with any resale or distribution of such shares or any interest
therein.
(vii) The certificate(s) evidencing the shares of the Parent Common
Stock to be issued pursuant to the transactions contemplated hereby shall bear
the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
any state securities laws and may not be sold or transferred
in the absence of such registration or an exemption therefrom
under the Securities Act of 1933, as amended, and applicable
state securities laws."
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION CORP.
The Parent and Acquisition Corp. jointly and severally represent and
warrant to the Company that:
5.1 Corporate Organization. Each of the Parent and Acquisition Corp. is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of the Parent and Acquisition Corp. has all
requisite corporate power and authority to own, operate and lease the properties
and assets it now owns, operates and leases and to carry on its business as
presently conducted. The Parent and Acquisition Corp. are each duly qualified to
transact business as a foreign corporation and are each in good standing in the
jurisdictions set forth opposite their respective names in Schedule 5.1, which
are the only jurisdictions where such qualification is required by reason of the
nature of the properties and assets currently owned, operated or leased by the
Parent or Acquisition Corp. or the business currently conducted by them, except
for such jurisdictions where the failure to be so qualified would not have a
Go2Net Material Adverse Effect (as defined below). Acquisition Corp. is a
corporation newly formed by Parent and has not conducted any business other than
as expressly set forth in or contemplated by this Agreement. The Parent has
previously delivered to the Company complete and correct copies of (i) its
Certificate of Incorporation (certified by the Secretary of State of Delaware as
of a recent date) and its By-Laws (certified by the Secretary of
the Parent as of a recent date) and (ii) the Certificate of Incorporation of
Acquisition Corp. and all amendments thereto to the date hereof (certified by
the Secretary of State of the State of Delaware as of a recent date) and the
By-Laws of Acquisition Corp. (certified by the secretary of Acquisition Corp. as
of a recent date). Neither the Certificate of Incorporation nor the By-Laws of
the Parent or Acquisition Corp. has been amended since the respective dates of
certification thereof, nor has any action been taken for the purpose of
effecting any amendment of such instruments. The term "Go2Net Material Adverse
Effect" means for purposes of this Agreement, any change, event or effect that
is, or would be, materially adverse to the business, operation, assets,
liabilities, financial condition or results of operations of the Parent and
Acquisition Corp., taken as a whole.
5.2 Authorization. Each of the Parent and Acquisition Corp. has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly approved by the Boards of Directors of the Parent and Acquisition
Corp. and by the Parent as the sole stockholder of Acquisition Corp., and no
other corporate proceedings on the part of the Parent or Acquisition Corp. are
necessary to approve and authorize the execution and delivery of this Agreement
or (subject to the filing of the Certificates of Merger pursuant to the CGCL and
the DGCL) the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Parent and Acquisition
Corp. and constitutes the valid and binding agreement of the Parent and
Acquisition Corp., enforceable in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting the enforcement
of creditors' rights generally and by general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or in
law).
5.3 Consents and Approvals; No Violations. Subject to (a) the filing of
Certificates of Merger with the Secretary of State of the State of California
and the Secretary of State of the State of Delaware and (b) compliance with
applicable federal and state securities laws, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not:
(i) violate or conflict with any provisions of the Certificate of Incorporation
or By-Laws of the Parent or Acquisition Corp.; (ii) breach, violate or
constitute an event of default (or an event which with the lapse of time or the
giving of notice or both would constitute an event of default) under, give rise
to any right of termination, cancellation, modification or acceleration under,
or require any consent or the giving of any notice under, any note, bond,
indenture, mortgage, security agreement, lease, license, franchise, permit,
agreement or other instrument or obligation to which the Parent or Acquisition
Corp. are parties, or by which any of them or any of their respective properties
or assets may be bound, or result in the creation of any lien, claim or
encumbrance of any kind whatsoever upon the properties or assets of the Parent
or Acquisition Corp. pursuant to the terms of any such instrument or obligation,
other than any breach, violation, default, termination, cancellation,
modification or acceleration which would not have a Go2Net Material Adverse
Effect; (iii) violate or conflict with any law,
statute, ordinance, code, rule, regulation, judgment, order, writ, injunction or
decree or other instrument of any Federal, state, local or foreign court or
governmental or regulatory body, agency or authority applicable to the Parent or
Acquisition Corp. or by which any of their respective properties or assets may
be bound, except for such violations or conflicts which would not have a Go2Net
Material Adverse Effect; or (iv) require, on the part of the Parent or
Acquisition Corp., any filing or registration with, or permit, license,
exemption, consent, authorization or approval of, or the giving of any notice
to, any governmental or regulatory body, agency or authority other than any
filing, registration, permit, license, exemption, consent, authorization,
approval or notice which if not obtained or made would not have a Go2Net
Material Adverse Effect.
5.4 Capitalization. (a) The authorized capital stock of the Parent
consists of 50,000,000 shares of Parent Common Stock, of which 12,962,313 shares
are issued and outstanding as of April 26, 1999 and 1,000,000 shares of
Preferred Stock, of which 300,000 shares are designated Series A Convertible
Preferred Stock and of which 167,507 shares are issued and outstanding as of
April 26, 1999. All of the issued and outstanding shares of Parent Common Stock
are (and all shares of Parent Common Stock to be issued in connection with the
Merger, when issued in accordance with this Agreement, shall be) duly
authorized, validly issued, fully paid and nonassessable, and none of such
shares has been issued in violation of any applicable preemptive rights. There
are no agreements or commitments to which the Parent is a party or by which it
is bound for the redemption or repurchase of any shares of its capital stock.
Except for options issued under the Parent's employee stock option plans,
including those assumed in connection with prior acquisition transactions
(collectively, the "Stock Option Plans"), and except for 132,493 shares of
Series A Preferred Stock required to be issued to Vulcan Ventures Incorporated
pursuant to a Stock Purchase Agreement dated as of March 15, 1999, there are no
outstanding options, warrants or other rights to purchase, or securities
convertible into or exchangeable for, shares of the capital stock of the Parent,
and (except as contemplated by this Agreement and except with respect to options
issued under the Stock Option Plans) there are no agreements or commitments to
which the Parent is a party or by which it is bound pursuant to which the Parent
is or may become obligated to issue additional shares of its capital stock.
(b) The authorized capital stock of Acquisition Corp. consists
of 1,000 shares of common stock, par value $0.01 per share, of which 100 shares
are issued and outstanding, all of which shares are owned beneficially and of
record by the Parent. There are no outstanding options, warrants or other rights
to purchase, or securities convertible into or exchangeable for, shares of the
capital stock of Acquisition Corp., and there are no agreements or commitments
to which Acquisition Corp. is a party or by which it is bound pursuant to which
Acquisition Corp. is or may become obligated to issue additional shares of its
capital stock.
5.5 SEC Reports and Financial Statements. The Parent has heretofore
delivered or made available to the Company complete and correct copies of all
reports and other filings filed by the Parent with the SEC pursuant to the
Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Acts") since and including the filing date of the Registration
Statement with respect to the Parent's initial public offering (such reports and
other filings collectively referred to herein as the "SEC Filings"). The SEC
Filings constitute all of the documents required to be filed by the Parent under
the SEC Acts with the SEC since such date. All documents required to be filed as
exhibits to the SEC Filings have been so filed, and all contracts so filed as
exhibits are in full force and effect, except those which are expired in
accordance with their terms, and neither Parent nor any of its subsidiaries is
in default thereunder. As of their respective dates, the SEC Filings 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. The
audited financial statements of the Parent included in the SEC Filings comply in
all material respects with the published rules and regulations of the SEC with
respect thereto, and such audited financial statements (i) were prepared from
the books and records of the Parent, (ii) were prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated therein or in the notes or schedules thereto) and (iii)
present fairly the financial position of the Parent as at the dates thereof and
the results of operations and cash flows (or changes in financial position, for
the fiscal year ended September 30, 1998 and earlier years) for the periods then
ended. The unaudited financial statements included in the SEC Filings comply in
all material respects with the published rules and regulations of the SEC with
respect thereto; and such unaudited financial statements (i) were prepared from
the books and records of the Parent, (ii) were prepared in accordance with
generally accepted accounting principles, except as otherwise permitted under
the Exchange Act and the rules and regulations thereunder, on a consistent basis
(except as may be indicated therein or in the notes or schedules thereto) and
(iii) present fairly the financial position of the Parent as at the dates
thereof and the results of operations and cash flows (or changes in financial
condition) for the periods then ended, subject to normal year-end adjustments
and any other adjustments described therein or in the notes or schedules
thereto. The foregoing representations and warranties in this Section 5.5 shall
also be deemed to be made with respect to all filings made with the SEC on or
before the Effective Time.
5.6 Litigation. Except as set forth in Schedule 5.6 hereto, there are
no suits, actions, claims, proceedings (including, without limitation, arbitral
or administrative proceedings) or investigations pending or, to the knowledge of
the Parent and Acquisition Corp., threatened against the Parent, Acquisition
Corp. or their respective properties, assets or business or, to the knowledge of
the Parent and Acquisition Corp., pending or threatened against any of their
respective officers, directors, employees, agents or consultants in connection
with their respective businesses. There are no such suits, actions, claims,
proceedings or investigations pending, or, to the knowledge of the Parent and
Acquisition Corp., threatened challenging the validity or propriety of the
transactions contemplated by this Agreement. There is no judgment, order,
injunction, decree or award (whether issued by a court, an arbitrator or an
administrative agency) to which either the Parent or Acquisition Corp. is a
party, or involving the Parent's or
Acquisition Corp.'s respective properties, assets or business, which is
unsatisfied or which requires continuing compliance therewith by the Parent or
Acquisition Corp.
5.7 Compliance with Applicable Law. Except as set forth in Schedule 5.7
the Parent is not in violation of any applicable safety, health, environmental
or other law, statute, ordinance, code, rule, regulation, judgment, order,
injunction, writ or decree of any Federal, state, local or foreign court or
governmental or regulatory body, agency or authority having, asserting or
claiming jurisdiction over it or over any part of its business, operations,
properties or assets, except where any such violation would not have a Go2Net
Material Adverse Effect. The Parent has not received any notice alleging any
such violation, nor to the knowledge of the Parent, is there any inquiry,
investigation or proceedings relating thereto.
5.8 Brokers; Payments. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of the Parent or
Acquisition Corp.
5.9 Disclosure. No representation or warranty by the Parent or
Acquisition Corp. contained in this Agreement and no statement contained in any
of the Disclosure Schedules delivered or to be delivered pursuant to this
Agreement by Parent or Acquisition Corp. contains or will contain, when
considered together as a whole, any untrue statement of a material fact or omits
or will omit to state any material fact necessary to make the statements
contained therein not misleading, in light of the circumstances under which they
were made.
ARTICLE VI
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME
6.1 Conduct of Business of the Company. During the period commencing on
the date hereof and continuing until the Effective Time, the Company and the
Equityholders agree that the Company, except as otherwise expressly contemplated
by this Agreement or agreed to in writing by the Parent:
(a) will carry on its business only in the ordinary course and consistent
with past practice;
(b) will not declare or pay any dividend on or make any other
distribution (however characterized) in respect of shares of its capital stock;
(c) will not, directly or indirectly, redeem or repurchase, or agree to
redeem or repurchase, any shares of its capital stock;
(d) will not amend its Certificate of Incorporation or By-Laws;
(e) will not issue, or agree to issue, any shares of its capital stock, or
any options, warrants or other rights to acquire shares of its capital stock, or
any securities convertible into or exchangeable for shares of its capital stock;
(f) will not combine, split or otherwise reclassify any shares of its
capital stock;
(g) will not form a Subsidiary;
(h) will use its commercially reasonable best efforts to preserve intact
its present business organization, keep available the services of its officers
and key employees and preserve its relationships with clients and others having
business dealings with it to the end that its goodwill and ongoing business
shall not be materially impaired at the Effective Time;
(i) will not (i) make any capital expenditures individually in excess of
$4,000 or in the aggregate in excess of $8,000, (ii) enter into any license,
distribution, OEM, reseller, joint venture or other similar agreement, (iii)
enter into or terminate any lease of, or purchase or sell, any real property,
(iv) enter into any leases of personal property involving individually in excess
of $4,000 annually or in the aggregate in excess of $8,000 annually, (v) incur
or guarantee any additional indebtedness for borrowed money, (vi) create or
permit to become effective any security interest, mortgage, lien, charge or
other encumbrance on its properties or assets, or (vii) enter into any agreement
to do any of the foregoing;
(j) will not adopt or amend any Benefit Plan for the benefit
of Employees, or increase the salary or other compensation (including, without
limitation, bonuses or severance compensation) payable or to become payable to
its Employees or accelerate, amend or change the period of exercisability or the
vesting schedule of options granted under any stock option plan or agreements
except as specifically required by the terms of such plans or agreements, or
enter into any agreement to do any of the foregoing;
(k) will not accelerate receivables or delay payables;
(l) will promptly advise the Parent of the commencement of, or threat of
(to the extent that such threat comes to the knowledge of the Company, or any of
the Equityholder), any claim, action, suit, proceeding or investigation against,
relating to or involving the Company or any of its Subsidiaries or any of their
directors, officers, employees, agents or consultants in connection with their
businesses or the transactions contemplated hereby that could reasonably be
expected to have a Company Material Adverse Effect;
(m) will use its commercially reasonable efforts to maintain in full force
and effect all insurance policies maintained by the Company on the date hereof;
and
(n) will not enter into any agreement to dissolve, merge, consolidate or,
except in the ordinary course, sell any material assets of the Company, or
acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial equity interest in or substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership or other business
organization or division, or otherwise acquire or agree to acquire any assets in
excess of $1,000 in the aggregate.
6.2 Conduct of Business of Acquisition Corp. During the period
commencing on the date hereof and continuing until the Effective Time,
Acquisition Corp. shall not engage in any activities of any nature except as
provided in or contemplated by this Agreement.
6.3 Conduct of Parent and Acquisition Corp. During the period
commencing on the date hereof and continuing until the Effective Time, neither
the Parent not Acquisition Corp. will take any action which would cause the
Merger to fail to qualify as a reorganization under the provisions of Section
368(a) of the Code.
6.4 Other Negotiations. Neither the Company nor any of the
Equityholders will (nor will they permit any of their respective officers,
directors, employees, agents, partners and affiliates on their behalf to) take
any action to solicit, initiate, seek, encourage or support any inquiry,
proposal or offer from, furnish any information to, or participate in any
discussions or negotiations with, any corporation, partnership, person or other
entity or group (other than Parent) regarding any acquisition of the Company,
any merger or consolidation with or involving the Company, or any acquisition of
any material portion of the stock or assets of the Company, or any equity or
debt financing of the Company or any material license of Intellectual Property
Rights (any of the foregoing being referred to in this Agreement as an
"Acquisition Transaction") or enter into an agreement concerning any Acquisition
Transaction with any party other than Parent. If between the date of this
Agreement and the termination of this Agreement pursuant to Article XI, the
Company receives from a third party any offer to negotiate or consummate an
Acquisition Transaction, the Company shall (i) notify Parent immediately (orally
and in writing) of such offer, including the identity of such party and the
terms of any proposal therein, and (ii) notify such third party of the Company's
obligations under this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access to Properties and Records. The Company and the Parent will
provide each other and their respective accountants, counsel and other
authorized advisors, with reasonable access, during business hours, to their
premises and properties and their books and records (including, without
limitation, contracts, leases, insurance policies, litigation files, minute
books, accounts, working papers and tax returns filed and in preparation) and
will cause its officers to furnish to each other and their respective authorized
advisors such additional financial, tax and operating data and other information
pertaining to their respective businesses as the Company or
the Parent, as the case may be, shall from time to time reasonably request. All
of such data and information shall be kept confidential by Parent and the
Company unless and until Merger is consummated.
7.2 Transfer of Shares. The Stockholders agree that they (i) shall not
dispose of or in any way encumber their shares prior to the consummation of the
transactions contemplated hereby, (ii) shall take no action inconsistent with
the approval and consummation of said transactions and (iii) at the Closing
shall surrender the stock certificates representing all shares of Company Stock
owned by them, duly endorsed for transfer.
7.3 Affiliates' Letters. Concurrently with the execution of this
Agreement, all persons who are "affiliates" of the Company or Parent for
purposes of Rule 145 under the Securities Act, which shall include each
Equityholder shall deliver, and each Equityholder agrees to deliver to the
Company, a signed, written agreement, in the form attached as Exhibit D hereto,
to the effect that such person will not sell, or in any other way reduce such
person's risk relative to (within the meaning of the SEC's rules relating to
pooling of interests accounting), any shares of Parent Common Stock issued to
such person pursuant to the Merger until such time as financial statements
(including combined revenues and net income) covering at least 30 days of
post-Merger operations have been published.
7.4 Reasonable Efforts; etc. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use his/its reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including obtaining any consents, authorizations, exemptions and approvals from,
and making all filings with, any governmental or regulatory authority, agency or
body which are necessary in connection with the transactions contemplated by
this Agreement.
7.5 Material Events. At all times prior to the Effective Time, each
party shall promptly notify the others in writing of the occurrence of any event
which will or may result in the failure to satisfy any of the conditions
specified in Article IX or Article X hereof.
7.6 Fees and Expenses. The parties hereto shall bear and pay all of
their own fees, costs and expenses relating to the transactions contemplated by
this Agreement, including, without limitation, the fees and expenses of their
respective counsel, accountants, brokers and financial advisors, except that the
Equityholders shall be responsible for all fees, costs and expenses incurred by
the Company in connection with this Agreement and the transactions contemplated
hereby and such fees, costs and expenses shall be deemed expenses of the
Equityholders and paid by the Equityholders. Notwithstanding the foregoing, if
the Closing occurs, then the Parent shall pay the first $30,000 of the Company's
legal fees and expenses in connection with the transactions contemplated hereby
subject to the receipt of appropriate documentation and invoices.
7.7 Nasdaq National Market Listing. Parent shall cause the shares of
Parent Common Stock issuable in the Merger to be authorized for listing on The
Nasdaq National Market.
7.8 Tax Treatment. Each of the Parent, Acquisition Corp., the Company
and the Equityholders shall use their reasonable commercial efforts to cause the
Merger to qualify as a reorganization under Section 368(a) of the Code. Parent
and its Subsidiaries will not take, or cause the Company to take, any action
after the Effective Time which will cause the Merger to fail to qualify as a
reorganization under the provisions of Section 368(a) of the Code.
ARTICLE VIII
COVENANTS OF CERTAIN EQUITYHOLDERS
8.1 Representations and Agreements of Cubic Science, Inc.
(a) Cubic Science, Inc. ("Cubic") hereby covenants and agrees that for
a period of twelve months from the date herof, Cubic shall, for a sum of $2,500
per month, continue to (i) lease to the Company the office space which the
Company currently occupies and the T-1 line currently used by the Company, and
(ii) provide all other services to the Company currently provided by Cubic, all
in accordance with that certain letter agreement, dated December 28, 1999, by
and between the Company and Cubic. Cubic further agrees that so long as Parent
shall require, Cubic shall use its best efforts to continue to provide the ISP
services currently provided to the Company pursuant to that certain agreement
between Cubic and Netcom On-Line Communications Services, dated February 24,
1997.
(b) Cubic hereby represents and warrants to the Company, the Parent and
Acquisition Corp. that any and all inventions, modifications, discoveries,
designs, know-how, object code, source code, computer software, products, or any
other proprietary technology created, developed, worked on, modified by or used
by Li Ping ("Ping") in connection with the Company's business, as well as all
intellectual property rights with respect thereto (herein called "Inventions"),
during the time period in which Ping was employed by Cubic are the sole and
absolute property of the Company and that Cubic has no claim of right or title
to or ownership of or other encumbrance upon any such Inventions. Cubic hereby
assigns any rights it may have or acquire in the Inventions and benefits and/or
rights resulting therefrom to the Company without compensation. Cubic further
agrees that upon the request of the Company or the Parent, and without any
compensation to it, Cubic will take such action and execute such documents as
the Company or the Parent may request to evidence and perfect the Company's
ownership of such Inventions.
(c) Cubic hereby agrees that it shall permit Ping to continue to work
full-time as a product developer for the Company at the Company's expense and
that any and all inventions, modifications, discoveries, designs, know-how,
object code, source code, computer software,
products, and any other proprietary technology created, developed, worked on or
used by Ping after the date hereof in connection with the Company's business, as
well as all intellectual property rights with respect thereto, shall be the sole
and absolute property of the Company.
8.2 Non-competition. Each of the Equityholders hereby agrees that for a
period of two (2) years after the date hereof, he, she or it will not, directly
or indirectly, alone or as a partner, officer, director, employee, consultant,
agent, independent contractor or stockholder of any company or business
organization, engage in any business activity, or have a financial interest in
any business activity (excepting only the ownership of not more than 5% of the
outstanding securities of any class of any entity listed on an exchange or
regularly traded in the over-the-counter market), which is directly or
indirectly in competition with the products or services being developed,
marketed, sold or otherwise provided by the Company, or which is directly or
indirectly detrimental to the Company's business as of the Closing Date
("Competitive Activity"). Such Equityholder further agrees that, for a period of
two (2) years from after the date hereof, he, she or it will not in any
capacity, either separately, jointly or in association with others, directly or
indirectly, solicit or contact in connection with, or in furtherance of, a
Competitive Activity any of the Company's employees, consultants, agents,
suppliers, customers or prospects that were such with respect to the Company at
any time during the one year immediately preceding the date hereof or that
become such with respect to the Company at any time during the one year
immediately following the date hereof my termination. Such Equityholder's
obligations under this Section 7.10 shall survive the termination or cessation
of his, her or its employment with the Company.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF
THE PARENT AND ACQUISITION CORP.
The obligation of the Parent and Acquisition Corp. to consummate the
transactions contemplated hereby shall be subject to the satisfaction, on or
prior to the Closing Date, of each of the following conditions (any of which may
be waived in writing by the Parent and Acquisition Corp. in their sole
discretion):
9.1 Representations and Warranties True. The representations and
warranties of the Company and the Equityholders which are contained in this
Agreement, or contained in any Schedule, certificate or instrument delivered or
to be delivered pursuant to this Agreement, shall be true and correct in all
material respects at and as of the Closing Date as though such representations
and warranties were made on and as of the Closing Date, and at the Closing the
Company shall have delivered to the Parent and Acquisition Corp. a certificate
(signed on behalf of the Company by the President of the Company) to that effect
with respect to all such representations and warranties made by the Company, and
the Equityholders shall have executed and delivered to the Parent and
Acquisition Corp. a certificate to that effect with respect to all such
representations and warranties made by the Equityholders.
9.2 Performance. The Company and the Equityholders shall have performed
and complied in all material respects with all of the obligations under this
Agreement which are required to be performed or complied with by them on or
prior to the Closing Date, and at the Closing the Company shall have delivered
to the Parent and Acquisition Corp. a certificate (duly executed on behalf of
the Company by the President and the Chief Financial Officer of the Company) to
that effect with respect to all such obligations required to have been performed
or complied with by the Company on or before the Closing Date, and the
Equityholders shall have executed and delivered to the Parent and Acquisition
Corp. a certificate to that effect with respect to all such obligations required
to have been performed or complied with by the Equityholders on or before the
Closing Date.
9.3 Affiliates' Letters. The Company shall have obtained from the
Equityholders the letter agreements described in Section 7.3 hereof and shall
have delivered such executed letter agreements to the Parent.
9.4 Absence of Litigation. No statute, rule or regulation shall have
been enacted or promulgated, and no order, decree, writ or injunction shall have
been issued and shall remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental or regulatory body,
agency or authority shall have been instituted by any person (or instituted or
threatened by any governmental or regulatory body, agency or authority), and no
investigation by any governmental or regulatory body, agency or authority shall
have been commenced with respect to the transactions contemplated hereby or with
respect to the Company which would have a material adverse effect on the
transactions contemplated hereby or have a Company Material Adverse Effect.
9.5 Consents. Except for the consent required to be obtained under the
Distributor Agreement by and between the Company and Comtex Scientific
Corporation, dated January 28, 1999, all approvals, consents, waivers and
authorizations required to be obtained by the Company or any Equityholder in
connection with the Merger and the other transactions contemplated by this
Agreement (including those identified on Schedule 3.3) shall have been obtained
and shall be in full force and effect.
9.6 Additional Agreements. Parent shall have the following
agreements:
(i) Offer Letters, in a form satisfactory to Parent, executed by each of
Daqi (▇▇▇▇▇▇) ▇▇, ▇▇▇▇▇▇ (▇▇▇▇▇) Xu, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Li Ping and ▇▇▇▇▇
▇▇▇▇▇ (the "Key Employees").
(ii) the Confidentiality and Employment-At-Will Agreement for Employees in
the form of Exhibit E-1 hereto, duly executed by each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Daqi
(▇▇▇▇▇▇) ▇▇, ▇▇▇▇▇▇ (▇▇▇▇▇) Xu, and Li Ping.
(iii) the Confidentiality and Employment-At-Will Agreement for Employees in
the form of Exhibit E-2 hereto, duly executed by each of ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇.
(iv) an Option Agreement in the form of Exhibit H hereto, by
the Parent to each of the Key Employees, duly executed, granting them options to
purchase an aggregate of 100,000 shares of Parent Common Stock to be allocated
in a manner determined by the Parent and Daqi (▇▇▇▇▇▇) Lu;
(v) the Escrow Agreement annexed as Exhibit C hereto, duly executed by the
Stockholders and the Escrow Agent;
(vi) Resignations of all officers and directors of the Company, effective
as of the Effective Time;
(vii) the Letter of Transmittal in the form of Exhibit B duly executed by
holders of 100% of the outstanding shares of Company Stock (the "Letter of
Transmittal"); and
(viii) the Assignment of Inventions and Confidentiality Agreement
in the form of Exhibit I hereto, duly executed by each of ▇▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇ ▇▇▇▇, and the Key Employees.
9.7 Delivery of Certificates for Cancellation. The share certificates
representing all of the issued and outstanding shares of Company Common Stock as
of the Closing Date, duly endorsed in blank, shall have been surrendered for
cancellation.
9.8 Appraisal Rights. The holders of 100% of the issued and outstanding
shares of Company Stock shall have voted in favor of the approval of the Merger
and the transactions contemplated hereby and no holders of shares of Company
Stock shall have demanded appraisal rights in respect of the Merger.
9.9 Certificate of Merger. The Company shall have executed and
delivered to the Parent counterparts of the Certificates of Merger to be filed
with the Secretary of State of the State of California and the Secretary of
State of the State of Delaware in connection with the Merger.
9.10 Payment of Indebtedness. At or prior to the Effective Time, the
Company shall have paid in full all outstanding indebtedness such that at the
Closing the Company shall not have any outstanding indebtedness (other than
accounts payable incurred in the ordinary course of business.
9.11 Due Diligence. The Parent shall have completed its investigation
of the Company and its business and all legal and other due diligence to its
satisfaction, in its sole discretion.
9.12 Supporting Documents. The Company shall have delivered to the
Parent a certificate of the Secretary of the Company, dated the Closing Date,
certifying on behalf of the Company (i) that attached thereto is a true and
complete copy of the By-laws of such Company as in effect on the date of such
certification; (ii) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors and Stockholders of such Company
authorizing the execution, delivery and performance of this Agreement and the
consummation of the Merger; and (iii) to the incumbency and specimen signature
of each officer of the Company executing on behalf of such company this
Agreement and the other agreements related hereto.
9.13 Shareholders' Agreement. The Company shall have delivered to
Parent evidence that the Shareholders' Agreement, dated June 1, 1998, entered
into among ▇▇▇▇ ▇▇, Daqi (▇▇▇▇▇▇) ▇▇, ▇▇▇▇▇▇ (▇▇▇▇▇) Xu, and ▇▇▇▇ ▇▇▇▇ Tang is
terminated and is of no further force and effect.
ARTICLE X
CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY AND THE EQUITYHOLDERS
The obligation of the Company and the Equityholders to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions (any of which may be waived in writing by the Company and the
Equityholders in their sole discretion):
10.1 Representations and Warranties True. The representations and
warranties of each of the Parent and Acquisition Corp. contained in this
Agreement, or contained in any Schedule, certificate or other instrument or
document delivered or to be delivered pursuant to this Agreement, shall be true
and correct in all material respects at and as of the Closing Date as though
such representations and warranties were made on and as of the Closing Date, and
at the Closing each of the Parent and Acquisition Corp. shall have delivered to
the Company and the Equityholders a certificate (signed on its behalf by its
President and its Chief Financial Officer) to that effect with respect to all
such representations and warranties made by such entity.
10.2 Performance. Each of the Parent and Acquisition Corp. shall have
performed and complied in all material respects with all of the obligations
under this Agreement which are required to be performed or complied with by them
on or prior to the Closing Date, and at the Closing each of the Parent and
Acquisition Corp. shall have delivered to the Company and the Equityholders a
certificate, signed on its behalf by its President and its Chief Financial
Officer, to that effect with respect to all such obligations required to have
been performed or complied with by such entity on or before the Closing Date.
10.3 Absence of Litigation. No statute, rule or regulation shall have
been enacted or promulgated, and no order, decree, writ or injunction shall have
been issued and shall remain in
effect, by any court or governmental or regulatory body, agency or authority
which restrains, enjoins or otherwise prohibits the consummation of the
transactions contemplated hereby, and no action, suit or proceeding before any
court or governmental or regulatory body, agency or authority shall have been
instituted by any person (or instituted or threatened by any governmental or
regulatory body, agency or authority) and no investigation by any governmental
or regulatory body, agency or authority shall have been commenced with respect
to the transactions contemplated hereby or with respect to the Parent or
Acquisition Corp. which would have a material adverse effect on the transactions
contemplated hereby or on the business of the Parent and Acquisition Corp. taken
as a whole.
10.4 Consents. All approvals, consents, waivers and authorizations
required to be obtained by Parent or Acquisition Corp. in connection with the
Merger and the other transactions contemplated by this Agreement (including
those identified on Schedule 5.3) shall have been obtained and shall be in full
force and effect.
10.5 Additional Agreements. The Parent shall have executed and
delivered (and shall have agreed to cause the Surviving Corporation to execute
and deliver immediately following the Effective Time, as applicable)
counterparts of the following agreements;
(i) the Offer Letters referred to in Section 9.6(i) hereof;
(ii) the Confidentiality and Employment-At-Will Agreements for Employees
referred to in Section 9.6(ii) and 9.6(iii) hereof;
(iii) the Option Agreements referred to in Section 9.6(iv) hereof; and
(iv) the Escrow Agreement referred to in Section 9.6(v)
hereof, together with counterparts signed by the Escrow Agent.
10.6 Certificates of Merger. The Parent and Acquisition Corp. shall
have executed and delivered to the Company counterparts of the Certificates of
Merger to be filed with the Secretary of the State of the State of California
and the Secretary of State of the State of Delaware in connection with the
Merger.
10.7 Shares of Parent Common Stock. Subject to the deposit into escrow
of shares of Parent Common Stock contemplated under Section 2.8, at the Closing
the Parent shall deliver to the Stockholders the shares of Parent Common Stock
issuable to the Stockholders pursuant to Section 2.2(a) hereof.
10.8 Supporting Documents. (a) The Parent shall have delivered to the
Company a certificate of the Secretary of the Parent, dated the Closing Date,
certifying on behalf of the Parent (i) that attached thereto is a true and
complete copy of the By-laws of such Parent as in effect on the date of such
certification; (ii) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors of such Parent authorizing the
execution, delivery and performance of this Agreement and the consummation of
the Merger; and (iii) to the incumbency and specimen signature of each officer
of the Parent executing on behalf of such Parent this Agreement and the other
agreements related hereto.
(b) Acquisition Corp. shall have delivered to the Company a certificate
of the Secretary of Acquisition Corp., dated the Closing Date, certifying on
behalf of Acquisition Corp. (i) that attached thereto is a true and complete
copy of the By-laws of such Acquisition Corp. as in effect on the date of such
certification; (ii) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors and stockholders of such
Acquisition Corp. authorizing the execution, delivery and performance of this
Agreement and the consummation of the Merger; and (iii) to the incumbency and
specimen signature of each officer of Acquisition Corp. executing on behalf of
such Acquisition Corp. this Agreement and the other agreements related hereto.
ARTICLE XI
TERMINATION
11.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by the mutual written consent of the Company and the Parent;
(b) by either the Company or the Parent
(i) if any court or governmental or regulatory agency, authority or body
shall have enacted, promulgated or issued any statute, rule, regulation, ruling,
writ or injunction, or taken any other action, restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby and all appeals and
means of appeal therefrom have been exhausted; or
(ii) if the Effective Time shall not have occurred on or before May 21,
1999; provided, however, that the right to terminate this Agreement pursuant to
this Section 11.1(b)(ii) shall not be available to any party whose (or whose
affiliate(s)') breach of any representation or warranty or failure to perform or
comply with any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date;
or
(c) by the Company, if any of the conditions specified in Article X have
not been met or waived prior to such time as such condition can no longer be
satisfied; or
(d) by the Parent, if any of the conditions specified in Article IX shall
not have been met or waived prior to such time as such condition can no longer
be satisfied.
11.2 Effect of Termination. In the event of termination of this
Agreement, this Agreement shall forthwith become void and there shall be no
liability on the part of any of the parties hereto or (in the case of the
Company, the Parent and Acquisition Corp.) their respective officers or
directors, except for Sections 7.6 and 14.6, and the last sentence of Section
7.1, which shall remain in full force and effect, and except that nothing herein
shall relieve any party from liability for a breach of this Agreement prior to
the termination hereof.
ARTICLE XII
INDEMNIFICATION; SURVIVAL OF
REPRESENTATIONS AND WARRANTIES
12.1 Indemnity Obligations. Subject to Section 12.4 hereof, the
Equityholders hereby jointly and severally agree to indemnify and hold the
Parent harmless from, and to reimburse the Parent for, any Indemnity Claims (as
that term is hereinafter defined) arising under the terms and conditions of this
Agreement. For purposes of this Agreement, the term "Indemnity Claim" shall mean
any and all losses, damages, deficiencies, liabilities, obligations, actions,
claims, suits, proceedings, demands, assessments, judgments, recoveries, fees,
costs and expenses (including, without limitation, all out-of-pocket expenses,
reasonable investigation expenses and reasonable fees and disbursements of
accountants and counsel) of any nature whatsoever, net of insurance proceeds
actually realized by Parent (collectively, "Losses") arising out of, based upon
or resulting from (i) any inaccuracy in or breach of any representation or
warranty of the Company or the Equityholders which is contained in this
Agreement or the Letter of Transmittal or any Schedule or certificate delivered
pursuant hereto or thereto; (ii) any breach or nonfulfillment of, or any failure
to perform, any of the covenants, agreements or undertakings of the Company
(which covenants, agreements or undertakings were to be performed or complied
with on or prior to the consummation of the Merger) or the Equityholders which
are contained in or made pursuant to the terms and conditions of this Agreement
or the Letter of Transmittal; (iii) any claims arising prior to the Closing
which otherwise would have been covered by fire, property, casualty or liability
insurance if the Company had insurance in place for all periods prior to the
Closing, or (iv) any claims arising from Taxes that are otherwise due prior to
the Closing.
12.2 Notification of Claims. Subject to the provisions of Section 12.3
below, in the event of the occurrence of an event which the Parent asserts
constitutes an Indemnity Claim, Parent shall provide the Equityholders with
prompt written notice of such event and shall otherwise promptly make available
to the Equityholders all relevant information which is material to the claim and
which is in the possession of the indemnified party. If such event involves the
claim of any third party (a "Third-Party Claim"), the Equityholders as the
indemnifying parties shall have the right to elect to join in the defense,
settlement, adjustment or compromise of any such Third-Party Claim, and, if they
so elect to control such defense,
settlement, adjustment or compromise, and to employ counsel to assist such
indemnifying parties in connection with the handling of such claim, at the sole
expense of the indemnifying parties, in the case of the Equityholders as the
indemnifying parties, to be paid from amounts held in escrow by the Escrow Agent
in accordance with the terms of the Escrow Agreement. Unless the Equityholder
elect to assume such defense, settlement, adjustment or compromise, Parent shall
have the right to settle any such Third-Party Claim; provided, however, that
Parent may not effect the settlement, adjustment or compromise of any such
Third-Party Claim without the written consent of the Equityholders, which
consent shall not be unreasonably withheld. In the event that the Equityholders
have consented in writing to any such settlement, adjustment or compromise, the
Equityholders shall have no power or authority to object to the amount of any
claim by Parent against the escrow for indemnity with respect to such
settlement, adjustment or compromise. The Equityholders shall have the right to
settle, adjust, or compromise any ThirdParty Claim, the defense of which is
controlled by the Equityholders, using amounts held in escrow; provided,
however, that, unless the settlement, adjustment or compromise involves no more
than the payment of an amount that is less than the amount of funds then
remaining in the escrow and provides for the unconditional release of Parent,
the Company and their respective affiliates, the Equityholders may not effect
the settlement, adjustment, compromise or satisfaction of any such Third-Party
Claim without the consent of the Parent, which consent shall not be unreasonably
withheld. Parent's failure to give timely notice or to promptly furnish the
Representative with any relevant data and documents in connection with any
Third-Party Claim shall not constitute a defense (in part or in whole) to any
claim for indemnification by such party, except and only to the extent that such
failure shall result in any prejudice to the indemnifying party. In connection
with any Third-Party Claim, the indemnified party, or the indemnifying party if
it has assumed the defense of such claim pursuant to the preceding sentence,
shall diligently pursue the defense of such Third-Party Claim.
12.3 Duration. Except as otherwise provided in this Agreement, all
representations, warranties, covenants and agreements of the parties contained
in or made pursuant to this Agreement, and the rights of the parties to seek
indemnification with respect thereto, shall survive the Closing but, except in
respect of any claims for indemnification as to which notice shall have been
duly given prior to the Escrow Release Date (as defined below), the
representations and warranties of the Company and the Equityholders contained in
this Agreement and the Letter of Transmittal other than the Covered
Representations (as defined below) shall expire on the earlier of (i) the date
Parent has received a signed opinion from its independent auditors certifying
the financial statements for Parent for the fiscal year ending September 30,
1999 in connection with their completion of the audit of such financial
statements and (ii) the first anniversary of the Closing Date (the "Escrow
Release Date"). To be duly given, any such notice shall set forth in reasonable
detail the nature of such claim, the provisions under this Agreement or the
Letter of Transmittal pursuant to which such claim is being asserted and, to the
extent feasible, a reasonable estimate of the anticipated amount of such claim
("Claim Notice").
12.4 Escrow. At the Effective Time, ten percent (10%) of the sum of the
Merger Shares and Stock Options (collectively, the "Escrow Deposit") shall be
delivered to the Escrow Agent, to be held for a period ending on the Escrow
Release Date, except the Escrow Deposit may be withheld after the Escrow Release
Date to satisfy claims for indemnification which are the subject to a Claims
Notice delivered prior to the Escrow Release Date. The Escrow Deposit shall be
held and disbursed by the Escrow Agent in accordance with an Escrow Agreement in
the form attached hereto as Exhibit C. For the purpose of any claim against the
Escrow Deposit hereunder, the value per share of the Escrow Deposit shall be
deemed to be the Closing Market Price (less the exercise price therefore with
respect to the Stock Options). Except with respect to claims based on fraud
committed by the Company or the Equityholders, which are not limited, if the
Closing occurs, Parent agrees that Parent's sole and exclusive remedy and
recourse against the Equityholders under this Agreement for Losses attributable
to any inaccuracy or breach of any representation or warranty of the Company or
the Equityholders which is contained in this Agreement or the Letter of
Transmittal or any Schedule or certificate delivered pursuant hereto or thereto
other than Losses arising under Section 13.5 and from breaches of the
representations and warranties set forth in Sections 3.4, 3.9 and 3.11 (the
"Covered Representations") shall be against the Escrow Deposit held in escrow
pursuant to the Escrow Agreement. Notwithstanding anything herein to the
contrary, except as provided under Section 13.5 and in the next sentences, (i)
the Equityholders shall have no liability for indemnification pursuant to this
Article XII until the aggregate Losses to the Parent and the Company exceed
$25,000 (the "Basket"), at which point the Equityholders shall be liable for the
full amount of all Losses, and (ii) the maximum aggregate liability of the
Equityholders hereunder shall not exceed the value (determined by reference to
the Closing Market Price) of the Escrow Deposit (the "Maximum Indemnification").
With respect to indemnification claims arising under Section 12.1(i) from any
inaccuracy in or breach of any Covered Representations, or for Sections
12.1(ii), (iii) or (iv) of this Article XII, neither the Basket nor the Maximum
Indemnification limitation shall apply.
12.5 No Contribution. The Equityholders hereby waive, acknowledge and
agree that the Equityholders shall not have and shall not exercise or assert (or
attempt to exercise or assert), any right of contribution, right of indemnity or
other right or remedy against the Parent or the Company in connection with any
indemnification payments which the Equityholders are required to make under this
Article XII.
ARTICLE XIII
REGISTRATION RIGHTS
13.1 Registrable Shares. For purposes of this Agreement, "Registrable
Shares" shall mean the shares of Parent Common Stock issued in the Merger; and
any shares of Parent Common Stock issued upon the exercise of Stock Options
which are exercised prior to the filing of the Registration Statement (as
defined below); provided, however, that a distribution of shares of Parent
Common Stock issued in the Merger without additional consideration, to
underlying beneficial owners (such as the general and limited partners,
stockholders of trust beneficiaries of
a Stockholder) shall not be deemed such a sale or transfer for purposes of this
Article XIII and such underlying beneficial owners shall be entitled to the same
rights under this Article XIII as the initial Stockholder from which the
Registrable Shares were received and shall be deemed a Stockholder for the
purposes of this Article XIII.
13.2 Required Registration. Parent shall use its best efforts to
prepare and file with the SEC, at least ten (10) days prior to the date that
Parent is scheduled to publicly issue its initial press release of Parent's
financial results for the fiscal quarter ending June 30, 1999 and reflecting at
least thirty days of combined operations of Parent and the Company (the "Initial
Release Date"), a registration statement on Form S-3 (and Form S-8 with respect
to the Stock Options and Option Shares) (or such successor or other appropriate
form) under the Securities Act with respect to the Registrable Shares (the
"Registration Statement") and to effect all such registrations, qualifications
and compliances (including, without limitation, obtaining appropriate
qualifications under applicable state securities or "Blue Sky" laws and
compliance with any other applicable governmental requirements or regulations)
as any selling Stockholder may reasonably request and that would permit or
facilitate the sale of Registrable Shares (provided however that Parent 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).
13.3 Effectiveness; Suspension Right.
(a) Parent will use its best efforts to cause the Registration
Statement to become effective under the Securities Act (including without
limitation the filing of any amendments or other documents necessary for such
effectiveness) and to maintain the effectiveness of the Registration Statement
and other applicable registrations, qualifications and compliances until one
year from the Closing Date (the "Registration Effective Period"), and from time
to time will amend or supplement the Registration Statement and the prospectus
contained therein as and to the extent necessary to comply with the Securities
Act, the Exchange Act and any applicable state securities statute or regulation,
subject to the following limitations and qualifications.
(b) Following the later to occur of the Initial Release Date
and such date as the Registration Statement is first declared effective, the
Stockholders will be permitted to offer and sell the Registrable Shares
registered therein during the Registration Effective Period in the manner
described in the Registration Statement provided that the Registration Statement
remains effective and has not been suspended.
(c) Notwithstanding any other provision of this Article XIII,
Parent shall have the right at any time to require that all Stockholders suspend
further open market offers and sales of Registrable Shares whenever, and for so
long as, in the reasonable judgment of Parent, upon written advice of counsel,
there is in existence material undisclosed information or events with respect to
Parent (the "Suspension Right"). In the event Parent exercises the Suspension
Right, such suspension will continue for the period of time reasonably necessary
for disclosure to occur
at a time that is not detrimental to Parent and its stockholders or until such
time as the information or event is no longer material, each as determined in
good faith by Parent after consultation with counsel, provided that the holders
of Registrable Shares will be afforded the right to effect open market offers
and sales of Registrable Shares for a minimum of ten trading days during each
calendar quarter; provided, further, that any such suspension shall apply only
for so long as "affiliates" (as defined in Rule 501 under the Securities Act of
1933) of the Parent are restricted from selling shares of Parent Common Stock.
Parent will promptly give the Stockholders notice of any such suspension and
will use all reasonable efforts to minimize the length of the suspension.
13.4 Expenses. The costs and expenses to be borne by Parent for
purposes of this Article XIII shall include, without limitation, printing
expenses (including a reasonable number of prospectuses for circulation by the
selling Stockholders), legal fees and disbursements of counsel for Parent, "blue
sky" expenses, accounting fees and filing fees, but shall not include
underwriting commissions or similar charges, legal fees (if any) and
disbursements of counsel for the selling Stockholders.
13.5 Indemnification.
(a) To the extent permitted by law, Parent will indemnify and
hold harmless each Stockholder, any underwriter (as defined in the Securities
Act) for such Stockholder, its officers, directors, stockholders or partners and
each person, if any, who controls such Stockholder or underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (A) any untrue statement
or alleged untrue statement of a material fact contained or incorporated by
reference in the Registration Statement, including any preliminary prospectus or
final prospectus contained therein or any amendments or supplements thereto, (B)
the omission or alleged omission to state or incorporate by reference therein a
material fact required to be stated or incorporated by reference therein, or
necessary to make the statements included or incorporated by reference therein
not misleading, or (C) any violation or alleged violation by Parent of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law; and Parent will pay to each such Stockholder (and its officers,
directors, stockholders or partners), underwriter or controlling person, any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section
13.5(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of Parent (which consent may not be unreasonably withheld); nor shall Parent be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon (i) a Violation which
occurs in reliance upon and in
conformity with written information furnished by any such Stockholder expressly
for use in the Registration Statement, or (ii) a Violation that would not have
occurred if such Stockholder had delivered to the purchaser the version of the
Prospectus most recently provided by Parent to the Stockholder as of a date
prior to such sale.
(b) To the extent permitted by law, each selling Stockholder,
severally and not jointly, will indemnify and hold harmless Parent, each of its
directors, each of its officers who has signed the Registration Statement, each
person, if any, who controls Parent within the meaning of the Securities Act,
any underwriter, any other Stockholder selling securities pursuant to the
Registration Statement and any controlling person of any such underwriter or
other Stockholder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Securities Act, the Exchange Act or other federal or state law, insofar as, and
only to the extent that, such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation (which
includes without limitation the failure of the Stockholder to comply with the
prospectus delivery requirements under the Securities Act, and the failure of
the Stockholder to deliver the most current prospectus provided by Parent prior
to the date of such sale), in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished by such Stockholder expressly for use in the Registration
Statement or such Violation is caused by the Stockholder's failure to deliver to
the purchaser of the Stockholder's Registrable Shares a prospectus (or amendment
or supplement thereto) that had been made available to the Stockholder by Parent
prior to the date of the sale; and each such Stockholder will pay any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this Section 13.5(b) in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 13.5(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Stockholder, which consent
shall not be unreasonably withheld. The aggregate indemnification and
contribution liability of each Stockholder under this Section 13.5(b) shall not
exceed the net proceeds received by such Stockholder in connection with sale of
shares pursuant to the Registration Statement.
(c) Each person entitled to indemnification under this Section
13.5 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought and shall permit the Indemnifying Party to assume the defense of any such
claim and any litigation resulting therefrom, provided that counsel for the
Indemnifying Party who conducts the defense of such claim or any litigation
resulting therefrom shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may participate
in such defense at such party's expense, and provided further that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 13.5 unless the
Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in
the defense of any such claim or
litigation, shall (except with the consent of each Indemnified Party) consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
(d) To the extent that the indemnification provided for in
this Section 13.5 is held by a court of competent jurisdiction to be unavailable
to an Indemnified Party with respect to any loss, liability, claim, damage or
expense referred to herein, then the Indemnifying Party, in lieu of indemnifying
such Indemnified Party hereunder, shall contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one had and of the Indemnified Party on the other
in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue of alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Indemnifying Party or by the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
13.6 Procedures for Sale of Shares Under Registration Statement.
(a) Notice and Approval. If any Stockholder shall propose to
sell (which may include an intent to sell over a specific period of time)
Registrable Shares pursuant to the Registration Statement, it shall notify
Parent of its intent to do so (including the proposed manner and timing of all
sales) at least one (1) full trading day prior to such sale, and the provision
of such notice to Parent shall conclusively be deemed to reestablish and
reconfirm an agreement by such Stockholder to comply with the registration
provisions set forth in this Agreement. Unless otherwise specified in such
notice, such notice shall be deemed to constitute a representation that any
information previously supplied by such Stockholder expressly for inclusion in
the Registration Statement (as the same may have been superseded by subsequent
such information) is accurate as of the date of such notice. At any time within
such one (1) trading-day period, Parent may refuse to permit the Stockholder to
resell any Registrable Shares pursuant to the Registration Statement; provided,
however, that in order to exercise this right, Parent must deliver a certificate
in writing to the Stockholder to the effect that a delay in such sale is
necessary because a sale pursuant to the Registration Statement in its
then-current form without the addition of material, non-public information about
Parent, could constitute a violation of the federal securities laws.
Notwithstanding the foregoing, Parent will ensure that in any event the
Stockholders shall have at least ten (10) trading days (prorated for partial
quarters) available to
sell Registrable Shares during each calendar quarter (or portion thereof) from
the Initial Release Date until the expiration of the applicable Registration
Effective Period.
(b) Delivery of Prospectus. For any offer or sale of any of
the Registrable Shares by a Stockholder in a transaction that is not exempt
under the Securities Act, the Stockholder, in addition to complying with any
other federal securities laws, shall deliver a copy of the final prospectus (or
amendment of or supplement to such prospectus) of Parent covering the
Registrable Shares in the form furnished to the Stockholder by Parent to the
purchaser of any of the Registrable Shares on or before the settlement date for
the purchase of such Registrable Shares.
(c) Copies of Prospectuses. Subject to the provisions of this
Section 13.6, when a Stockholder is entitled to sell and gives notice of its
intent to sell Registrable Shares pursuant to the Registration Statement, Parent
shall, within two (2) trading days following the request, furnish to such
Stockholder a reasonable number of copies of a supplement to or in amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Shares, such prospectus shall not as of the date
of delivery to the Stockholder include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statement therein not misleading or incomplete in the light of the
circumstances then existing.
13.7 Transferability of Registration Rights. The rights under this
Article XIII are not transferable except (a) a transfer by will or intestacy,
(b) estate planning transfers consisting of gifts to the spouse or issue of the
transferee and transfers to trusts for the benefit of the spouse or issue of the
transferee, (c) a transfer to the constituent partners of a Stockholder that is
a partnership as part of a pro rata distribution of the shares of Parent Common
Stock held by such partnership so long as all such transferees appoint a single
representative as their attorney-in-fact for the purpose of receiving any
notices and exercising their rights under this Article XIII, or (d) with the
written consent of Parent.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 Amendment. This Agreement may be amended by written agreement
among the Company and the Parent prior to the Effective Time.
14.2 Waiver of Compliance. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant or agreement contained herein may be waived only by a written notice
from the party or parties entitled to the benefits thereof. No failure by any
party hereto to exercise, and no delay in exercising, any right hereunder, shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder preclude any other or future exercise of that right by that
party.
14.3 Notices. All notices and other communications hereunder shall be
deemed given if given in writing and delivered personally, by registered or
certified mail, return receipt requested, postage prepaid, or by overnight
courier to the party to receive the same at its respective address set forth
below (or at such other address as may from time to time be designated by such
party to the others in accordance with this Section 14.3):
(a) if to the Company or the Stockholders, to:
IQC Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Daqi (▇▇▇▇▇▇) Lu
with copies to:
▇▇▇▇▇ & Associates
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
(b) if to the Parent or Acquisition Corp., to:
Go2Net, Inc.
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▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with copies to:
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
A Professional Corporation
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
All such notices and communications hereunder shall be deemed given
when received, as evidenced by the signed acknowledgment of receipt of the
person to whom such notice or communication shall have been personally
delivered, the acknowledgment of receipt returned to the sender by the
applicable postal authorities or the confirmation of delivery rendered by the
applicable overnight courier service.
14.4 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors (or, in the case of the Equityholders, their respective
heirs, administrators, executors and personal representatives) and permitted
assigns. Neither this Agreement nor any rights, duties or obligations hereunder
shall be assigned by any party hereto without the prior written consent of the
other parties hereto, except that vested rights to receive payment or to
initiate legal action with respect to causes of action that have accrued
hereunder shall be assignable by devise, descent or operation of law.
14.5 No Third Party Beneficiaries. Neither this Agreement or any
provision hereof nor any Schedule, certificate or other instrument delivered
pursuant hereto, nor any agreement to be entered into pursuant hereto or any
provision hereof, is intended to create any right, claim or remedy in favor of
any person or entity, other than the parties hereto and their respective
successors (or, in the case of the Equityholders, their respective heirs,
administrators, executors and personal representatives) and permitted assigns
and any other parties indemnified under Article XII.
14.6 Public Announcements. Promptly upon execution and delivery of this
Agreement, the Parent and the Company shall issue a press release in such form
as they shall mutually agree. Thereafter, and prior to the consummation of the
Merger or the termination of this Agreement, none of the parties hereto shall,
except as mutually agreed by the Parent and the Company, or except as may be
required by law or applicable regulatory authority (including, without
limitation, the rules applicable to Nasdaq National Market companies), issue any
reports, releases, announcements or other statements to the public relating to
the transactions contemplated hereby.
14.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.8 Headings. The article and section headings contained in this
Agreement are solely for convenience of reference, are not part of the agreement
of the parties and shall not be used in construing this Agreement or in any way
affect the meaning or interpretation of this Agreement.
14.9 Entire Agreement. This Agreement, and the Schedules, certificates
and other instruments and documents delivered pursuant hereto, together with the
other agreements referred to herein and to be entered into pursuant hereto,
embody the entire agreement of the parties hereto in respect of, and there are
no other agreements or understandings, written or oral, among the parties
relating to, the subject matter hereof, other than the Confidentiality
Agreements. This Agreement supersedes all prior agreements and understandings,
written or oral, between the parties with respect to such subject matter, other
than the Confidentiality Agreements.
14.10 Governing Law. The parties hereby agree that this Agreement, and
the respective rights, duties and obligations of the parties hereunder, shall be
governed by and construed in accordance with the General Corporation Law of the
State of Delaware as to matters within the scope thereof and, as to all other
matters, shall be governed by and construed with the laws of the State of
Washington, without giving effect to principles of conflicts of law thereunder.
Each of the parties hereby (i) irrevocably consents and agrees that any legal or
equitable action or proceeding arising under or in connection with this
Agreement shall be brought exclusively in the Federal or state courts sitting in
Seattle, Washington and any court to which an appeal may be taken in any such
litigation, and (ii) by execution and delivery of this Agreement, irrevocably
submits to and accepts, with respect to any such action or proceeding, for
itself and in respect of its properties and assets, generally and
unconditionally, the jurisdiction of the aforesaid courts, and irrevocably
waives any and all rights such party may now or hereafter have to object to such
jurisdiction.
[Remainder of Page Intentionally Left Blank]
GO2NET, INC.
COUNTERPART SIGNATURE PAGE
TO AGREEMENT AND PLAN OF MERGER
IN WITNESS WHEREOF, the Parent, Acquisition Corp., the Company's
Stockholders and Optionholders named below have caused this Agreement to be duly
executed and delivered as an instrument under seal as of the date first above
written.
PARENT:
GO2NET, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive
Officer
ACQUISITION CORP.:
VA ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive
Officer
THE COMPANY:
IQC CORPORATION
By: /s/ ▇▇▇▇ ▇▇
-------------------
Name: ▇▇▇▇ ▇▇
Title: President
GO2NET, INC.
COUNTERPART SIGNATURE PAGE
TO AGREEMENT AND PLAN OF MERGER
IN WITNESS WHEREOF, the Parent, Acquisition Corp., and the Company's
Stockholders and Optionholders named below have caused this Agreement to be duly
executed and delivered as an instrument under seal as of the date first above
written.
STOCKHOLDERS:
GOLDENWOOD INTERNATIONAL, INC.
By: /s/ ▇▇▇▇ ▇▇
------------------------
Name: ▇▇▇▇ ▇▇
Title:
/s/ ▇▇▇▇ ▇▇
--------------------------
▇▇▇▇ ▇▇
/s/ Daqi (▇▇▇▇▇▇) Lu
-------------------------
Daqi (▇▇▇▇▇▇) Lu
/s/ Weihua (▇▇▇▇▇) Xu
--------------------------
Weihua (▇▇▇▇▇) Xu
/s/ ▇▇▇▇ ▇▇▇▇ Tang
---------------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
CUBIC SCIENCE, INC.
By: /s/ ▇▇▇▇ ▇▇
------------------------
Name: ▇▇▇▇ ▇▇
Title:
GO2NET, INC.
COUNTERPART SIGNATURE PAGE
TO AGREEMENT AND PLAN OF MERGER
IN WITNESS WHEREOF, the Parent, Acquisition Corp., and the Company's
Stockholders and Optionholders named below have caused this Agreement to be duly
executed and delivered as an instrument under seal as of the date first above
written.
STOCKHOLDERS:
/s/ ▇▇▇▇ ▇▇
--------------------------
▇▇▇▇ ▇▇
/s/ Eng ▇▇▇ ▇▇
--------------------------
Eng ▇▇▇ ▇▇
/s/ I ▇▇▇ ▇▇▇
---------------------------
I ▇▇▇ ▇▇▇
/s/ ▇▇▇ ▇▇▇▇ Lo
-----------------------------
▇▇▇ ▇▇▇▇ Lo
GO2NET, INC.
COUNTERPART SIGNATURE PAGE
TO AGREEMENT AND PLAN OF MERGER
IN WITNESS WHEREOF, the Parent, Acquisition Corp., and the Company's
Stockholders and Optionholders named below have caused this Agreement to be duly
executed and delivered as an instrument under seal as of the date first above
written.
OPTIONHOLDERS:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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/s/ ▇▇▇▇ ▇▇▇▇▇
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/s/ ▇▇▇▇▇ ▇▇▇▇▇
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇
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