NETCENTIVES INC.
UVN HOLDINGS, INC.
▇▇▇▇▇ DOG ACQUISITION CORPORATION
AGREEMENT AND PLAN OF MERGER
March 3, 2000
TABLE OF CONTENTS
Page
SECTION ONE
1. The Merger............................................... 1
1.1 The Merger.......................................... 1
1.2 Closing; Effective Time............................. 1
1.3 Effect of the Merger................................ 2
1.4 Certificate of Incorporation; Bylaws................ 2
1.5 Directors and Officers.............................. 2
1.6 Effect on Capital Stock............................. 2
1.7 Surrender of Certificates........................... 3
1.8 No Further Ownership Rights in Target Common Stock.. 5
1.9 Tax Consequences.................................... 5
1.10 Taking of Necessary Action; Further Action.......... 5
1.11 Withholding......................................... 5
1.12 Lost, Stolen or Destroyed Certificates.............. 5
1.13 Unvested Consideration.............................. 5
SECTION TWO
2. Representations and Warranties of Target................. 6
2.1 Organization; Subsidiaries.......................... 6
2.2 Articles of Incorporation and Bylaws................ 7
2.3 Capital Structure................................... 7
2.4 Authority........................................... 8
2.5 No Conflicts; Required Filings and Consents......... 8
2.6 Financial Statements................................ 8
2.7 Absence of Undisclosed Liabilities.................. 8
2.8 Absence of Certain Changes.......................... 9
2.9 Litigation.......................................... 10
2.10 Restrictions on Business Activities................. 11
2.11 Permits; Products; Regulation....................... 11
2.12 Title to Property................................... 12
2.13 Intellectual Property............................... 13
2.14 Environmental Matters............................... 15
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TABLE OF CONTENTS
(continued)
Page
2.15 Taxes............................................... 16
2.16 Employee Benefit Plans.............................. 18
2.17 Certain Agreements Affected by the Merger........... 20
2.18 Employee Matters.................................... 20
2.19 Material Contracts.................................. 21
2.20 Interested Party Transactions....................... 23
2.21 Insurance........................................... 23
2.22 Compliance With Laws................................ 23
2.23 Minute Books........................................ 23
2.24 Complete Copies of Materials........................ 23
2.25 Brokers' and Finders' Fees.......................... 23
2.26 Vote Required....................................... 23
2.27 Board Approval...................................... 23
2.28 Inventory........................................... 24
2.29 Accounts Receivable................................. 24
2.30 Customers and Suppliers............................. 24
2.31 Third Party Consents................................ 25
2.32 No Commitments Regarding Future Products............ 25
2.33 Vital Processing.................................... 25
2.34 SHC Direct.......................................... 25
2.35 Representations Complete............................ 25
SECTION THREE
3. Representations and Warranties of Acquiror and Merger
Sub....................................................... 26
3.1 Organization, Standing and Power..................... 26
3.2 Authority............................................ 26
3.3 No Conflict; Required Filings and Consents........... 26
3.4 Acquiror Common Stock................................ 27
3.5 SEC Documents; Financial Statements.................. 27
3.6 Litigation........................................... 28
SECTION FOUR
4. Additional Agreements..................................... 28
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TABLE OF CONTENTS
(continued)
Page
4.1 Best Efforts and Further Assurances.................. 28
4.2 Consents; Cooperation................................ 28
4.3 Public Disclosure.................................... 29
4.4 FIRPTA............................................... 29
4.5 State Statutes....................................... 29
4.6 Blue Sky Laws........................................ 29
SECTION FIVE
5. Conditions to the Merger.................................. 29
5.1 Conditions to Obligations of Each Party to Effect
the Merger........................................... 29
5.2 Additional Conditions to Obligations of Target....... 30
5.3 Additional Conditions to the Obligations of Acquiror
and Merger Sub....................................... 32
SECTION SIX
6. Escrow and Indemnification................................ 34
6.1 Survival of Representations and Warranties........... 34
6.2 Escrow Fund.......................................... 34
6.3 Indemnification...................................... 35
6.4 Damages Payments..................................... 35
6.5 Escrow Period........................................ 36
6.6 Distributions; Voting................................ 36
6.7 Method of Asserting Claims........................... 36
6.8 Representative of the Stockholders; Power of
Attorney............................................. 36
SECTION SEVEN
7. General Provisions........................................ 37
7.1 Notices.............................................. 37
7.2 Interpretation....................................... 38
7.3 Counterparts......................................... 38
7.4 Entire Agreement; Nonassignability; Parties in
Interest............................................. 38
7.5 Severability......................................... 38
7.6 Remedies Cumulative.................................. 39
7.7 Governing Law........................................ 39
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TABLE OF CONTENTS
(continued)
Page
7.8 Rules of Construction................................ 39
7.9 Amendments and Waivers............................... 39
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EXHIBITS
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Exhibit A - Certificate of Merger
Exhibit B - Plan of Merger
Exhibit C - Articles of Merger
Exhibit D - Exchange Ratio
Exhibit E - Vesting Terms
Exhibit F - Escrow Agreement
Exhibit G - Employment Agreement
Exhibit H - Non-Competition Agreement
Exhibit I - Amended and Restated Investors' Rights Agreement
Exhibit J - Stockholder Agreement
Exhibit K - Indemnity Agreement
AGREEMENT AND PLAN OF MERGER
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This Agreement and Plan of Merger (the "Agreement") is made and
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entered into as of March 3, 2000, by and among Netcentives Inc., a Delaware
corporation ("Acquiror"), ▇▇▇▇▇ Dog Acquisition Corporation, a Delaware
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corporation ("Merger Sub") and wholly owned subsidiary of Acquiror, and UVN
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Holdings, Inc., an Arizona corporation ("Target").
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RECITALS
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A. The Boards of Directors of Target, Acquiror and Merger Sub believe
it is in the best interests of their respective companies and the stockholders
of their respective companies that Target and Merger Sub combine into a single
company through the merger of Merger Sub with and into Target (the "Merger")
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and, in furtherance thereof, have approved the Merger. Pursuant to the Merger,
among other things, the outstanding shares of capital stock of Target (the
"Target Common Stock") shall be converted into shares of the Common Stock of
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Acquiror (the "Acquiror Common Stock"), at the rate set forth herein.
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B. Target, Acquiror and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
C. The parties intend, by executing this Agreement, to adopt a plan
of reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
----
reorganization under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
AGREEMENT
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The parties hereby agree as follows:
SECTION ONE
1. The Merger.
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1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
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subject to and upon the terms and conditions of this Agreement, the Certificate
of Merger attached hereto as Exhibit A (the "Certificate of Merger"), the Plan
--------- ---------------------
of Merger attached hereto as Exhibit B (the "Plan of Merger"), the Articles of
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Merger attached hereto as Exhibit C (the "Articles of Merger") and the
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applicable provisions of the Arizona Revised Statutes ("Arizona Law") and the
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Delaware General Corporation Law ("Delaware Law"), Merger Sub shall be merged
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with and into Target, the separate corporate existence of Merger Sub shall cease
and Target shall continue as the surviving corporation of the Merger. Target as
the surviving corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation."
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1.2 Closing; Effective Time. The closing of the transactions
-----------------------
contemplated by this Agreement (the "Closing") shall take place concurrently
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with the execution of this Agreement by the parties hereto (the "Closing Date").
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In connection with the Closing, the parties
shall cause the Merger to be consummated by filing (a) the Certificate of
Merger, together with the required officers' certificates, with the Secretary of
State of the State of Delaware in accordance with the relevant provisions of
Delaware Law (the time of such filing being the "Effective Time") and (b) the
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Plan of Merger and the Articles of Merger with the Arizona Corporation
Commission in accordance with the relevant provisions of Arizona Law. In
addition, Target shall publish the Article of Merger and file an affidavit of
publication with the Arizona Corporation Commission within the time periods
specified by Arizona Law. The Closing shall take place at the offices of ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or at
such other location as the parties agree.
1.3 Effect of the Merger. At the Effective Time, the effect of the
--------------------
Merger shall be as provided in this Agreement, the Certificate of Merger, the
Plan of Merger, the Articles of Merger and the applicable provisions of Arizona
and Delaware Law. At the Effective Time, all the property, rights, privileges,
powers and franchises of Target and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Target and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
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(a) At the Effective Time, the Articles of Incorporation of
Target, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by Arizona Law and such Articles of Incorporation.
(b) At the Effective time, the Bylaws of Target, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by law, the Articles of
Incorporation of the Surviving Corporation and such Bylaws.
1.5 Directors and Officers. At the Effective Time, the directors of
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Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, and the officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified.
1.6 Effect on Capital Stock. By virtue of the Merger and without any
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action on the part of Merger Sub, Target or any of their respective
stockholders, the following shall occur at the Effective Time:
(a) Conversion of Target Common Stock. All of the issued and
---------------------------------
outstanding shares of Common Stock, no par value per share, of Target (the
"Target Common Stock") issued and outstanding immediately prior to the Effective
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Time (other than shares to be cancelled pursuant to Section 1.6(b)) shall be
converted and exchanged for that number of shares of Acquiror Common Stock as
shall be determined in accordance with the calculations set forth with respect
to the Target Common Stock set forth on Exhibit D attached hereto (the "Exchange
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Ratio"). All shares of Target Common Stock, when so converted, shall no longer
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be outstanding
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and shall automatically be cancelled and retired and shall cease to exist, and
each holder of a certificate representing any such shares of Target Common Stock
shall cease to have any rights with respect thereto.
(b) Cancellation of Target Common Stock Owned by Target. At the
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Effective Time, all shares of Target Common Stock that are owned by Target as
treasury stock immediately prior to the Effective Time shall be cancelled and
extinguished without any conversion thereof.
(c) Capital Stock of Merger Sub. At the Effective Time, each
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share of Common Stock of Merger Sub ("Merger Sub Common Stock") issued and
-----------------------
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of Common
Stock of the Surviving Corporation. Each stock certificate of Merger Sub
evidencing ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
(d) Adjustments. The Exchange Ratio shall be adjusted to reflect
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fully the effect of any stock split, reverse split, stock dividend (including
any dividend or distribution of securities convertible into Acquiror Common
Stock or Target Common Stock), reorganization, recapitalization or other like
change with respect to Acquiror Common Stock or Target Common Stock occurring
after the date of this Agreement and prior to the Effective Time.
(e) Fractional Shares. No fraction of a share of Acquiror Common
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Stock will be issued, but in lieu thereof each holder of shares of Target Common
Stock who would otherwise be entitled to a fraction of a share of Acquiror
Common Stock (after aggregating all fractional shares of Acquiror Common Stock
to be received by such holder) shall receive from Acquiror an amount of cash
(rounded to the nearest whole cent) equal to the product of (i) such fraction,
multiplied by (ii) $52.00.
1.7 Surrender of Certificates.
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(a) Exchange Agent. American Stock Transfer & Trust Company
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shall act as exchange agent (the "Exchange Agent") in the Merger.
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(b) Acquiror to Provide Common Stock and Cash. Promptly after
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the Effective Time, Acquiror shall make available to the Exchange Agent for
exchange in accordance with this Section 1, through such reasonable procedures
as Acquiror may adopt, (i) the shares of Acquiror Common Stock issuable pursuant
to Section 1.6(a) less the number of shares of Acquiror Common Stock to be
deposited into an escrow fund (the "Escrow Fund") pursuant to the requirements
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of Section 6 and (ii) cash in an amount sufficient to permit payment of cash in
lieu of fractional shares pursuant to Section 1.6(e).
(c) Exchange Procedures. At the Closing, each holder of record
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of a certificate or certificates (the "Certificates") which immediately prior to
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the Effective Time represented outstanding shares of Target Common Stock whose
shares were converted into the right to receive shares of Acquiror Common Stock
(and cash in lieu of fractional shares) pursuant
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to Section 1.6, shall surrender such Certificates. The Acquiror shall deliver
such Certificates for cancellation to the Exchange Agent, together with a letter
of transmittal, duly completed and validly executed by each Target stockholder
in accordance with the instructions thereto, and the Exchange Agent shall
deliver to each Target stockholder in exchange therefor a certificate
representing the number of whole shares of Acquiror Common Stock less the number
of shares of Acquiror Common Stock to be deposited in the Escrow Fund on such
holder's behalf pursuant to Section 6 below and payment in lieu of fractional
shares which such holder has the right to receive pursuant to Section 1.6, and
the Certificate so surrendered shall forthwith be cancelled. Until so
surrendered, each Certificate will be deemed from and after the Effective Time,
for all corporate purposes, other than the payment of dividends, to evidence the
ownership of the number of full shares of Acquiror Common Stock into which such
shares of Target Common Stock shall have been so converted and the right to
receive an amount in cash in lieu of the issuance of any fractional shares in
accordance with Section 1.6. As soon as practicable after the Effective Time,
and subject to and in accordance with the provisions of Section 6 below,
Acquiror shall cause to be distributed to the Escrow Agent (as defined in
Section 6 below) a certificate or certificates representing, with respect to
each Target stockholder, fifteen percent (15%) of the shares of Acquiror Common
Stock otherwise issuable to such stockholder, which shall be registered in the
name of the Escrow Agent as nominee for the holders of Certificates cancelled
pursuant to this Section 1.7. Such shares shall be beneficially owned by such
holders and shall be held in escrow and shall be available to compensate
Acquiror for certain damages as provided in Section 6 below. To the extent not
used for such purposes, such shares shall be released, all as provided in
Section 6 below.
(d) No Liability. Notwithstanding anything to the contrary in this
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Section 1.7, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to any person for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(e) Distributions With Respect to Unexchanged Shares. No dividends or
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other distributions with respect to Acquiror Common Stock with a record date
after the Effective Time will be paid to the holder of any unsurrendered
Certificate with respect to the shares of Acquiror Common Stock represented
thereby until the holder of record of such Certificate shall surrender such
Certificate. Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Acquiror Common Stock issued in exchange therefor,
without interest, at the time of such surrender, the amount of any such
dividends or other distributions with a record date after the Effective Time
payable (but for the provisions of this Section 1.7(e)) with respect to such
shares of Acquiror Common Stock.
(f) Transfers of Ownership. If any certificate for shares of Acquiror
----------------------
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of such
issuance that the Certificate so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Acquiror or any agent designated by it any transfer
or other taxes required by reason of the issuance of a certificate for shares of
Acquiror Common Stock in any name other than that of the registered holder of
the Certificate
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surrendered, or established to the satisfaction of Acquiror or any agent
designated by it that such tax has been paid or is not payable.
1.8 No Further Ownership Rights in Target Common Stock. All shares of
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Acquiror Common Stock issued upon the surrender for exchange of shares of Target
Common Stock in accordance with the terms hereof (including any cash paid in
lieu of fractional shares) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Target Common Stock, and
there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Target Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be cancelled and exchanged as provided in this Section 1.
1.9 Tax Consequences. It is intended by the parties that the Merger
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shall constitute a reorganization within the meaning of Section 368 of the Code.
1.10 Taking of Necessary Action; Further Action. If at any time after
------------------------------------------
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Target and Merger Sub, the officers and directors of Target
and Merger Sub are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action, so
long as such action is not inconsistent with this Agreement.
1.11 Withholding. Each of the Exchange Agent, Acquiror, and the
-----------
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Target Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or any provision of state,
local or foreign tax law or under any other applicable legal requirement. To the
extent such amounts are so deducted or withheld, such amounts shall be treated
for all purposes under this Agreement as having been paid to the person to whom
such amounts would otherwise have been paid.
1.12 Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of
Acquiror Common Stock (and cash in lieu of fractional shares) as may be required
pursuant to Section 1.6; provided, however, that Acquiror may, in its discretion
and as a condition precedent to such issuance, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as Acquiror may
reasonably direct as indemnity against any claim that may be made against
Acquiror, the Surviving Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.13 Unvested Consideration. During the two year period following the
----------------------
Effective Time, Acquiror shall pay to the stockholders of Target shares of
Common Stock with a
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value of up to 15% of the "Total Consideration" (as defined in Exhibit D) upon
the terms specified in Exhibit E hereto.
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SECTION TWO
2. Representations and Warranties of Target.
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In this Agreement, any reference to a "Material Adverse Effect" with
-----------------------
respect to any entity or group of entities means any event, change or effect
that, when taken individually or together with all other adverse changes and
effects, is or is reasonably likely to be materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business, operations,
results of operations or prospects of such entity and its subsidiaries, taken as
a whole, or to prevent or materially delay consummation of the Merger or
otherwise to prevent such entity and its subsidiaries from performing their
obligations under this Agreement.
In this Agreement, any reference to a party's "knowledge" means such
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party's actual knowledge after due and diligent inquiry of officers, directors
and other employees of such party reasonably believed to have knowledge of the
matter in questions.
Except as disclosed in a document dated as of the date of this
Agreement and delivered by Target to Acquiror prior to the execution and
delivery of this Agreement and referring to the representations and warranties
in this Agreement (the "Disclosure Schedule"), Target represents and warrants to
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Acquiror and Merger Sub as follows:
2.1 Organization; Subsidiaries.
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(a) Each of Target, Universal Value Network, LLC ("Worldwide"),
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SHC Venture LLC ("Momentum"), Golden Retriever Systems LLC ("GRS") and each
-------- ---
subsidiary of Target (collectively with Worldwide, Momentum and GRS, each a
"Subsidiary") is a corporation or limited liability company duly organized,
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validly existing and in good standing under the laws of its jurisdiction of
organization. Each of Target and each Subsidiary has the requisite corporate
power and authority and all necessary government approvals to own, lease and
operate its properties and to carry on its business as now being conducted and
as proposed to be conducted, except where the failure to have such power,
authority and governmental approvals would not, individually or in the
aggregate, have a Material Adverse Effect on Target or such Subsidiary. Each of
Target and each Subsidiary is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have a Material Adverse Effect on Target or
such Subsidiary. A true and complete list of all the Subsidiaries, together with
the jurisdiction of organization of each Subsidiary, is set forth in Section 2.1
of the Disclosure Schedule. Target is, or at the Effective Time will be, the
owner of all outstanding shares of capital stock or membership interests of each
Subsidiary (other than GRS) and all such shares or membership interests are duly
authorized, validly issued, fully paid and nonassessable. As of the date hereof
and at the Effective Time, Target owns a 49% membership interest in GRS. All of
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the outstanding shares of capital stock or membership interests of each
Subsidiary owned by Target are owned free and clear of all liens, charges,
claims, encumbrances or rights of others. Except as set forth in Section 2.1 of
the Disclosure Schedule, there are no outstanding subscriptions, options,
warrants, puts, calls, rights, exchangeable or convertible securities or other
commitments or agreements of any character relating to the issued or unissued
capital stock or other securities of any Subsidiary, or otherwise obligating
Target or any Subsidiary to issue, transfer, sell, purchase, redeem or otherwise
acquire any such securities. Except as set forth in Section 2.1 of the
Disclosure Schedule, Target does not directly or indirectly own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, limited liability company, joint venture or other business
association or entity. The identity and percentage ownership of each holder of
equity in each entity specified on Section 2.1 is true, complete and correct.
2.2 Articles of Incorporation and Bylaws. Target has delivered a true
------------------------------------
and correct copy of the Articles of Incorporation and Bylaws or other charter
documents, as applicable, of Target and each Subsidiary, each as amended to
date, to Acquiror. Neither Target nor any Subsidiary is in violation of any of
the provisions of its Articles of Incorporation or Bylaws or equivalent
organizational documents.
2.3 Capital Structure. The authorized capital stock of Target
-----------------
consists of 10,000 shares of Common Stock, of which 9,600 shares were issued and
outstanding as of the close of business on the date hereof. There are no other
outstanding shares of capital stock or voting securities and no outstanding
commitments to issue any shares of capital stock or voting securities. All
outstanding shares of Target Common Stock are duly authorized, validly issued,
fully paid and non-assessable and are free of any liens or encumbrances other
than any liens or encumbrances created by or imposed upon the holders thereof,
and are not subject to preemptive rights or rights of first refusal created by
statute, the Articles of Incorporation or Bylaws of Target or any agreement to
which Target is a party or by which it is bound. All outstanding shares of
Target Common Stock were issued in compliance with all applicable federal and
state securities laws. Except (a) for the rights created pursuant to this
Agreement and (b) as set forth in Section 2.1 of the Disclosure Schedule, there
are no options, warrants, calls, rights, commitments, agreements or arrangements
of any character to which Target or any Subsidiary is a party or by which Target
or any Subsidiary is bound relating to the issued or unissued capital stock of
Target or any Subsidiary or obligating Target or any Subsidiary to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of capital stock of Target or any Subsidiary
or obligating Target or any Subsidiary to grant, extend, accelerate the vesting
of, change the price of, or otherwise amend or enter into any such option,
warrant, call, right, commitment or agreement. There are no contracts,
commitments or agreements relating to voting, purchase or sale of Target's
capital stock (i) between or among Target and any of its stockholders and (ii)
to the best of Target's knowledge, between or among any of Target's
stockholders, except for the Buy-Sell Agreement dated March 31, 1998 between
Target and the stockholders of Target, which will be terminated as of the
Closing. Section 2.3 of the Disclosure Schedule sets forth the name and address
of each stockholder of Target and the number of shares owned by such
stockholder.
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2.4 Authority. Target has all requisite corporate power and authority
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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 authorized by all necessary
corporate action on the part of Target. Target's Board of Directors has
unanimously approved the Merger and this Agreement. This Agreement has been duly
executed and delivered by Target and assuming due authorization, execution and
delivery by Acquiror and Merger Sub, constitutes the valid and binding
obligation of Target enforceable against Target in accordance with its terms.
2.5 No Conflicts; Required Filings and Consents.
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(a) The execution and delivery of this Agreement by Target does
not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under (i)
any provision of the Articles of Incorporation or Bylaws of Target or any of the
organizational documents of the Subsidiaries, as amended, or (ii) any material
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Target or any Subsidiary or any of
their properties or assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
------------
Entity") is required by or with respect to Target or any Subsidiary in
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connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger, together with the required officers' certificates, as
provided in Section 1.2 required by Delaware Law, (ii) the filing of the Plan of
Merger and Articles of Merger, as provided in Section 1.2, required by Arizona
Law and (iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the Securities Act of 1933, as
amended (the "Securities Act"), and applicable state securities laws.
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2.6 Financial Statements. Section 2.6 of the Disclosure Schedule
--------------------
includes a true, correct and complete copy of the audited consolidated financial
statements of Target and the Subsidiaries (other than GRS and Momentum) for the
fiscal year ended December 31, 1999 (the "Financial Statements"). The Financial
--------------------
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated and
with each other. The Financial Statements accurately set out and describe the
financial condition and operating results of Target and its consolidated
Subsidiaries as of the dates, and for the periods, indicated therein. Target
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
2.7 Absence of Undisclosed Liabilities. Neither Target nor any
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Subsidiary has material obligations or liabilities of any nature (matured or
unmatured, fixed or contingent) other than (i) those set forth or adequately
provided for in the Balance Sheet for the period ended
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December 31, 1999 (the "Target Balance Sheet"), (ii) those incurred in the
--------------------
ordinary course of business and not required to be set forth in the Target
Balance Sheet under generally accepted accounting principles, (iii) those
incurred in the ordinary course of business since the date of the Target Balance
Sheet and consistent with past practice, and (iv) those incurred in connection
with the execution of this Agreement. As of the Effective Time, all of the
outstanding liabilities of Target and the Subsidiaries are as set forth in an
officer's certificate delivered by the President and Chief Financial Officer.
2.8 Absence of Certain Changes. Except as set forth in Section 2.8 of
--------------------------
the Disclosure Schedule, since December 31, 1999 ( the "Target Balance Sheet
--------------------
Date") there has not been, occurred or arisen any:
----
(a) transaction by Target or any Subsidiary except in the
ordinary course of business as conducted on that date and consistent with past
practices;
(b) amendments or changes to the Articles of Incorporation or
Bylaws of Target;
(c) capital expenditure or commitment by Target or any
Subsidiary, in any individual amount exceeding $10,000, or in the aggregate,
exceeding $100,000;
(d) destruction of, damage to, or loss of any assets (including,
without limitation, intangible assets), business or customer of Target or any
Subsidiary (whether or not covered by insurance) which would constitute a
Material Adverse Effect;
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates, any change in policies
in making or reversing accruals, or any change in capitalization of software
development costs) by Target or any revaluation by Target of any of its or any
of its Subsidiaries' assets;
(g) revaluation by Target or any Subsidiary of any of their
respective assets;
(h) declaration, setting aside, or payment of a dividend or
other distribution in respect to the capital stock of Target, or any direct or
indirect redemption, purchase or other acquisition by Target of any of its
capital stock;
(i) increase in the salary or other compensation payable or to
become payable by Target to any officers, directors, employees or advisors of
Target or any Subsidiary, except in the ordinary course of business consistent
with past practice, or the declaration, payment, or commitment or obligation of
any kind for the payment by Target of a bonus or other additional salary or
compensation to any such person except as otherwise contemplated by this
Agreement, or other than as set forth in Section 2.16 below, the establishment
of any bonus, insurance, deferred compensation, pension, retirement, profit
sharing, stock option (including
-9-
without limitation, the granting of stock options, stock appreciation rights,
performance awards), stock purchase or other employee benefit plan;
(j) sale, lease, license of other disposition of any of the assets or
properties of Target or any Subsidiary, except in the ordinary course of
business and not in excess of $10,000 in the aggregate;
(k) termination or material amendment of any material contract,
agreement or license (including any distribution agreement) to which Target or
any Subsidiary is a party or by which it is bound;
(l) loan by Target or any Subsidiary to any person or entity, or
guaranty by Target or any Subsidiary of any loan, except for (x) travel or
similar advances made to employees in connection with their employment duties in
the ordinary course of business, consistent with past practices and (y) trade
payables not in excess of $10,000 in the aggregate and in the ordinary course of
business, consistent with past practices;
(m) waiver or release of any right or claim of Target or any
Subsidiary, including any write-off or other compromise of any account
receivable of Target or any Subsidiary, in excess of $10,000 in the aggregate;
(n) the commencement or notice or threat of commencement of any
lawsuit or proceeding against or, to the Target's or Target's officers' or
directors' knowledge, investigation of Target or any Subsidiary or their
respective affairs;
(o) notice of any claim of ownership by a third party of Target's or
any Subsidiary's Intellectual Property (as defined in Section 2.13 below) or of
infringement by Target or any Subsidiary of any third party's Intellectual
Property rights;
(p) issuance or sale by Target or any Subsidiary of any of its shares
of capital stock, or securities exchangeable, convertible or exercisable
therefor, or of any other of its securities;
(q) change in pricing or royalties set or charged by Target or any
Subsidiary to its customers or licensees or in pricing or royalties set or
charged by persons who have licensed Intellectual Property to Target or any
Subsidiary;
(r) event or condition of any character that has or could reasonably
be expected to have a Material Adverse Effect on Target or any Subsidiary; or
(s) agreement by Target, any Subsidiary or any officer or employee of
either on behalf of such entity to do any of the things described in the
preceding clauses (a) through (r) (other than negotiations with Acquiror and its
representatives regarding the transactions contemplated by this Agreement).
2.9 Litigation. There is no private or governmental action, suit,
----------
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or
-10-
domestic, or, to the knowledge of Target and each Subsidiary, threatened against
Target or any Subsidiary or any of their respective properties or any of their
respective officers or directors (in their capacities as such) that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Target or any Subsidiary. To the knowledge of Target
and each Subsidiary, there are no facts or circumstances existing that,
individually or in the aggregate, could reasonably be expected to give rise to
any litigation that could reasonably be expected to have a Material Adverse
Effect on Target or any Subsidiary. There is no judgment, decree or order
against Target or any Subsidiary or, to the best knowledge of Target and its
Subsidiaries, any of their respective directors or officers (in their capacities
as such), that could prevent, enjoin, or materially alter or delay any of the
transactions contemplated by this Agreement, or that could reasonably be
expected to have a Material Adverse Effect on Target. All litigation to which
Target or any Subsidiary is a party (or, to the knowledge of Target, threatened
to become a party) is disclosed in the Disclosure Schedule.
2.10 Restrictions on Business Activities. There is no agreement,
-----------------------------------
judgment, injunction, order or decree binding upon Target or any Subsidiary
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any current or future business practice of Target or any
Subsidiary, any acquisition of property by Target or any Subsidiary or the
overall conduct of business by Target or any Subsidiary as currently conducted
or as proposed to be conducted by Target or by any Subsidiary. Neither Target
nor any Subsidiary has entered into any agreement under which Target or any
Subsidiary is restricted from selling, licensing or otherwise distributing any
of its products to any class of customers, in any geographic area, during any
period of time or in any segment of the market.
2.11 Permits; Products; Regulation.
-----------------------------
(a) Each of Target and each Subsidiary is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders necessary for Target or
that Subsidiary, to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Target Authorizations") and no
---------------------
suspension or cancellation of any Target Authorization is pending or, to the
best of Target's knowledge, threatened, except where the failure to have, or the
suspension or cancellation of, any Target Authorization would not have a
Material Adverse Effect on Target. Neither Target nor any Subsidiary is in
conflict with, or in default or violation of, (i) any laws applicable to Target
or any Subsidiary or by which any property or asset of Target or any Subsidiary
is bound or affected, (ii) any Target Authorization, or (iii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Target or any Subsidiary is a party or
by which Target or any Subsidiary or any property or asset of Target or any
Subsidiary is bound or affected, except for any such conflict, default or
violation that would not, individually or in the aggregate, have a Material
Adverse Effect on Target or any Subsidiary.
(b) Target has not received any written notices, citations or
decisions by any governmental or regulatory body that any product produced,
manufactured, marketed or distributed at any time by Target or any Subsidiary
(the "Products") is defective or fails to meet any applicable standards
--------
promulgated by any such governmental or regulatory body. To the best
-11-
knowledge of Target, Target and each Subsidiary has complied in all material
respects with the laws, regulations, policies, procedures and specifications
with respect to the design, manufacture, labeling, testing and inspection of the
Products. There have been no recalls, field notifications or seizures ordered
or, to Target's knowledge, threatened by any such governmental or regulatory
body with respect to any of the Products.
(c) Target has obtained, in all jurisdictions where either
Target or a Subsidiary is marketing or has marketed its Products, all applicable
licenses, registrations, approvals, clearances and authorizations required by
local, state or federal agencies in such jurisdictions regulating the safety,
effectiveness and market clearance of the Products currently or previously
marketed by Target or any Subsidiary in such countries, except for any such
failures as would not, individually or in the aggregate, have a Material Adverse
Effect on Target. Target has identified and made available for examination by
Acquiror all information relating to regulation of its Products, including
licenses, registrations, approvals, permits, device listings, inspections,
Target's recalls and product actions, audits and Target's ongoing focus group
studies. Target has identified in writing to Acquiror all locations where
regulatory information and documents are kept.
2.12 Title to Property.
-----------------
(a) Each of Target and each Subsidiary has good and marketable
title to all of its respective properties, interests in properties and assets,
real and personal, reflected in the Target Balance Sheet or acquired after the
Target Balance Sheet Date (except properties, interests in properties and assets
sold or otherwise disposed of since the Target Balance Sheet Date in the
ordinary course of business), or with respect to leased properties and assets,
valid leasehold interests in, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except (i) the lien of current
taxes not yet due and payable, (ii) such imperfections of title, liens and
easements as do not and will not materially detract from or interfere with the
use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties, and (iii) liens
securing debt which is reflected on the Target Balance Sheet. The plants,
property and equipment of Target and Subsidiaries that are used in the
operations of their businesses are in good operating condition and repair. All
properties used in the operations of Target and its Subsidiaries are reflected
in the Target Balance Sheet to the extent United States generally accepted
accounting principles require the same to be reflected. Section 2.12(a) of the
Disclosure Schedule sets forth a true, correct and complete list of all real
property owned or leased by Target and by each Subsidiary, the name of the
lessor, the date of the lease and each amendment thereto and the aggregate
annual rental and other fees payable under such lease. Such leases are in good
standing, are valid and effective in accordance with their respective terms, and
there is not under any such leases any existing default or event of default (or
event which with notice or lapse of time, or both, would constitute a default).
(b) Section 2.12(b) of the Disclosure Schedule also sets forth a
true, correct and complete list of all equipment (the "Equipment") owned or
---------
leased by Target and its Subsidiaries, and such Equipment is, taken as a whole,
(i) adequate for the conduct of Target's business, consistent with its past
practice, and (ii) in good operating condition (except for ordinary wear and
tear).
-12-
2.13 Intellectual Property.
---------------------
(a) Target and each of its Subsidiaries own, or are licensed or
otherwise possess legally enforceable rights to use all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
copyrights, and any applications for any of the foregoing, maskworks, net lists,
schematics, industrial models, inventions, technology, know-how, trade secrets,
inventory, ideas, algorithms, processes, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material ("Intellectual Property") that
---------------------
are used or proposed to be used in the business of Target or any Subsidiary as
currently conducted or as proposed to be conducted by Target or any Subsidiary.
Without limiting the foregoing, Target or a Subsidiary is the owner of the
source code for the Momentum System Architecture, which includes Member
Enrollment and Customer Service, Momentum Database and the GRS Transaction
Processing System. The description of the Momentum System Architecture entitled
"Momentum System Architecture and Ownership of Source Code and Data" provided by
Target to Acquiror is accurate and complete.
(b) Section 2.13 of the Disclosure Schedule lists (i) all
patents and patent applications and all registered and unregistered trademarks,
trade names and service marks, registered and unregistered copyrights, and
maskworks, included in the Intellectual Property, including the jurisdictions in
which each such Intellectual Property right has been issued or registered or in
which any application for such issuance and registration has been filed, (ii)
all licenses, sublicenses and other agreements as to which Target or any
Subsidiary is a party and pursuant to which any person is authorized to use any
Intellectual Property, and (iii) all licenses, sublicenses and other agreements
as to which Target or any Subsidiary is a party and pursuant to which Target or
any Subsidiary is authorized to use any third party patents, trademarks or
copyrights, including software ("Third Party Intellectual Property Rights")
----------------------------------------
which are incorporated in, are, or form a part of any Target product that is
material to its business. Neither Target nor any Subsidiary is in violation of
any license, sublicense or agreement described in Section 2.13 of the Disclosure
Schedule. The execution and delivery of this Agreement by Target and the
consummation of the transactions contemplated hereby, will neither cause Target
or any Subsidiary to be in violation or default under any such license,
sublicense or agreement, nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement. Except as set forth in Section 2.13 of the Disclosure Schedule,
Target is the sole and exclusive owner or licensee of, with all right, title and
interest in and to (free and clear of any liens), the Intellectual Property, and
has sole and exclusive rights (and is not contractually obligated to pay any
compensation to any third party in respect thereof) to the use thereof or the
material covered thereby in connection with the services or products in respect
of which Intellectual Property is being used.
(c) There is no material unauthorized use, disclosure,
infringement or misappropriation of any Intellectual Property rights of Target
or any Subsidiary, any trade secret material to Target or any Subsidiary or any
Intellectual Property right of any third party to the extent licensed by or
through Target or any Subsidiary, by any third party, including any employee or
former employee of Target or any Subsidiary. Neither Target nor any Subsidiary
has entered into any agreement to indemnify any other person against any charge
of infringement
-13-
of any Intellectual Property, other than indemnification provisions contained in
purchase orders arising in the ordinary course of business.
(d) Neither Target nor any Subsidiary is or will be as a result
of the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any license, sublicense or other
agreement relating to the Intellectual Property or Third Party Intellectual
Property Rights.
(e) All patents, registered trademarks, service marks and
copyrights held by Target or any Subsidiary are valid and existing and there is
no assertion or claim (or basis therefor) challenging the validity of any
Intellectual Property of Target or any Subsidiary. Target has not been sued in
any suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party. Neither the conduct of the
business of Target and each Subsidiary as currently conducted or contemplated
nor the manufacture, sale, licensing or use of any of the products of Target or
any Subsidiary as now manufactured, sold or licensed or used, nor the use in any
way of the Intellectual Property in the manufacture, use, sale or licensing by
Target or any Subsidiary of any products currently proposed, infringes on or
will infringe or conflict with, in any way, any license, trademark, trademark
right, trade name, trade name right, patent, patent right, industrial model,
invention, service ▇▇▇▇ or copyright of any third party. All registered
trademarks, service marks and copyrights held by Target are valid and existing.
To Target's knowledge, no third party is challenging the ownership by Target or
any Subsidiary, or the validity or effectiveness of, any of the Intellectual
Property. Neither Target nor any Subsidiary has brought any action, suit or
proceeding for infringement of Intellectual Property or breach of any license or
agreement involving Intellectual Property against any third party. There are no
pending, or to the best of Target's knowledge, threatened interference, re-
examinations, oppositions or nullities involving any patents, patent rights or
applications therefor of Target or any Subsidiary, except such as may have been
commenced by Target or any Subsidiary. There is no breach or violation of or
threatened or actual loss of rights under any license agreement to which Target
is a party.
(f) Target has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Target does not
already own by operation of law.
(g) Target has taken all necessary and appropriate steps to
protect and preserve the confidentiality of all Intellectual Property not
otherwise protected by patents, patent applications or copyright ("Confidential
------------
Information"). Each of Target and its respective Subsidiaries has a policy
-----------
requiring each employee, consultant and independent contractor to execute
proprietary information and confidentiality agreements substantially in Target's
standard forms and all current and former employees, consultant and independent
contractors of Target and each Subsidiary have executed such an agreement. All
use, disclosure or appropriation of Confidential Information owned by Target or
a Subsidiary by or to a third party has been pursuant to the terms of a written
agreement between Target or the applicable Subsidiary and such third party. All
use, disclosure or appropriation of Confidential Information not owned by
-14-
Target or a Subsidiary has been pursuant to the terms of a written agreement
between Target or a Subsidiary and the owner of such Confidential Information,
or is otherwise lawful.
2.14 Environmental Matters.
---------------------
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any
-----------------------------
federal, state or local laws, ordinances, codes, regulations, rules, policies
and orders, as each may be amended from time to time, that are intended to
assure the protection of the environment, or that classify, regulate, call for
the remediation of, require reporting with respect to, or list or define air,
water, groundwater, solid waste, hazardous or toxic substances, materials,
wastes, pollutants or contaminants; which regulate the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Materials or
materials containing Hazardous Materials; or which are intended to assure the
protection, safety and good health of employees, workers or other persons,
including the public.
(ii) "Hazardous Materials" shall mean any toxic or
-------------------
hazardous substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including without limitation,
those substances, materials and wastes defined in or regulated under any
Environmental and Safety Laws; petroleum and petroleum products including crude
oil and any fractions thereof; natural gas, synthetic gas, and any mixtures
thereof; radon; asbestos; and any other pollutant or contaminant
(iii) "Property" shall mean all real property leased or
--------
owned by Target or its Subsidiaries either currently or in the past.
(iv) "Facilities" shall mean all buildings and improvements
----------
on the Property of Target or its Subsidiaries.
(b) Target represents and warrants as follows: (i) no methylene
chloride or asbestos is contained in or has been used at or released from the
Facilities; (ii) all Hazardous Materials and wastes have been disposed of in
accordance with all Environmental and Safety Laws; (iii) Target and its
Subsidiaries have received no notice (verbal or written) of any noncompliance of
the Facilities or of its past or present operations with Environmental and
Safety Laws; (iv) no notices, administrative actions or suits are pending or
threatened relating to Hazardous Materials or a violation of any Environmental
and Safety Laws; (v) neither Target nor its Subsidiaries are a potentially
responsible party under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), or any state analog statute, arising
------
out of events occurring prior to the Closing Date; (vi) there has not been in
the past, and are not now, any contamination, disposal, spilling, dumping,
incineration, discharge, storage, treatment or handling of Hazardous Materials
on, under or migrating to or from the Facilities or Property (including without
limitation, soils and surface and ground waters); (vii) there have not been in
the past, and are not now, any underground tanks or underground improvements at,
on or under the Property including without limitation, treatment or storage
tanks, sumps, or water, gas or oil ▇▇▇▇▇; (viii) there are no polychlorinated
biphenyls ("PCBs")
----
-15-
deposited, stored, disposed of or located on the Property or Facilities or any
equipment on the Property containing PCBs at levels in excess of 50 parts per
million; (ix) there is no formaldehyde on the Property or in the Facilities, nor
any insulating material containing urea formaldehyde in the Facilities; (x) the
Facilities and Target's and its Subsidiaries uses and activities therein have at
all times complied with all Environmental and Safety Laws; (xi) Target and its
Subsidiaries have all the permits and licenses required to be issued and are in
full compliance with the terms and conditions of those permits; and (xii)
neither Target nor any of its Subsidiaries is liable for any off-site
contamination nor under any Environmental and Safety Laws.
2.15 Taxes.
-----
(a) For purposes of this Section 2.15 and other provisions of
this Agreement relating to Taxes, the following definitions shall apply:
(i) The term "Taxes" shall mean all taxes, however
-----
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, (A) imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, all income or profits taxes (including but not limited to,
federal, state and foreign income taxes), payroll and employee withholding
taxes, unemployment insurance contributions, social security taxes, sales and
use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts
taxes, withholding taxes, business license taxes, occupation taxes, real and
personal property taxes, stamp taxes, environmental taxes, transfer taxes,
workers' compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar nature
to any of the foregoing, which are required to be paid, withheld or collected,
(B) any liability for the payment of amounts referred to in (A) as a result of
being a member of any affiliated, consolidated, combined or unitary group, or
(C) any liability for amounts referred to in (A) or (B) as a result of any
obligations to indemnify another person.
(ii) The term "Returns" shall mean all reports, estimates,
-------
declarations of estimated tax, information statements and returns required to be
filed in connection with any Taxes, including information returns with respect
to backup withholding and other payments to third parties.
(b) All Returns required to be filed by or on behalf of Target
or any Subsidiary have been duly filed on a timely basis and such Returns are
true, complete and correct. All Taxes shown to be payable on such Returns or on
subsequent assessments with respect thereto, and all payments of estimated Taxes
required to be made by or on behalf of Target or any Subsidiary under Section
6655 of the Code or comparable provisions of state, local or foreign law, have
been paid in full on a timely basis, and no other Taxes are payable by Target or
any Subsidiary with respect to items or periods covered by such Returns (whether
or not shown on or reportable on such Returns). Target and each Subsidiary have
withheld and paid over all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding in connection
with amounts paid or owing to any employee,
-16-
creditor, independent contractor, or other third party. There are no liens on
any of the assets of Target or any Subsidiary with respect to Taxes, other than
liens for Taxes not yet due and payable or for Taxes that Target or that
Subsidiary is contesting in good faith through appropriate proceedings. Neither
Target nor any Subsidiary has been at any time a member of an affiliated group
of corporations filing consolidated, combined or unitary income or franchise tax
returns for a period for which the statute of limitations for any Tax
potentially applicable as a result of such membership has not expired.
(c) The amount of Target's and any Subsidiary's liabilities for
unpaid Taxes for all periods through the date of the Financial Statements do
not, in the aggregate, exceed the amount of the current liability accruals for
Taxes reflected on the Financial Statements, and the Financial Statements
properly accrue in accordance with generally accepted accounting principles
("GAAP") all liabilities for Taxes of Target and its Subsidiaries payable after
the date of the Financial Statements attributable to transactions and events
occurring prior to such date. No liability for Taxes of Target or any Subsidiary
has been incurred (or prior to Closing will be incurred) since such date other
than in the ordinary course of business.
(d) Acquiror has been furnished by Target true and complete
copies of (i) relevant portions of income tax audit reports, statements of
deficiencies, closing or other agreements received by or on behalf of Target or
any Subsidiary relating to Taxes, and (ii) all federal, state and foreign income
or franchise tax returns and state sales and use tax Returns for or including
Target and its Subsidiaries for all periods since Target's and such
Subsidiaries' inception.
(e) No audit of the Returns of or including Target and its
Subsidiaries by a government or taxing authority is in process, threatened or,
to Target's knowledge, pending (either in writing or orally, formally or
informally). No deficiencies exist or have been asserted (either in writing or
orally, formally or informally) or are expected to be asserted with respect to
Taxes of Target or any of its Subsidiaries, and Target has not received notice
(either in writing or orally, formally or informally) nor does it expect to
receive notice that it or any Subsidiary has not filed a Return or paid Taxes
required to be filed or paid. Neither Target nor any Subsidiary is a party to
any action or proceeding for assessment or collection of Taxes, nor has such
event been asserted or threatened (either in writing or orally, formally or
informally) against Target, any Subsidiary or any of their respective assets. No
waiver or extension of any statute of limitations is in effect with respect to
Taxes or Returns of Target or any Subsidiary. Target and each Subsidiary have
disclosed on their federal and state income and franchise tax returns all
positions taken therein that could give rise to a substantial understatement
penalty within the meaning of Code Section 6662 or comparable provisions of
applicable state tax laws.
(f) Target and its Subsidiaries are not (nor have they ever
been) parties to any tax sharing agreement. Since April 16, 1997, neither Target
nor any of its Subsidiaries has been a distributing corporation or a controlled
corporation in a transaction described in Section 355(a) of the Code.
(g) Target is not, nor has it been, a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period
-17-
specified in Section 897(c)(1)(A)(ii) of the Code. Target is not a "consenting
corporation" under Section 341(f) of the Code. Neither Target nor any Subsidiary
has entered into any compensatory agreements with respect to the performance of
services which payment thereunder would result in a nondeductible expense to
Target or to such Subsidiary pursuant to Section 280G of the Code or an excise
tax to the recipient of such payment pursuant to Section 4999 of the Code.
Neither Target nor any Subsidiary has agreed to, nor is it required to make,
other than by reason of the Merger, any adjustment under Code Section 481(a) by
reason of, a change in accounting method, and Target and each Subsidiary will
not otherwise have any income reportable for a period ending after the Closing
Date attributable to a transaction or other event (e.g., an installment sale)
occurring prior to the Closing Date with respect to which Target or such
Subsidiary received the economic benefit prior to the Closing Date. Neither
Target nor any Subsidiary is, nor has it been, a "reporting corporation" subject
to the information reporting and record maintenance requirements of Section
6038A and the regulations ther eunder.
(h) The Disclosure Schedule contains accurate and complete
information regarding Target's and its Subsidiaries' net operating losses for
federal and each state tax purposes. Target and its Subsidiaries have no net
operating losses and credit carryovers or other tax attributes currently subject
to limitation under Sections 382, 383, or 384 of the Code.
2.16 Employee Benefit Plans.
----------------------
(a) Schedule 2.16 lists, with respect to Target, each Subsidiary
of Target and any trade or business (whether or not incorporated) which is
treated as a single employer with Target (an "ERISA Affiliate") within the
---------------
meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all employee benefit
plans (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), (ii) each loan to a non-officer employee in
-----
excess of $10,000, loans to officers and directors and any stock option, stock
purchase, phantom stock, stock appreciation right, supplemental retirement,
severance, sabbatical, medical, dental, vision care, disability, employee
relocation, cafeteria benefit (Code Section 125) or dependent care (Code Section
129), life insurance or accident insurance plans, programs or arrangements,
(iii) all contracts and agreements relating to employment that provide for
annual compensation in excess of $100,000 and all severance agreements, with any
of the directors, officers or employees of Target or its Subsidiaries (other
than, in each case, any such contract or agreement that is terminable by the
Company or its Subsidiary at will or without penalty or other adverse
consequence), (iv) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (v) other fringe or
employee benefit plans, programs or arrangements that apply to senior management
of Target or any Subsidiary and that do not generally apply to all employees,
and (vi) any current or former employment or executive compensation or severance
agreements, written or otherwise, as to which unsatisfied obligations of Target
or any Subsidiary of greater than $10,000 remain for the benefit of, or relating
to, any present or former employee, consultant or director of Target or any
Subsidiary (together, the "Target Employee Plans").
---------------------
(b) Target has furnished to Acquiror a copy of each of the
Target Employee Plans and related plan documents (including trust documents,
insurance policies or contracts, employee booklets, summary plan descriptions
and other authorizing documents, and,
-18-
to the extent still in its possession, any material employee communications
relating thereto) and has, with respect to each Target Employee Plan which is
subject to ERISA reporting requirements, provided copies of the Form 5500
reports filed for the last three plan years. Any Target Employee Plan intended
to be qualified under Section 401(a) of the Code has either obtained from the
Internal Revenue Service a favorable determination letter as to its qualified
status under the Code, including all amendments to the Code effected by the Tax
Reform Act of 1986 and subsequent legislation, or has applied to the Internal
Revenue Service for such a determination letter prior to the expiration of the
requisite period under applicable Treasury Regulations or Internal Revenue
Service pronouncements in which to apply for such determination letter and to
make any amendments necessary to obtain a favorable determination. Target has
also furnished Acquiror with the most recent Internal Revenue Service
determination letter issued with respect to each such Target Employee Plan, and
nothing has occurred since the issuance of each such letter which could
reasonably be expected to cause the loss of the tax-qualified status of any
Target Employee Plan subject to Code Section 401(a).
(c) Except as set forth in Section 2.16(c) of the Disclosure
Schedule, (i) none of the Target Employee Plans promises or provides retiree
medical or other retiree welfare or life insurance benefits to any person; (ii)
there has been no "prohibited transaction," as such term is defined in Section
406 of ERISA and Section 4975 of the Code, with respect to any Target Employee
Plan, which could reasonably be expected to have, in the aggregate, a Material
Adverse Effect; (iii) each Target Employee Plan has been administered in
accordance with its terms and in compliance with the requirements prescribed by
any and all statutes, rules and regulations (including ERISA and the Code),
except as would not have, in the aggregate, a Material Adverse Effect, and
Target and each Subsidiary or ERISA Affiliate have performed all obligations
required to be performed by them under, are not in any material respect in
default under or violation of, and have no knowledge of any material default or
violation by any other party to, any of the Target Employee Plans; (iv) neither
Target nor any Subsidiary or ERISA Affiliate is subject to any liability or
penalty under Sections 4976 through 4980 of the Code or Title I of ERISA with
respect to any of the Target Employee Plans; (v) all material contributions
required to be made by Target or any Subsidiary or ERISA Affiliate to any Target
Employee Plan have been made on or before their due dates and a reasonable
amount has been accrued for contributions to each Target Employee Plan for the
current plan years; (vi) with respect to each Target Employee Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 or ERISA has occurred; (vii) no Target Employee Plan
is covered by, and neither Target nor any Subsidiary or ERISA Affiliate has
incurred or expects to incur any direct or indirect liability under, arising out
of or by operation of Title IV of ERISA in connection with the termination of,
or an employee's withdrawal from, any Target Employee Plan or other retirement
plan or arrangement, and no fact or event exists that could give rise to any
such liability, or under Section 412 of the Code; (viii) Target and the
Subsidiaries have not incurred any liability under, and have complied in all
respects with, the Worker Adjustment Retraining Notification Act, (the "WARN
----
Act")and no fact or event exists that could give rise to liability under such
---
act; and (ix) no compensation paid or payable to any employee of Target or any
Subsidiary has been, or will be, non-deductible by reason of application of
Section 162(m) of the Code. With respect to
-19-
each Target Employee Plan subject to ERISA as either an employee pension plan
within the meaning of Section 3(2) of ERISA or an employee welfare benefit plan
within the meaning of Section 3(1) of ERISA, Target has prepared in good faith
and timely filed all requisite governmental reports (which were true and correct
as of the date filed) and has properly and timely filed and distributed or
posted all notices and reports to employees required to be filed, distributed or
posted with respect to each such Target Employee Plan. No suit, administrative
proceeding, action or other litigation has been brought, or to the best
knowledge of Target is threatened, against or with respect to any such Target
Employee Plan, including any audit or inquiry by the IRS or United States
Department of Labor. Neither Target nor any Subsidiary or other ERISA Affiliate
is a party to, or has made any contribution to or otherwise incurred any
obligation under, any "multiemployer plan" as defined in Section 3(37) of ERISA.
(d) With respect to each Target Employee Plan, Target and each
of its United States Subsidiaries have complied with (i) the applicable health
care continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and the proposed regulations thereunder and
-----
(ii) the applicable requirements of the Family Leave Act of 1993 and the
regulations thereunder, except to the extent that such failure to comply would
not, in the aggregate, have a Material Adverse Effect.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of Target, any Subsidiary or any other ERISA Affiliate to severance
benefits or any other payment (including, without limitation, unemployment
compensation, golden parachute or bonus), except as expressly provided in this
Agreement, or (ii) accelerate the time of payment or vesting of any such
benefits, or increase the amount of compensation due any such employee or
service provider.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by Target, any Subsidiary or other ERISA
Affiliate relating to, or change in participation or coverage under, any Target
Employee Plan which would materially increase the expense of maintaining such
Plan above the level of expense incurred with respect to that Plan for the most
recent fiscal year included in Target's financial statements.
2.17 Certain Agreements Affected by the Merger. Neither the execution
-----------------------------------------
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (a) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or employee of Target or any of its
Subsidiaries, (b) increase any benefits otherwise payable by Target, or (c)
result in the acceleration of the time of payment or vesting of any such
benefits.
2.18 Employee Matters. Target and each of its Subsidiaries are in
----------------
compliance in all material respects with all currently applicable federal,
state, local and foreign laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment, wages, hours
and occupational safety and health and employment practices, and is not engaged
in any unfair labor practice. There are no pending claims against Target or any
of its Subsidiaries under any workers compensation plan or policy or for long
term disability. Neither
-20-
Target nor any of its Subsidiaries has any material obligations under COBRA with
respect to any former employees or qualifying beneficiaries thereunder. There
are no controversies pending or, to the knowledge of Target or any of its
Subsidiaries, threatened, between Target or any of its Subsidiaries and any of
their respective employees, which controversies have or could reasonably be
expected to have a Material Adverse Effect on Target. Neither Target nor any of
its Subsidiaries is a party to any collective bargaining agreement or other
labor unions contract nor does Target or any of its Subsidiaries know of any
activities or proceedings of any labor union or other group to organize any such
employees.
2.19 Material Contracts.
------------------
(a) Subsections (i) through (ix) of Section 2.19(a) of the
Disclosure Schedule contain a list of all contracts and agreements to which
Target or any Subsidiary is a party and that are material to the business,
results of operations, or condition (financial or otherwise), of Target and the
Subsidiaries taken as a whole (such contracts, agreements and arrangements as
are required to be set forth in Section 2.19(a) of the Disclosure Schedule being
referred to herein collectively as the "Material Contracts"). Material Contracts
------------------
shall include, without limitation, the following and shall be categorized in the
Disclosure Schedule as follows:
(i) each contract and agreement (other than routine
purchase orders and pricing quotes in the ordinary course of business covering a
period of less than 1 year) for the purchase of inventory, spare parts, other
materials or personal property with any supplier or for the furnishing of
services to Target or any Subsidiary under the terms of which Target or any
Subsidiary: (A) paid or otherwise gave consideration of more than $10,000 in the
aggregate during the calendar year ended December 31, 1999, (B) is likely to pay
or otherwise give consideration of more than $10,000 in the aggregate during the
calendar year ended December 31, 2000, (C) is likely to pay or otherwise give
consideration of more than $10,000 in the aggregate over the remaining term of
such contract, or (D) cannot be cancelled by Target or such Subsidiary without
penalty or further payment of less than $10,000;
(ii) each customer contract and agreement (other than
routine purchase orders, pricing quotes with open acceptance and other tender
bids, in each case, entered into in the ordinary course of business and covering
a period of less than one year) to which Target or any Subsidiary is a party
which (A) involved consideration of more than $10,000 in the aggregate during
the calendar year ended December 31, 1999, (B) is likely to involve
consideration of more than $10,000 in the aggregate during the calendar year
ended December 31, 2000, (C) is likely to involve consideration of more than
$10,000 in the aggregate over the remaining term of the contract, or (D) cannot
be cancelled by Target or such Subsidiary without penalty or further payment of
less than $10,000;
(iii) (A) all distributor, manufacturer's representative,
broker, franchise, agency and dealer contracts and agreements to which Target or
any Subsidiary is a party (specifying on a matrix, in the case of distributor
agreements, the name of the distributor, product, territory, termination date
and exclusivity provisions) and (B) all sales promotion, market research,
marketing and advertising contracts and agreements to which Target or any
Subsidiary is a party which: (1) involved consideration of more than $10,000 in
the aggregate
-21-
during the calendar year ended December 31, 1999, (2) are likely to involve
consideration of more than $10,000 in the aggregate during the calendar year
ended December 31, 10,000, or (3) are likely to involve consideration of more
than $10,000 in the aggregate over the remaining term of the contract; (iv) all
management contracts with independent contractors or consultants (or similar
arrangements) to which Target or any Subsidiary is a party and which (A)
involved consideration of more than $10,000 in the aggregate during the calendar
year ended December 31, 1999, (B) are likely to involve consideration of more
than $10,000 in the aggregate during the calendar year ended December 31, 2000,
or (C) are likely to involve consideration of more than $10,000 in the aggregate
over the remaining term of the contract;
(iv) all contracts and agreements (excluding routine
checking account overdraft agreements involving ▇▇▇▇▇ cash amounts) under which
Target or any Subsidiary has created, incurred, assumed or guaranteed (or may
create, incur, assume or guarantee) indebtedness or under which Target or any
Subsidiary has imposed (or may impose) a security interest or lien on any of
their respective assets, whether tangible or intangible, to secure indebtedness;
(vi) all contracts and agreements that limit the ability
of Target or any Subsidiary or, after the Effective Time, Acquiror or any of its
affiliates, to compete in any line of business or with any person or in any
geographic area or during any period of time, or to solicit any customer or
client;
(vii) all contracts and agreements between or among
Target or any Subsidiary, on the one hand, and any affiliate of Target (other
than a wholly owned subsidiary), on the other hand;
(viii) all contracts and agreements to which Target or any
Subsidiary is a party under which it has agreed to supply products to a customer
at specified prices, whether directly or through a specific distributor,
manufacturer's representative or dealer; and
(ix) all other contracts or agreements (A) which are
material to Target and its Subsidiaries or the conduct of their respective
businesses, (B) the absence of which would have a Material Adverse Effect on
Target, or (C) which are believed by Target to be of unique value even though
not material to the business of Target.
(b) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on Target, each Target license, each Material
Contract and each other material contract or agreement of Target or any
Subsidiary which would not have been required to be disclosed in Section 2.19(a)
of the Disclosure Schedule had such contract or agreement been entered into
prior to the date of this Agreement, is a legal, valid and binding agreement,
and none of the Target licenses or Material Contracts is in default by its terms
or has been cancelled by the other party; Target and the Subsidiaries are not in
receipt of any claim of default under any such agreement; and none of Target or
any of the Subsidiaries anticipates any termination or
-22-
change to, or receipt of a proposal with respect to, any such agreement as a
result of the Merger or otherwise. Target has furnished Acquiror with true and
complete copies of all such agreements together with all amendments, waivers or
other changes thereto.
2.20 Interested Party Transactions. Neither Target nor any
-----------------------------
Subsidiary is indebted to any director, officer, employee or agent of Target or
any Subsidiary (except for amounts due as normal salaries and bonuses and in
reimbursement of ordinary expenses), and no such person is indebted to Target or
any Subsidiary.
2.21 Insurance. Target and each of its Subsidiaries have policies
---------
of insurance and bonds of the type and in amounts customarily carried by persons
conducting businesses or owning assets similar to those of Target and its
Subsidiaries. Each of such policies is listed on Section 2.21 of the Disclosure
Schedule. There is no material claim pending under any of such policies or bonds
as to which coverage has been questioned, denied or disputed by the underwriters
of such policies or bonds. All premiums due and payable under all such policies
and bonds have been paid and Target and its Subsidiaries are otherwise in
compliance with the terms of such policies and bonds. Target has no knowledge of
any threatened termination of, or material premium increase with respect to, any
of such policies.
2.22 Compliance With Laws. Each of Target and its Subsidiaries has
--------------------
complied with, is not in violation of, and has not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business.
2.23 Minute Books. The minute books of Target and its Subsidiaries
------------
made available to Acquiror contain a complete summary of all meetings of
directors and stockholders or actions by written consent since the time of
incorporation of Target and the respective Subsidiaries through the date of this
Agreement, and reflect all transactions referred to in such minutes accurately
in all material respects.
2.24 Complete Copies of Materials. Target has delivered or made
----------------------------
available true and correct copies of each document that has been requested by
Acquiror or its counsel in connection with their legal and accounting review of
Target and its Subsidiaries.
2.25 Brokers' and Finders' Fees. Target has not incurred, nor will
--------------------------
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.26 Vote Required. The affirmative vote of the holders of a majority
-------------
of the shares of Target Common Stock is the only vote of the holders of any of
Target's capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
2.27 Board Approval. The Board of Directors of Target has unanimously
--------------
(a) approved this Agreement and the Merger, (b) determined that the Merger is in
the best
-23-
interests of the stockholders of Target and is on terms that are fair to such
stockholders and (c) recommended that the stockholders of Target approve this
Agreement and the Merger.
2.28 Inventory. The inventories shown on the Financial Statements or
---------
thereafter acquired by Target, consisted of items of a quantity and quality
usable or salable in the ordinary course of business. Since December 31, 1999,
Target has continued to replenish inventories in a normal and customary manner
consistent with past practices. Target has not received written or oral notice
that it will experience in the foreseeable future any difficulty in obtaining,
in the desired quantity and quality and at a reasonable price and upon
reasonable terms and conditions, the raw materials, supplies or component
products required for the manufacture, assembly or production of its products.
The values at which inventories are carried reflect the inventory valuation
policy of Target, which is consistent with its past practice and in accordance
with generally accepted accounting principles applied on a consistent basis.
Since December 31, 1999, due provision was made on the books of Target in the
ordinary course of business consistent with past practices to provide for all
slow-moving, obsolete, or unusable inventories to their estimated useful scrap
values and such inventory reserves are adequate to provide for such slow-moving,
obsolete or unusable inventory and inventory shrinkage.
2.29 Accounts Receivable.
-------------------
(a) Target has made available to Acquiror a list of all accounts
receivable of Target and each Subsidiary reflected on the Financial Statements
("Accounts Receivable") along with a range of days elapsed since invoice.
-------------------
(b) All Accounts Receivable of Target and its Subsidiaries arose
in the ordinary course of business, are carried at values determined in
accordance with GAAP consistently applied. No person has any lien on any of such
Accounts Receivable and no request or agreement for deduction or discount has
been made with respect to any of such Accounts Receivable.
(c) All of the inventories of Target and each Subsidiary
reflected in the Financial Statements and Target's books and records on the date
hereof were purchased, acquired or produced in the ordinary and regular course
of business and in a manner consistent with Target's regular inventory practices
and are set forth on Target's books and records in accordance with the practices
and principles of Target consistent with the method of treating said items in
prior periods. None of the inventory of Target or any Subsidiary reflected on
the Financial Statements or on Target's books and records as of the date hereof
(in either case net of the reserve therefor) is obsolete, defective or in excess
of the needs of the business of Target reasonably anticipated for the normal
operation of the business consistent with past practices and outstanding
customer contracts. The presentation of inventory on the Financial Statements
conforms to GAAP and such inventory is stated at the lower of cost or net
realizable value.
2.30 Customers and Suppliers. As of the date hereof, no customer
-----------------------
which individually accounted for more than 5% of Target's gross revenues during
the 12-month period preceding the date hereof, and no supplier of Target, has
cancelled or otherwise terminated, or made any written threat to Target to
cancel or otherwise terminate its relationship with Target, or
-24-
has at any time on or after December 31, 1999 decreased materially its services
or supplies to Target in the case of any such supplier, or its usage of the
services or products of Target in the case of such customer, and to Target's
knowledge, no such supplier or customer intends to cancel or otherwise terminate
its relationship with Target or to decrease materially its services or supplies
to Target or its usage of the services or products of Target, as the case may
be. From and after the date hereof, no customer which individually accounted for
more than 5% of Target's gross revenues during the 12 month period preceding the
date hereof, has cancelled or otherwise terminated, or made any written threat
to Target to cancel or otherwise terminate, for any reason, including without
limitation the consummation of the transactions contemplated hereby, its
relationship with Target, and to Target's knowledge, no such customer intends to
cancel or otherwise terminate its relationship with Target or to decrease
materially its usage of the services or products of Target. Target has not
knowingly breached, so as to provide a benefit to Target that was not intended
by the parties, any agreement with, or engaged in any fraudulent conduct with
respect to, any customer or supplier of Target.
2.31 Third Party Consents. Except as set forth in Section 2.31 of the
--------------------
Disclosure Schedule, no consent or approval is needed from any third party in
order to effect the Merger, this Agreement or any of the transactions
contemplated hereby.
2.32 No Commitments Regarding Future Products. Target has made no
----------------------------------------
sales to customers that are contingent upon providing future enhancements of
existing products, to add features not presently available on existing products
or to otherwise enhance the performance of its existing products (other than
beta or similar arrangements pursuant to which Target's customers from time to
time test or evaluate products). The products Target has delivered to customers
substantially comply with published specifications for such products and Target
has not received material complaints from customers about its products that
remain unresolved. Section 2.32 of the Disclosure Schedule accurately sets forth
a complete list of products in development (exclusive of mere enhancements to
and additional features for existing products).
2.33 Vital Processing. Target has provided to Acquiror a true,
----------------
complete and correct copy of an irrevocable, permanent waiver by Vital
Processing, Inc. of its right of first refusal with respect to a sale of
Target's minority ownership interest in GRS. Such waiver has not been amended or
otherwise modified and is in full force and effect.
2.34 SHC Direct. Target has provided to Acquiror true, complete and
----------
correct copies of agreements providing that Target will purchase (a) the entire
interest of SHC Direct, LLC, in Universal Value Network, LLC, (b) the entire
interest of SHC Direct, LLC in SHC Venture LLC and (c) the entire interest of
Vital Processing, Inc. in SHC Venture LLC (collectively, the "Repurchase
----------
Agreements"). Such agreements have not been amended or otherwise modified and
----------
are in full force and effect. Each of such agreements is enforceable against
each of the parties thereto in accordance with its terms.
2.35 Representations Complete. None of the representations or
------------------------
warranties made by Target herein or in any Schedule hereto, including the
Disclosure Schedule, or certificate furnished by Target pursuant to this
Agreement, when all such documents are read
-25-
together in their entirety, contains or will contain at the Effective Time any
untrue statement of a material fact, or omits or will omit at the Effective Time
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
SECTION THREE
3. Representations and Warranties of Acquiror and Merger Sub.
---------------------------------------------------------
Acquiror and Merger Sub hereby jointly and severally represent and
warrant to Target as follows:
3.1 Organization, Standing and Power. Each of Acquiror and Merger
--------------------------------
Sub is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization. Each of Acquiror and Merger Sub
has the corporate power to own its properties and to carry on its business as
now being conducted and as proposed to be conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified and in good standing would have a Material Adverse Effect on
Acquiror. Acquiror has delivered a true and correct copy of the Certificate of
Incorporation and Bylaws of Acquiror and Merger Sub, each as amended to date, to
Target. Neither Acquiror nor any of its subsidiaries is in violation of any
material provisions of its Certificate of Incorporation or Bylaws or equivalent
organizational documents.
3.2 Authority. Acquiror and Merger Sub have all requisite 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
authorized by all necessary corporate action on the part of Acquiror and Merger
Sub (other than, with respect to the Merger, the filing and recordation of
appropriate merger documents as required by Delaware Law and Arizona Law). This
Agreement has been duly executed and delivered by Acquiror and Merger Sub and
constitutes the valid and binding obligations of Acquiror and Merger Sub.
3.3 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under (i) any provision of
the Certificate of Incorporation or Bylaws of Acquiror or Merger Sub, as
amended, or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Acquiror or Merger Sub or their properties or assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Acquiror or Merger Sub in connection with the execution
and delivery of this Agreement by Acquiror and
-26-
Merger Sub or the consummation by Acquiror and Merger Sub of the transactions
contemplated hereby, except for (i) the filing of appropriate merger documents
as required by Delaware Law and Arizona Law, (ii) any filings as may be required
under the Securities Act and applicable state securities laws, (iii) the filing
with the Nasdaq National Market of a Notification Form for Listing of Additional
Shares with respect to the shares of Acquiror Common Stock issuable upon
conversion of the Target Common Stock in the Merger and (iv) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not have a Material Adverse Effect on Acquiror and would
not prevent, materially alter or delay any the transactions contemplated by this
Agreement.
3.4 Acquiror Common Stock. The shares of Acquiror Common Stock to be
---------------------
issued to the stockholders of Target pursuant to the Merger and this Agreement
are duly authorized and, when issued in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable. The issuance of
Acquiror Common Stock pursuant to the Merger will transfer to the stockholders
of Target valid title to such shares of Acquiror Common Stock, free and clear of
all liens, encumbrances, security interests, charges, restrictions or other
similar encumbrances or defects in title.
3.5 SEC Documents; Financial Statements.
-----------------------------------
(a) Acquiror has filed all forms, reports and documents required
to be filed by Acquiror with the SEC since October 13, 1999, and previously has
made available to the Target copies, in the form filed with the SEC, of its
Quarterly Report on Form 10-Q for the period ended September 30, 1999 filed with
the SEC by Acquiror, and Acquiror will have made available to Target true and
complete copies of any additional documents filed with the SEC by Acquiror after
the date hereof and prior to the Effective Time (collectively, the "Acquiror SEC
------------
Documents"). As of their respective filing dates, the Acquiror SEC Documents
---------
complied in all material respects with the requirements of the Exchange Act and
the Securities Act, and none of the Acquiror SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a subsequently filed Acquiror SEC Document.
(b) The financial statements of Acquiror, including the notes
thereto, included in the Acquiror SEC Documents (the "Acquiror Financial
------------------
Statements") were complete and correct in all material respects as of their
----------
respective filing dates, complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto as of their respective dates, and have been
prepared in accordance with United States generally accepted accounting
principles applied on a basis consistent throughout the periods indicated and
consistent with each other (except as may be indicated in the notes thereto or,
in the case of unaudited statements, included in Quarterly Reports on Forms 10-
Q). The Acquiror Financial Statements fairly present the consolidated financial
condition and operating results of Acquiror and its subsidiaries at the dates
and during the periods indicated therein (subject, in the case of unaudited
statements, to normal, recurring year-end adjustments). There has been no change
in Acquiror accounting policies except as described in the notes to the Acquiror
Financial Statements.
-27-
3.6 Litigation. There is no action, suit, proceeding or
----------
investigation pending or, to the knowledge of Acquiror, threatened against
Acquiror or any of its subsidiaries that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on Acquiror.
SECTION FOUR
4. Additional Agreements.
---------------------
4.1 Best Efforts and Further Assurances. Each of the parties to this
-----------------------------------
Agreement shall use its best efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby.
4.2 Consents; Cooperation.
---------------------
(a) Each of Acquiror and Target shall use its reasonable best
efforts to promptly (i) obtain from any Governmental Entity any consents,
licenses, permits, waivers, approvals, authorizations or orders required to be
obtained or made by Acquiror or Target or any of their subsidiaries in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereunder, and (ii) make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Merger required under the Securities Act and
the Exchange Act and any other applicable federal, state or foreign securities
laws.
(b) Each of Acquiror and Target shall give or cause to be given
any required notices to third parties, and use its reasonable best efforts to
obtain all consents, waivers and approvals from third parties (i) necessary,
proper or advisable to consummate the transactions contemplated hereunder, (ii)
disclosed or required to be disclosed in the Disclosure Schedule or the Acquiror
Disclosure Schedule, or (iii) required to prevent a Material Adverse Effect on
Target or Acquiror from occurring prior or after the Effective Time. In the
event that Acquiror or Target shall fail to obtain any third party consent,
waiver or approval described in this Section 4.2(b), it shall use its reasonable
best efforts, and shall take any such actions reasonably requested by the other
party, to minimize any adverse effect upon Acquiror and Target, their respective
subsidiaries and their respective businesses resulting (or which could
reasonably be expected to result after the Effective Time) from the failure to
obtain such consent, waiver or approval.
(c) Each of Acquiror and Target will, and will cause their
respective subsidiaries to, take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on them with respect
to the consummation of the transactions contemplated by this Agreement and will
promptly cooperate with and furnish information to any party hereto necessary in
connection with any such requirements imposed
-28-
upon such other party in connection with the consummation of the transactions
contemplated by this Agreement and will take all reasonable actions necessary to
obtain (and will cooperate with the other parties hereto in obtaining) any
consent, approval, order or authorization of, or any registration, declaration
or filing with, any Governmental Entity or other person, required to be obtained
or made in connection with the taking of any action contemplated by this
Agreement.
4.3 Public Disclosure. Unless otherwise permitted by this Agreement,
-----------------
Acquiror and Target shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law or by obligations
pursuant to any listing agreement with the NASD.
4.4 FIRPTA. Target shall, prior to the Closing Date, provide
------
Acquiror with a properly executed Foreign Investment and Real Property Tax Act
of 1980 ("FIRPTA") Notification Letter, which shall state that shares of capital
------
stock of Target do not constitute "United States real property interests" under
Section 897(c) of the Code, for purposes of satisfying Acquiror's obligations
under Treasury Regulation Section 1.1445-2(c)(3). In addition, simultaneously
with delivery of such Notification Letter, Target shall have provided to
Acquiror, as agent for Target, a form of notice to the Internal Revenue Service
in accordance with the requirements of Treasury Regulation Section 1.897-2(h)(2)
along with written authorization for Acquiror to deliver such notice form to the
Internal Revenue Service on behalf of Target upon the Closing of the Merger.
4.5 State Statutes. If any state takeover law shall become
--------------
applicable to the transactions contemplated by this Agreement, Acquiror and its
Board of Directors or Target and its Board of Directors, as the case may be,
shall use their reasonable best efforts to grant such approvals and take such
actions as are necessary so that the transactions contemplated by this Agreement
may be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effects of such state takeover law on
the transactions contemplated by this Agreement.
4.6 Blue Sky Laws. Target shall use its best efforts to assist
-------------
Acquiror as may be necessary to comply with the securities and blue sky laws of
all jurisdictions which are applicable in connection with the issuance of
Acquiror Common Stock in connection with the Merger.
SECTION FIVE
5. Conditions to the Merger.
------------------------
5.1 Conditions to Obligations of Each Party to Effect the Merger.
------------------------------------------------------------
The respective obligations of each party to this Agreement to consummate and
effect this Agreement and the transactions contemplated hereby shall be subject
to the satisfaction on or prior to the
-29-
Effective Time of each of the following conditions, any of which may be waived,
in writing, by agreement of all the parties hereto:
(a) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal. In the event an
injunction or other order shall have been issued, each party agrees to use its
reasonable diligent efforts to have such injunction or other order lifted.
(b) Governmental Approval. Acquiror, Target and Merger Sub and
---------------------
their respective subsidiaries shall have timely obtained from each Governmental
Entity all approvals, waivers and consents, if any, necessary for consummation
of or in connection with the Merger and the several transactions contemplated
hereby, including, without limitation, such approvals, waivers and consents as
may be required under the Securities Act and under any state securities laws.
(c) Tax Opinion. Acquiror and Target shall have received
-----------
written opinions of Acquiror's legal counsel and Target's legal counsel,
respectively, to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code, and such opinions shall not
have been withdrawn. In rendering such opinions, counsel shall be entitled to
rely upon, among other things, reasonable assumptions as well as representations
of Acquiror, Merger Sub and Target and certain stockholders of Target.
(d) Escrow Agreement. Acquiror, Target, Escrow Agent and the
----------------
Stockholders' Representative (as defined in Section 6 below) shall have entered
into an Escrow Agreement substantially in the form attached hereto as Exhibit F.
5.2 Additional Conditions to Obligations of Target. The obligations
----------------------------------------------
of Target to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by Target:
(a) Representations, Warranties and Covenants. (i) Each of the
representations and warranties of Acquiror and Merger Sub in this Agreement that
is expressly qualified by a reference to materiality shall be true in all
respects as so qualified, and each of the representations and warranties of
Acquiror and Merger Sub in this Agreement that is not so qualified shall be true
and correct in all material respects, on and as of the Effective Time as though
such representation or warranty had been made on and as of such time (except
that those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date), and (ii)
Acquiror and Merger Sub shall have performed and
-30-
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by them as of the
Effective Time.
(b) Certificates of Acquiror.
------------------------
(i) Compliance Certificate of Acquiror. Target shall have
----------------------------------
been provided with a certificate executed on behalf of Acquiror by its President
or its Chief Financial Officer to the effect that, as of the Effective Time,
each of the conditions set forth in Section 5.2(a) above has been satisfied with
respect to Acquiror.
(ii) Certificate of Secretary of Acquiror. Target shall
------------------------------------
have been provided with a certificate executed by the Secretary or Assistant
Secretary of Acquiror certifying:
(A) Resolutions duly adopted by the Board of Directors
of Acquiror authorizing the execution of this Agreement and the execution,
performance and delivery of all agreements, documents and transactions
contemplated hereby; and
(B) the incumbency of the officers of Acquiror
executing this Agreement and all agreements and documents contemplated hereby.
(c) Certificates of Merger Sub.
--------------------------
(i) Compliance Certificate of Merger Sub. Target shall
------------------------------------
have been provided with a certificate executed on behalf of Merger Sub by its
President or its Chief Financial Officer to the effect that, as of the Effective
Time, each of the conditions set forth in Section 5.2(a) above has been
satisfied with respect to Merger Sub.
(ii) Certificate of Secretary of Merger Sub. Target shall
--------------------------------------
have been provided with a certificate executed by the Secretary or Assistant
Secretary of Merger Sub certifying:
(A) Resolutions duly adopted by the Board of Directors
and the sole stockholder of Merger Sub authorizing the execution of this
Agreement and the execution, performance and delivery of all agreements,
documents and transactions contemplated hereby; and
(B) the incumbency of the officers of Merger Sub
executing this Agreement and all agreements and documents contemplated hereby.
(d) Legal Opinion. Target shall have received a legal opinion
-------------
from Acquiror's legal counsel in the form approved by Target.
(e) Good Standing. Target shall have received a certificate or
-------------
certificates of the Secretary of State of the State of Delaware and any
applicable franchise tax authority of such state, certifying as of a date no
more than three business days prior to the Effective Time that each of Acquiror
and Merger Sub has filed all required reports, paid all
-31-
required fees and taxes and is, as of such date, in good standing and authorized
to transact business as a domestic corporation.
5.3 Additional Conditions to the Obligations of Acquiror and Merger
---------------------------------------------------------------
Sub. The obligations of Acquiror and Merger Sub to consummate and effect this
---
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by Acquiror:
(a) Representations, Warranties and Covenants. (i) Each of the
-----------------------------------------
representations and warranties of Target in this Agreement that is expressly
qualified by a reference to materiality shall be true in all respects as so
qualified, and each of the representations and warranties of Target in this
Agreement that is not so qualified shall be true and correct in all material
respects, on and as of the Effective Time as though such representation or
warranty had been made on and as of such time (except that those representations
and warranties which address matters only as of a particular date shall remain
true and correct as of such date), and (ii) Target shall have performed and
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by it as of the
Effective Time.
(b) No Material Adverse Changes. There shall not have occurred
---------------------------
any material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations, results of operations or prospects of Target and its subsidiaries,
taken as a whole.
(c) Certificates of Target.
----------------------
(i) Compliance Certificate of Target. Acquiror and Merger
--------------------------------
Sub shall have been provided with a certificate executed on behalf of Target by
its President or its Chief Financial Officer to the effect that, as of the
Effective Time, each of the conditions set forth in Section 5.3(a) and (b) above
has been satisfied.
(ii) Certificate of Secretary of Target. Acquiror and
----------------------------------
Merger Sub shall have been provided with a certificate executed by the Secretary
of Target certifying:
(A) Resolutions duly adopted by the Board of Directors
and all of the stockholders of Target authorizing the execution of this
Agreement and the execution, performance and delivery of all agreements,
documents and transactions contemplated hereby;
(B) the Articles of Incorporation and Bylaws of
Target, as in effect immediately prior to the Effective Time, including all
amendments thereto; and
(C) the incumbency of the officers of Target executing
this Agreement and all agreements and documents contemplated hereby.
-32-
(d) Third Party Consents. Acquiror shall have been furnished
--------------------
with evidence satisfactory to it that Target has obtained those consents,
waivers, approvals or authorizations of those Governmental Entities and third
parties whose consent or approval are required in connection with the Merger as
set forth in Sections 4.2(a) and (c).
(e) Injunctions or Restraints on Merger and Conduct of Business.
-----------------------------------------------------------
No proceeding brought by any administrative agency or commission of other
governmental authority or instrumentality, domestic or foreign, seeking to
prevent the consummation of the Merger shall be pending. In addition, no
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Acquiror's conduct or operation of
the business of Target and its subsidiaries, following the Merger shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other Governmental Entity, domestic or foreign, seeking the
foregoing be pending.
(f) Legal Opinion. Acquiror shall have received a legal opinion
-------------
from Target's legal counsel, in the form approved by Acquiror.
(g) FIRPTA Certificate. Target shall, prior to the Closing Date,
------------------
provide Acquiror with a properly executed FIRPTA Notification Letter and a form
of notice to the Internal Revenue Service in accordance with the requirements of
Treasury Regulation Section 1.897-2(h)(2) along with written authorization for
Acquiror to deliver such notice form to the Internal Revenue Service on behalf
of Target upon the Closing of the Merger, as set forth in Section 4.4 above.
(h) Stockholder Agreements. Acquiror shall have received from
----------------------
all of the holders of the Target Common Stock outstanding immediately prior to
the Effective Time, duly executed and delivered Stockholder Agreements in
substantially the form attached hereto as Exhibit J.
(i) Resignation of Directors and Officers. Acquiror shall have
-------------------------------------
received letters of resignation from each of the directors and officers of
Target in office immediately prior to the Effective Time, which resignations in
each case shall be effective as of the Effective Time.
(j) Non-Competition Agreements. Each of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇
--------------------------
Larsson, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have executed a Non-
Competition Agreement substantially in the form attached hereto as Exhibit H.
(k) Employment Agreements. Each of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇ shall have executed an Employment Agreement substantially
in the form attached hereto as Exhibit G.
(l) Indemnity Agreements. All holders of Target Common Stock
--------------------
outstanding immediately prior to the Effective Time shall have executed the form
of Indemnity Agreement attached hereto as Exhibit K.
-33-
(m) Consummation of SHC Direct Purchases. Target shall have
------------------------------------
completed the purchase of all of the ownership interests of SHC Direct, LLC in
each of Universal Value Network LLC and SHC Venture LLC, subject only to the
issuance of 58,000 shares of Acquiror Common Stock to SHC Direct, LLC.
(n) Consummation of Vital Processing Purchase. Target shall have
-----------------------------------------
completed the purchase of the entire ownership interest of Vital Processing in
SHC Venture LLC.
(o) Business Management Agreement. GRS and Vital Processing
-----------------------------
Services shall have executed and delivered to Acquiror an agreement granting
Acquiror certain business management rights in the customer loyalty program
markets in a form acceptable to Acquiror.
(p) Buy-Sell Agreement. Each of the parties to the Buy-Sell
------------------
Agreement dated March 31, 1998, between Target and the stockholders of Target
shall have agreed in writing to terminate such agreement in connection with the
transactions contemplated hereby.
(q) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance. Target shall have delivered to
----------------------------
Acquiror such certificates and information as Acquiror may require to confirm
that no filings are required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976 in connection with the transactions contemplated by this Agreement.
SECTION SIX
6. Escrow and Indemnification.
--------------------------
6.1 Survival of Representations and Warranties. All covenants to be
------------------------------------------
performed prior to the Effective Time, and all representations and warranties in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the consummation of the Merger.
6.2 Escrow Fund. As soon as practicable after the Effective Time, a
-----------
portion of the Acquiror Common Stock to be issued in the Merger at the Closing
shall, without any act of any stockholder of Target, be registered in the name
of, and be deposited with, American Stock Transfer and Trust Corporation (or
other institution selected by Acquiror with the reasonable consent of Target) as
escrow agent (the "Escrow Agent"), such deposit to constitute the escrow fund
------------
(the "Escrow Fund") and to be governed by the terms set forth herein and in the
-----------
Escrow Agreement attached hereto as Exhibit F (the "Escrow Agreement"). As soon
--------- ----------------
as practicable after the Effective Time, fifteen percent (15%) of the shares of
Acquiror Common Stock that each Target stockholder is entitled to receive in the
Merger on the Closing Date in exchange for the Target Common Stock (the "Initial
-------
Escrow Shares" and, together with the New Shares (as defined below in Section
-------------
6.6(a)), the "Escrow Shares") shall be deposited by Acquiror into the Escrow
-------------
Fund. In the event that any Damages (as defined below) arise, the Escrow Fund
shall be available to compensate the Indemnified Persons (defined below)
pursuant to the indemnification
-34-
obligations of the stockholders of the Target pursuant to Section 6.3 and in
accordance with the Escrow Agreement.
6.3 Indemnification.
---------------
(a) Indemnified Damages. Subject to the limitations set forth in
-------------------
this Section 6, from and after the Effective Time, the former stockholders of
Target shall protect, defend, indemnify and hold harmless Acquiror and the
Surviving Corporation and their respective affiliates, officers, directors,
employees, representatives and agents (Acquiror, Surviving Corporation and each
of the foregoing persons or entities is hereinafter referred to individually as
an "Indemnified Person" and collectively as "Indemnified Persons") from and
------------------ -------------------
against any and all losses, costs, damages, liabilities, fees (including without
limitation attorneys' fees) and expenses (collectively, the "Damages"), that any
-------
of the Indemnified Persons incurs or reasonably anticipates incurring by reason
of or in connection with any claim, demand, action or cause of action alleging
misrepresentation, breach of, or default in connection with, any of the
representations, warranties, covenants or agreements of Target contained in this
Agreement, including any exhibits or schedules attached hereto, and the
Certificate of Merger, which becomes known to Acquiror including, without
limitation, (i) any operating expenses of Target or any Subsidiary prior to the
Closing Date that were not included in the determination of the Total
Consideration pursuant to Exhibit D and (ii) any unscheduled obligations
required to be paid by Target to SHC Direct, LLC pursuant to Section 2 of that
certain SHC Venture LLC Membership Interest Purchase Agreement dated the date
hereof. Damages in each case shall be net of the amount of any insurance
proceeds and indemnity and contribution actually recovered by Acquiror or the
Surviving Corporation.
(b) Exclusive Contractual Remedy and Limitations. Acquiror, the
--------------------------------------------
former stockholders of Target and Target each acknowledge that Damages, if any,
would relate to unresolved contingencies existing at the Effective Time, which
if resolved at the Effective Time would have led to a reduction in the total
consideration Acquiror would have agreed to pay in connection with the Merger.
The maximum liability of any former holder of the Target Common Stock for any
breach of a representation, warranty or covenant of the Target shall be limited
to the number of Escrow Shares in the Escrow Fund in which such holder has an
interest; provided, however, that nothing herein shall limit the liability of
any officer, director or stockholder of Target for such person's or entity's
fraud or intentional misrepresentation.
6.4 Damages Payments. Notwithstanding the foregoing, Acquiror may not
----------------
receive any compensation for damages unless and until a certificate signed by an
officer of Acquiror (an "Officer's Certificate") identifying Damages has been
---------------------
delivered to the Escrow Agent (or to the Stockholder's Representative if
following the Escrow Period), in which case Acquiror shall receive Escrow Shares
(or cash if following the termination of the Escrow Period) equal in value to
the full amount of such Damages without deduction. For purposes hereof, the
value of the Escrow Shares shall be the average closing price of the Acquiror's
Common Stock shares (as quoted on NASDAQ as reported in The Wall Street Journal)
for the ten trading days immediately prior to the date any claim by an
Indemnified Party is paid. In determining the amount of any Damages attributable
to a breach, any materiality standard contained in a representation, warranty or
covenant of Acquiror shall be disregarded.
-35-
6.5 Escrow Period. Subject to the following requirements, the Escrow
-------------
Fund shall remain in existence until the date that is twelve (12) months after
the Effective Time (the "Escrow Period"). Upon the expiration of the Escrow
-------------
Period, the Escrow Fund shall terminate with respect to all Escrow Shares;
provided, however, that the number of Escrow Shares, which, in the reasonable
judgment of Acquiror, subject to the objection of the Stockholders'
Representative (as defined in Section 6.8 below) and the subsequent arbitration
of the claim in the manner provided in the Escrow Agreement, are necessary to
satisfy any unsatisfied claims specified in any Officer's Certificate delivered
to the Escrow Agent prior to the expiration of such Escrow Period with respect
to facts and circumstances existing on or prior to the end of the Escrow Period
shall remain in the Escrow Fund (and the Escrow Fund shall remain in existence)
until such claims have been resolved. As soon as all such claims have been
resolved, the Escrow Agent shall deliver to the stockholders of Target all
Escrow Shares and other property remaining in the Escrow Fund and not required
to satisfy such claims. Deliveries of Escrow Shares to the stockholders of
Target pursuant to this Section 6.5 and the Escrow Agreement shall be made in
proportion to their respective original contributions to the Escrow Fund.
6.6 Distributions; Voting.
---------------------
(a) Any shares of Acquiror Common Stock or other equity
securities issued or distributed by Acquiror (including shares issued upon a
stock split) ("New Shares") in respect of the Escrow Shares that have not been
----------
released from the Escrow Fund shall be added to the Escrow Fund and become a
part thereof. When and if cash dividends on Escrow Shares in the Escrow Fund
shall be declared and paid, they shall be retained in escrow pending final
distribution of the Escrow Fund and will not be immediately distributed to the
beneficial owners of the Escrow Shares. Such dividends will become part of the
Escrow Fund and will be available to satisfy Damages. The beneficial owners of
the Escrow Shares shall pay any taxes on such dividends.
(b) Each stockholder of Target shall have voting rights with
respect to that number of Escrow Shares contributed to the Escrow Fund on behalf
of such stockholder (and on any voting securities added to the Escrow Fund in
respect of such Escrow Shares) so long as such Escrow Shares or other voting
securities are held in the Escrow Fund. As the record holder of such shares, the
Escrow Agent shall vote such shares in accordance with the instructions of the
stockholders of Target having the beneficial interest therein and shall promptly
deliver copies of all proxy solicitation materials to such stockholders.
Acquiror shall show the Acquiror Common Stock contributed to the Escrow Fund as
issued and outstanding on its balance sheet.
6.7 Method of Asserting Claims. All claims for indemnification by any
--------------------------
Indemnified Person pursuant to this Section 6 shall be made in accordance with
the provisions of the Escrow Agreement.
6.8 Representative of the Stockholders; Power of Attorney. In the
-----------------------------------------------------
event that the Merger is approved by the requisite stockholders, effective upon
such vote, and without further act of any stockholder, a committee (the
"Committee") of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ shall be
---------
appointed as agents and attorneys-in-fact (collectively, the "Stockholders'
------------
Representative") for each stockholder of Target, for and on behalf of
--------------
stockholders
-36-
of Target, to give and receive notices and communications on behalf of Target
stockholders, to enter into and perform the Escrow Agreement, to authorize
delivery to Acquiror of Escrow Shares or other property from the Escrow Fund in
satisfaction of claims by Acquiror or any other Indemnified Person, to object to
such deliveries, to agree to, negotiate, enter into settlements and compromises
of, and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary or
appropriate in the judgment of Stockholders' Representative for the
accomplishment of the foregoing. The Stockholders' Representative shall act by
vote or written action or consent of a majority of the members of the Committee.
SECTION SEVEN
7. General Provisions.
------------------
7.1 Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
48 hours after being deposited in the regular mail as certified or registered
mail (airmail if sent internationally) with postage prepaid, if such notice is
addressed to the party to be notified at such party's address or facsimile
number as set forth below, or as subsequently modified by written notice,
(a) if to Acquiror or Merger Sub, to:
Netcentives Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Executive Vice President, Operations, and
Chief Financial Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Target, to:
UVN Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
-37-
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
7.2 Interpretation. When a reference is made in this Agreement to
--------------
Exhibits or Schedules, such reference shall be to an Exhibit or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
------- --------
"including" when used herein shall be deemed in each case to be followed by the
---------
words "without limitation." The phrase "made available" in this Agreement shall
------------------ --------------
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. The phrases "the
date of this Agreement," "the date hereof," and terms of similar import, unless
---------------------- ---------------
the context otherwise requires, shall be deemed to refer to March 3, 2000. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
7.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
7.4 Entire Agreement; Nonassignability; Parties in Interest. This
-------------------------------------------------------
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Disclosure Schedule and the Acquiror Disclosure
Schedule (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, except for the Confidentiality Agreement, which shall continue in full
force and effect, and shall survive any termination of this Agreement or the
Closing, in accordance with its terms; (b) are not intended to confer upon any
other person any rights or remedies hereunder, except as set forth in Sections
1.6(a) and (e), 1.7, 1.8, 1.12; and (c) shall not be assigned by operation of
law or otherwise except as otherwise specifically provided.
7.5 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed
by each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (a) such provision shall be
excluded from this Agreement, (b) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (c) the balance of the
Agreement shall be enforceable in accordance with its terms.
-38-
7.6 Remedies Cumulative. Except as otherwise provided herein, any and
-------------------
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.
7.7 Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law. Each of the
parties to this Agreement consents to the exclusive jurisdiction and venue of
the courts of the state and federal courts of San Francisco County, California.
7.8 Rules of Construction. The parties hereto agree that they have
---------------------
been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
7.9 Amendments and Waivers. Any term of this Agreement may be amended
----------------------
or waived only with the written consent of the parties or their respective
successors and assigns. Any amendment or waiver effected in accordance with this
Section 7.9 shall be binding upon the parties and their respective successors
and assigns.
[Signature Page Follows]
-39-
Target, Acquiror and Merger Sub have executed this Agreement as of the
date first written above.
TARGET
UVN HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
------------------------------
(Print)
Title: President
-----------------------------
Address: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
---------------------------
ACQUIROR
NETCENTIVES INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------
(Print)
Title: Executive VP, Operations, and CFO
---------------------------------
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
---------------------------
MERGER SUB:
▇▇▇▇▇ DOG ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------
(Print)
Title: Secretary
-----------------------------
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
---------------------------
EXHIBIT A
CERTIFICATE OF MERGER
EXHIBIT A
CERTIFICATE OF MERGER
of ▇▇▇▇▇ Dog Acquisition Corporation (Delaware)
into
UVN Holdings, Inc. (Arizona)
(Under Section 252(c))
1. The name and state of incorporation of each of the constituent
corporations of the merger is as follows:
Name State of Incorporation
▇▇▇▇▇ Dog Acquisition Corporation Delaware
UVN Holdings, Inc. Arizona
2. An agreement and plan of merger has been approved, adopted, certified,
executed and acknowledged by each of the constituent corporations in accordance
with the requirements of Section 252(c) of the General Corporation Law of the
State of Delaware.
3. The name of the surviving corporation of the merger is UVN Holdings,
Inc.
4. The certificate of incorporation of the constituent Arizona
corporation, UVN Holdings, Inc., is and shall be the certificate of
incorporation of the surviving corporation.
5. The executed agreement and plan of merger is on file at an office of
UVN Holdings, Inc., the surviving corporation. The address of the office of the
surviving corporation at which the agreement of merger is filed is ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
6. A copy of the agreement and plan of merger will be furnished by the
surviving corporation, on request and without cost, to any stockholder of any
constituent corporation.
7. The name and authorized capital stock of the constituent corporation
that is not a Delaware corporation are as follows:
Name Authorized Capital Stock
---- ------------------------
UVN Holdings, Inc. 10,000 Shares of Common Stock,
no par value
8. UVN Holdings, Inc. agrees that it may be served with process in the
State of Delaware in any proceeding for enforcement of any obligation of any
constituent corporation of the State of Delaware, as well as for enforcement of
any obligation of UVN Holdings, Inc. arising from the merger, including any suit
or other proceeding to enforce the right of any stockholders as determined in
appraisal proceedings pursuant to Section 262 of the Delaware General
Corporation Law. UVN Holdings, Inc. irrevocably appoints the Secretary of State
of Delaware as its agent to accept service of process in any such suit or other
proceedings. The address to which a copy of such process shall be mailed by the
Secretary of State of Delaware shall be ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
IN WITNESS WHEREOF, UVN Holdings, Inc. has caused this Certificate to be
signed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, its President, and ▇▇▇▇▇ ▇▇▇▇▇, its Secretary, this
_____ day of March, 2000.
UVN Holdings, Inc.
By:_______________________
President
By:_______________________
Secretary
-2-
EXHIBIT B
PLAN OF MERGER
EXHIBIT B
PLAN OF MERGER
--------------
This Plan of Merger (this "Plan") is made and effective as of March__,
2000, by and between UVN Holdings, Inc., an Arizona corporation ("UVN"), and
▇▇▇▇▇ Dog Acquisition Corporation, a Delaware Corporation ("▇▇▇▇▇ Dog"), and
shall constitute a "plan of merger" as described in A.R.S. (S) 10-1101.B.
RECITALS
--------
A. UVN was incorporated on April 4, 1997, under the laws of the State of
Arizona. As of the date set forth above, its sole authorized capital stock
consists of 10,000 shares of no par value common stock, of which 9,600 shares
are issued and outstanding as of the date set forth above. All issued and
outstanding shares of such common stock are owned by those shareholders of UVN
described on the attached Exhibit "A" (the "Shareholders"), in accordance with
-----------
the shareholdings as set forth on the attached Exhibit "A".
----------
▇. ▇▇▇▇▇ Dog was incorporated on March 1, 2000, under the laws of the
State of Delaware. As of the date set forth above, its sole authorized capital
stock consists of 1,000 shares of $0.01 par value common stock, of which 1,000
shares are issued and outstanding as of the date set forth above. All issued and
outstanding shares of such common stock are owned by Netcentives Inc., a
Delaware corporation ("Netcentives").
C. The boards of directors of ▇▇▇▇▇ Dog and UVN have determined that it
is advisable and in the best interests of each of the parties that ▇▇▇▇▇ Dog
merge into UVN in a transaction qualifying as a reorganization under I.R.C (S)
368(a)(1), under the terms and conditions set forth in this Plan, and pursuant
to the laws of the State of Arizona and the State of Delaware. The boards of
directors of each company, the Shareholders and Netcentives have adopted
resolutions authorizing the adoption and execution of this Plan.
AGREEMENT
---------
NOW, THEREFORE, ▇▇▇▇▇ Dog and UVN agree to merge on the terms and
conditions set forth below.
1. ▇▇▇▇▇ Dog shall merge with and into UVN, and UVN shall continue as the
surviving corporation. Upon the merger of ▇▇▇▇▇ Dog into UVN (the "Merger") on
the Effective Date, as defined in Section 2, below, the separate existence of
▇▇▇▇▇ Dog shall cease, and UVN and ▇▇▇▇▇ Dog shall become a single corporation.
The corporate identity, existence, purposes, rights, privileges, powers,
franchises and immunities of UVN shall continue unaffected and unimpaired by the
Merger, and the corporate identity, existence, purposes, rights, privileges,
powers, franchises and immunities of ▇▇▇▇▇ Dog shall be merged into UVN and UVN
shall be fully vested therewith.
2. Upon satisfaction of all conditions precedent to the consummation
of the Merger, as contemplated by this Plan, Articles of Merger shall be filed
in the office of the Arizona Corporation Commission pursuant to the provisions
of A.R.S. (S) 10-1105, and a Certificate of Merger shall be filed with the
Delaware Secretary of State in accordance with the provisions of the Delaware
General Corporation Law. The date of the last such filing shall be referred to
in this Plan as the "Effective Date;" provided that UVN and ▇▇▇▇▇ Dog intend
that the filings shall be made concurrently with the offices of the Arizona
Corporation Commission and the Delaware Secretary of State, and that the
Effective Date shall occur not later than March 3, 2000.
3. On the Effective Date, the Articles of Incorporation and Bylaws
of UVN, as in effect immediately prior to the Effective Date, shall continue to
be the Articles of Incorporation and Bylaws of UVN, as the surviving
corporation, and shall not be changed or affected in any respect.
4. By virtue of the Merger and without any action on the part of
▇▇▇▇▇ Dog, UVN or any of their respective shareholders, the following shall
occur on the Effective Date.
a. All of the issued and outstanding shares of common stock of
UVN (the "UVN Common Stock") issued and outstanding immediately prior to the
Effective Date (other than shares to be canceled pursuant to Section 4(b)) shall
be converted and exchanged for that number of shares of Netcentives common stock
as shall be determined in accordance with the calculations set forth with
respect to the UVN Common Stock set forth on Exhibit "B" attached hereto (the
-----------
"Exchange Ratio"). All shares of UVN Common Stock, when so converted, shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such shares of
UVN Common Stock shall cease to have any rights with respect thereto.
b. At the Effective Date, all shares of UVN Common Stock that
are owned by UVN as treasury stock immediately prior to the Effective Date shall
be canceled and extinguished without any conversion thereof.
c. At the Effective Date, each share of Common Stock of ▇▇▇▇▇
Dog ("▇▇▇▇▇ Dog Common Stock") issued and outstanding immediately prior to the
Effective Date shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock of UVN. Each stock
certificate of ▇▇▇▇▇ Dog evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of UVN.
d. The Exchange Ratio shall be adjusted to reflect fully the
effect of any stock split, reverse split, stock dividend (including any dividend
or distribution of securities convertible into Netcentives common stock or UVN
Common Stock), reorganization, recapitalization or other like change with
respect to Netcentives common stock or UVN Common Stock occurring after the date
of this Plan and prior to the Effective Date.
-2-
e. No fraction of a share of Netcentives common stock will be
issued, but in lieu thereof each holder of shares of UVN Common Stock who would
otherwise be entitled to a fraction of a share of Netcentives Common Stock
(after aggregating all fractional shares of Netcentives Common Stock to be
received by such holder) shall receive an amount of cash (rounded to the nearest
whole cent) equal to the product of (i) such fraction, multiplied by (ii)
$52.00.
5. On the Effective Date:
a. UVN shall, without any other transfer, succeed to and
possess all of the rights, privileges, powers, franchises and immunities both of
a public and private nature and shall be subject to all of the restrictions,
debts, liabilities and duties of ▇▇▇▇▇ Dog.
b. The rights, privileges, powers, franchises and immunities of
▇▇▇▇▇ Dog, and all property, real, personal and mixed, of ▇▇▇▇▇ Dog shall be
vested in UVN, and all debts due or belonging to ▇▇▇▇▇ Dog shall be assumed by
UVN. By virtue of the Merger, UVN will acquire all of the assets of ▇▇▇▇▇ Dog.
c. Title to any real estate and to any other property vested by
deed or otherwise in ▇▇▇▇▇ Dog shall not revert or be in any way impaired by
reason of the Merger or the statutes providing therefor; provided, however, that
all rights of creditors and all liens upon the property of ▇▇▇▇▇ Dog shall be
preserved unimpaired, and all debts, liabilities and duties of ▇▇▇▇▇ Dog shall
attach to UVN and may be enforced against it to the same extent as if they had
been incurred or contracted by UVN. After the Effective Date, UVN and the
former directors and officers of ▇▇▇▇▇ Dog shall each execute or cause to be
executed such further assignments, assurances or other documents as may be
necessary or desirable to confirm title to the properties, assets and rights of
▇▇▇▇▇ Dog in UVN or to otherwise carry out the purposes of this Plan, and the
former officers and directors of ▇▇▇▇▇ Dog shall and will do all such acts and
thing to accomplish the intent of this Plan which UVN may reasonably request.
6. UVN represents, warrants and covenants with ▇▇▇▇▇ Dog as follows:
a. UVN is a corporation duly organized, validly existing and in
good standing under the laws of the State of Arizona, and has all necessary
power to own its properties and assets and to carry on its business as now
conducted.
b. The execution and delivery of this Plan by UVN has been duly
approved and authorized by all necessary corporate action and such Plan is
enforceable against UVN, subject only to obtaining authorization of the Plan by
the Shareholders of UVN, and the execution of this Plan by UVN will not violate
the provisions of or constitute a breach or default under UVN's Articles of
Incorporation, Bylaws, or any material agreement to which UVN is a party.
-3-
c. UVN will take all action necessary or appropriate to consummate
the Merger.
7. ▇▇▇▇▇ Dog represents, warrants and covenants with UVN as follows:
▇. ▇▇▇▇▇ Dog is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all
necessary corporate power to own its properties and assets and to carry on its
business as now conducted.
b. The execution and delivery of this Plan by ▇▇▇▇▇ Dog have been
duly authorized by all necessary corporate action and such Plan is enforceable
against ▇▇▇▇▇ Dog, subject only to obtaining approval of the Plan by
Netcentives, and the execution of this Plan by ▇▇▇▇▇ Dog will not violate the
provisions of or constitute a breach or default under ▇▇▇▇▇ Dog's Certificate of
Incorporation, Bylaws or any material agreement to which ▇▇▇▇▇ Dog is a party.
▇. ▇▇▇▇▇ Dog will take all action necessary or appropriate to
consummate the Merger.
▇. ▇▇▇▇▇ Dog has and will have issued and outstanding as of the
Effective Date 1,000 shares of its common capital stock, which shares are duly
and validly authorized and issued, fully paid and nonassessable. ▇▇▇▇▇ Dog has
and will have, as of the Effective Date, no other class of stock authorized,
issued or outstanding.
▇. ▇▇▇▇▇ Dog has filed with the United States and the State of
Arizona all income tax returns and other returns and reports required by law to
be filed.
f. The minute books of ▇▇▇▇▇ Dog have been delivered to UVN and
accurately reflect all material actions taken as of the date set forth above
by its shareholders, Board of Directors and committees of the Board of
Directors, and contain true and accurate copies of ▇▇▇▇▇ Dog's Certificate of
Incorporation, Bylaws and other charter documents.
▇. ▇▇▇▇▇ Dog will not incur or agree to incur any obligation or
liability, absolute or contingent, except such liabilities as would be incurred
in the ordinary course of ▇▇▇▇▇ Dog's business and consistent with sound
business practice.
8. The obligations of the parties to proceed with the Merger shall be
subject to the following conditions:
a. The holders of at least a majority of the outstanding shares of
each class of stock of ▇▇▇▇▇ Dog and UVN entitled to vote on such matters shall
have voted in favor of the Merger of ▇▇▇▇▇ Dog into UVN pursuant to the terms of
this Plan.
-4-
b. There shall be no order in effect of any court or
administrative or governmental authority which prohibits the performance of this
Plan or the consummation of the Merger.
9. UVN and ▇▇▇▇▇ Dog shall take or cause to be taken all
actions, or do or cause to be done all things necessary, proper or advisable
under the laws of the State of Arizona or the State of Delaware to make the
Merger effective, subject however to the appropriate vote or consent of the
Shareholders of UVN and Netcentives in accordance with the laws of the State of
Arizona and the State of Delaware.
10. At any time prior to the Effective Date, this Agreement may
be terminated by the board of directors of either party.
Executed as of the date set forth above.
"▇▇▇▇▇ Dog" ▇▇▇▇▇ DOG ACQUISITION CORPORATION, a
Delaware corporation
By
----------------------------------------
Its: CEO
------------------------------------
By
----------------------------------------
Its: Secretary
------------------------------------
"UVN" UVN HOLDINGS, INC., an Arizona corporation
By
----------------------------------------
Its: President
------------------------------------
By
----------------------------------------
Its: [ILLEGIBLE]
------------------------------------
-5-
EXHIBIT C
ARTICLES OF MERGER
EXHIBIT C
ARTICLES OF MERGER
OF
UVN HOLDINGS, INC.
AND
▇▇▇▇▇ DOG ACQUISITION CORPORATION
THESE ARTICLES OF MERGER are adopted and shall be delivered to the Arizona
Corporation Commission for filing pursuant to Arizona Revised Statutes ("ARS")
(S)(S) 10-1101, 10-1105 and 10-1107 by UVN Holdings, Inc., an Arizona
corporation, formerly known as Universal Value Network, Inc. ("Surviving
Corporation"), and ▇▇▇▇▇ Dog Acquisition Corporation, a Delaware corporation
("Merging Corporation").
ARTICLE I
---------
The Surviving Corporation is duly organized and validly existing under the
laws of the State of Arizona, having been incorporated on April 4, 1997. The
Merging Corporation in duly organized and validly existing under the laws of the
State of Delaware, having been incorporated on March 1, 2000.
ARTICLE II
----------
A Plan of Merger has been filed with the Arizona Corporation Commission
concurrently herewith, and contains the terms and conditions of this merger, as
required by ARS (S) 10-1101.B. The boards of directors of both the Merging
Corporation and the Surviving Corporation unanimously approved the Plan of
Merger.
ARTICLE III
-----------
The merger described in the Plan of Merger is permitted by the laws of the
State of Delaware, under whose law the Merging Corporation is incorporated, and
the Merging Corporation has complied with the laws of the State of Delaware in
effecting the merger described herein.
ARTICLE IV
----------
The name and address of the known place of business of the Surviving
Corporation is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
ARTICLE V
---------
The name and address of the statutory agent of the Surviving
Corporation is ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇.
ARTICLE VI
----------
As to the Merging Corporation and the Surviving Corporation, the
designation, number of shares outstanding and the number of votes entitled to be
cast by each voting group entitled to vote on such Plan of Merger, are as
follows:
Number of Designation
Shares of Number of Votes
Name of Corporation Outstanding Class Entitled to be Cast
------------------- ----------- ----------- -------------------
UVN Holdings, Inc. 9,600 Common 9,600
▇▇▇▇▇ Dog Acquisition 1,000 Common 1,000
Corporation
ARTICLE VII
-----------
As to the Merging Corporation and the Surviving Corporation, the total
number of votes cast for and against such Plan of Merger by each voting group
entitled to vote separately thereon, respectively, are as follows:
Total Total Designation
Name of Shares Shares of
Corporation Voted for Voted Against Class
----------- --------- ------------- -----------
UVN Holdings, Inc. 9,600 0 Common
▇▇▇▇▇ Dog Acquisition
Corporation 1,000 0 Common
-2-
DATED: March ________ 2000.
"Merging Corporation" ▇▇▇▇▇ Dog Acquisition Corporation, a
Delaware corporation
By
--------------------------------
Its: CEO
-----------------------------
By
--------------------------------
Its: Secretary
-----------------------------
"Surving Corporation" UVN Holdings, Inc. an Arizona corporation
By
----------------------------------
Its: President
-------------------------------
By
----------------------------------
Its: Asst. Secretary
-------------------------------
-3-
EXHIBIT D
EXCHANGE RATIO
The Exchange Ratio shall be calculated by dividing the "Total
Netcentives Shares" by the "Total UVN Shares." The "Total Netcentives Shares"
------------------------
shall be calculated by dividing the "Vested Consideration" by $52.00. The
"Total UVN Shares" shall equal 9,600.
----------------
The "Vested Consideration" shall equal 85% of the "Total
--------------------
Consideration." The "Total Consideration" shall equal twenty-nine million
-------------------
dollars ($29,000,000) minus (a) the "Repurchase Cost," (b) all expenses in
excess of $50,000 incurred by Target in connection with the preparation for and
consummation of the transactions contemplated by this Agreement and (c) the
amount of all existing known liabilities of Target and the Subsidiaries at the
Effective Time.
The "Repurchase Cost" shall equal $5,317,323.92.
EXHIBIT E
VESTING TERMS
If for the period from January 1, 2000 through December 31, 2000, the
"Net Revenues" of Target and its wholly-owned subsidiaries generated from any
loyalty programs using the Momentum System, including the United Airlines and
Delta Airlines programs and any new programs that are implemented (collectively,
the "Programs") are at least $3,500,000, then 50% of the Unvested Consideration
--------
will be paid to the Target stockholders on March 1, 2001.
If for the period from January 1, 2001 through December 31, 2001, the
"Net Revenues" of Target and its wholly-owned subsidiaries generated from any
Programs are at least $5,273,000, then any remaining Unvested Consideration will
be paid to the Target stockholders on March 1, 2002.
"Net Revenues" shall mean gross revenues minus the actual cost of the
------------
rewards granted or accrued under the Programs, as recorded by Acquiror in
accordance with generally accepted accounting principles.
If the Net Revenues from the Programs are at least 70% of the required
amounts in either period, then the amount of the Unvested Consideration shall be
pro-rated. For example, if Net Revenues are 82% of the required amount, then
82% of the Unvested Consideration payable for the applicable period will be
paid. If the Net Revenues are only 69% of the required amount for any period,
none of the Unvested Consideration will be paid with respect to such period.
In addition, if the Net Revenues are at least 120% of the required
amount for the period ended December 31, 2000, then 120% of the Unvested
Consideration otherwise payable for such period will be paid to Target
stockholders with respect to that period, and the remaining Unvested
Consideration may be earned for the following period. In no event will the
aggregate Unvested Consideration exceed 48,888 shares of Acquiror Common Stock.
EXHIBIT F
ESCROW AGREEMENT
EXHIBIT F
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is entered into as of March 3,
---------
2000, by and among Netcentives Inc., a Delaware corporation (the "Acquiror"),
--------
UVN Holdings, Inc., an Arizona corporation (the "Target"), a committee (the
------
"Committee") of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ (collectively,
---------
the "Stockholders' Representative") and American Stock Transfer & Trust Company
----------------------------
(the "Escrow Agent").
------------
RECITALS
Acquiror, ▇▇▇▇▇ Dog Acquisition Corporation, a Delaware corporation and
wholly-owned subsidiary of Acquiror (the "Merger Sub"), and Target have entered
----------
into an Agreement and Plan of Merger dated as of March 3, 2000 (the "Merger
------
Agreement"), pursuant to which Acquiror will acquire Target through the
---------
statutory merger of Merger Sub with and into Target (the "Merger"). The Merger
------
Agreement provides that the escrow fund provided for hereby will secure the
indemnification obligations of Target Stockholders (defined below) to the
Acquiror, the surviving corporation in the Merger (the "Surviving Corporation")
---------------------
and each of their respective affiliates, officers, directors, employees,
representatives and agents under the Merger Agreement, on the terms and
conditions set forth herein. Pursuant to the Merger Agreement, Target
Stockholders will receive shares of common stock of Acquiror ("Acquiror Common
---------------
Stock"), a portion of which is to be deposited into the escrow fund provided for
-----
hereby. The parties desire to establish the terms and conditions pursuant to
which such escrow fund will be established and maintained.
AGREEMENT
The parties agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not
-------------
otherwise defined shall have the meanings given them in the Merger Agreement.
2. Consent of Target Stockholders. By virtue of the approval by the
------------------------------
stockholders of Target immediately prior to the Effective Time ("Target
------
Stockholders") of the Merger Agreement and the exhibits thereto and the
------------
execution and delivery of an Indemnity Agreement by each Target Stockholder
pursuant to the Merger Agreement, Target Stockholders have consented to: (a)
the establishment of the Escrow Fund (as defined below) to secure the
indemnification obligations of Target Stockholders under Section 6 of the Merger
Agreement, (b) the appointment of Stockholders' Representative as their
representative for purposes of this Agreement and as attorney-in-fact and agent
for and on behalf of each Target Stockholder with respect to the subject matter
of this Agreement, and the taking by Stockholders' Representative of any and all
actions and the making of any decisions required or permitted to be taken or
made by them under this Agreement and (c) all of the other terms, conditions and
limitations set forth in this Agreement.
3. Escrow and Indemnification.
--------------------------
(a) Escrow Fund. As soon as practicable after the Effective Time,
-----------
Acquiror shall deposit with the Escrow Agent: 41,554.8373 shares of Acquiror
Common Stock registered in the name of Escrow Agent, which is equal to fifteen
percent (15%) of the shares of Acquiror Common Stock that each Target
Stockholder is entitled to receive in the Merger, pursuant to Section 1.6(a) of
the Merger Agreement (the "Initial Escrow Shares"). In addition, from time to
---------------------
time thereafter, Acquiror shall deposit with Escrow Agent additional shares of
Acquiror Common Stock or other equity securities issued or distributed by
Acquiror (including shares issued upon a stock split) in respect of the Initial
Escrow Shares (the "New Shares" and, together with the Initial Escrow Shares,
----------
the "Escrow Shares") subject to and in accordance with Section 6.6 of the Merger
-------------
Agreement. When and if cash dividends on Escrow Shares in the Escrow Fund (the
"Escrow Cash") shall be declared and paid, they shall be retained in escrow
-----------
pending final distribution of the Escrow Fund and will not be immediately
distributed to the beneficial owners of the Escrow Shares. Such dividends will
become part of the Escrow Fund and will be available to satisfy Damages. The
beneficial owners of the Escrow Shares shall pay any taxes on such dividends.
The Escrow Shares and the Escrow Cash are referred to herein as the "Escrow
------
Fund." Exhibit A hereto sets forth the name of each Target Stockholder and the
---- ---------
number of Escrow Shares contributed to the Escrow Fund on behalf of each such
Target Stockholder pursuant to Section 6.2 of the Merger Agreement. The value of
the Escrow Shares, as determined in accordance with Section 4(c)(iii) below,
contributed by each Target Stockholder divided by the aggregate value of the
Escrow Shares, as determined in accordance with Section 4(c)(iii) below,
contributed by all Target Stockholders to the Escrow Fund shall be each such
Target Stockholder's "proportionate interest" in the Escrow Shares. The Escrow
----------------------
Fund shall be held as a trust fund and shall not be subject to any lien,
attachment, trustee process or any other judicial process of any creditor of any
party hereto. Escrow Agent agrees to accept delivery of the Escrow Fund and to
hold such Escrow Fund in escrow subject to the terms and conditions of this
Agreement and Section 6 of the Merger Agreement.
(b) Indemnification. Target Stockholders have agreed in Section 6 of
---------------
the Merger Agreement to indemnify and hold harmless each of the Acquiror,
Surviving Corporation and each of their respective affiliates, officers,
directors, employees, representatives and agents (Acquiror, Surviving
Corporation and each of the foregoing persons and entities is referred to
hereinafter as an "Indemnified Person" and collectively as "Indemnified
------------------ -----------
Persons") from and against Damages, as defined in Section 6.3 of the Merger
-------
Agreement. The Escrow Fund shall be security for this indemnity obligation of
Target Stockholders, subject to the limitations, and in the manner provided, in
this Agreement and the Merger Agreement.
4. Administration of Escrow Fund. Escrow Agent shall administer the
-----------------------------
Escrow Fund as follows:
(a) Escrow Agent shall hold and safeguard the Escrow Fund during the
Escrow Period (as defined in Section 6 below), shall treat such fund as a trust
fund in accordance with the terms of this Agreement and the Merger Agreement and
not as the property of Acquiror and shall hold and dispose of the Escrow Fund
only in accordance with the terms hereof.
-2-
(b) Escrow agent shall invest the Escrow Cash as directed in writing
by Stockholders' Representative in any of the following:
(i) obligations issued or guaranteed by the United States of
America or any agency or instrumentality thereof;
(ii) certificates of deposit of or interest bearing accounts
with national banks or corporations endowed with trust powers, having capital
and surplus in excess of $100,000,000;
(iii) commercial paper that at the time of investment is rated ▇-
▇ by Standard and Poor's Corporation or P-1 by ▇▇▇▇▇'▇ Investor Service;
(iv) repurchase agreements with any bank or corporation
described in clause (ii) above, fully secured by obligations described in clause
(i) above; or
(v) any money market fund registered under the Investment
Company Act of 1940, as amended, for which any bank or corporation described in
clause (ii) above is the adviser.
Any interest or other income earned on the Escrow Cash shall be paid to the
former holders of Target Common Stock upon the release of the Escrow Cash to
such holders pursuant to Section 6 below.
(c) Upon receipt by Escrow Agent at any time on or before the last
day of the Escrow Period of a certificate signed by any officer of Acquiror (an
"Officer's Certificate"):
----------------------
(i) stating that Acquiror, Surviving Corporation or any other
Indemnified Person has paid or reasonably anticipates that it will have to pay
or incur Damages and
(ii) specifying in reasonable detail the individual items of
Damages included in the amount so stated, the date each such item was paid or
incurred, and the nature of the misrepresentation, breach of warranty or claim
to which such item is related,
Escrow Agent shall, subject to the provisions of Section 4(d) below,
deliver to Acquiror out of the Escrow Fund, as promptly as practicable, Escrow
Shares or other assets held in the Escrow Fund in an amount equal to such
Damages.
(iii) For the purposes of determining the number of Escrow Shares
to be delivered to Acquiror out of the Escrow Fund pursuant to Section 4(c), the
Escrow Shares shall be valued at the average closing price of the Acquiror's
Common Stock shares (as quoted on NASDAQ as reported in The Wall Street Journal)
for the ten trading days immediately prior to the date any claim is paid.
(d) Objections to Claims. At the time of delivery of any Officer's
Certificate to Escrow Agent, a duplicate copy of such certificate shall be
delivered to Stockholders'
-3-
Representative and for a period of 30 days after receipt of the Officer's
Certificate, Escrow Agent shall make no delivery to Acquiror from the Escrow
Fund pursuant to Section 4(c) hereof unless Escrow Agent shall have received
written authorization from Stockholders' Representative to make such delivery.
After the expiration of such 30 day period, Escrow Agent shall make delivery
from the Escrow Fund in accordance with Section 4(c) hereof, provided that no
such payment or delivery may be made if Stockholders' Representative shall
object in a written statement to the claim made in the Officer's Certificate,
and such statement shall have been delivered to Escrow Agent and Acquiror prior
to the expiration of such 30 day period.
(e) Resolution of Conflicts; Arbitration.
------------------------------------
(i) In case Stockholders' Representative shall so object in
writing to any claim or claims made in any Officer's Certificate, Stockholders'
Representative and Acquiror shall attempt in good faith to agree upon the rights
of the respective parties with respect to each of such claims within 45 days
after Escrow Agent's receipt of Stockholders' Representative's written objection
to the claim pursuant to Section 4(d) (the "Negotiation Period"). If
------------------
Stockholders' Representative and Acquiror should so agree during the Negotiation
Period, a memorandum setting forth such agreement shall be prepared and signed
by both parties and shall be furnished to Escrow Agent. Escrow Agent shall be
entitled to rely on any such memorandum and distribute the Escrow Shares and/or
other property from the Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement has been reached by the end of the
Negotiation Period, either Acquiror or Stockholders' Representative may demand
arbitration of the matter unless the amount of the Damages is at issue in
pending litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained by settlement or a non-appealable
decision of a court of competent jurisdiction or both parties agree to
arbitration; and in either such event the matter shall be settled by arbitration
conducted by a single arbitrator, selected by mutual agreement of the parties or
otherwise in accordance with the then prevailing rules of the American
Arbitration Association as adopted by the State of California. The arbitration
shall be conducted in San Francisco County, California. The written decision of
the arbitrator as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in Section 4(c) hereof, Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold payments
out of the Escrow Fund in accordance therewith. The arbitrator shall award
reimbursement to the prevailing party in the arbitration of its reasonable
expenses of the arbitration (including costs and reasonable attorneys' fees).
The award of the arbitrator shall be the sole and exclusive monetary remedy of
the parties and shall be enforceable in any court of competent jurisdiction.
Notwithstanding the foregoing, any party shall be entitled to seek injunctive
relief or other equitable remedies from any court of competent jurisdiction.
5. Third-Party Claims. In the event Acquiror becomes aware of a third-
------------------
party claim which Acquiror believes may result in a demand against the Escrow
Fund, Acquiror shall notify Stockholders' Representative of such claim, and
Stockholders' Representative and Target Stockholders through Stockholders'
Representative shall be entitled, at their expense, to participate in any
defense of such claim; provided, however, that failure to so notify
-4-
Stockholders' Representative shall not relieve Target Stockholders from any
liability they have under this Agreement or the Merger Agreement with respect to
such third party claim except to the extent the Target Stockholders have been
prejudiced by any such failure. Acquiror shall have the right in its reasonable
discretion to settle any such claim. In the event that Stockholders'
Representative has consented in writing to any such settlement, Stockholders'
Representative shall have no power or authority to object under any provision
hereof or Section 6 of the Merger Agreement to the amount of any claim by
Acquiror against the Escrow Fund consistent with such settlement.
6. Release of Escrow Fund. Subject to the following requirements, the
----------------------
Escrow Fund shall remain in existence from the Effective Time until one (1) year
from the date hereof (the "Escrow Period"). Upon the expiration of the Escrow
-------------
Period, the Escrow Fund shall terminate with respect to all Escrow Shares then
remaining in the Escrow Fund, and all such Escrow Shares shall be delivered to
Target Stockholders; provided, however, that a number of Escrow Shares, which,
in the reasonable judgment of Acquiror, is necessary to satisfy any unsatisfied
claims specified in any Officer's Certificate delivered to Escrow Agent prior to
the expiration of such Escrow Period with respect to facts and circumstances
existing on or prior to one (1) year from the date hereof shall remain in the
Escrow Fund (and the Escrow Fund shall remain in existence) until such claims
have been resolved; provided further, that Acquiror agrees to notify Escrow
Agent in writing of the expiration of the Escrow Period. As soon as all such
claims have been resolved, Escrow Agent shall deliver to Target Stockholders all
Escrow Shares and other property then remaining in the Escrow Fund and not
required to satisfy such claims. Deliveries of Escrow Shares and other property
to Target Stockholders pursuant to this Section 6 shall be made in accordance
with each Target Stockholder's proportionate interest in the Escrow Shares.
7. Stockholders' Representative.
----------------------------
(a) Stockholders' Representative may be changed by Target
Stockholders from time to time upon not less than 10 days' prior written notice
to Acquiror; provided that Stockholders' Representative may not be removed
unless holders of a majority in interest of the Escrow Fund agree to such
removal and to the identity of the substituted agent. No bond shall be required
of Stockholders' Representative, and Stockholders' Representative shall not
receive compensation for his or her services. Notices or communications to or
from Stockholders' Representative shall constitute notice to or from each of the
Target Stockholders. Stockholders' Representative shall be entitled to submit a
claim and receive reimbursement from the Escrow Fund for all reasonable,
documented out-of-pocket expenses incurred by Stockholders' Representative as a
result of acting as the Stockholders' Representative; provided, however, that
such right to reimbursement shall be subordinate to Acquiror's claims on the
Escrow Fund, if any, and shall be paid only after all such claims have been
satisfied. Any such reimbursement shall be paid in Escrow Shares out of the
Escrow Fund. For purposes of such reimbursement of Stockholders' Representative,
Escrow Shares shall be valued at the at the average closing price of the
Acquiror's Common Stock shares (as quoted on NASDAQ as reported in The Wall
Street Journal) for the ten trading days immediately prior to the date of any
such reimbursement.
-5-
(b) Stockholders' Representative shall not be liable for any act done
or omitted hereunder as Stockholders' Representative while acting in good faith
and in the exercise of reasonable judgment. Target Stockholders on whose behalf
Escrow Shares were contributed to the Escrow Fund shall severally indemnify
Stockholders' Representative and hold Stockholders' Representative harmless
against any loss, liability or expense incurred without gross negligence, bad
faith or willful misconduct on the part of Stockholders' Representative and
arising out of or in connection with the acceptance or administration of
Stockholders' Representative's duties hereunder, including the reasonable fees
and expenses of any legal counsel retained by Stockholders' Representative.
(c) Stockholders' Representative shall act by vote or written action
or consent of a majority of the members of the Committee. A decision, act,
consent or instruction of Stockholders' Representative shall constitute a
decision of all Target Stockholders and shall be final, binding and conclusive
upon each of such stockholders, and Escrow Agent, Acquiror, Surviving
Corporation, and all other Indemnified Persons may rely upon any such decision,
act, consent or instruction of Stockholders' Representative as being the
decision, act, consent or instruction of each and every such Target Stockholder.
Escrow Agent, Acquiror, Surviving Corporation, and all other Indemnified Persons
are hereby relieved from any liability to any person for any acts done by them
in accordance with such decision, act, consent or instruction of Stockholders'
Representative.
8. Escrow Agent's Duties.
---------------------
(a) Acquiror and Stockholders' Representative acknowledge and agree
that Escrow Agent (i) shall not be responsible for any of the agreements
referred to herein but shall be obligated only for the performance of such
duties as are specifically set forth in this Agreement and as set forth in any
additional written escrow instructions which Escrow Agent may receive after the
date of this Agreement that are signed by an officer of Acquiror and
Stockholders' Representative; (ii) shall not be obligated to take any legal or
other action hereunder which might in its reasonable judgment involve expense or
liability unless it shall have been furnished with indemnity reasonably
acceptable to it; and (iii) may rely on and shall be protected in acting or
refraining from acting upon any written notice, instruction, instrument,
statement, request or document furnished to it hereunder and reasonably believed
by it to be genuine and to have been signed or presented by the proper person,
and shall have no responsibility for determining the accuracy thereof.
(b) Escrow Agent is hereby expressly authorized to disregard any and
all warnings given by any of the parties hereto or by any other person,
excepting only orders or process of courts of law or written decision of
arbitrator pursuant to Section 4(e), and is hereby expressly authorized to
comply with and obey orders, judgments or decrees of any court or written
decision of arbitrator. In case Escrow Agent obeys or complies with any such
order, judgment or decree of any court or written decision of arbitrator, Escrow
Agent shall not be liable to any of the parties hereto or to any other person by
reason of such compliance, notwithstanding any such order, judgment or decree
being subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
-6-
(c) Escrow Agent shall not be liable in any respect on account of the
identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder.
(d) Escrow Agent shall not be liable for the expiration of any rights
under any statute of limitations with respect to this Agreement or any documents
deposited with Escrow Agent.
(e) Neither Escrow Agent nor any of its directors, officers or
employees shall be liable to anyone for any action taken or omitted to be taken
by it or any of its directors, officers or employees hereunder except in the
case of gross negligence, bad faith or willful misconduct. Subject to Section
8(g) below, Acquiror and Target Stockholders (collectively, the "Indemnifying
------------
Parties") covenant and agree to jointly and severally indemnify Escrow Agent and
-------
hold it harmless from and against any fee, loss, liability or expense (including
reasonable attorney's fees and expenses) (a "Loss") incurred by Escrow Agent
----
arising out of or in connection with the performance of its obligations in
accordance with the provisions of this Agreement or with the administration of
its duties hereunder, unless such Loss shall arise out of or be caused by Escrow
Agent's gross negligence, bad faith or willful misconduct; provided, however,
that indemnification for Escrow Agent's standard fees and expenses set forth on
the fee schedule attached hereto as Exhibit B shall be borne exclusively by
---------
Acquiror, and provided further that the indemnity agreement contained in this
Section 8(e) shall not apply to amounts paid in settlement of any Loss if such
settlement is effected without the consent of Acquiror and Stockholders'
Representative.
(f) To the extent that Escrow Agent becomes liable for the payment of
any taxes in respect of income derived from the investment of funds held or
payments made hereunder, Escrow Agent shall satisfy such liability to the extent
possible from the Escrow Fund. Subject to Section 8(g) below, Indemnifying
Parties agree to jointly and severally indemnify and hold Escrow Agent harmless
from and against any taxes, additions for late payment, interest, penalties and
other expenses, that may be assessed against Escrow Agent on any payment or
other activities under this Agreement unless any such tax, addition for late
payment, interest, penalty or other expense shall arise out of or be caused by
the actions of, or a failure to act by, Escrow Agent. No distributions will be
made to Target Stockholders unless Escrow Agent is supplied with an original,
signed Form W-9 or its equivalent prior to distribution.
(g) Notwithstanding the joint and several nature of the obligations
of Indemnifying Parties under Section 8(e) and 8(f), Target Stockholders' total
collective share of the liability for indemnification of Escrow Agent under
Sections 8(e) and 8(f) hereof (the "Indemnification Liability") shall in no
-------------------------
event exceed the value of the Escrow Fund then available to pay such liability.
Any and all amounts to be paid by Target Stockholders for their share of the
Indemnification Liability shall be payable only out of the Escrow Fund. Subject
to the foregoing, each of the Indemnifying Parties shall contribute to the
Indemnification Liability in such proportion as is appropriate to reflect the
relative fault of each individual Indemnifying Party, including up to all such
Indemnification Liability in the case of any tax liability arising from failure
to provide correct information with respect to any taxes pursuant to Section
8(f) above. In all cases where there is no such basis for allocating
contribution for such Indemnification
-7-
Liability or except as otherwise provided in Section 8(e), one half of the total
Indemnification Liability shall be paid out of the Escrow Fund and allocated pro
rata among each of the Target Stockholders according to their respective
percentage ownership of the Escrow Fund, and one half of the total
Indemnification Liability shall be paid by Acquiror.
(h) Escrow Agent may resign at any time upon giving at least 30 days'
written notice to Acquiror and Stockholders' Representative; provided, however,
that no such resignation shall become effective until the appointment of a
successor escrow agent, which shall be accomplished as follows: Acquiror and
Stockholders' Representative shall use their best efforts to mutually agree upon
a successor agent within 30 days after receiving such notice. If the parties
fail to agree upon a successor escrow agent within such time, Stockholders'
Representative with the consent of Acquiror, which shall not be unreasonably
withheld, shall have the right to appoint a successor escrow agent authorized to
do business in California. The successor escrow agent selected in the preceding
manner shall execute and deliver an instrument accepting such appointment and it
shall thereupon be deemed Escrow Agent hereunder and it shall without further
acts be vested with all the estates, properties, rights, powers, and duties of
the predecessor Escrow Agent as if originally named as Escrow Agent. If no
successor escrow agent is named, Escrow Agent may apply to a court of competent
jurisdiction for the appointment of a successor escrow agent. Thereafter, the
predecessor Escrow Agent shall be discharged from any further duties and
liabilities under this Agreement. The provisions of paragraphs 8(e) and 8(f)
shall survive the resignation or removal of Escrow Agent or the termination of
this Agreement.
9. Fees, Expenses and Taxes. Acquiror agrees to pay or reimburse Escrow
------------------------
Agent for its normal services hereunder in accordance with the fee schedule
attached hereto as Exhibit B. The Escrow Agent shall be entitled to
---------
reimbursement upon 30 days' written notice for all expenses incurred in
connection with Sections 8(e) and 8(f) above, and payment of any legal fees and
expenses incurred by the Escrow Agent in connection with the resolution of any
claim by any party hereunder. Taxes incurred with respect to the earnings of the
Escrow Fund and payments made hereunder shall be borne by the party to whom such
earnings are distributed (or to be distributed) or to whom such payment is made.
10. Miscellaneous.
-------------
(a) Amendments and Waivers. Any term of this Agreement may be amended
----------------------
or waived with the written consent of the parties or their respective successors
and assigns. Any amendment or waiver effected in accordance with this Section
10(a) shall be binding upon the parties and their respective successors and
assigns.
(b) Successors and Assigns. The terms and conditions of this
----------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
-8-
(c) Governing Law; Jurisdiction. This Agreement and all acts and
---------------------------
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of conflicts of
law. Each of the parties to this Agreement consents to the exclusive
jurisdiction and venue of the courts of the state and federal courts of San
Francisco County, California.
(d) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(e) Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(f) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below, or as subsequently modified by written
notice.
If to the Acquiror:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇, Esq.
If to Target:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: President
with a copy to:
-9-
If to Stockholders' Representative:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to Escrow Agent:
American Stock Transfer & Trust Company
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
(g) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed
by each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
(h) Entire Agreement. Except as set forth in the Merger Agreement,
----------------
this Agreement is the product of all of the parties hereto, and constitutes the
entire agreement between such parties pertaining to the subject matter hereof,
and merges all prior negotiations and drafts of the parties with regard to the
transactions contemplated herein. Any and all other written or oral agreements
existing between the parties hereto regarding such transactions are expressly
canceled.
(i) Advice of Legal Counsel. Each party acknowledges and represents
-----------------------
that, in executing this Agreement, it has had the opportunity to seek advice as
to its legal rights from legal counsel and that the person signing on its behalf
has read and understood all of the terms and provisions of this Agreement. This
Agreement shall not be construed against any party by reason of the drafting or
preparation thereof.
[Signature Page Follows]
-10-
The parties have executed this Agreement as of the date first above
written.
ACQUIROR:
NETCENTIVES INC.
By:________________________________
Name:______________________________
(print)
Title:_____________________________
TARGET:
UVN HOLDINGS, INC.
By:________________________________
Name:______________________________
(print)
Title:_____________________________
ESCROW AGENT:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By:________________________________
Name:______________________________
(print)
Title:_____________________________
STOCKHOLDERS' REPRESENTATIVE
_____________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
_____________________________
▇▇▇▇▇ ▇▇▇▇▇
_____________________________
▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT A
TARGET STOCKHOLDERS
Indemnifying Number of Shares Initially
Stockholder Name Deposited in Escrow Fund
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, as 29,867.5393
trustee
▇▇▇▇▇ ▇. ▇▇▇▇▇ 5,194.3547
▇▇▇▇ ▇. ▇▇▇▇, as trustee 2,164.3006
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., 649.2943
as trustee
▇▇▇▇ ▇. ▇▇▇▇▇▇ 865.7535
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as 2,597.1773
trustee
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 216.4176
--------------
TOTAL 41,554.8373
A-1
EXHIBIT B
FEE SCHEDULE
Reasonable fee to be agreed upon from time to time.
B-1
EXHIBIT G
EMPLOYMENT AGREEMENT
EXHIBIT G
FORM OF EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is dated as of March ___, 2000,
---------
by and between ______________ ("Employee") and Netcentives Inc., a Delaware
--------
corporation (the "Company"), and shall be effective for all purposes as of the
-------
Effective Time (the "Effective Date") under the Agreement and Plan of Merger
--------------
among the Company, UVN Holdings, Inc. ("Target") and ▇▇▇▇▇ Dog Acquisition
------
Corporation ("Merger Sub") of even date herewith.
----------
BACKGROUND
Employee was previously employed as the [title] of Target and was a major
stockholder of Target. In connection with the merger of Merger Sub with and
into Target (the "Merger"), the Company is acquiring all of Employee's equity
------
ownership of Target. In order, to enable the Company to secure more fully the
benefits of the Merger, it is a condition of the Company's obligation to
consummate such merger that Employee and the Company enter into this Agreement.
AGREEMENT
1. Term of Agreement. This Agreement shall commence on the Effective Date
-----------------
and shall have a term of one (1) year the ("Original Term"). This Agreement may
-------------
be terminated, with or without cause, by either party, as provided in Section 5
hereof. Upon mutual, written consent by Employee and the Company, the term of
this Agreement may continue after expiration of the Original Term (the
"Additional Term").
---------------
2. Duties.
------
(a) Position. Employee shall be employed by the Company as
--------
[___________].
(b) Obligations to the Company. Employee agrees to the best of his
--------------------------
ability and experience that he will at all times loyally and conscientiously
perform all of the duties and obligations required of and from Employee pursuant
to the terms hereof, and to the reasonable satisfaction of the Company. During
the term of Employee's employment relationship with the Company, Employee
further agrees that he will devote substantially all of his business time and
attention to the business of the Company, and Employee will not directly or
indirectly engage or participate in any business that is competitive in any
manner with the business of the Company. Nothing in this Agreement will prevent
Employee from accepting speaking or presentation engagements in exchange for
honoraria or from serving as a member of the board of directors for entities not
competitive in any manner with the business of the Company, serving on boards of
charitable organizations, or from owning no more than one percent (1%) of the
outstanding equity securities of a corporation whose stock is listed on a
national stock exchange. Employee will comply with and be bound by the
Company's operating policies, procedures and practices from time to time in
effect during the term of Employee's employment.
-1-
3. At-Will Employment. The Company and Employee acknowledge that
------------------
Employee's employment is and shall continue to be at-will, as defined under
applicable law, and that Employee's employment with the Company may be
terminated by either party at any time for any or no reason. Employee shall be
entitled to receive severance benefits upon termination of employment only as
explicitly set forth in Section 5 hereof. The rights and duties created by this
Section 3 may not be modified in any way except by a written agreement executed
by the President of the Company and approved by the Board of Directors of the
Company.
4. Compensation. For the duties and services to be performed by Employee
------------
hereunder, the Company shall pay Employee, and Employee agrees to accept, the
salary, bonuses and other benefits described below in this Section 4.
(a) Salary. Employee shall receive an annual salary of $[___].
------
Employee's salary will be payable pursuant to the Company's normal payroll
practices. Employee's salary shall be formally reviewed by the Company on an
annual basis or more frequently if the Company conducts more frequent salary
reviews for comparable employees and shall be subject to reduction only if such
reduction is of general applicability for all similarly situated employees.
(b) Bonuses. Employee's entitlement to receive up to 25% of his
-------
annual salary in management bonuses from the Company is discretionary and shall
be determined by the Board or its Compensation Committee in good faith based
upon the extent to which Employee's individual performance objectives and the
Company's profitability objectives and other financial and nonfinancial
objectives are achieved during the applicable bonus period.
(c) Additional Benefits. Employee will be eligible to participate in
-------------------
the Company's employee benefit plans of general application, including without
limitation, those plans covering medical, disability and life insurance in
accordance with the rules established for individual participation in any such
plan and under applicable law. Employee will be eligible for vacation and sick
leave in accordance with the policies in effect during the term of this
Agreement and will receive such other benefits as the Company generally provides
to its other employees of comparable position and experience. The Company
agrees that Employee shall be provided service credit for the entire period of
time Employee was employed with Target for the purposes of all current and
future employee benefit plans, including without limitation, vacation and sick
leave and 401(k) plan, to the fullest extent allowed by any of such plans.
(d) Reimbursement of Expenses. Employee shall be authorized to incur
-------------------------
on behalf and for the benefit of, and shall be reimbursed by, the Company for
reasonable expenses, provided that such expenses are substantiated in accordance
with Company policies.
(e) Stock Options. In connection with the commencement of Employee's
-------------
employment, the Board of Directors shall grant to Employee an option to purchase
_____________ shares of the Company's Common Stock ("Shares") with an exercise
price of the fair market value on the date of the grant. [_________] percent
(___%) of these options will
-2-
vest on the [____] year anniversary of this Agreement and the remaining options
will thereafter vest at the rate of [_____] of the remaining options per month,
at the end of each calendar month, with total vesting in 48 months. Vesting
will, of course, depend on Employee's continued employment with the Company. The
option will be an incentive stock option to the maximum extent allowed by the
Internal Revenue Code of 1986, as amended, and will be subject to the terms of
the Company's 1996 Stock Option Plan and the Stock Option Agreement between
Employee and the Company. The vesting terms of the options are to be considered
confidential information for purposes of the Confidentiality Agreement (defined
in Section 7 below).
5. Termination of Employment and Severance Benefits.
------------------------------------------------
(a) Termination of Employment. Employee's employment under this
-------------------------
Agreement may only be terminated during its Original Term or any Additional Term
as follows:
(i) By the Company for Cause (as defined in Section 6 below),
or as a result of Employee's death or Permanent Disability (as defined in
Section 6 below) ("Termination for Cause");
---------------------
(ii) By the Company for any reason other than for Cause, which
determination may be made by the Company at any time at the Company's sole
discretion, for any or no reason ("Termination Without Cause");
-------------------------
(iii) By Employee for Good Reason ("Resignation for Good
--------------------
Reason"); or
(iv) By Employee for any reason other than Good Reason (as
defined in Section 6 below) ("Voluntary Resignation").
---------------------
(b) Severance Benefits. Employee shall be entitled to receive
------------------
severance benefits upon termination of employment only as set forth in this
Section 5(b):
(i) Voluntary Resignation; Termination for Cause. If Employee's
--------------------------------------------
employment is terminated by him pursuant to a Voluntary Resignation or by the
Company for Cause, then Employee shall not be entitled to receive payment of any
severance benefits. Employee will receive payment(s) for all salary and unpaid
vacation accrued as of the date of Employee's termination of employment and
Employee's benefits will be continued under the Company's then existing benefit
plans and policies in accordance with such plans and policies in effect on the
date of termination and in accordance with applicable law.
(ii) Resignation for Good Reason; Termination Without Cause. If
------------------------------------------------------
Employee's employment is terminated by Employee for Good Reason or by the
Company Without Cause, Employee will be entitled to receive severance benefits
as follows:
-3-
(A) Employee will be entitled to receive payment for all
salary and unpaid vacation accrued as of the date of Employee's termination of
employment and payment of severance benefits equal to Employee's regular monthly
salary for the lesser of (i) two months from the date of the Involuntary
Termination or (ii) until Employee finds full-time employment, part-time
employment, or some combination thereof pursuant to which Employee works or is
paid for an equivalent of at least 30 hours per week (the "Severance Period").
----------------
Such payments shall be made ratably over the Severance Period according to the
Company's standard payroll schedule.
(B) Health insurance benefits with the same coverage
provided to Employee prior to the termination (e.g. medical, dental, optical,
mental health) and in all other respects significantly comparable to those in
place immediately prior to the termination will be provided pursuant to the
provisions of COBRA at the Company's cost over the Severance Period.
6. Definitions.
-----------
(a) For purposes of this Agreement, "Cause" for Employee's
-----
termination will exist at any time after the happening of one or more of the
following events:
(i) Employee's willful misconduct in performance of his duties
hereunder, including Employee's refusal to comply in any material respect with
the legal directives of the Company's Board of Directors so long as such
directives are not inconsistent with the Employee's position and duties, which
improper performance or refusal to comply has a material adverse effect on the
Company and is not remedied within ten (10) working days after written notice
from the Board of Directors, which written notice shall state the specific
details of the alleged willful misconduct and that failure to remedy such
conduct may result in Termination for Cause, provided however, that if
Employee's refusal to comply as set forth above is the direct result of Employee
being on a statutorily mandated leave of absence from work, including without
limitation, any pregnancy or family, medical or workers' compensation leave,
then there shall not be "Cause" for Employee's termination;
(ii) Dishonest or fraudulent conduct, a deliberate attempt to do
an injury to the Company, or conduct that materially discredits the Company or
is materially detrimental to the reputation of the Company, including conviction
of a felony; or
(iii) Employee's material breach of any element of the Company's
Confidential Information and Invention Assignment Agreement.
(b) For purposes of this Agreement, Employee shall be deemed to have
terminated his or her employment for "Good Reason" if such termination occurs
-----------
within 30 days of the date that Employee first learns of one of the following
events: (i) a material adverse change in Employee's duties and responsibilities
as specified herein or as subsequently agreed to by Employee and the Company
causing such duties and responsibilities to be of less stature or of
-4-
less responsibility, (ii) any reduction of Employee's base salary, or a material
reduction of Employee's benefits or perquisites, other than a reduction of
general applicability for all similarly situated employees, (iii) a relocation
of Employee's primary site for performing services on behalf of the Company to a
facility or location more than one hundred (100) miles from the Company's
current location, or (iv) the breach by the Company of a material term of this
Agreement which breach is not remedied within ten (10) working days after
written notice from Employee to the Company.
(c) For purposes of this Agreement, "Permanent Disability" shall mean
--------------------
that Employee has been unable to perform his duties as a result of his
incapacity due to physical or mental illness, which incapacity continues for at
least 120 continuous calendar days or 150 calendar days during any consecutive
12-month period. Prior to Employee's termination for Permanent Disability,
Company shall provide Employee with not less than twenty (20) working days
written notice that failure to return to work will result in termination of
employment for Permanent Disability.
7. Confidentiality Agreement. Employee shall sign, a Confidential
-------------------------
Information and Invention Assignment Agreement (the "Confidentiality Agreement")
-------------------------
substantially in the form attached hereto as Exhibit A. Employee hereby
---------
represents and warrants to the Company that he has complied with all obligations
under the Confidentiality Agreement and agrees to continue to abide by the terms
of the Confidentiality Agreement and further agrees that the provisions of the
Confidentiality Agreement shall survive any termination of this Agreement or of
Employee's employment relationship with the Company.
8. Noncompetition Covenant. Employee has been actively involved in the
-----------------------
direction of Target's business and has thereby acquired considerable experience,
knowledge and skill. The Company wishes to protect its investment in Target, by
restricting the activities of Employee that might compete with or otherwise harm
such business, and, as part of the consideration and inducement to the Company
for the Merger, Employee is willing to agree to and abide by such restrictions
as hereinafter provided.
(a) General. Employee acknowledges that Employee held a substantial
-------
number of shares of the capital stock of Target prior to the Merger. Employee
further acknowledges that the value of the consideration paid by the Company in
connection with the Merger is substantial and that preservation of the goodwill
associated with Target is important to the Company. Accordingly, Target and the
Company desire that Employee enter into a non-competition agreement with the
Company as set forth in this Section 8 and Employee is willing to agree to such
non-competition provisions as are set forth herein.
(b) Non-Compete. In connection with the Merger, Employee agrees that
-----------
for a period of one (1) year from the termination of Employee's employment by
the Company Effective Date, Employee will not engage in the Restricted Business
in a Restricted Territory (as such terms are herein defined) as an employee,
proprietor, officer, consultant, agent, director or
-5-
shareholder or representative of, a person, corporation, partnership or other
entity, including, without limitation, a family member; provided, however, that
in the event of a Voluntary Resignation by Employee, Employee shall comply with
this covenant for a period of eighteen (18) months from the Effective Date.
(c) Certain Definitions. For purposes of this Section 8:
-------------------
(i) "Restricted Business" shall mean the business engaged in by
-------------------
Target or the Company prior to the Merger including, without limitation, any
business engaged in loyalty or relationship marketing products or services, or
in online or offline promotions or direct marketing products or services;
provided, however, that the Restricted Business shall not include the business
engaged in by NeoMar Corporation on the Effective Date, which is the brokering
or reselling of promotional articles.
(ii) "Restricted Territory" shall mean the counties, cities and
--------------------
states of the United States of America, and each political subdivision and/or
nation where Target conducts business, or where the business of Target is
conducted by the Company.
(d) Non-Solicitation. For a period ending on the later of (i) three
----------------
(3) years from the Effective Date, and (ii) one (1) year following the
termination of Employee's employment under this Agreement, Employee shall not
(i) participate in any effort or act to solicit the employees or consultants of
Target, the Company or any of their affiliates to cease their employment or
service relationship with Target, the Company any of their affiliates or (ii)
encourage or solicit any customer, supplier, associate or employee of Target,
the Company or any of their affiliates to breach any contractual or employment
obligation with Target, the Company or any of their affiliates to the extent
that any of such activities would be considered an unfair trade practice under
applicable law.
(e) Severability. The parties intend that the covenants contained in
------------
the preceding paragraphs shall be construed as a series of separate covenants,
one for each county, city, state, nation, and other political subdivision of the
Restricted Territory. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
said paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced by such court. It is the intent of the parties that the
covenants set forth herein be enforced to the maximum degree permitted by
applicable law.
(f) Reformation. In the event that the provisions of this Section 8
-----------
should ever be deemed to exceed the scope, time or geographic limitations of
applicable law regarding
-6-
covenants not to compete, then such provisions shall be reformed to the maximum
scope, time or geographic limitations, as the case may be, permitted by
applicable laws.
(g) Representations of Employee. Employee represents that: (i) he is
---------------------------
familiar with the covenants not to compete and not to solicit set forth in this
Agreement, (ii) he is fully aware of his obligations hereunder, including,
without limitation, the length of time, scope and geographic coverage of these
covenants, (iii) he finds the length of time, scope and geographic coverage of
these covenants to be reasonable, (iv) he is receiving specific, bargained-for
consideration for its covenants not to compete and not to solicit, (v) the
covenants are essential to the growth and stability of the business of Target
and the Company during the prescribed periods and to the continued viability of
such business and (vi) execution of this Agreement and performance of Employee's
obligations hereunder and thereunder, will not conflict with, or result in a
violation or breach of, any other agreement to which Employee is a party or any
judgment, order or decree to which Employee is subject.
(h) Breach. Employee acknowledges that in the event of a material
------
breach of any of the provisions of this Section 8 by Employee, the Company may
sustain irreparable harm, and, therefore, Employee agrees that in addition to
any other remedies which the Company may have under this Agreement or otherwise,
the Company may be entitled to obtain equitable relief, including specific
performance and injunctions restraining Employee from committing or continuing
any such violation of this Section 8.
9. Conflicts. Employee represents that his performance of all the terms
---------
of this Agreement will not breach any other agreement to which Employee is a
party. Employee has not, and will not during the term of this Agreement, enter
into any oral or written agreement in conflict with any of the provisions of
this Agreement. Employee further represents that he is entering into or has
entered into an employment relationship with the Company of his own free will.
10. Successors. Any successor to the Company (whether direct or indirect
----------
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
to all or substantially all of the Company's business and/or assets shall assume
the obligations under this Agreement and agree expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of Employee's rights hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
11. Miscellaneous Provisions.
------------------------
(a) No Duty to Mitigate. Employee shall not be required to mitigate
-------------------
the amount of any payment contemplated by this Agreement (whether by seeking new
employment
-7-
or in any other manner), nor, except as otherwise provided in this Agreement,
shall any such payment be reduced by any earnings that Employee may receive from
any other source.
(b) Amendments and Waivers. Any term of this Agreement may be amended
----------------------
or waived only with the written consent of the parties.
(c) Sole Agreement. This Agreement, including any Exhibits hereto,
--------------
constitutes the sole agreement of the parties and supersedes all oral
negotiations and prior writings with respect to the subject matter hereof.
(d) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
seventy-two (72) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if to
the Company, then at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and if
to Employee such party's address or facsimile number as set forth below, in
either case as subsequently modified by written notice.
(e) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.
(f) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(g) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
(h) Arbitration. Any dispute or claim arising out of or in
-----------
connection with this Agreement will be finally settled by binding arbitration in
San Francisco, California in accordance with the rules of the American
Arbitration Association by one arbitrator appointed in accordance with said
rules. The arbitrator shall apply California law, without reference to rules of
conflicts of law or rules of statutory arbitration, to the resolution of any
dispute. Judgment on the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. Notwithstanding the foregoing, the parties
may apply to any court of competent jurisdiction for preliminary or interim
equitable relief, or to compel arbitration in accordance with this paragraph,
without breach of this arbitration provision. This Section 11(h) shall not
apply to the Confidentiality Agreement.
-8-
(i) Advice of Counsel. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES
-----------------
THAT, IN EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK
THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE
TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED
AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
[Signature Page Follows]
-9-
The parties have executed this Agreement the date first written above.
COMPANY:
NETCENTIVES INC.
By:______________________________
Title:___________________________
EMPLOYEE:
_________________________________
Address:_________________________
_________________________
-10-
EXHIBIT A
---------
CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
EXHIBIT H
NON-COMPETITION AGREEMENT
EXHIBIT H
NETCENTIVES INC.
FORM OF NON-COMPETITION AGREEMENT
This Non-Competition Agreement (the "Agreement") is made and entered into
---------
as of March ___, 2000, between Netcentives Inc., a Delaware corporation (the
"Company"), and [name of shareholder] ("Covenantor").
------- ----------
RECITALS
--------
This Agreement is entered into in connection with that certain Agreement
and Plan of Merger dated as of March ___, 2000 (the "Agreement"), by and among
---------
the Company, UVN Holdings, Inc., an Arizona corporation ("Target"), and ▇▇▇▇▇
------
Dog Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of the Company ("Sub"). Pursuant to the terms of the Agreement, Sub
---
will be merged (the "Merger") with and into Target, with Target as the surviving
------
entity.
AGREEMENT
---------
The parties hereby agree as follows:
1. Experience and Skill of Covenantor. As a shareholder of Target,
----------------------------------
Covenantor has been involved in the management of Target's business since
Target's inception and has thereby acquired considerable experience and skill.
The Company wishes to protect its investment in the business acquired pursuant
to the Merger by restricting the activities of Covenantor which might compete
with or otherwise harm such business, and, as part of the consideration and
inducement to the Company for acquiring the business, Covenantor is willing to
agree to and abide by such restrictions as hereinafter provided.
2. Covenant Not to Compete.
-----------------------
(a) General. Covenantor acknowledges that Covenantor holds a
-------
substantial number of shares and/or options to acquire shares of the Common
Stock of Target. Covenantor further acknowledges that the value of the
consideration paid by the Company in connection with the Merger is substantial
and that preservation of the goodwill associated with Target is a part of the
consideration which the Company is receiving in the Merger in exchange for the
Merger consideration. The Company desires that Covenantor enter into a non-
competition agreement with the Company as set forth in this section and
Covenantor is willing to agree to such non-competition provisions as set forth
below. Target and Covenantor agree that such non-competition provisions are
separately bargained-for consideration and are material inducements to the
Company to enter into the Agreement. Accordingly, Covenantor and Target agree
to the non-competition provisions set forth in this section.
(b) Non-Compete. In connection with the Merger, Covenantor agrees
-----------
that for a period of one (1) year following the later of the termination of
Covenantor's employment by
Target and the closing of the Merger, Covenantor will not own, operate, manage,
or provide consulting services to, or be an employee of, or own an interest in,
or be a proprietor, owner, partner, stockholder, director, officer, employee,
consultant, agent or representative of, a person, corporation, partnership or
other entity, including, without limitation, a family member, which owns,
operates, manages, or provides consulting services to, or in any other way
provides services to, either directly or indirectly, any business or businesses
engaged in the Restricted Business in a Restricted Territory (as such terms are
defined below). Notwithstanding the foregoing, nothing contained in this Section
2 shall prohibit Covenantor from (i) making investments in any corporation whose
securities are regularly and publicly traded on a national stock exchange or the
Nasdaq National Market, provided that such investments shall not result in his
or her owning beneficially at any time more than 1% of the equity securities of
any corporation (other than the Company) which is engaged in the Restricted
Business or (ii) continuing his employment by Golden Retriever Systems LLC.
(c) Certain Definitions. For purposes of this Section 2:
-------------------
(i) "Restricted Business" shall mean the business engaged in by
-------------------
Target or the Company prior to the Merger including, without limitation, any
business engaged in loyalty or relationship marketing products or services, or
in online or offline promotions or direct marketing products or services;
provided, however, that the Restricted Business shall not include the business
currently engaged in by NeoMar Corporation, which is the brokering or reselling
of promotional articles.
(ii) "Restricted Territory" shall mean the counties, cities and
--------------------
states of the United States of America and each political subdivision and/or
nation where Target conducts business, or where the business of Target is
conducted by the Company.
(d) Solicitation. For a period of three (3) years from the date of
------------
this Agreement, Covenantor shall not (i) engage or participate in any effort or
act to solicit Target's customers, suppliers, associates, employees or
consultants to cease doing business, or their association or employment with
Target or (ii) interfere in any manner in the contractual or employment
relationship between the Company or Target and any such customer, supplier,
associate, employee or consultant of the Company or Target.
(e) Severability. The parties intend that the covenants contained in
------------
the preceding paragraphs shall be construed as a series of separate covenants,
one for each county, city, state, nation, and other political subdivision of the
Restricted Territory. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
said paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced by such court. It is the intent of the parties that the
covenants set forth in this Agreement be enforced to the maximum degree
permitted by applicable law.
-2-
(f) Reformation. In the event that the provisions of this Section 2
-----------
should ever be deemed to exceed the scope, time or geographic limitations of
applicable law regarding covenants not to compete, then such provisions shall be
automatically reformed to the maximum scope, time or geographic limitations, as
the case may be, permitted by applicable laws.
3. Confidentiality. Covenantor has not at any time prior to the date of
---------------
this Agreement disclosed in any manner, or used for any purpose whatsoever, any
Confidential Information (as defined below) except in the fulfillment of any of
Covenantor's employment, fiduciary or similar obligations to Target. Covenantor
will treat and hold as confidential (and not disclose or provide access to any
person or entity) and refrain from using for any purpose whatsoever any
information, regardless of format, relating to intellectual property of Target
or to any product development, price, customer and supplier lists, pricing and
marketing plans, policies and strategies, details of client or consultant
contracts, operations methods, product development techniques, business
acquisition plans, new personnel acquisition plans of Target or any other
confidential or proprietary information with respect to Target (collectively,
"Confidential Information"); provided that Covenantor shall not be liable
------------------------
hereunder for disclosure or use of any Confidential Information if such
Confidential Information: (a) is within the public domain at the time it is
disclosed or used or comes within the public domain as a result of a permissive
disclosure or use by an unrelated third party without any responsibility or
involvement of the Covenantor; or (b) is disclosed pursuant to the written
instructions of the Company.
4. Representations of Covenantor. Covenantor represents that: (a) he or
-----------------------------
she is familiar with the covenants not to compete and not to solicit set forth
in this Agreement, (b) he or she is fully aware of his or her obligations under
this Agreement, including, without limitation, the length of time, scope and
geographic coverage of these covenants, and (c) the execution of this Agreement,
and performance of Covenantor's obligations under this Agreement, will not
conflict with, or result in a violation or breach of, any other agreement to
which Covenantor is a party or any judgment, order or decree to which Covenantor
is subject.
5. Breach. Covenantor acknowledges that in the event of a breach of any
------
of the provisions of this Agreement by Covenantor the Company or Target would
sustain irreparable harm, and, therefore, Covenantor agrees that in addition to
any other remedies which the Company or Target may have under this Agreement or
otherwise, the Company shall be entitled to obtain equitable relief, including
specific performance and injunctions restraining the Covenantor from committing
or continuing any such violation of this Agreement.
6. Reasonableness of Terms. Covenantor acknowledges that the length,
-----------------------
scope and geographic coverage to which the restrictions imposed in Section 2
above shall apply are fair and reasonable and are reasonably required for the
protection of the Company and Target and that the definition of Restricted
Business used in this Agreement conforms to the business in which Target is
engaged at the date of this Agreement. If any provision of this Agreement is
held to be invalid or unenforceable by judicial order for any reason, such
action shall not affect the enforceability of the remaining provisions of this
Agreement and, without limiting the foregoing, any such holdings shall in no
event preclude the Company or Target from enforcing the provisions of this
Agreement for such term, in such territory and to such extent not inconsistent
-3-
with or prohibited by such judicial order. If the provisions of this Agreement
should ever be deemed to exceed the time, scope or geographic limitations
permitted by applicable law, then such provisions shall be reformed to the
maximum time, scope or geographic limitations, as the case may be, permitted by
applicable laws.
7. Use of Name. From and after the date of this Agreement the Covenantor
-----------
will not without the consent of the Company use or consent to or cooperate in
the use of the name "Netcentives," "Universal Value Network," "Momentum,"
"ClickRewards," "ClickMiles" or any similar names thereto in any business other
than that of the Company.
8. Advice of Legal Counsel. Covenantor acknowledges and represents that,
-----------------------
in executing this Agreement, he or she has consulted with counsel (or has
affirmatively chosen not to do so) and is fully aware of his or her rights and
obligations under this Agreement. This Agreement shall not be construed against
any party by reason of its drafting or preparation.
9. Miscellaneous.
-------------
(a) Amendments and Waivers. Any term of this Agreement may be amended
----------------------
or waived with the written consent of the parties or their respective successors
and assigns. Any amendment or waiver effected in accordance with this section
shall be binding upon the parties and their respective successors and assigns.
(b) Successors and Assigns. The terms and conditions of this
----------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
(c) Governing Law; Jurisdiction. This Agreement and all acts and
---------------------------
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of conflicts of
law. Each of the parties to this Agreement consents to the exclusive
jurisdiction and venue of the state and federal courts of San Francisco County,
California.
(d) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(e) Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(f) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier,
-4-
overnight delivery service or confirmed facsimile, or forty-eight (48) hours
after being deposited in the regular mail as certified or registered mail
(airmail if sent internationally) with postage prepaid, if such notice is
addressed to the party to be notified at such party's address or facsimile
number as set forth below, or as subsequently modified by written notice.
(g) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed
by each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
(h) Entire Agreement. This Agreement and the documents referred to
----------------
herein are the product of both of the parties hereto, and constitutes the entire
agreement between such parties pertaining to the subject matter hereof and
thereof, and merges all prior negotiations and drafts of the parties with regard
to the transactions contemplated herein and therein. Any and all other written
or oral agreements existing between the parties hereto regarding such
transactions are expressly canceled.
(i) Attorney's Fees. If any action at law or in equity (including
---------------
arbitration) is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
(j) WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW,
--------------------
EACH OF THE PARTIES WAIVES ANY RIGHT TO TRIAL BY JURY THAT THE PARTIES MAY HAVE
IN ANY ACTION OR PROCEEDING IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS RELATED HERETO.
(k) Third-Party Reliance. The parties hereto do not intend to create
--------------------
any third-party beneficiaries of their agreement hereunder, and no person or
entity other than such parties and their respective successors, heirs and
permitted assigns shall have any rights under this Agreement.
(l) Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law or equity on
such party, and the exercise of any one remedy will not preclude the exercise of
any other.
(m) Further Assurances. Each party agrees to cooperate fully with the
------------------
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and
-5-
reflect the transactions described herein and contemplated hereby and to carry
into effect the intents and purposes of this Agreement.
(n) Dispute Resolution. Any dispute or claim arising out of or in
------------------
connection with this Agreement will be finally settled by binding arbitration in
San Francisco, California in accordance with the then-current Commercial
Arbitration Rules of the American Arbitration Association by three arbitrators
appointed in accordance with said rules. Each party shall select one such
arbitrator, and the two arbitrators so chosen shall select the third arbitrator.
The arbitrators shall apply California law, without reference to rules of
conflicts of law or rules of statutory arbitration, to the resolution of any
dispute. Judgment on the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. Notwithstanding the foregoing, the parties
may apply to any court of competent jurisdiction for preliminary or interim
equitable relief, or to compel arbitration in accordance with this paragraph,
without breach of this arbitration provision.
-6-
The parties have caused this Agreement to be executed as of the date first
written above.
NETCENTIVES INC.
By:__________________________
Title:_______________________
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
--------------
COVENANTOR
_____________________________
Name:
Address:_____________________
_____________________________
_____________________________
Fax No:______________________
-7-
EXHIBIT I
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
EXHIBIT I
NETCENTIVES INC.
________________________________________________________________________________
FORM OF AMENDED AND RESTATED RIGHTS AGREEMENT
March [...], 2000
________________________________________________________________________________
TABLE OF CONTENTS
Page
----
SECTION 1 - Restrictions on Transferability; Registration Rights...... 2
1.1 Certain Definitions......................................... 2
1.2 Restrictions................................................ 4
1.3 Restrictive Legend.......................................... 4
1.4 Notice of Proposed Transfers................................ 4
1.5 Requested Registration...................................... 5
1.6 Company Registration........................................ 7
1.7 Registration on Form S-3.................................... 8
1.8 Limitations on Subsequent Registration Rights............... 9
1.9 Expenses of Registration.................................... 9
1.10 Registration Procedures..................................... 9
1.11 Indemnification............................................. 9
1.12 Information by Holder....................................... 11
1.13 Rule 144 Reporting.......................................... 11
1.14 Transfer of Registration Rights............................. 11
1.15 Standoff Agreement.......................................... 12
1.16 Termination of Rights....................................... 12
SECTION 2 - Right of Participation.................................... 12
SECTION 3 - Miscellaneous............................................. 12
3.1 Assignment.................................................. 12
3.2 Third Parties............................................... 12
3.3 Governing Law............................................... 13
3.4 Counterparts................................................ 13
3.5 Notices..................................................... 13
3.6 Severability................................................ 13
3.7 Amendment and Waiver........................................ 13
3.8 Effect of Amendment or Waiver............................... 13
3.9 Rights of Holders........................................... 13
3.10 Delays or Omissions......................................... 14
AMENDED AND RESTATED RIGHTS AGREEMENT
This Amended and Restated Rights Agreement (the "Agreement") is entered
into as of the [...] day of March, 2000, by and among Netcentives Inc., a
Delaware corporation (the "Company"), the investors listed on Exhibit A hereto
---------
(the "Prior Investors") and the investors (the " New Investors") listed on
Exhibit C.
---------
RECITALS
WHEREAS, pursuant to an Amended and Restated Rights Agreement dated January
[...], 2000 (the "Prior Rights Agreement"), the Prior Investors received certain
----------------------
rights with respect to registration and pro-rata participation, some of which
have expired.
WHEREAS, the Company, Correspondence Acquisition Corporation and Post
Communications, Inc. ("Post") have entered into an Agreement and Plan of
----
Reorganization dated February [...], 2000 (the "Reorganization Agreement"), in
------------------------
connection with which the New Investors listed on Exhibit C hereto under the
---------
caption "Post Investors" (the "New Post Investors") will be receiving shares of
the Common Stock of the Company as a result of their ownership of shares of the
Common Stock of Post that will be issued (a) upon conversion of the Series A and
Series B Preferred Stock of Post (the "Early Round Post Merger Shares") and (b)
upon conversion of the Series C Preferred Stock of Post (the "Later Round Post
Merger Shares" and collectively with the Early Round Post Merger Shares, the
"Post Merger Shares").
WHEREAS, a condition to the closing of the transactions contemplated by the
Reorganization Agreement is the amendment of the Prior Rights Agreement to grant
certain rights to the New Post Investors.
WHEREAS, the Company, ▇▇▇▇▇ Dog Acquisition Corporation and UVN
Holdings, Inc. ("UVN") have entered into an Agreement and Plan of Merger dated
---
March [...], 2000 (the "UVN Merger Agreement"), in connection with which the New
Investors listed on Exhibit C hereto under the caption "UVN Investors" (the "New
--------- -------------
UVN Investors") will be receiving shares of the Common Stock of the Company as a
result of their ownership of shares of the Common Stock of UVN or in exchange
for certain limited liability company interests or the cancellation of
indebtedness.
WHEREAS, a condition to the closing of the transactions contemplated by the
Merger Agreement is the amendment of the Prior Rights Agreement to grant certain
rights to the New UVN Investors.
WHEREAS, Section 3.7 of the Prior Rights Agreement provides that the Prior
Rights Agreement may be amended by written consent of the holders of a majority
of the outstanding shares of the Registrable Securities and the Company.
NOW, THEREFORE, the parties hereby agree that the Prior Rights Agreement is
amended and restated in its entirety as follows:
SECTION 1
Restrictions on Transferability; Registration Rights
----------------------------------------------------
1.1 Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
----------
other federal agency at the time administering the Securities Act.
"Conversion Shares" means the Common Stock issued or issuable upon
-----------------
conversion of the Preferred Shares as defined herein.
"Holder" shall mean any individual or entity holding Registrable
------
Securities and any person holding Registrable Securities to whom the rights
under this Agreement have been transferred in accordance with Section 1.14
hereof.
"Initiating Holders" shall mean Holders in the aggregate of not less
------------------
than fifty percent (50%) of the Registrable Securities as defined for purposes
of that particular section, except with respect to Section 1.7 of this Agreement
where it shall mean (i) the Holders of a majority of the MaxMiles Merger Shares
(as defined below), (ii) Holders in the aggregate of not less than fifty percent
(50%) of the Registrable Securities as defined for purposes of Section 1.7,
(iii) AOL, or (iv) Holders in the aggregate of a majority of the UVN Merger
Shares (as defined below).
"Preferred Shares" shall mean (i) the 1,452,613 shares of Series A
----------------
Preferred Stock of the Company issued pursuant to Subscription Agreements dated
September 16, 1996 and September 23, 1996, (ii) the 560,000 shares of Series B
Preferred Stock of the Company issued pursuant to Subscription Agreements dated
November 7, 1996 and November 21, 1996 and pursuant to the exercise of warrants
dated June 30, 1997, (iii) the 46,891 shares of Series B Preferred Stock subject
to warrants issued in connection with the issuance of promissory notes by the
Company on June 30, 1997 and August 20, 1997, (iv) the 31,000 shares of Series B
Preferred Stock subject to warrants held by Silicon Valley Bank and Phoenix
Leasing dated January 14, 1997 and May 5, 1997, respectively, (v) the 18,462
shares of Series C Preferred Stock subject to warrants held by Phoenix Leasing
dated May 31, 1998, (vi) the 7,754,847 shares of Series C Preferred Stock issued
pursuant to the Series C Preferred Stock Purchase Agreement dated September 16,
1997, (vii) the 5,476,192 shares of Series D Preferred Stock issued pursuant to
the Series D Preferred Stock Purchase Agreement dated August 14, 1998 and (viii)
the 5,278,283 shares of Series E Preferred Stock issued pursuant to the Series E
Preferred Stock Purchase Agreement dated March 19, 1999.
The terms "register," "registered" and "registration" refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the
---------------------
Company in complying with Sections 1.5, 1.6 and 1.7 of this Agreement,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements
-2-
of counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be paid in any
event by the Company).
"Registrable Securities" means (i) the Conversion Shares; (ii) the
----------------------
shares of Common Stock issued to the persons listed on Exhibit B pursuant to
---------
that certain Agreement and Plan of Reorganization dated as of January 31, 2000
by and among the Company, Arachnid Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of the Company and MaxMiles, Inc., a
Delaware corporation (the "MaxMiles Merger Shares"), provided, however, that for
---------------------- -------- -------
the purposes of Section 1.5 and 1.6 of this Agreement the MaxMiles Merger Shares
shall not be deemed Registrable Securities; (iii) the 1,560,000 shares of Common
Stock issued to America Online, Inc. pursuant to the Interactive Marketing and
Software Distribution Agreement dated January 28, 2000 (the "AOL Shares"),
----------
provided, however, that for the purposes of Section 1.5 and 1.6 of this
-------- -------
Agreement the AOL Shares shall not be deemed Registrable Securities and
provided, further that prior to January 29, 2001 the AOL Shares shall not be
-------- -------
deemed to be Registrable Securities for any purpose under this Agreement; (iv)
the Post Merger Shares, provided, however, that for the purposes of Section 1.5
-------- -------
of this Agreement the Post Merger Shares shall not be deemed Registrable
Securities and provided further, that for purposes of Section 1.6 of this
----------------
Agreement the Later Round Post Merger Shares shall not be deemed to be
Registrable Securities; (v) the shares of Common Stock issued (1) to the
stockholders of UVN pursuant to that certain Agreement and Plan of Merger dated
as of March [__], 2000 by and among the Company, ▇▇▇▇▇ Dog Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of the Company,
and UVN, (2) to SHC Direct LLC pursuant to that certain Membership Interest
Purchase Agreement dated as of March [____], 2000 by and between SHC Direct LLC
and UVN and (3) to ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in cancellation of indebtedness
owed by UVN (collectively, the shares specified in clauses (1), (2) and (3), the
"UVN Merger Shares") , provided, however, that for the purposes of Section 1.5
----------------- -------- -------
and 1.6 of this Agreement the UVN Merger Shares shall not be deemed Registrable
Securities; and (vi) any Common Stock of the Company issued or issuable in
respect of the Preferred Shares, the Conversion Shares, the MaxMiles Merger
Shares, the AOL Shares, the Post Merger Shares, the UVN Shares or other
securities issued or issuable with respect to the Preferred Shares, the
Conversion Shares, the MaxMiles Merger Shares, the AOL Shares, the Post Merger
Shares, the UVN Shares upon any stock split, stock dividend, recapitalization,
or similar event, or any Common Stock otherwise issued or issuable with respect
to the Conversion Shares, the Preferred Shares, the MaxMiles Merger Shares, the
AOL Shares, the Post Merger Shares, or the UVN Shares; provided, however, that
-------- -------
shares of Common Stock or other securities shall only be treated as Registrable
Securities if and so long as they have not been (A) sold to or through a broker
or dealer or underwriter in a public distribution or a public securities
transaction, or (B) sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof so that all transfer restrictions and restrictive legends with respect
thereto are removed upon the consummation of such sale.
"Restricted Securities" shall mean the securities of the Company
---------------------
required to bear the legend set forth in Section 1.3 of this Agreement.
-3-
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
----------------
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for the Holders (except as
provided by Section 1.9).
1.2 Restrictions. Neither the Preferred Shares, Conversion Shares,
------------
MaxMiles Merger Shares, the AOL Shares nor the UVN Shares shall be sold,
assigned, transferred or pledged except upon the conditions specified in this
Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. The Holders will cause any proposed purchaser,
assignee, transferee or pledgee of the Preferred Shares, Conversion Shares,
MaxMiles Merger Shares, the AOL Shares and the UVN Shares to agree to take and
hold such securities subject to the provisions and upon the conditions specified
in this Agreement.
1.3 Restrictive Legend. Each certificate representing (i) the Preferred
------------------
Shares, (ii) the Conversion Shares, (iii) the MaxMiles Shares, (iv) the AOL
Shares, (v) the UVN Shares and (vi) any other securities issued in respect of
the securities referenced in clauses (i) through (vi), upon any stock split,
stock dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted by the provisions of Section 1.4 below) be stamped
or otherwise imprinted with legends in the following form (in addition to any
legend required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
Each Holder consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Restricted Securities in
order to implement the restrictions on transfer established in this Section 1.
1.4 Notice of Proposed Transfers. The holder of each certificate
----------------------------
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 1. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall, and whose legal opinion shall be, reasonably
satisfactory to the Company, addressed to the Company, to the effect that the
proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the
Commission to the effect that the transfer of such securities without
registration
-4-
will not result in a recommendation by the staff of the Commission that action
be taken with respect thereto, whereupon the holder of such Restricted
Securities shall be entitled to transfer such Restricted Securities in
accordance with the terms of the notice delivered by the holder to the Company.
The Company will not require such a legal opinion or "no action" letter (a) in
any transaction in compliance with Rule 144 or 145(d), (b) in any transaction in
which a Holder which is a corporation distributes Restricted Securities after
six (6) months after the purchase thereof solely to its majority-owned
subsidiaries or affiliates for no consideration, or (c) in any transaction in
which a Holder which is a partnership distributes Restricted Securities after
six (6) months after the purchase thereof solely to partners thereof for no
consideration, provided that each transferee agrees in writing to be subject to
the terms of this Section 1.4. Each certificate evidencing the Restricted
Securities transferred as above provided shall bear, except if such transfer is
made pursuant to Rule 144, the appropriate restrictive legend set forth in
Section 1.3 above, except that such certificate shall not bear such restrictive
legend if, in the opinion of counsel for such holder and the Company, such
legend is not required in order to establish compliance with any provisions of
the Securities Act.
1.5 Requested Registration.
----------------------
(a) Request for Registration. In case the Company shall receive from
------------------------
Initiating Holders a written request that the Company effect any qualification,
compliance or registration the reasonably anticipated aggregate price to the
public of which net of underwriting discounts and commissions, would exceed
$10,000,000:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within twenty (20) days after receipt of such written notice from
the Company; provided, however, that the Company shall not be obligated to take
-------- -------
any action to effect any such registration, qualification or compliance pursuant
to this Section 1.5:
(1) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(2) Prior to the earlier of (i) six (6) months following
the Company's initial public offering or (ii) March 19, 2001;
-5-
(3) During the period ending on the date three (3) months
immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan);or
(4) After the Company has effected two (2) such
registrations pursuant to this subparagraph 1.5(a), such registrations have been
declared or ordered effective and the securities offered pursuant to such
registrations have been sold; or
(5) If the Company shall furnish to such Holders a
certificate, signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 1.5 shall be deferred for a single period
not to exceed one hundred-twenty (120) days from the date of receipt of written
request from the Initiating Holders.
Subject to the foregoing clauses (1) through (5), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the written request or
requests of the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to
------------
Section 1.5 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section l.5(a)(i). The right of any Holder to registration pursuant to Section
1.5 shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 1.5 and the inclusion of such Holder's
Registrable Securities in the underwriting, to the extent requested, to the
extent provided in this Agreement.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by a
majority in interest of the Initiating Holders (which managing underwriter shall
be reasonably acceptable to the Company). Notwithstanding any other provision
of this Section 1.5, if the managing underwriter advises the Initiating Holders
in writing that marketing factors require a limitation of the number of shares
to be underwritten, then the Company shall so advise all Holders of Registrable
Securities and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Holders at the time of filing the
registration statement. No Registrable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so
-6-
withdrawn shall also be withdrawn from registration, and such Registrable
Securities shall not be transferred in a public distribution prior to one
hundred eighty (180) days after the effective date of such registration.
1.6 Company Registration.
--------------------
(a) Notice of Registration. If at any time or from time to time, the
----------------------
Company shall determine to register any of its securities, either for its own
account or the account of a security holder or holders other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved in such registration, all the Registrable Securities specified in a
written request or requests received within twenty (20) days after receipt of
such written notice from the Company by any Holder, but only to the extent that
such inclusion will not diminish the number of securities included by the
Company or by holders of the Company's securities who have demanded such
registration.
(b) Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 1.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company (or by the
holders who have demanded such registration). Notwithstanding any other
provision of this Section 1.6, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the Registrable Securities to
be included in such registration to a minimum of 30% of the total shares to be
included in such underwriting or exclude them entirely in the case of the
Company's initial public offering. The Company shall so advise all Holders and
the other holders distributing their securities through such underwriting
pursuant to piggyback registration rights similar to this Section 1.6, and the
number of shares of Registrable Securities and other securities that may be
included in the registration and underwriting shall be allocated among all
Holders in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders at the time of filing the
registration statement. To facilitate the allocation of shares in accordance
with the above provisions, the Company or the underwriters may round the number
of shares allocated to any Holder or other holder to the nearest 100 shares. If
any Holder or other holder disapproves of the terms of any such underwriting, he
or she may elect to withdraw therefrom by written notice to the Company and the
managing underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of the
-7-
registration statement relating thereto (the "Lock-Up Period"); provided,
however, that if such registration is not the Company's initial public offering
such Lock-Up Period shall be one hundred twenty (120) days unless the managing
underwriter determines that marketing factors require a longer period in which
case the Lock-Up Period shall be specified by the managing underwriter but shall
not exceed one hundred eighty (180) days.
(c) Right to Terminate Registration. The Company shall have the right
-------------------------------
to terminate or withdraw any registration initiated by it under this Section 1.6
prior to the effectiveness of such registration, whether or not any Holder has
elected to include securities in such registration.
1.7 Registration on Form S-3.
--------------------------
(a) If the Initiating Holder requests that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities, the reasonably
anticipated aggregate price to the public of which, net of underwriting
discounts and commissions, would exceed $500,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form; provided,
--------
however, that the Company shall not be required to effect more than two
-------
registrations pursuant to this Section 1.7 in any twelve (12) month period; and
provided further, however, that no Holder of UVN Shares may act as an Initiating
-------------------------
Holder pursuant to this Section 1.7 more than once. The Company will (i)
promptly give written notice of the proposed registration to all other Holders,
and (ii) as soon as practicable, use its best efforts to effect such
registration (including, without limitation, the execution of an undertaking to
file post-effective amendments, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within twenty (20)
days after receipt of such written notice from the Company. The substantive
provisions of Section 1.5(b) shall be applicable to each registration initiated
under this Section 1.7.
(b) Notwithstanding the foregoing, the Company shall not be obligated
to take any action pursuant to this Section 1.7: (i) in any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act, (ii) during the period
ending on a date three (3) months following the effective date of, a
registration statement (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities), (iii) if the Company shall furnish to such Holder a certificate
signed by the President of the Company stating that, in the good faith judgment
of the Board of Directors, it would be seriously detrimental to the Company or
its shareholders for registration statements to be filed in
-8-
the near future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a single period not to exceed one
hundred twenty (120) days from the receipt of the request to file such
registration by such Holder or Holders, or (iv) on behalf of AOL if the Company
has effected one (1) such registration on behalf of AOL.
1.8 Limitations on Subsequent Registration Rights. From and after the
---------------------------------------------
date of this Agreement, the Company shall not enter into any agreement granting
any holder or prospective holder of any securities of the Company registration
rights with respect to such securities unless such holder derives its rights as
an additional Holder hereunder, or such shares or securities are entitled to be
included in registrations only to the extent that the inclusion of such
securities will not diminish the amount of Registrable Securities that are
included.
1.9 Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration pursuant to Sections 1.5, 1.6 or 1.7 and the
reasonable cost of one special legal counsel to represent all of the Holders
together in any such registration shall be borne by the Company, provided that
the Company shall not be required to pay the Registration Expenses of any
registration proceeding begun pursuant to Section 1.5, the request of which has
been subsequently withdrawn by the Initiating Holders. In such case, the Holders
of Registrable Securities to have been registered shall bear all such
Registration Expenses pro rata on the basis of the number of shares to have been
registered unless the Holders of a majority of the Registrable Securities agree
to forfeit their right to one demand registration pursuant to Section 1.5.
Notwithstanding the foregoing, however, if at the time of the withdrawal, the
Holders have learned of a material adverse change in the condition, business or
prospects of the Company from that known to the Holders at the time of their
request, of which the Company had knowledge at the time of the request, then the
Holders shall not be required to pay any of said Registration Expenses or to
forfeit the right to one demand registration.
1.10 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
eighty (120); and
(b) Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities.
1.11 Indemnification.
---------------
(a) The Company will indemnify each Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been
-9-
effected pursuant to this Section 1, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the Company in
connection with any such registration, qualification or compliance, and the
Company will reimburse each such Holder, each of its officers and directors, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder, controlling person or underwriter and stated to be
specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such Holder, each of its officers and directors and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein; provided, however, that the liability
of a Holder for indemnification under this Section 1.11(b) shall not exceed the
gross proceeds from the offering received by such Holder.
(c) Each party entitled to indemnification under this Section 1.11
(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
-10-
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or litigation, 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 1 unless
the failure to give such notice is materially prejudicial to an Indemnifying
Party's ability to defend such action. 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 which 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.
1.12 Information by Holder. The Holder or Holders of Registrable
---------------------
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 1.
1.13 Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements); and
(c) So long as a Holder owns any Restricted Securities, to furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
ninety (90) days after the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public),
and of the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
1.14 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted Holders under Sections 1.5, 1.6 and 1.7 may be
assigned to a transferee or
-11-
assignee reasonably acceptable to the Company in connection with any transfer or
assignment of Registrable Securities by a Holder (together with any affiliate);
provided, that (a) such transfer may otherwise be effected in accordance with
--------
applicable securities laws, (b) notice of such assignment is given to the
Company, and (c) such transferee or assignee (i) is a wholly-owned subsidiary,
affiliated investment fund or constituent partner (including limited partners)
of such Holder, or (ii) acquires from such Holder the lesser of (a) 150,829 more
shares of Restricted Securities (as appropriately adjusted for stock splits and
the like) or (b) all of the Restricted Securities then owned by such Holder.
1.15 Standoff Agreement. Each Holder agrees not to sell, make any short
------------------
sale of, loan, grant any option for the purchase of, or otherwise dispose of any
Registrable Securities (other than those included in the registration) without
the prior written consent of the Company on or before April 10, 2000.
1.16 Termination of Rights. No Holder shall be entitled to exercise any
---------------------
right provided for in this Section 1:
(a) after three (3) years following the consummation of the sale of
securities pursuant to a registration statement filed by the Company under the
Act in connection with the initial firm commitment underwritten offering of its
securities to the general public, or
(b) on or after the closing of a public offering of the Common Stock
of the Company, initiated by the Company, when all shares of the Holder's
Registrable Securities may be sold under Rule 144 during any 90-day period;
provided, however, that the provisions of this subsection (b) shall not apply
where the Holder owns more than two percent (2%) of the Company's outstanding
stock until such time as such Holder owns less than two percent (2%) of the
outstanding stock.
SECTION 2
Right of Participation
----------------------
[Terminated]
SECTION 3
Miscellaneous
-------------
3.1 Assignment. Except as otherwise provided in this Agreement, the
----------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties to this
Agreement.
3.2 Third Parties. Nothing in this Agreement, express or implied, is
-------------
intended to confer upon any party, other than the parties to this Agreement, and
their respective successors
-12-
and assigns, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided in this Agreement.
3.3 Governing Law. This Agreement shall be governed by and construed under
-------------
the laws of the State of California in the United States of America without
giving effect to the conflicts of laws principles thereof.
3.4 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
3.5 Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be sent by prepaid registered or certified mail, return
receipt requested, or otherwise delivered by hand or by messenger addressed to
the other party at the address shown below or at such other address for which
such party gives notice under this Agreement. Such notice shall be deemed to
have been given when delivered if delivered personally, or, if sent by mail, at
the earlier of its receipt or three (3) days after deposit in the mail.
3.6 Severability. If one or more provisions of this Agreement are held to
------------
be unenforceable under applicable law, portions of such provisions, or such
provisions in their entirety, to the extent necessary, shall be severed from
this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
3.7 Amendment and Waiver. Any provision of this Agreement may be amended
--------------------
or waived with the written consent of the Company and the Holders of at least a
majority of the outstanding shares of the Registrable Securities, so long as the
effect is to treat all Holders equally. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each Holder of Registrable
Securities and the Company. In addition, the Company may waive performance of
any obligation owing to it, as to some or all of the Holders of Registrable
Securities, or agree to accept alternatives to such performance, without
obtaining the consent of any Holder of Registrable Securities. In the event that
an underwriting agreement is entered into between the Company and any Holder,
and such underwriting agreement contains terms differing from this Agreement, as
to any such Holder the terms of such underwriting agreement shall govern.
3.8 Effect of Amendment or Waiver. The Holders and their successors and
-----------------------------
assigns acknowledge that by the operation of Section 3.7 of this Agreement the
holders of a majority of the outstanding Registrable Securities, acting in
conjunction with the Company, will have the right and power to diminish or
eliminate any or all rights or increase any or all obligations pursuant to this
Agreement.
3.9 Rights of Holders. Each holder of Registrable Securities shall have
-----------------
the absolute right to exercise or refrain from exercising any right or rights
that such holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such holder shall not incur any liability
-13-
to any other holder of any securities of the Company as a result of exercising
or refraining from exercising any such right or rights.
3.10 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party to this Agreement, upon any breach or
default of the other party, shall impair any such right, power or remedy of such
non-breaching party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either
under this Agreement, or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
[Signature Pages Follow]
-14-
The parties hereto have executed this Agreement as the date first written
above.
"COMPANY" "PRIOR INVESTORS"
NETCENTIVES INC. INTEGRAL CAPITAL PARTNERS IV, L.P.
a Delaware corporation By: Integral Capital Management IV, LLC
Its General Partner
By:____________________________ By:___________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Manager
Title:_________________________
"NEW INVESTORS" INTEGRAL CAPITAL PARTNERS IV MS SIDE
FUND, L.P.
_______________________________ By: ICP MS Management, LLC
Print Name of Investor Its General Partner
By:___________________________________
By:____________________________ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Manager
Title:_________________________ ▇▇▇▇▇▇▇▇ VIII,
A California Limited Partnership
By: ▇▇▇▇▇▇▇▇ VIII Management, L.L.C.
A Delaware Limited Liability
Company, Its General Partner
By:___________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Authorized Signatory
▇▇▇▇▇▇▇▇ ASSOCIATES FUND III,
A California Limited Partnership
By: ▇▇▇▇▇▇▇▇ VIII Management, L.L.C.
A Delaware Limited Liability
Company, Its General Partner
By:___________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Authorized Signatory
Signaturer page to Amended and Restated Rights Agreement
AFFINITY TRUST
By:___________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Authorized Signatory
▇▇▇▇▇▇▇ ▇. & ▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇, TTEE, THE
▇▇▇▇▇▇▇ ▇. & ▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇ TRUST U/D/T
9/17/75
By:___________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇, trustee
INFORMATION TECHNOLOGY VENTURES, L.P.
a California limited partnership
By: ITV MANAGEMENT, LLC
a California limited liability
company
By:___________________________________
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Principal Member
ITV AFFILIATES FUND, L.P.
a California limited partnership
By: ITV MANAGEMENT, LLC
a California limited liability
company
By:___________________________________
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Principal Member
Signaturer page to Amended and Restated Rights Agreement
NEW ENTERPRISE ASSOCIATES VII, LIMITED
PARTNERSHIP
By: NEA Partners VII, Limited Partnership
Its General Partner
By:__________________________________
Title:_______________________________
NEA PRESIDENTS FUND, L.P.
By: NEA General Partners, L.P.
By: General Partner
By:__________________________________
Title:_______________________________
NEA VENTURES 1997
By: ________________________________
▇▇▇▇ ▇▇▇▇▇▇, Vice President
Signaturer page to Amended and Restated Rights Agreement
"NEW UVN INVESTORS"
By:______________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, individually and as
Stockholders' Representative
By:______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇, individually and as
Stockholders' Representative
By:______________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇, individually and as
Stockholders' Representative
SHC DIRECT LLC
By:______________________________________
Name:
Title:
_________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇
_________________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Signature page to Amended and Restated Rights Agreement
EXHIBIT A
PRIOR INVESTORS
EXHIBIT B
MAXMILES STOCKHOLDERS
C3 Supplies Technology, Inc.
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
Industrial Petro-Chemicals, Inc.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
EXHIBIT C
NEW INVESTORS
POST INVESTORS Number of Shares of Common Stock Owned
Name and Address
UVN INVESTORS
Name and Address
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ floor
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
SHC Direct LLC
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
EXHIBIT J
STOCKHOLDER AGREEMENT
EXHIBIT J
NETCENTIVES INC.
UVN HOLDINGS, INC.
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (the "Agreement") is made and entered into as
---------
of March 3, 2000, among Netcentives Inc., a Delaware corporation ("Acquiror"),
--------
and each of the stockholders of UVN Holdings, Inc., an Arizona corporation
("Target"), listed on the signature page hereto (the "Stockholders").
------- ------------
RECITALS
Pursuant to an Agreement and Plan of Merger dated as of March 3, 2000 (the
"Merger Agreement") by and among Acquiror, ▇▇▇▇▇ Dog Acquisition Corporation, a
----------------
Delaware corporation and wholly owned subsidiary of Acquiror ("Sub"), and
---
Target, Sub is merging with and into Target (the "Acquisition") and Target, as
-----------
the surviving corporation of the Acquisition, will thereby become a wholly owned
subsidiary of Acquiror. Pursuant to Section 1.6 of the Merger Agreement, each
of the Stockholders will receive, in exchange for their shares of common stock
of Target, common stock of Acquiror (the "Acquiror Common Stock").
---------------------
In consideration of the execution of the Merger Agreement by Acquiror, each
Stockholders is delivering this Agreement.
AGREEMENT
1. Representations, Warranties and Covenants of the Stockholders. Each
-------------------------------------------------------------
Stockholder hereby represents and warrants to the Acquiror and agrees with the
Acquiror as follows:
a. Authorization. This Agreement constitutes the Stockholder's valid
-------------
and legally binding obligation, enforceable in accordance with its terms. The
Stockholder has full power and authority to enter into this Agreement.
b. Purchase Entirely for Own Account. The Stockholder hereby
---------------------------------
confirms that the Acquiror Common Stock to be received by the Stockholder
pursuant to the Merger Agreement will be acquired for investment for such
Stockholder's own account, not as a nominee or agent, and that such Stockholder
has no present intention of selling, granting any participation in, or otherwise
distributing the Acquiror Common Stock except in accordance with applicable
federal and state securities laws.
c. Disclosure of Information. The Stockholder has received all the
-------------------------
information it considers necessary or appropriate for making an investment
decision in the Acquiror Common Stock including, without limitation, the
Acquiror's Prospectus dated October 13, 1999 and the Acquiror's Report on Form
10-Q for the period ended September 30, 1999. The Stockholder further
represents that it has had an opportunity to ask questions and receive answers
from the Acquiror regarding an investment in the Acquiror Common Stock.
d. Exemption from Registration Requirements. The Stockholder
----------------------------------------
understands that the Acquiror Common Stock has not been, and will not be,
registered under the Securities Act of 1933, as amended (the "Securities Act"),
by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Stockholder's representations as
expressed herein.
e. Restricted Securities. The Stockholder understands that the
---------------------
Acquiror Common Stock is a "restricted security" under the federal securities
laws inasmuch as such shares are being acquired from the Acquiror in a
transaction not involving a public offering and that under such laws and
applicable regulations such shares may be resold without registration under the
Securities Act only in certain limited circumstances. In this connection, the
Stockholder represents that it is familiar with Rule 144 under the Securities
Act, as presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act.
f. Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, the Stockholder further agrees not to make
any disposition of all or any portion of the Acquiror Common Stock unless and
until:
(i) there is then in effect a Registration Statement under the
Securities Act covering such proposed disposition, and such disposition is made
in accordance with such Registration Statement; or
(ii) (A) it shall have notified the Acquiror of the proposed
disposition and shall have furnished the Acquiror with a detailed statement of
the circumstances surrounding the proposed disposition, and (B) if reasonably
requested by the Acquiror, the Stockholder shall have furnished the Acquiror
with an opinion of counsel, reasonably satisfactory to the Acquiror, that such
disposition will not require registration under the Securities Act.
g. Legends. It is understood that certificates for the Acquiror
-------
Common Stock, and any securities issued in respect thereof or exchange therefor,
may bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION
IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
h. Such Stockholder has read the Merger Agreement and believes that
(i) the representations and warranties of the Target and the Subsidiaries,
including the disclosure schedule thereto, are accurate and complete and (ii)
such representations and warranties do 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 made therein, in light of the circumstances in
which they were made, not misleading.
2
2. Additional Documents. Each Stockholder hereby covenants and agrees to
--------------------
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Acquiror, to carry out the purpose and intent of this
Agreement and the Merger Agreement.
3. Consent and Waiver. Each Stockholder hereby gives any consents or
------------------
waivers that are reasonably required for the consummation of the Acquisition
under the terms of any agreement to which such Stockholder is a party or
pursuant to any rights Stockholder may have.
4. Miscellaneous.
-------------
a. Survival of Warranties. The warranties, representations and
----------------------
covenants of the Acquiror and the Stockholders contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Stockholders or the Acquiror.
b. Transfer; Successors and Assigns. The terms and conditions of
--------------------------------
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
c. Notices.
-------
(i) All notices, requests, demands and other communications
under this Agreement or in connection herewith shall be given to or made upon
the respective parties as follows: if to the Stockholders, to the address set
forth with respect to the Stockholders on the signature page of this Agreement,
or, if to the Acquiror, to its principal executive offices.
(ii) All notices, requests, demands and other communications
given or made in accordance with the provisions of this Agreement shall be in
writing, and shall be delivered by hand or first class certified or registered
mail, return receipt requested, and shall be deemed to be given or made upon
personal delivery or when receipt is so confirmed.
(iii) Any party may, by written notice to the other, alter its
address, and such notice shall be considered to have been given ten (10) days
after the mailing thereof.
d. Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
e. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
3
f. Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed
by each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
4
The parties have caused this Agreement to be duly executed on the date
first written above.
ACQUIROR
NETCENTIVES INC.
By: _____________________________
Name: ___________________________
(print)
Title:____________________________
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
STOCKHOLDERS
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, as Trustee UTA dated March
1, 1993
By: _____________________________
Name: ___________________________
(print)
Title:____________________________
Address for Notice:
__________________________________
__________________________________
__________________________________
Shares beneficially owned: 6,900
5
▇▇▇▇▇ ▇. ▇▇▇▇▇
________________________________
Address for Notice:
________________________________
________________________________
________________________________
Shares beneficially owned: 1,200
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as Trustee UTA dated August
26, 1998
By: ___________________________
Name: _________________________
(print)
Title:__________________________
Address for Notice:
________________________________
________________________________
________________________________
Shares beneficially owned: 600
6
▇▇▇▇ ▇. ▇▇▇▇, as Trustee UTA dated February 25,
1975
By: ___________________________
Name: _________________________
(print)
Title:__________________________
Address for Notice:
________________________________
________________________________
________________________________
Shares beneficially owned: 500
▇▇▇▇ ▇. ▇▇▇▇▇▇
________________________________
Address for Notice:
________________________________
________________________________
________________________________
Shares beneficially owned: 200
7
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., as Trustee UTA dated
December 3, 1997
By: ___________________________
Name: _________________________
(print)
Title:__________________________
Address for Notice:
________________________________
________________________________
________________________________
Shares beneficially owned: 150
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
________________________________
Address for Notice:
________________________________
________________________________
________________________________
Shares beneficially owned: 50
8
EXHIBIT K
INDEMNITY AGREEMENT
EXHIBIT K
EXECUTION VERSION
INDEMNITY AGREEMENT
This Indemnity Agreement (the "Agreement") is made and entered into as of
---------
March 3, 2000 by and among Netcentives Inc., a Delaware corporation
("Acquiror"), UVN Holdings, Inc., an Arizona corporation, and the undersigned
--------
stockholder of Target ("Holder").
------
RECITALS
--------
This Agreement is entered into in connection with that certain Agreement
and Plan of Merger dated as of March 3, 2000 (the "Merger Agreement") among
----------------
Acquiror, Target and ▇▇▇▇▇ Dog Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of Acquiror ("Merger Sub"). The Merger Agreement
----------
provides for the Merger (the "Merger") of Merger Sub into Target. Capitalized
------
terms used but not defined in this Agreement shall have the defined meanings as
set forth for such terms in the Merger Agreement.
Section 6 of the Merger Agreement provides for indemnification obligations
by the stockholders of Target immediately prior to the Effective Time (the
"Target Stockholders") arising out of or resulting from any breach of Target's
-------------------
representations, warranties, covenants or agreements set forth in the Merger
Agreement.
As a condition precedent to the obligations of Acquiror and Merger Sub to
proceed with the consummation of the Merger, each Target Stockholder must enter
into an agreement in the form of this Agreement.
Pursuant to Section 6.8 of the Merger Agreement, Holder has agreed to the
irrevocable appointment of the Stockholders' Representative to act on behalf of
Target Stockholders in connection with this Agreement, the Merger Agreement and
transactions contemplated hereby and thereby.
AGREEMENT
---------
The parties agree as follows.
1. Indemnity Obligations. Holder agrees to indemnify and hold Acquiror
---------------------
harmless in accordance with all of the provisions of Section 6 of the Merger
Agreement and agrees to be bound by Section 6 and all other provisions of the
Merger Agreement that relate to Section 6 and the rights and obligations under
Section 6.
2. Representations and Warranties of Holder.
----------------------------------------
(a) Organization and Authority of the Holder. Holder has full power
----------------------------------------
and authority to execute this Agreement, to make the representations, warranties
and covenants contained in this Agreement and to perform Holder's obligations
under this Agreement.
(b) Ownership of the Shares. Exhibit A hereto sets forth all shares
----------------------- ---------
of Target Common Stock owned by Holder, including all Target Common Stock as to
which Holder has sole or shared voting or investment power, and all rights,
options and warrants to acquire Target Common Stock.
(c) Non-Contravention by Holder. The execution and delivery of this
---------------------------
Agreement by Holder, and the consummation of the transactions contemplated in
this Agreement and the Merger Agreement will not (i) violate, conflict with or
result in a breach of any provision of the trust agreement if Holder is a trust,
(ii) violate, conflict with or result in a breach of or constitute a default
under any judgment, order, statute, law, rule or regulation of any court or
governmental agency or body having jurisdiction over Holder or the property of
Holder, or (iii) violate, conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which Holder
is a party or by which Holder is bound or to which any of the property or assets
of Holder is subject, except in the case of clause (iii) above for violations,
conflicts, breaches and defaults that would not affect the ability of Holder to
consummate the transactions contemplated hereby and thereby.
3. Termination. This Agreement shall be terminated and shall be of no
-----------
further force and effect upon the earliest of (i) termination of the Merger
Agreement pursuant to Section 5 of the Merger Agreement, (ii) the payment of
Damages by Target Stockholders equal to the indemnification limitation amount in
Section 6 of the Merger Agreement, or (iii) the termination of Target
Stockholders' indemnity obligations to Acquiror under Section 8 of the Merger
Agreement for any other reason.
4. Miscellaneous.
-------------
(a) Amendments and Waivers. Any term of this Agreement may be
----------------------
amended or waived with the written consent of the parties or their respective
successors and assigns. Any amendment or waiver effected in accordance with this
Section 4(a) shall be binding upon the parties and their respective successors
and assigns.
(b) Successors and Assigns. The terms and conditions of this
----------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
(c) Governing Law; Jurisdiction. This Agreement and all acts and
---------------------------
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of conflicts of
law. Each of the parties to this Agreement consents to the exclusive
jurisdiction and venue of the courts of the state and federal courts of San
Francisco County, California.
-2-
(d) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(e) Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(f) Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below, or as subsequently modified by written
notice.
(g) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed
by each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
(h) Entire Agreement. Except for and subject to the Merger
----------------
Agreement, this Agreement and the documents referred to herein are the product
of all of the parties hereto, and constitute the entire agreement between such
parties pertaining to the subject matter hereof and thereof, and merge all prior
negotiations and drafts of the parties with regard to the transactions
contemplated herein and therein. Any and all other written or oral agreements
existing between the parties hereto regarding such transactions are expressly
canceled.
(i) Advice of Legal Counsel. Each party acknowledges and represents
-----------------------
that, in executing this Agreement, it has had the opportunity to seek advice as
to its legal rights from legal counsel and that the person signing on its behalf
has read and understood all of the terms and provisions of this Agreement. This
Agreement shall not be construed against any party by reason of the drafting or
preparation thereof.
-3-
The parties have caused this Agreement to be executed on the date first
above written.
ACQUIROR
NETCENTIVES INC.
By:____________________________________
Name:__________________________________
(print)
Title:_________________________________
TARGET
UVN HOLDINGS, INC.
By:____________________________________
Name:__________________________________
(print)
Title:_________________________________
HOLDER
_______________________________________
(Signature)
_______________________________________
(Printed)
_______________________________________
Address:
_______________________________________
_______________________________________
_______________________________________
Facsimile:
---------------------------------------
-4-
EXHIBIT A
Holder Ownership of Target Stock
Number of Shares of
Holder Target Stock
-------------------------- ------------
▇▇▇▇ ▇. ▇▇▇▇▇▇ 200
EXHIBIT A
Holder Ownership of Target Stock
Number of Shares of
Holder Target Stock
------------------------------------------- ------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as Trustee UTA dated 600
August 26, 1998
EXHIBIT A
Holder Ownership of Target Stock
Number of Shares of
Holder Target Stock
------------------------------------------- ------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 50
EXHIBIT A
Holder Ownership of Target Stock
Number of Shares of
Holder Target Stock
------------------------------------------- ------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., as Trustee UTA
dated December 3, 1997 150
EXHIBIT A
Holder Ownership of Target Stock
Number of Shares of
Holder Target Stock
------------------------------------------- ------------
▇▇▇▇ ▇. ▇▇▇▇, as Trustee UTA dated 500
February 28, 1975
EXHIBIT A
Holder Ownership of Target Stock
Number of Shares of
Holder Target Stock
------------------------------------------- ------------
▇▇▇▇▇ ▇. ▇▇▇▇▇ 1200
EXHIBIT A
Holder Ownership of Target Stock
Number of Shares of
Holder Target Stock
------------------------------------------- ------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, as Trustee UTA dated 6900
March 1, 1993