EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PERFECTMARKET, INC.
MB ACQUISITION CORPORATION
METROBEAT, INC.
▇▇▇▇ ▇▇▇▇▇▇
AND
▇▇▇▇▇▇ ▇▇▇▇▇
MAY 31, 1996
------------------
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
TABLE OF CONTENTS
PAGE
----
SECTION 1 - THE MERGER.......................................................... 1
1.1 Merger.............................................................. 1
1.2 Effective Time of the Merger........................................ 1
1.3 Closing............................................................. 1
1.4 Effects of the Merger............................................... 2
1.5 Certificate of Incorporation; Bylaws; Directors; Officers........... 2
1.6 Taking of Necessary Action.......................................... 2
SECTION 2 - EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES................. 2
2.1 Consideration; Payment.............................................. 2
2.2 Effect on Capital Stock of Sub...................................... 3
2.3 Surrender of Certificates........................................... 6
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF METROBEAT......................... 7
3.1 Organization, Standing and Power.................................... 8
3.2 Capital Structure................................................... 8
3.3 Authority........................................................... 9
3.4 Financial Statements................................................ 10
3.5 Inventory........................................................... 10
3.6 Receivables......................................................... 11
3.7 Compliance with Law................................................. 11
3.8 No Defaults......................................................... 11
3.9 Litigation.......................................................... 12
3.10 No Material Adverse Effect.......................................... 12
3.11 Absence of Undisclosed Liabilities.................................. 13
3.12 Information Supplied................................................ 13
3.13 Certain Agreements.................................................. 14
3.14 Plans............................................................... 14
3.15 Major Contracts..................................................... 14
3.16 Taxes............................................................... 16
3.17 Interests of Officers............................................... 17
3.18 Technology.......................................................... 18
3.19 Restrictions on Business Activities................................. 19
3.20 Title to Properties: Absence of Liens and Encumbrances:
Condition of Equipment.............................................. 20
3.21 Governmental Authorizations and Licenses............................ 20
3.22 Environmental Matters............................................... 20
3.23 Insurance........................................................... 21
3.24 Labor Matters....................................................... 21
3.25 Customers; Backlog; Returns and Complaints.......................... 21
3.26 Employees........................................................... 22
3.27 Questionable Payments............................................... 22
3.28 Import/Export....................................................... 22
3.29 Brokers; Finders.................................................... 22
3.30 Disclosure.......................................................... 22
SECTION 4 - REPRESENTATIONS AND WARRANTIES OF
PERFECTMARKET AND SUB............................................... 23
4.1 Organization; Standing and Power.................................... 23
4.2 Capitalization of PerfectMarket..................................... 23
4.3 Authority........................................................... 24
4.4 Financial Statements................................................ 25
4.5 Compliance with Law................................................. 25
4.6 No Defaults......................................................... 25
4.7 Litigation.......................................................... 26
4.8 No Material Adverse Effect.......................................... 26
4.9 Absence of Undisclosed Liabilities.................................. 26
4.10 Technology.......................................................... 26
4.11 Governmental Authorizations and Licenses............................ 27
4.12 Environmental Matters............................................... 27
4.13 Labor Matters....................................................... 28
4.15 Import/Export....................................................... 28
4.16 Brokers; Finders.................................................... 28
4.17 Disclosure.......................................................... 28
SECTION 5 - CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME;
ADDITIONAL AGREEMENTS............................................... 29
5.1 Conduct of Business of MetroBeat.................................... 29
5.2 Exclusivity; Acquisition Proposals.................................. 31
5.3 MetroBeat Shareholders' Approval.................................... 31
5.4 Notification of Certain Matters..................................... 32
5.5 Consents............................................................ 32
5.6 Reasonable Efforts.................................................. 32
5.7 Public Announcements................................................ 33
5.8 Tax Returns and Income Tax Liability................................ 33
5.9 Support of Event Listings Business.................................. 34
-ii-
5.10 Payment of Liabilities.............................................. 34
5.11 Payment of Legal Expenses........................................... 34
5.12 "MetroBeat" ▇▇▇▇.................................................... 34
SECTION 6 - CONDITIONS PRECEDENT................................................ 35
6.1 Conditions to Each Party's Obligation to Effect the Merger.......... 35
6.2 Conditions to Obligations of PerfectMarket and Sub.................. 35
6.3 Conditions to Obligations of MetroBeat.............................. 37
SECTION 7 - INDEMNIFICATION..................................................... 37
7.1 Indemnification..................................................... 37
7.2 Procedures.......................................................... 38
7.3 Right of Set-Off.................................................... 38
7.4 Survival of Representations, Warranties and Covenants............... 38
SECTION 8 - TERMINATION......................................................... 39
8.1 Termination......................................................... 39
8.2 Expenses............................................................ 39
8.3 Procedure and Effect of Termination................................. 39
SECTION 9 - GENERAL PROVISIONS.................................................. 40
9.1 Amendment........................................................... 40
9.2 Extension; Waiver................................................... 40
9.3 Arbitration......................................................... 40
9.4 Notices............................................................. 41
9.5 Broker's or Finder's Fees........................................... 42
9.6 Interpretation...................................................... 42
9.7 Counterparts........................................................ 42
9.8 Entire Agreement.................................................... 42
9.9 No Transfer......................................................... 42
9.10 Severability........................................................ 42
9.11 Other Remedies...................................................... 42
9.12 Further Assurances.................................................. 43
9.13 Absence of Third-Party Beneficiary Rights........................... 43
9.14 Mutual Drafting..................................................... 43
9.15 Governing Law....................................................... 43
9.16 Employees........................................................... 43
-iii-
EXHIBITS
Exhibit A Plan of Merger
Exhibit B Certificate of Merger
Exhibit C Restated Certificate of Incorporation of PerfectMarket
Exhibit D MetroBeat Disclosure Schedule
Exhibit E PerfectMarket Disclosure Schedule
Exhibit F Form of Opinion of Counsel to MetroBeat
Exhibit G Form of FIRPTA Notification Letter and Form of Notice
Exhibit H Form of Employment and Noncompetition Agreement
Exhibit I Form of Shareholder's Representation Statement
-iv-
SCHEDULES
3.1 Qualifications to do Business
3.2(c) Capital Structure
3.3(b) Third-Party Consents
3.6 Accounts Receivable
3.7 Compliance with Laws
3.9 Litigation
3.14 Employee Benefit Plans
3.15 Major Contracts
3.18(a) MetroBeat Intellectual Property Rights
3.18(b) Third-Party Intellectual Property Rights
3.18(c) MetroBeat's standard end-user license agreements
3.20 Real Property
3.23 Insurance
3.25 Significant Customers
3.26 Employees
5.1 Conduct of Business
-v-
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is dated as of
May 31, 1996 among PERFECTMARKET, INC., a Delaware corporation
("PerfectMarket"), MB ACQUISITION CORPORATION, a New York corporation and a
wholly-owned subsidiary of PerfectMarket ("Sub"), METROBEAT, INC., a New York
corporation ("MetroBeat"), ▇▇▇▇ ▇▇▇▇▇▇ (the "Principal Shareholder") and ▇▇▇▇▇▇
▇▇▇▇▇.
RECITAL
The Boards of Directors of PerfectMarket, MetroBeat and Sub have each
approved the terms and conditions of the acquisition of MetroBeat by
PerfectMarket to be effected by the merger of Sub with and into MetroBeat,
pursuant to the terms and subject to the conditions of this Agreement in
accordance with the New York Business Corporation Law.
NOW THEREFORE, in consideration of the premises and mutual covenants and
agreements contained in this Agreement, PerfectMarket, Sub, MetroBeat and the
Principal Shareholder agree as follows:
SECTION 1.
THE MERGER
A. MERGER. Subject to the terms and conditions of this Agreement, the
------
Plan of Merger in substantially the form attached hereto as Exhibit A (the "Plan
---------
of Merger") and the Certificate of Merger in substantially the form attached
hereto as Exhibit B (the "Certificate of Merger"), Sub will be merged with and
---------
into MetroBeat (the "Merger") in accordance with the applicable provisions of
the New York Business Corporation Law (the "New York Statute"). The Plan of
Merger provides for the mode of consummating the Merger. The Certificate of
Merger shall be executed by the parties thereto concurrently with the execution
of this Agreement.
B. EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
----------------------------
Agreement and the Plan of Merger, the Certificate of Merger and the required
certificates, if any, shall be duly filed in accordance with the New York
Secretary of State in accordance with the New York Statute simultaneous with or
as soon as practicable following the Closing (as defined in Section 1.3 below).
The Merger shall become effective (the "Effective Time") upon the filing of the
Certificate of Merger with the New York Secretary of State (as defined in
Section 1.3 below) and as provided under the New York Statute.
C. CLOSING. Unless this Agreement shall have been terminated pursuant to
-------
Section 8, the closing of the Merger (the "Closing") will take place at 10:00
a.m. Pacific Standard Time on June 19, 1996 (the "Closing Date") or, if the
closing conditions contained in Section 6 are not satisfied or waived
on or prior to such date, the first business day after satisfaction or waiver of
all such conditions, at the offices of Wilson, Sonsini, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
Professional Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
unless a different date or place is agreed to in writing by the parties.
D. EFFECTS OF THE MERGER. Subject to the terms and conditions of this
---------------------
Agreement and the Certificate of Merger, at the Effective Time: (i) the separate
existence of Sub shall cease and Sub shall be merged with and into MetroBeat
(Sub and MetroBeat are sometimes referred to as the "Constituent Corporations,"
and MetroBeat after the Merger is sometimes referred to as the "Surviving
Corporation"), and (ii) the Merger shall have all the effects provided by the
New York Statute, this Agreement and the Certificate of Merger.
E. CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS. At the
---------------------------------------------------------
Effective Time, (i) the Certificate of Incorporation of MetroBeat, as amended
and substantially in the form attached to the Plan of Merger as Exhibit A, shall
---------
be the Certificate of Incorporation of the Surviving Corporation, until altered,
amended or repealed as provided in the New York Statute; (ii) the Bylaws of Sub,
as in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation, until thereafter duly altered, amended or repealed as
provided in the New York Statute or in the Certificate of Incorporation or
Bylaws of the Surviving Corporation; (iii) the directors of Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation and will hold office from the Effective Time until their respective
successors are duly elected or appointed and qualified in the manner provided in
the Certificate of Incorporation and Bylaws of the Surviving Corporation, as
such instruments may be amended from time to time, either before or after the
Effective Time, or as otherwise provided by law; and (iv) the officers of Sub at
the Effective Time shall be the initial officers of the Surviving Corporation.
F. TAKING OF NECESSARY ACTION. Prior to the Effective Time, the parties
--------------------------
shall take, or cause to be taken, all such reasonable actions as may be
necessary or appropriate in order to effect, as expeditiously as reasonably
practicable, the Merger.
SECTION 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS;
SURRENDER OF CERTIFICATES
A. CONSIDERATION; PAYMENT. In consideration of the transactions
----------------------
contemplated hereby, PerfectMarket has agreed to pay an aggregate of $[*]
in the form of Series B Preferred Stock, par value $ 0.01 per share, of
PerfectMarket (the "Series B Preferred") and/or cash (the "Aggregate
Consideration"), pursuant to the terms and subject to the conditions set forth
in this Agreement. The Series B Preferred shall have the rights, preferences
and privileges set forth in the Restated Certificate of Incorporation of
PerfectMarket, substantially in the form attached hereto as Exhibit C (the
---------
"Restated Certificate").
-------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
-2-
B. EFFECT ON CAPITAL STOCK OF SUB. At the Effective Time by virtue of
------------------------------
the Merger and without any action on the part of the holders of any shares of
capital stock of MetroBeat:
i. Capital Stock of Sub. Each issued and outstanding share of
--------------------
capital stock of Sub shall be converted into one share of Common Stock, $.001
par value, of the Surviving Corporation. Each stock certificate of Sub
evidencing ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
ii. Cancellation of Certain Shares of Capital Stock of MetroBeat.
------------------------------------------------------------
All shares of capital stock of MetroBeat ("MetroBeat Capital Stock") that are
owned directly or indirectly by MetroBeat or any subsidiary of MetroBeat shall,
by virtue of the Merger and without any action on the part of MetroBeat or any
subsidiary of MetroBeat, be canceled, and no consideration shall be delivered in
exchange therefor.
iii. Effect on MetroBeat Capital Stock. Each share of MetroBeat
---------------------------------
Capital Stock (other than shares canceled pursuant to Section 2.2(b)) that is
issued and outstanding immediately prior to the Effective Time, shall, subject
to Section 2.2(f) and (g) below, be automatically canceled and extinguished and
be converted into the right to receive an amount equal to the Aggregate
Consideration divided by the number of shares of MetroBeat Capital Stock issued
and outstanding as of the Effective Time.
iv. Cancellation of Other Equity Securities. Except as otherwise
---------------------------------------
provided in this Agreement, all shares of and all options to acquire shares of
capital stock or other equity securities of MetroBeat other than MetroBeat
Capital Stock shall be canceled as of the Effective Time without consideration
received in exchange therefor.
v. Payment of the Aggregate Consideration.
--------------------------------------
(1) Subject to Section 2.2(e)(iii) below, the Aggregate
Consideration to be paid by PerfectMarket pursuant to the Merger shall be [*]
(2) The Final Payment shall be paid by PerfectMarket either in
the form of Series B Preferred and/or cash. At least [*], each of PerfectMarket,
on the one hand, and Shareholder's Agent (as defined in Section 7.2), on the
other hand, shall elect the form of consideration (cash or Series B Preferred
(or if after the closing of an IPO as defined in Section
-------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
-3-
2.2(e)(iv) below, Common Stock)) comprising 50% of the Final Payment. If any
portion of the Final Payment is elected to be made in cash, such cash payment
shall be secured by a number of shares of Series B Preferred equal to the value
of such cash payment (the value of such Series B Preferred to be calculated in
accordance with Section 2.2(e)(v)).
(3) PerfectMarket shall issue a minimum of [*] shares and a
maximum of [*] shares of its capital stock (as adjusted for stock splits,
stock dividends and similar recapitalizations of PerfectMarket) to the
shareholders of MetroBeat pursuant to this Section 2.2. If the shareholders
elect cash for any portion of the Final Payment pursuant to Section 2.2(e)(ii),
then both the minimum of [*] shares and the maximum of [*] shares shall
be reduced by the number of shares equal to such minimum or maximum multiplied
by the percentage equal to the amount of the cash payment elected by the
shareholders as the numerator, and $[*] million as the denominator. Such
an adjustment shall not be applicable to any portion of the Final Payment
PerfectMarket elects to make in cash. At the time PerfectMarket shall be
obligated to deliver a cumulative aggregate amount to the shareholders of
MetroBeat of [*] shares of capital stock in accordance with the provisions
of this Section 2.2(e), all payment obligations of PerfectMarket in excess of
such amount shall immediately terminate. In the event that PerfectMarket's
payment obligations as calculated through the Final Payment shall be less than
[*] shares of capital stock, PerfectMarket shall issue as part of the Final
Payment such additional number of shares of capital stock as required such that
the cumulative aggregate shares issued pursuant to this Section 2.2(e) shall
equal [*] shares.
(4) Notwithstanding anything to the contrary in this Agreement,
in the event that PerfectMarket closes an initial public offering (an "IPO") of
its Common Stock, par value $0.01 per share (the "PM Common Stock"), then
PerfectMarket may, in its sole discretion (A) accelerate any portion or all of
the Aggregate Consideration not yet due to the shareholders of MetroBeat
pursuant to this Agreement, and/or (B) issue shares of PM Common Stock instead
of Series B Preferred under this Section 2.2(e); provided, however, that in the
-------- -------
event such IPO closes prior to the First Anniversary, 50% of the First and
Second Deferred and Final Payments shall be accelerated to the IPO closing date,
in the event such IPO closes after the First Anniversary but before the Second
Anniversary, 50% of the Second Deferred and Final Payments shall be accelerated
to the IPO closing date and in the event such IPO closes after the Second
Anniversary but before the Third Anniversary, 50% of the Final Payment shall be
accelerated to the IPO closing date.
(5) The valuation of the Series B Preferred (or PM Common Stock
if applicable) shall be determined as follows:
(a) If the PM Common Stock is traded or quoted on a national
securities exchange or the Nasdaq National Market, the per share valuation of
the PM Common Stock shall be the average of the closing prices of the PM Common
Stock as quoted on the exchange or the Nasdaq National Market for the ten day
period ending on the day before the applicable Payment Date.
(b) If the Payment Date is the date of the closing of a PerfectMarket
IPO, the valuation shall equal the price to the public of PM Common Stock in the
IPO;
-------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
-4-
(c) If (A) or (B) above do not apply and PerfectMarket shall have
closed a Preferred Stock financing within 90 days of the Payment Date, the per
share valuation will equal the purchase price of such Preferred Stock; and
(d) If none of (A), (B) or (C) apply, the parties shall negotiate in
good faith the valuation of the Series B Preferred. If PerfectMarket and the
Shareholders' Agent are unable to agree on the valuation as of the Payment Date,
then the valuation, which valuation shall be based on fair market value, shall
be set by an independent appraiser agreed to by PerfectMarket and the
Shareholders' Agent. If PerfectMarket and the Shareholders' Agent cannot agree
on an appraiser within 30 days after the Payment Date, each of PerfectMarket and
Shareholders' Agent shall pick one appraiser and these two appraisers shall pick
a third appraiser to determine the valuation. Any appraiser chosen under this
provision shall be one of the six largest accounting firms in the U.S. (a "Big
Six Accounting Firm"), or an internationally known valuation firm with expertise
in determining the valuation of companies such as PerfectMarket. In the event
of such arbitration, PerfectMarket and Shareholders' Agent agree that (x) the
last completed Preferred Stock financing of PerfectMarket, if it shall have
occurred within 24 months of the Payment Date, shall be a minimum price for
determining the valuation by the appraisers and (y) PerfectMarket shall pay two-
thirds of the cost of the appraisal and the shareholders of MetroBeat shall pay
one-third of such cost, provided, however, (I) that PerfectMarket shall pay all
-------- -------
of the shareholders' portion of the appraisal cost to the extent such portion
exceeds $25,000, and (II) unless otherwise prohibited by law, the shareholders
may elect to have PerfectMarket pay the shareholders' portion of the cost of the
appraisal above $5,000 (the "Reimbursable Amount") and, in such event, the
shareholders shall deliver to PerfectMarket a number of shares of capital stock
of PerfectMarket the fair market value of which shall equal the Reimbursable
Amount (as determined by the appraisal described above). In the event the per
share valuation is determined in accordance with this Section 2.2(e)(D), the
Payment Date shall be postponed until ten (10) days after a final determination
of the valuation.
vi. Fractional Shares. No fractional shares of Series B Preferred or
-----------------
PM Common Stock, as the case may be, shall be issued, but in lieu thereof each
holder of shares of MetroBeat Common Stock who would otherwise be entitled to
receive a fraction of a share of Series B Preferred or PM Common Stock, as the
case may be, shall receive from PerfectMarket an amount of cash equal to the per
share valuation of the Series B Preferred or PM Common Stock, as the case may
be, as determined in Section 2.2(e) above multiplied by the fraction of a share
of Series B Preferred or PM Common Stock, as the case may be, to which such
holder would otherwise be entitled. The fractional share interests of each
shareholder shall be aggregated, so that no shareholder shall receive cash in an
amount greater than the value of one full share of Series B Preferred or PM
Common Stock, as the case may be.
vii. Dissenters' Rights. Any shares of MetroBeat Capital Stock held
------------------
by a holder who has properly exercised dissenters' rights for such shares in
accordance with the New York Statute and who, as of the Effective Time, has not
effectively withdrawn or lost such dissenters' rights ("Dissenting Shares")
shall not be converted into the right to receive the consideration set forth in
Section 2, but shall instead be converted into the right to receive such
consideration as may be determined to be due with
-5-
respect to such Dissenting Shares pursuant to the New York Statute. MetroBeat
agrees that, except with the prior written consent of PerfectMarket, or as
required under the New York Statute, it will not voluntarily make any payment
with respect to, or settle or offer to settle, any such purchase demand. If
after the Effective Time any Dissenting Shares shall lose their status as
Dissenting Shares, PerfectMarket shall deliver, upon surrender by such
shareholder of a certificate or certificates representing shares of MetroBeat
Capital Stock in accordance with Section 2.3(c), the amount of consideration to
which the holder thereof would otherwise be entitled under Section 2.2.
viii. Relinquishment of Shares. In the event the Principal
------------------------
Shareholder voluntarily terminates his employment with PerfectMarket or its
subsidiary, as the case may be, prior to 24 months following the Closing, as set
forth pursuant to the terms of the Employment and Noncompetition Agreement in
the form attached hereto as Exhibit F, [*] In the event PerfectMarket is
precluded by applicable law from accepting the return of such consideration at
such time, such consideration shall be held in escrow by a third-party selected
by PerfectMarket and shall be returned to PerfectMarket at the earliest date
permitted under applicable law.
C. SURRENDER OF CERTIFICATES.
-------------------------
i. Exchange Agent. PerfectMarket shall act as Exchange Agent (the
--------------
"Exchange Agent") in the Merger. Prior to the Closing Date, MetroBeat shall
deliver to the Exchange Agent specific instructions to be followed by Exchange
Agent, and Exchange Agent shall have no liability for acting in accordance with
those instructions.
ii. PerfectMarket to Provide the Aggregate Consideration. On the
----------------------------------------------------
Closing Date, PerfectMarket shall set aside the Aggregate Consideration for
exchange in accordance with Section 2.2 and the Plan of Merger, through such
reasonable procedures as PerfectMarket may adopt.
iii. Exchange Procedures. Prior to the Closing Date, the Exchange
-------------------
Agent or MetroBeat, as PerfectMarket and MetroBeat shall agree, shall mail to
each holder of record of certificate(s) or other documents which represent
MetroBeat Capital Stock (the "Certificates"), to be converted into the Aggregate
Consideration pursuant to Section 2.2(c) hereof and the Plan of Merger: (i) a
letter of transmittal (which shall specify that, with respect to the
Certificates, delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to
-------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
-6-
the Exchange Agent and shall be in such form and have such other provisions as
PerfectMarket may reasonably specify); and (ii) instructions for use in
effecting the surrender of the Certificates. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by PerfectMarket, together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor that portion of the Aggregate Consideration with respect to
the MetroBeat Capital Stock properly covered by such Certificate as to which
such holder is entitled pursuant to Section 2.2(c) and the Plan of Merger.
Certificates so surrendered pursuant to this Section 2.3 shall be canceled at
the Effective Time (if not otherwise canceled or terminated in accordance with
their terms). In the event of a transfer of ownership of MetroBeat Capital Stock
which is not registered on the transfer records of MetroBeat, the appropriate
Aggregate Consideration may be delivered to a transferee if the Certificate
representing such transferred security is presented to the Exchange Agent and
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.3, each Certificate shall be
deemed at any time after the Effective Time to represent solely the right to
receive upon such surrender that portion of the Aggregate Consideration (without
interest and subject to applicable withholding, escheat, and other laws) to
which such holder is entitled.
iv. No Further Ownership Rights in Capital Stock of MetroBeat. The
---------------------------------------------------------
amounts paid in respect of MetroBeat Capital Stock in accordance with the terms
of this Agreement and the Plan of Merger shall be deemed to have been delivered
in full satisfaction of all rights pertaining thereto, and following the
Effective Time, holders of the Certificates shall have no further rights to, or
ownership in, shares of capital stock of MetroBeat. There shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of MetroBeat Capital 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 canceled and exchanged in accordance with the terms of this Agreement
and the Plan of Merger.
v. No Liability. Notwithstanding anything to the contrary in this
------------
Section 2.3, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of shares of the capital stock of MetroBeat
for any amount paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
vi. Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
certificates evidencing shares of MetroBeat Capital Stock 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 in a form
reasonably satisfactory to PerfectMarket of that fact by the holder thereof,
such consideration as may be required pursuant to Section 2.2(c).
SECTION 3
REPRESENTATIONS AND WARRANTIES OF METROBEAT
-7-
Except as disclosed in the disclosure schedule attached as Exhibit C which
---------
identifies by section and subsection number any exception to a representation
and warranty in this Section 3 as well as the basis for any such exception (the
"MetroBeat Disclosure Schedule"), each of MetroBeat and the Principal
Shareholder represents and warrants to PerfectMarket and Sub as follows:
A. ORGANIZATION, STANDING AND POWER. MetroBeat is a corporation duly
--------------------------------
organized and validly and legally existing under the laws of New York and has
all requisite power and authority to own, operate and lease its properties and
to carry on its business as now being conducted. MetroBeat is duly qualified as
a foreign corporation and is in good standing in each jurisdiction in which the
failure to so qualify would have a Material Adverse Effect (as defined below).
Schedule 3.1 sets forth a true and complete list of the states and foreign
------------
countries where MetroBeat is qualified as a foreign corporation. MetroBeat has
no subsidiaries or affiliated companies and does not otherwise own or control,
directly or indirectly, any equity interest in any partnership, corporation,
joint venture, business association or other entity and has no loans to any
partnership, corporation, joint venture, business association or other entity.
MetroBeat has delivered to PerfectMarket complete and correct copies of its
Certificate of Incorporation and Bylaws, in each case as amended to the date
hereof, and has delivered or made available to PerfectMarket copies of its
corporate minute books which include all minutes of MetroBeat's directors' and
shareholders' meetings and a stock ledger setting forth the record ownership of
all outstanding shares of MetroBeat Capital Stock. The term "Material Adverse
Effect" means any change, event or effect that is materially adverse to the
business, assets (including intangible assets), liabilities, financial
condition, results of operations or prospects of MetroBeat, or Perfect Market,
as the context requires.
B. CAPITAL STRUCTURE.
-----------------
i. The authorized capital stock of MetroBeat consists of 200 shares
of Common Stock, no par value ("MetroBeat Common Stock"). There are issued and
outstanding 198 shares of MetroBeat Common Stock. All outstanding shares of
MetroBeat Common Stock are validly issued, fully paid and nonassessable and not
subject to preemptive rights created by statute, or by MetroBeat's Certificate
of Incorporation or Bylaws, each as in effect immediately prior to the Effective
Time, or by any agreement to which MetroBeat is a party or by which MetroBeat
may be bound.
ii. Other than as described in this Section 3.2, there are no
outstanding shares of MetroBeat Common Stock, preferred stock or any other
equity securities of MetroBeat, and there are no options, warrants, calls,
conversion rights, commitments or agreements of any character to which MetroBeat
or the Principal Shareholder is a party or by which MetroBeat or the Principal
Shareholder may be bound that do or may obligate MetroBeat to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of MetroBeat
Common Stock, preferred stock or other equity securities or that do or may
obligate MetroBeat to grant, extend or enter into any such option, warrant,
call, conversion right, commitment or agreement. There are no outstanding
arrangements, agreements, commitments or understandings of any kind affecting or
relating to the voting, issuance, purchase, redemption, repurchase or transfer
of any capital stock of MetroBeat or any other securities of MetroBeat. Other
than as provided in or contemplated by this Agreement, MetroBeat and the
Principal Shareholder have not,
-8-
and prior to the Effective Time will not, become party to or subject to any
contract or obligation wherein any person has a right or option to purchase or
acquire any rights in any additional capital stock or securities of MetroBeat.
iii. Schedule 3.2(c) contains a complete and accurate list of, and the
---------------
number of shares owned of record by, the holders of outstanding MetroBeat Common
Stock. As of the Balance Sheet Date (as defined in Section 3.4), no shares of
MetroBeat Common Stock held by certain persons were subject to repurchase upon
termination of employment.
iv. As of the Effective Time, there shall be no shares of capital
stock of MetroBeat or options or other rights therefor outstanding or in
existence other than those held by PerfectMarket.
C. AUTHORITY.
---------
i. MetroBeat has all requisite corporate power and authority to
enter into this Agreement and the Certificate of Merger and to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Certificate of Merger, the performance by MetroBeat of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action on the part of MetroBeat, including approval by its Board of
Directors and shareholders. The Principal Shareholder has full power and
authority to execute and deliver this Agreement, to perform such shareholder's
obligations under this Agreement, and to consummate the transactions
contemplated by this Agreement and the Certificate of Merger. The Principal
Shareholder has full power and authority to vote the outstanding shares of
MetroBeat Common Stock held by such shareholder to approve this Agreement, the
Plan of Merger, the Certificate of Merger and the transactions contemplated
hereby and thereby, and will vote all of such shares to approve this Agreement,
the Plan of Merger, the Certificate of Merger and the transactions contemplated
hereby and thereby in compliance with all applicable laws, and the Certificate
of Incorporation and Bylaws of MetroBeat. This Agreement is a legal, valid and
binding obligation of each of MetroBeat and the Principal Shareholder,
enforceable against MetroBeat and the Principal Shareholder in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency, or
other similar laws affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies is subject to the discretion
of the court before which any proceeding therefor may be brought. The
Certificate of Merger, when delivered by the parties thereto, will be a legal,
valid and binding obligation of MetroBeat enforceable against MetroBeat in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, or other similar laws affecting the enforcement of creditors' rights
generally and except that the availability of equitable remedies is subject to
the discretion of the court before which any proceeding therefore may be
brought. The only vote of the holders of any class or series of MetroBeat
Capital Stock necessary to approve this Agreement, the Plan of Merger, the
Certificate of Merger and the transactions contemplated hereby and thereby was
the affirmative vote of the holders of a majority of the outstanding shares of
MetroBeat Common Stock.
-9-
ii. The execution and delivery of this Agreement does not, and the
execution and delivery of the Certificate of Merger and the consummation of the
transactions contemplated hereby and thereby will not, conflict with or result
in any violation of any statute, law, rule, regulation, judgment, order, decree,
or ordinance applicable to MetroBeat or its properties or assets or the
Principal Shareholder, or conflict with or result in any breach or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
benefit under, or result in the creation of a lien or encumbrance on any of the
properties or assets of MetroBeat pursuant to (i) any provision of the
Certificate of Incorporation or Bylaws of MetroBeat or (ii) any agreement,
contract, note, mortgage, indenture, lease instrument, permit, concession,
franchise or license to which MetroBeat is a party or by which MetroBeat or any
of its property or assets may be bound or affected. Schedule 3.3(b) lists all
---------------
consents, waivers, and approvals under any of MetroBeat's agreements, contracts,
licenses or leases required to be obtained in connection with the consummation
of the transactions contemplated hereby and by the Plan of Merger and the
Certificate of Merger ("MetroBeat Third-Party Consents"). Copies of such
MetroBeat Third-Party Consents will be delivered by MetroBeat to PerfectMarket
prior to the Closing.
iii. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency, commission,
regulatory authority or other governmental authority or instrumentality, whether
domestic or foreign (a "Governmental Entity"), is required by or with respect to
MetroBeat or the Principal Shareholder in connection with the execution and
delivery of this Agreement and the Certificate of Merger by MetroBeat or the
consummation by MetroBeat of the transactions contemplated hereby or thereby,
except for (i) the filing of the Certificate of Merger and officers'
certificates with the New York Secretary of State and appropriate documents with
the relevant authorities of other states in which MetroBeat is qualified to do
business and (ii) such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws in
connection with the Merger.
D. FINANCIAL STATEMENTS. MetroBeat has furnished or made available to
--------------------
PerfectMarket its financial statements for the fiscal year ended on December 31,
1995, including the balance sheet of MetroBeat, and the related statement of
operations, cash flows and shareholders' equity (collectively, the "MetroBeat
Year-End Financial Statements") and MetroBeat's financial statements as of April
30, 1996, including a balance sheet of MetroBeat (the "Interim Balance Sheet")
as of April 30, 1996 (the "Balance Sheet Date") and the related statement of
income, retained earnings and, cash flows (the "Interim Financial Statements")
(the Interim Financial Statements together with the MetroBeat Year-End Financial
Statements are collectively referred to as the "MetroBeat Financial
Statements"). The MetroBeat Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied and fairly present the financial position of MetroBeat as of the dates
thereof and the results of its operations and cash flows for the periods then
ended, except that the Interim Financial Statements do not contain any footnote
disclosure required by GAAP. There has been no change in MetroBeat's accounting
policies, except as described in the notes to the MetroBeat Financial
Statements.
-▇▇-
▇. ▇▇▇▇▇▇▇▇▇. The inventories of MetroBeat shown on the Interim Balance
---------
Sheet ("Inventories") were valued at cost or market, whichever is lower, with
adequate allowances for excess and obsolete materials and materials below
standard quality, in accordance with GAAP consistently applied. The quality and
quantity of the Inventories are such that the Inventories are readily usable and
saleable in the normal course of business of MetroBeat, except such amounts as
are reserved on the Interim Balance Sheet in accordance with GAAP consistently
applied and in accordance with the past practice of MetroBeat. All items
included in such Inventories are owned by MetroBeat, except for sales made
subsequent to the Balance Sheet Date in the ordinary course of business, for all
of which either the purchaser has made full payment or the purchaser is
obligated to make payment and such obligation is an asset of MetroBeat in
accordance with GAAP consistently applied. Schedule 3.5 lists all Inventories
------------
materially in excess of reasonable estimated requirements for MetroBeat based
on current operations for the next three months.
F. RECEIVABLES. The receivables shown on the Interim Balance Sheet arose
-----------
in the ordinary course of business and have been collected or are collectible in
the book amounts thereof, less an amount not in excess of the allowance for
doubtful accounts provided for in such balance sheet. Allowances for doubtful
accounts and warranty returns are adequate and have been prepared in accordance
with GAAP consistently applied and in accordance with the past practices of
MetroBeat. The receivables of MetroBeat arising after the Balance Sheet Date
and prior to the Effective Time arose or will arise in the ordinary course of
business and have been collected or are collectible in the book amounts thereof,
less allowances for doubtful accounts and warranty returns determined in
accordance with the past practices of MetroBeat. None of the receivables of
MetroBeat is subject to any material claim of offset, recoupment, set off or
counterclaim and neither MetroBeat nor the Principal Shareholder has any
knowledge of any specific facts or circumstances (whether asserted or
unasserted) that could give rise to any such claim. No amount of receivables
are contingent upon the performance by MetroBeat of any obligation or contract.
No person has any lien on any of such receivables and no agreement for deduction
or discount has been made with respect to any of such receivables. Schedule 3.6
------------
sets forth an aging of accounts receivable of MetroBeat as of the Balance Sheet
Date in the aggregate and by customer (0-30 days, 31-60 days, 60-90 days and
greater than 90 days), and indicates for each category the respective amounts of
allowances for doubtful accounts and warranty returns and the amounts of
accounts receivable within each category which are subject to warranty claims in
the aggregate. Prior to the date of this Agreement, MetroBeat has provided
PerfectMarket with information regarding amounts of accounts receivable which
are subject to warranty claims by customer and has made available detailed
information regarding warranty claims made within the last year, including the
type and amounts of such claims. Schedule 3.6 lists pending authorized product
------------
returns.
G. COMPLIANCE WITH LAW. MetroBeat is in compliance and has conducted its
-------------------
business so as to comply with all laws, rules and regulations, judgments,
decrees or orders of any Governmental Entity applicable to its operations or
with respect to which compliance is a condition of engaging in the business
thereof. There are no judgments or orders, injunctions, decrees, stipulations
or awards (whether rendered by a court or administrative agency or by
arbitration) against MetroBeat or against any of its properties or businesses.
Without limiting the generality of the foregoing, MetroBeat has not violated any
United States and foreign import and export control laws and regulations, export
licensing laws and
-11-
regulations and customs regulations (including its obligations under the Foreign
Corrupt Practices Act) applicable to MetroBeat. MetroBeat has not been cited by
the United States Department of Commerce, the United States Customs Service or
any other relevant Governmental Entity for any violation of United States laws
or regulations relating to importing or exporting of products, materials or
services. Schedule 3.7 contains a summary of any violation of, or conflict with,
------------
any applicable statute, law, rule, regulation, ruling, order, judgment or decree
of which such Governmental Entity has notified MetroBeat, including any of the
foregoing relating to Environmental Laws (as defined in Section 3.22(c) below).
H. NO DEFAULTS. MetroBeat is not, nor has it or the Principal
-----------
Shareholder received notice that MetroBeat is or would be with the passage of
time, (a) in violation of any provision of its Certificate of Incorporation or
Bylaws or (b) in default or violation of any term, condition or provision of (i)
any judgment, decree, order, injunction or stipulation applicable to MetroBeat
or (ii) any agreement, note, mortgage, indenture, contract, lease or instrument,
permit, concession, franchise or license to which MetroBeat is a party or by
which MetroBeat or its properties or assets may be bound.
I. LITIGATION. There is no action, suit, proceeding, claim, arbitration
----------
or investigation pending or, to the knowledge of MetroBeat and the Principal
Shareholder, threatened, against MetroBeat or the Principal Shareholder, or
which in any manner challenges or seeks to prevent, enjoin, alter or delay any
of the transactions contemplated hereby. Schedule 3.9 sets forth with respect
------------
to each pending action, suit, proceeding, claim, arbitration or investigation to
which MetroBeat is a party, the forum, the parties thereto, a brief description
of the subject matter thereof and the amount of damages claimed. Neither
MetroBeat nor the Principal Shareholder is aware of any reasonable basis for any
other such litigation. MetroBeat has delivered or made available to
PerfectMarket correct and complete copies of all correspondence prepared by its
counsel for MetroBeat's independent public accountants in connection with all
completed audits or reviews of MetroBeat's financial statements and any such
correspondence since the date of the last such audit or review. Schedule 3.9
------------
accurately describes all product liability claims made against MetroBeat since
inception.
J. NO MATERIAL ADVERSE EFFECT. Since the Balance Sheet Date, MetroBeat
--------------------------
has conducted its business in the ordinary course and there has not occurred:
i. Any Material Adverse Effect;
ii. Any amendments or changes in the Certificate of Incorporation or
Bylaws of MetroBeat;
iii. Any damage, destruction or loss, whether covered by insurance or
not, materially and adversely affecting any of the properties or businesses of
MetroBeat;
iv. Any issuance, redemption, repurchase or other acquisition of
shares of capital stock of MetroBeat, or any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the capital stock of MetroBeat;
-12-
v. Any increase in or modification of the compensation or benefits
payable or to become payable by MetroBeat to any of its directors or employees;
vi. Any increase in or modification of any bonus, pension, insurance
or other employee benefit plan, payment or arrangement (including the granting
of stock options, restricted stock awards or stock appreciation rights) made to,
for or with any of its employees;
vii. Any sale of the property or assets of MetroBeat individually in
excess of $5,000 or in the aggregate in excess of $10,000 other than inventory
sales in the ordinary course of business consistent with past practice;
viii. Any alteration in any term of any outstanding security of
MetroBeat;
ix. Any (A) incurrence, assumption or guarantee by MetroBeat of any
debt for borrowed money; (B) issuance or sale of any securities convertible into
or exchangeable for debt securities of MetroBeat; or (C) issuance or sale of
options or other rights to acquire from MetroBeat, directly or indirectly, debt
securities of MetroBeat or any securities convertible into or exchangeable for
any such debt securities;
x. Any creation or assumption by MetroBeat of any mortgage, pledge,
security interest or lien or other encumbrance on any asset (other than liens
arising in the ordinary course of MetroBeat's business which in the aggregate
are not material and liens for taxes not yet due and payable);
xi. Any making of any loan, advance or capital contribution to, or
investment in, any person other than (A) travel loans or advances made in the
ordinary course of business of MetroBeat and (B) other loans and advances in an
aggregate amount which does not exceed $10,000 outstanding at any time;
xii. Any entry into, amendment of, relinquishment, termination or
nonrenewal by MetroBeat of any contract, lease transaction, commitment or other
right or obligation other than in the ordinary course of business consistent
with past practice;
xiii. Any transfer or grant of a right under the MetroBeat
Intellectual Property Rights (as defined in Section 3.18) other than those
transferred or granted in the ordinary course of business consistent with past
practice;
xiv. Any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of MetroBeat;
xv. Any violation of or conflict with any applicable laws, statutes,
orders, rules and regulations promulgated or judgment entered by any
Governmental Entity which, individually or in the aggregate, materially and
adversely affects (or, insofar as MetroBeat or the Principal Shareholder know,
might reasonably be expected to materially and adversely affect) MetroBeat; or
-13-
xvi. Any agreement or arrangement made by MetroBeat or the Principal
Shareholder to take any action which, if taken prior to the date hereof, would
have made any representation or warranty set forth in this Section 3.10 untrue
or incorrect as of the date when made.
K. ABSENCE OF UNDISCLOSED LIABILITIES. MetroBeat has no material
----------------------------------
liabilities or obligations (whether absolute, accrued, contingent or otherwise
and whether or not determined or determinable) except liabilities or obligations
(i) adequately provided for in the Interim Balance Sheet or (ii) incurred in the
ordinary course of business consistent with past practice and which are not,
individually or in the aggregate, material to MetroBeat. MetroBeat shall
provide PerfectMarket with a schedule of all outstanding liabilities as of the
Closing Date.
L. INFORMATION SUPPLIED. The materials to be prepared for use in
--------------------
soliciting approval of the Merger by MetroBeat's shareholders as described in
Section 5.3 and other solicitation materials relating to the Merger, on the date
on which MetroBeat mails such materials to its shareholders and at all times
from such date up to and including the Effective Time, will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, and will
comply in all respects with all applicable federal and state securities law
requirements.
M. CERTAIN AGREEMENTS. Neither the execution and delivery of this
------------------
Agreement or the Certificate of Merger nor the consummation of the transactions
contemplated hereby or thereby will (a) result in any payment (including
severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any director or employee of MetroBeat under any Plan (as defined
in Section 3.14) or otherwise, (b) materially increase any benefits otherwise
payable under any Plan, or (c) result in the acceleration of the time of payment
or vesting of any such benefits.
3.14 PLANS. All employee compensation, incentive, fringe or benefit
-----
plans, programs, policies, commitments or other arrangements (whether or not set
forth in a written document) covering any active, former or retired employee or
consultant of MetroBeat, or with respect to which MetroBeat has or may in the
future have liability, are listed on Schedule 3.14 (the "Plans"). To the extent
-------------
applicable, the Plans comply with the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and the Code, and no Plan is
an "employee pension plan" within the meaning of Section 3 of ERISA, nor is any
Plan intended to be qualified under Section 401(a) of the Code. MetroBeat has
furnished or made available to PerfectMarket copies of the most recent Internal
Revenue Service letters and Forms 5500 with respect to any such Plan. No Plan
is covered by Title IV of ERISA or Section 412 of the Code. Neither MetroBeat
nor any officer or director of MetroBeat has incurred any liability or penalty
under Section 4975 through 4980B of the Code or Title 1 of ERISA. Each Plan has
been maintained and administered in all material respects in compliance with its
terms and with the requirements prescribed by and all statutes, orders, rules
and regulations, including but not limited to ERISA and the Code, which are
applicable to such Plans. No suit, action or other litigation (excluding claims
for benefits incurred in the ordinary course of Plan activities) has been
brought, or to the best knowledge of MetroBeat and the Principal Shareholder is
threatened, against or with respect to any such
-14-
Plan. All contributions, reserves or premium payments required to be made or
accrued as of the date hereof to the Plans have been made or accrued. Schedule
--------
3.14 includes a listing of the accrued vacation liability of the Company as of
----
the Balance Sheet Date.
O. MAJOR CONTRACTS. Schedule 3.15 lists and describes:
--------------- -------------
i. Any union contract or any employment or consulting contract or
arrangement providing for future compensation, written or oral, with any
officer, consultant, director or employee which is not terminable by MetroBeat
on 30 days' notice or less without penalty or obligation to make payments
related to such termination;
ii. Any plan, contract or arrangement, whether written or oral,
providing for bonuses, pensions, deferred compensation, severance pay or
benefits, retirement payments, profit-sharing or the like;
iii. Any joint venture contract or arrangement or any other agreement
currently in effect which has involved or is expect to involve a sharing of
profits with other persons;
iv. Any existing OEM agreement, distribution agreement, volume
purchase agreement, or other similar agreement (but excluding individual
customer purchase orders) in which the annual amount involved in fiscal 1995
exceeded or is expected to exceed in fiscal 1996 $10,000 in aggregate amount or
pursuant to which MetroBeat has granted or received most favored nation pricing
provisions or exclusive marketing rights related to any product, group of
products or territory;
v. Any current individual customer purchase order for the sale of
goods or services in excess of $15,000;
vi. Any lease for real or personal property in which the amount of
payments which MetroBeat is required to make on an annual basis exceeds $10,000;
vii. Except for trade indebtedness incurred in the ordinary course of
business, any instrument evidencing or related in any way to indebtedness
incurred in the acquisition of companies or other entities or indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, leasehold obligations or otherwise;
viii. Any license agreement, either as licensor or licensee (excluding
nonexclusive software licenses granted to customers or end-users in the ordinary
course of business);
ix. Any contract containing covenants purporting to limit the
freedom of MetroBeat to compete in any line of business in any geographic area;
x. Any agreement of indemnification other than those entered in
connection with the sale of MetroBeat products in the ordinary course of
business;
-15-
xi. Any agreement, contract or commitment relating to capital
expenditures and which involve future payments individually in excess of $5,000
or in the aggregate in excess of $10,000 by MetroBeat;
xii. Any agreements, contracts or commitments relating to the disposition
or acquisition of any assets (other than Inventory) which involve payments
individually in excess of $5,000 or in the aggregate in excess of $10,000 by
MetroBeat;
xiii. Any purchase orders or contracts for the purchase of raw materials
which involve payments individually in excess of $5,000 or in the aggregate in
excess of $10,000;
xiv. Any agreement, contract or commitment relating to the disposition or
acquisition by MetroBeat of any Intellectual Property Rights; or
xv. Any other agreement, contract or commitment which is material to
MetroBeat. Each agreement, contract, mortgage, indenture, plan, lease,
instrument, permit, concession, franchise, arrangement, license and commitment
listed on the Schedule 3.15 (the "Major Contracts") is valid and binding on
MetroBeat, and is in full force and effect, and neither MetroBeat nor, to the
best knowledge of MetroBeat and the Principal Shareholder, any other party
thereto, has breached, any provision of, or is in default under the terms of,
any such Major Contract. No such Major Contract contains any material liquidated
damages, penalty or similar provision. MetroBeat does not intend to cancel,
withdraw, modify or amend any such Major Contract and, to the best knowledge of
MetroBeat and the Principal Shareholder, no party to any such contract,
agreement or instrument intends to cancel, withdraw, modify or amend any such
Major Contract.
P TAXES.
-----
i. All Tax (as defined below in Section 3.16(e)) returns,
statements, reports and forms (including estimated Tax returns and reports and
information returns and reports) required to be filed with any Taxing Authority
(as defined below) with respect to any Taxable period ending on or before the
Effective Time, by or on behalf of MetroBeat (collectively, the "MetroBeat
Returns"), have been or will be filed when due (including any extensions of such
due date), and all amounts shown due thereon on or before the Effective Time
have been or will be paid on or before such date. The Interim Balance Sheet (i)
fully accrues all actual and contingent liabilities for Taxes with respect to
all periods through the Balance Sheet Date and MetroBeat has not and will not
incur any Tax liability in excess of the amount reflected on the Interim Balance
Sheet with respect to such periods, and (ii) properly accrues in accordance with
GAAP all liabilities for Taxes payable after the Balance Sheet Date with respect
to all transactions and events occurring on or prior to such date. All
information set forth in the notes to the MetroBeat Year-End Financial
Statements relating to Tax matters is true, complete and accurate in all
material respects.
-16-
ii. No material Tax liability has been incurred since the Balance
Sheet Date other than in the ordinary course of business and adequate provision
has been or will be made for all Tax liabilities incurred since that date in
accordance with GAAP on at least a quarterly basis. MetroBeat has withheld and
paid to the applicable financial institution or Taxing Authority all amounts
required to be withheld. All MetroBeat Returns filed with respect to Taxable
years of MetroBeat through the Taxable year ended December 31, 1995, in the case
of the United States, have been examined and closed or are MetroBeat Returns
with respect to which the applicable period for assessment under applicable law,
after giving effect to extensions or waivers, has expired. Neither MetroBeat
nor any member of any affiliated or combined group of which MetroBeat has been a
member has granted any extension or waiver of the limitation period applicable
to any MetroBeat Returns.
iii. There is no material claim, audit, action, suit, proceeding, or
investigation now pending or, threatened against or with respect to MetroBeat in
respect of any Tax or assessment. No notice of deficiency or similar document of
any Taxing Authority has been received by MetroBeat, and there are no
liabilities for Taxes (including liabilities for interest, additions to tax and
penalties thereon and related expenses) with respect to the issues that have
been raised (and are currently pending) by any Tax Authority that could, if
determined adversely to MetroBeat, materially and adversely affect the liability
of MetroBeat for Taxes. Neither MetroBeat, nor any person on behalf of
MetroBeat, has entered into nor will it enter into any agreement or consent
pursuant to Section 341(f) of the Code. There are no liens for Taxes upon the
assets of MetroBeat except liens for current Taxes not yet due. Except as may be
required as a result of the Merger, MetroBeat has not been or will not be
required to include any material adjustment in Taxable income for any Tax period
(or portion thereof) ending on or after the Closing pursuant to Section 481 or
263A of the Code or any comparable provision under state or foreign Tax laws as
a result of transactions, events or accounting methods employed prior to the
Closing.
iv. There is no contract, agreement, plan or arrangement, including,
but not limited to, the provisions of this Agreement, covering any employee or
independent contractor or former employee or independent contractor of MetroBeat
that, individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to Section 280G, 162 or 404 of the Code.
Other than pursuant to this Agreement, MetroBeat is not a party to or bound by
(or will prior to the Effective Time become a party to or bound by) any tax
indemnity, tax sharing or tax allocation agreement (whether written, unwritten
or arising under operation of federal law as a result of being a member of a
group filing consolidated tax returns, under operation of certain state laws as
a result of being a member of a unitary group, or under comparable laws of other
states or foreign jurisdictions) which includes a party other than MetroBeat.
None of the assets of MetroBeat (i) is property that MetroBeat is required to
treat as owned by any other person pursuant to the so-called "safe harbor lease"
provisions of former Section 168(f)(8) of the Code, (ii) directly or indirectly
secures any debt the interest on which is tax exempt under Section 103(a) of the
Code or (iii) is "tax exempt use property" within the meaning of Section 168(h)
of the Code. MetroBeat has not participated in (nor will prior to the Effective
Time participate in) an international boycott within the meaning of Section 999
of the Code. MetroBeat has previously provided or made available to
PerfectMarket true and correct copies of all material Tax Returns, and, as
reasonably requested by PerfectMarket, prior to or following the date hereof,
-17-
information statements, reports, work papers, Tax opinions and memoranda and
other Tax data and documents.
v. For purposes of this Agreement, the term "Tax" (and, with
correlative meaning, "Taxes" and "Taxable") means (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Entity (a "Taxing Authority") responsible for the imposition of any
such tax (domestic or foreign), (ii) any liability for the payment of any
amounts of the type described in clause (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period and
(iii) any liability for the payment of any amounts of the type described in
clause (i) or (ii) as a result of any express or implied obligation to indemnify
any other person.
Q INTERESTS OF OFFICERS. Neither the Principal Shareholder nor any of
---------------------
MetroBeat's other officers or directors have any interest, either directly or
indirectly, in any property, real or personal, tangible or intangible, used in
or pertaining to MetroBeat's business, including any interest in the
Intellectual Property Rights (as defined in Section 3.18(a) below), except for
rights as a shareholder, and except for rights under any Plan. No employee,
shareholder, officer or director of MetroBeat, or their spouses or children, is
indebted to MetroBeat, nor is MetroBeat indebted to any of them.
-18-
R TECHNOLOGY.
----------
i. MetroBeat owns, or is licensed or otherwise entitled to exercise
all rights under or with respect to all patents, trademarks, trade names,
service marks, copyrights, and any applications therefor, formulae, processes,
designs, schematics, compositions, ideas, technology, know-how and tangible or
intangible proprietary information, trade secrets or materials employed in the
operation of the business of MetroBeat as currently conducted or as currently
proposed to be conducted (the "Intellectual Property Rights"). MetroBeat has
entered into a confidentiality and invention assignment agreement, in the form
previously provided to PerfectMarket, with each of its officers, directors,
employees and consultants providing MetroBeat, to the extent permitted by
applicable law, with title and ownership to Intellectual Property Rights
conceived, developed, reduced to practice by or at the direction of such person,
solely or jointly, during the period of employment by MetroBeat. Schedule
--------
3.18(a) lists all MetroBeat patents, trademarks, works of authorship, registered
-------
and unregistered copyrights, registered and unregistered trademarks, trade names
and service marks, and any applications therefor, which relate to or are a part
of MetroBeat's products or services (the "MetroBeat Intellectual Property
Rights"), and specifies the jurisdictions in which each such issuance and
registration has been filed, including the respective registration or
application numbers, together with a list of all of MetroBeat's currently
marketed software products and an indication as to which, if any, of such
software products have been registered for copyright protection with the United
States Copyright Office and any foreign offices. Without in any manner limiting
the foregoing, MetroBeat represents that it has filed for trademark registration
in the United States for the name "MetroBeat", that it has received confirmation
of receipt of such filing, and that it has conducted a trademark search that
showed the "MetroBeat" ▇▇▇▇ ▇▇▇▇▇ of prior registration or use.
ii. Schedule 3.18(b) includes and specifically identifies all third-
----------------
party patents, trademarks, works of authorship, registered and unregistered
copyrights, registered and unregistered trademarks, trade names and service
marks, and any applications therefor (the "Third-Party Intellectual Property
Rights") which are incorporated in, are, or form a part of, any MetroBeat
product or service. Schedule 3.18(b) lists (i) any requests MetroBeat has
----------------
received to make any such registration, including the identity of the requestor
and the item requested to be so registered, and the jurisdiction for which such
request has been made; (ii) all material licenses, sublicenses and other
agreements as to which MetroBeat is a party and pursuant to which any person is
authorized to use any MetroBeat Intellectual Property Rights or any trade secret
material to MetroBeat; and (iii) all material licenses, sublicenses and other
agreements as to which MetroBeat is a party and pursuant to which MetroBeat is
authorized to use any Third-Party Intellectual Property Rights, or trade secret
of a third party in or as any product or service, and includes the identity of
all parties thereto and a description and statement as to the status of the
applicable royalty thereof. Schedule 3.18(c) includes copies of MetroBeat's
----------------
standard end-user license agreements and lists all other agreements with respect
to which MetroBeat indemnifies third parties against intellectual property
infringement.
MetroBeat is not, nor as a result of the execution and delivery of this
Agreement or the performance of MetroBeat's obligations hereunder will be, in
violation of any license, sublicense or other agreement applicable to it.
MetroBeat is the sole and exclusive owner or licensee of, with all right,
-19-
title and interest in and to (free and clear of any liens or encumbrances), the
Intellectual Property Rights, and has sole and exclusive rights in respect
thereof, and is not contractually obligated to pay any compensation to any third
party. After the Closing, the Surviving Corporation will own or have the
exclusive right to use, sell, license and dispose of and the exclusive right to
bring actions for infringement of and otherwise exercise all Intellectual
Property Rights.
iii. No claims with respect to the Intellectual Property Rights have
been asserted, have been threatened or are likely to be threatened, by any
person. In addition, no grounds exist for any claims now or in the future (i)
to the effect that any business of MetroBeat as currently conducted or proposed
to be conducted infringes on or misappropriates any patents, works of
authorship, registered and unregistered copyrights, registered and unregistered
trademarks, trade name, service marks, trade secrets, tangible and intangible
proprietary information and technical knowhow and any applications therefor in
which a third party has any rights or (ii) challenging the ownership, validity
or effectiveness of any of the Intellectual Property Rights. No MetroBeat
Intellectual Property Right is subject to any lien, encumbrance or other secured
interest. MetroBeat does not know of any fact that would render the MetroBeat
Intellectual Property Rights invalid. There is no material unauthorized use,
infringement or misappropriation of any of the MetroBeat Intellectual Property
Rights by any third party, including any present or former employee of
MetroBeat. There is no material unauthorized use, infringement or
misappropriation of any of the Third-Party Intellectual Property Rights by
MetroBeat or by any third party, including any present or former employee of
MetroBeat. No Intellectual Property Right is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting in any manner the
licensing or exploitation thereof by MetroBeat. Except for end-user object code
license agreements for MetroBeat's products executed in the ordinary course of
business, without alteration or amendment of any material term therein, and in
accordance with MetroBeat's past practices (true and correct copies of the forms
of these agreements are attached as part of Schedule 3.18(c)), MetroBeat has not
----------------
entered into any agreement to indemnify any other person against any charge of
infringement relating to any Intellectual Property Right. No employee of
MetroBeat is in violation of any term of any confidentiality or invention
assignment agreement, employment contract (whether written or verbal), patent
disclosure agreement or any other contract or agreement relating to the
relationship of any such employee with MetroBeat or any other party (including
prior employers) because of the nature of the business conducted or proposed to
be conducted by MetroBeat.
S RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
-----------------------------------
judgment, injunction, order or decree binding upon MetroBeat or which has or
could reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of MetroBeat, any acquisition of property by
MetroBeat or the conduct of business of MetroBeat as currently conducted or as
currently proposed to be conducted.
-20-
T TITLE TO PROPERTIES: ABSENCE OF LIENS AND ENCUMBRANCES: CONDITION OF
--------------------------------------------------------------------
EQUIPMENT.
---------
i. Schedule 3.20 sets forth a true and complete list of all real
-------------
property owned or leased by MetroBeat and summarizes all material lease terms,
including the aggregate annual rental or other fees payable, the length of all
leases and the number of extensions available.
ii. MetroBeat has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens (other than liens for Taxes that are not yet delinquent),
charges, pledges, security interests or other encumbrances, except for such
imperfections of title and encumbrances, if any, which are not substantial in
character, amount or extent, and which do not materially detract from the value,
or interfere with the present use, of the property subject thereto or affected
thereby.
iii. MetroBeat has previously provided PerfectMarket with a listing of
the machinery and equipment (the "Equipment") owned or leased by MetroBeat as of
the Balance Sheet Date. The Equipment is, taken as a whole, (i) adequate for
the conduct of the business of MetroBeat consistent with its past practice, (ii)
suitable for the uses to which it is currently employed, (iii) in good operating
condition, subject to normal wear and tear, (iv) regularly and properly
maintained, (v) not obsolete, dangerous or in need of renewal or replacement,
except for renewal or replacement in the ordinary course of business, and (vi)
free from any material defects.
U GOVERNMENTAL AUTHORIZATIONS AND LICENSES. MetroBeat is the holder
----------------------------------------
of all licenses, authorizations, permits, concessions, certificates and other
franchises of any Governmental Entity required to operate its business
(collectively, the "Licenses") and is in compliance with the terms, conditions,
limitations, restrictions, standards, prohibitions, requirements and obligations
of such Licenses. The Licenses are in full force and effect. There is not now
pending, or to the best knowledge of MetroBeat and the Principal Shareholder is
there threatened in writing, any action, suit, investigation or proceeding
against MetroBeat before any Governmental Entity with respect to the Licenses,
nor is there any issued or outstanding notice, order or complaint with respect
to the violation by MetroBeat of the terms of any License or any rule or
regulation applicable thereto.
V ENVIRONMENTAL MATTERS.
---------------------
i. No substance that is regulated by any Governmental Entity or that
has been designated by any Governmental Entity to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment (a "Hazardous
Material") is present in, on or under any property that MetroBeat has at any
time owned, operated, occupied or leased.
ii. MetroBeat does not and has not transported, stored, used,
manufactured, released or exposed its employees or any other person to any
Hazardous Material in violation of any applicable statute, rule, regulation,
order or law.
-21-
iii. No permits, consents, waivers, exemptions, licenses, approvals
and other authorizations are required to be obtained by it under the laws of any
Governmental Entity relating to land use, public and employee health and safety,
pollution or protection of the environment (collectively, "Environmental Laws").
MetroBeat is in compliance in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or contained in any
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder. Neither MetroBeat nor the Principal
Shareholder has received any notice and is not aware of any past or present
condition or practice of the businesses conducted by MetroBeat which forms or
could be reasonably expected to form the basis of any material claim, action,
suit, proceeding, hearing or investigation against MetroBeat, arising out of the
manufacture, processing, distribution, use, treatment, storage, spill, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any Hazardous Material by MetroBeat.
W INSURANCE. Schedule 3.23 lists and summarizes all insurance policies
--------- -------------
and fidelity or surety bonds covering the assets, business, equipment,
properties, operations of MetroBeat, or the employees, officers and directors of
MetroBeat, their termination dates and the amounts of coverage under each such
policy and bond of MetroBeat. MetroBeat has not been refused any requested
insurance coverage. All premiums payable under all such policies and bonds have
been paid and MetroBeat is otherwise in full compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage). Such policies of insurance and bonds are of the type and in
amounts customarily carried by persons conducting businesses similar to that of
MetroBeat. Neither MetroBeat nor the Principal Shareholder knows of any
threatened termination of, or material premium increase with respect to, any of
such policies.
X LABOR MATTERS. MetroBeat is in compliance in all material respects
-------------
with all currently applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment and wages and
hours and occupational safety and health and employment practices, and is not
engaged in any unfair labor practice. Neither MetroBeat nor the Principal
Shareholder has received any notice from any Governmental Entity, and, there has
not been asserted before any Governmental Entity, any claim, action or
proceeding to which MetroBeat is a party or involving MetroBeat, and there is
neither pending nor, to MetroBeat's and the Principal Shareholder's best
knowledge, threatened any investigation or hearing concerning MetroBeat arising
out of or based upon any such laws, regulations or practices.
Y CUSTOMERS; BACKLOG; RETURNS AND COMPLAINTS. Schedule 3.25 sets
------------------------------------------ -------------
forth the customers of MetroBeat from January 1, 1995 to the date hereof which
purchased MetroBeat's products or consulting services in aggregate amounts in
excess of $15,000 ("Significant Customers"). As of the date hereof, MetroBeat
has no material backlog of customer orders. MetroBeat has not received any
customer complaints concerning its products and/or services which complaints it
has not been able to address to the satisfaction of the complainant within a
commercially reasonable length of time after MetroBeat received notice of such
complaint, nor has it had any of its products returned by a purchaser
-22-
thereof except for normal warranty returns consistent with past history and
those returns that would not result in a reversal of any revenue by MetroBeat.
Z EMPLOYEES. Schedule 3.26 identifies all MetroBeat employees and
--------- -------------
sets forth the job title and responsibilities of each such employee. MetroBeat
has previously provided to PerfectMarket a schedule setting forth the cash
compensation of the employees listed on Schedule 3.26 during the period from
-------------
January 1, 1995 to December 31, 1995 and from January 1, 1996 to the Balance
Sheet Date. None of such employees has indicated to MetroBeat or the Principal
Shareholder that he or she has a present intention to resign or retire.
AA QUESTIONABLE PAYMENTS. None of MetroBeat, the Principal Shareholder
---------------------
nor any director, officer or other employee of MetroBeat has: (i) made any
payments or provided services or other favors in the United States of America or
in any foreign country in order to obtain preferential treatment or
consideration by any Governmental Entity with respect to any aspect of the
business of MetroBeat; or (ii) made any political contributions which would not
be lawful under the laws of the United States (including the Foreign Corrupt
Practices Act) or the foreign country in which such payments were made. None of
MetroBeat, the Principal Shareholder nor any director, officer or other employee
of MetroBeat nor, to MetroBeat's or the Principal Shareholder's best knowledge,
any supplier of MetroBeat has been the subject of any inquiry or investigation
by any Governmental Entity in connection with payments or benefits or other
favors to or for the benefit of any governmental or armed services official,
agent, representative or employee with respect to any aspect of the business of
MetroBeat or with respect to any political contribution.
BB IMPORT/EXPORT. MetroBeat has not violated any United States and
-------------
foreign import and export control laws and regulations, export licensing laws
and regulations and customs regulations applicable to MetroBeat. MetroBeat has
not been cited by the United States Department of Commerce, the United States
Customs Service or any other relevant Governmental Entity for any material
violation of United States laws or regulations relating to importing or
exporting of products, materials or services. All goods imported into the United
States or any other country by MetroBeat ("Imported Goods") have with such
exceptions as are not material to MetroBeat been properly valued and classified
in accordance with applicable tariff laws, rules and regulations and all proper
duties, tariffs or excise taxes have been paid with respect to the Imported
Goods. No penalties have been assessed, asserted or claimed with respect to any
Imported Goods. All Imported Goods have been properly marked as to country of
origin, content and material.
CC BROKERS; FINDERS. MetroBeat has made no commitments to pay any
----------------
broker's or finder's fee or any similar commission or fee in connection with any
of the transactions contemplated by this Agreement, the Plan of Merger or the
Certificate of Merger ("Broker's or Finder's Fee") to any agent, broker,
investment banker or other firm or person.
DD DISCLOSURE. No representation or warranty made by MetroBeat or the
----------
Principal Shareholder in this Agreement, nor any financial statement, other
written financial information or schedule, certificate, schedule or exhibit
prepared and furnished or to be prepared and furnished by MetroBeat, the
Principal Shareholder or its representatives pursuant hereto or in connection
with the
-23-
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained herein or therein not misleading in light
of the circumstances under which they were furnished. There is no event, fact or
condition that has caused, or that reasonably could be expected to cause, a
Material Adverse Effect, that has not been set forth in this Agreement or the
MetroBeat Disclosure Schedule. The financial projections relating to MetroBeat
which were delivered to PerfectMarket prior to the date of this Agreement
("Financial Projections") were prepared by MetroBeat in good faith based upon
assumptions MetroBeat believes to be reasonable. MetroBeat is not aware of any
fact or information that would lead MetroBeat to believe that the Financial
Projections are misleading in any material respect.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF PERFECTMARKET AND SUB
Except as disclosed in the disclosure schedule attached as Exhibit D which
---------
identifies by section and subsection number any exception to representation and
warranty in this Section 3 as well as the basis for any such exception (the
"PerfectMarket Disclosure Schedule"), each of PerfectMarket and Sub represents
and warrants to MetroBeat as follows:
A ORGANIZATION; STANDING AND POWER. Each of PerfectMarket and Sub is a
--------------------------------
corporation legally and validly existing under the laws of its state of
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
PerfectMarket is duly qualified as a foreign corporation and is in good standing
in each jurisdiction in which the failure to so qualify would have a material
adverse effect. PerfectMarket has no direct or indirect subsidiaries or
affiliated companies (other than Sub) and does not otherwise own or control,
directly or indirectly, any equity interest in any partnership, corporation,
joint venture business association or other entity and has no loans to any
partnership, corporation, joint venture, business association or other entity.
PerfectMarket has delivered to MetroBeat complete and correct copies of its
Certificate of Incorporation and Bylaws, in each case as amended to the date
hereof.
B CAPITALIZATION OF PERFECTMARKET. Upon the filing of the Restated
--------------------------------
Certificate of Incorporation, the authorized capital Stock of PerfectMarket
shall consist of 25,000,000 shares of PM Common Stock, of which 8,740,357 shares
are currently issued and outstanding, 1,791,178 shares of Series A Preferred
Stock, par value $0.01 per share, of which 1,791,178 shares are currently issued
and outstanding, [*] shares of Series B Preferred, none of which shares
shall be issued and outstanding and 3,190,540 shares of Series C Preferred
Stock, par value $0.01 per share, up to which 3,190,540 shares shall be issued
outstanding. The authorized capital Stock of MB Acquisition Corporation consists
of 1,000 shares of Common Stock, par value $0.01 per share, of which 1,000
shares are issued and outstanding and owned beneficially and of record by
PerfectMarket. In addition, PerfectMarket has authorized 2,500,000 shares of
Common Stock under its 1996 Stock Option Plan. The Series B Preferred or PM
Common Stock, as the case may be, to be delivered by PerfectMarket at each
Payment Date will be duly authorized, validly issued shares of stock of
PerfectMarket, fully paid and
-------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
-24-
nonassessable. All of the shares of Series B Preferred or PM Common Stock to be
issued to the Principal Shareholder in accordance herewith will be offered,
issued, sold and delivered by PerfectMarket in compliance with all applicable
state and federal laws concerning the issuance of securities and none of such
shares were or will be issued in violation of the preemptive rights of any
shareholder of PerfectMarket. In the event the Principal Shareholder were to own
300,000 shares of capital stock of PerfectMarket as of the date hereof, there
would be no more than four active members of the Company's; management team who
own more outstanding shares of PerfectMarket (on an as converted to Common Stock
basis) as of the date hereof.
C AUTHORITY.
---------
i. Each of PerfectMarket and Sub has all requisite corporate power
and authority to enter into this Agreement and the Certificate of Merger and to
perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Certificate of Merger, the performance by each of
PerfectMarket and Sub of its obligations hereunder and thereunder and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of
PerfectMarket and Sub, including approval by their Board of Directors and
shareholders. Each of PerfectMarket and Sub has full power and authority to
execute and deliver this Agreement, to perform their obligations under this
Agreement, and to consummate the transactions contemplated by this Agreement,
the Plan of Merger and the Certificate of Merger. This Agreement is a legal,
valid and binding obligation of each of PerfectMarket and Sub, enforceable
against PerfectMarket and Sub in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, or other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought. The Certificate of Merger,
when delivered by the parties thereto, will be a legal, valid and binding
obligation of Sub enforceable against Sub in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency, or other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefore may be brought.
ii. The execution and delivery of this Agreement does not, and the
execution and delivery of the Certificate of Merger and the consummation of the
transactions contemplated hereby and thereby will not, conflict with or result
in any violation of any statute, law, rule, regulation, judgment, order, decree,
or ordinance applicable to PerfectMarket or Sub or their properties or assets,
or conflict with or result in any breach or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a benefit under, or
result in the creation of a lien or encumbrance on any of the properties or
assets of PerfectMarket pursuant to (i) any provision of the Certificate of
Incorporation or Bylaws of PerfectMarket or (ii) any agreement, contract, note,
mortgage, indenture, lease instrument, permit, concession, franchise or license
to which PerfectMarket is a party or by which PerfectMarket or any of its
property or assets may be bound or affected.
-25-
iii. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by or with
respect to PerfectMarket or Sub in connection with the execution and delivery of
this Agreement and the Certificate of Merger by PerfectMarket or Sub or the
consummation by PerfectMarket or Sub of the transactions contemplated hereby or
thereby, except for (i) the filing of the Certificate of Merger and officers'
certificates with the New York Secretary of State and (ii) such consents,
approvals, authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the Merger.
D FINANCIAL STATEMENTS.
--------------------
i. PerfectMarket has furnished or made available to MetroBeat the
compiled financial statements from the year ended December 31, 1995 (the
"PerfectMarket Balance Sheet Date")(the "PerfectMarket Year-End Financial
Statements"). PerfectMarket has also furnished or made available to MetroBeat
PerfectMarket's internal cash-based financial statements for the quarter ended
March 31, 1996 (the "PerfectMarket Interim Financial Statements" and
collectively with PerfectMarket Year-End Financial Statements, the
"PerfectMarket Financial Statements") including a Balance Sheet as of March 31,
1996. The PerfectMarket Financial Statements (i) are complete and correct in
all material respects, (ii) fairly present the financial condition of the
PerfectMarket of the date of the balance sheet contained therein, and the
statement of operations contained therein accurately presents the operating
results of PerfectMarket during the period indicated therein, (iii) are in
accordance with the books and records of PerfectMarket, and (iv) with respect to
the PerfectMarket Year-End Financial Statements only, have been prepared in
accordance with generally accepted accounting principles consistently applied
except that footnote disclosures contemplated by generally accepted accounting
principles are not provided.
ii. Except as set forth in the PerfectMarket Financial Statements,
the PerfectMarket has no material liabilities, contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of business subsequent to
the PerfectMarket Balance Sheet Date and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in the PerfectMarket
Financial Statements, which, in both cases, individually or in the aggregate,
are not material to the financial condition or operating results of
PerfectMarket.
E COMPLIANCE WITH LAW. PerfectMarket is in compliance and has conducted
-------------------
its business so as to comply with all laws, rules and regulations, judgments,
decrees or orders of any Governmental Entity applicable to its operations or
with respect to which compliance is a condition of engaging in the business
thereof. There are no judgments or orders, injunctions, decrees, stipulations
or awards (whether rendered by a court or administrative agency or by
arbitration) against PerfectMarket or against any of its properties or
businesses. Without limiting the generality of the foregoing, PerfectMarket has
not violated any United States and foreign import and export control laws and
regulations, export licensing laws and regulations and customs regulations
(including its obligations under the Foreign Corrupt Practices Act) applicable
to PerfectMarket. PerfectMarket has not been cited by the United ▇▇▇▇▇▇
-▇▇-
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Customs Service or any other relevant
Governmental Entity for any violation of United States laws or regulations
relating to importing or exporting of products, materials or services.
F NO DEFAULTS. PerfectMarket is not, (a) in violation of any provision
-----------
of its Certificate of Incorporation or Bylaws or (b) in default or violation of
any term, condition or provision of (i) any judgment, decree, order, injunction
or stipulation applicable to PerfectMarket or (ii) any agreement, note,
mortgage, indenture, contract, lease or instrument, permit, concession,
franchise or license to which PerfectMarket is a party or by which PerfectMarket
or its properties or assets may be bound.
G LITIGATION. There is no action, suit, proceeding, claim, arbitration
----------
or investigation pending or, to the knowledge of PerfectMarket, threatened,
against PerfectMarket, or which in any manner challenges or seeks to prevent,
enjoin, alter or delay any of the transactions contemplated hereby.
PerfectMarket is not aware of any reasonable basis for any other such
litigation.
H NO MATERIAL ADVERSE EFFECT. Since the Balance Sheet Date,
--------------------------
PerfectMarket has conducted its business in the ordinary course and there has
not occurred any Material Adverse Effect.
I ABSENCE OF UNDISCLOSED LIABILITIES. PerfectMarket has no material
----------------------------------
liabilities or obligations (whether absolute, accrued, contingent or otherwise
and whether or not determined or determinable) except liabilities or obligations
(i) adequately provided for in the PerfectMarket Year End Financial Statements
or (ii) incurred in the ordinary course of business consistent with past
practice since the PerfectMarket Balance Sheet Date.
J TECHNOLOGY.
----------
i. PerfectMarket owns, or is licensed or otherwise entitled to
exercise all rights under or with respect to all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor, formulae,
processes, designs, schematics, compositions, ideas, technology, know-how and
tangible or intangible proprietary information, trade secrets or materials
employed in the operation of the business of PerfectMarket as currently
conducted or as currently proposed to be conducted (the "PerfectMarket
Intellectual Property Rights"). PerfectMarket has entered into a
confidentiality and invention assignment agreement, with each of its officers,
directors, employees and consultants providing PerfectMarket, to the extent
permitted by applicable law, with title and ownership to PerfectMarket
Intellectual Property Rights conceived, developed, reduced to practice by or at
the direction of such person, solely or jointly, during the period of employment
by PerfectMarket.
ii. PerfectMarket is not, nor as a result of the execution and
delivery of this Agreement or the performance of PerfectMarket's obligations
hereunder will be, in violation of any license, sublicense or other agreement
applicable to it. PerfectMarket is the sole and exclusive owner or licensee of,
with all right, title and interest in and to (free and clear of any liens or
encumbrances), the PerfectMarket Intellectual Property Rights, and has sole and
exclusive rights in respect thereof, and is not contractually obligated to pay
any compensation to any third party.
-27-
iii. No claims with respect to the PerfectMarket Intellectual Property
Rights have been asserted, have been threatened or are likely to be threatened,
by any person. In addition, no grounds exist for any claims now or in the
future (i) to the effect that any business of PerfectMarket as currently
conducted or proposed to be conducted infringes on or misappropriates any
patents, works of authorship, registered and unregistered copyrights, registered
and unregistered trademarks, trade name, service marks, trade secrets, tangible
and intangible proprietary information and technical knowhow and any
applications therefor in which a third party has any rights or (ii) challenging
the ownership, validity or effectiveness of any of the PerfectMarket
Intellectual Property Rights. No PerfectMarket Intellectual Property Right is
subject to any lien, encumbrance or other secured interest. PerfectMarket does
not know of any fact that would render the PerfectMarket Intellectual Property
Rights invalid. There is no material unauthorized use, infringement or
misappropriation of any of the PerfectMarket Intellectual Property Rights by any
third party, including any present or former employee of PerfectMarket. No
PerfectMarket Intellectual Property Right is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting in any manner the
licensing or exploitation thereof by PerfectMarket. No employee of PerfectMarket
is in violation of any term of any confidentiality or invention assignment
agreement, employment contract (whether written or verbal), patent disclosure
agreement or any other contract or agreement relating to the relationship of any
such employee with PerfectMarket or any other party (including prior employers)
because of the nature of the business conducted or proposed to be conducted by
PerfectMarket.
K GOVERNMENTAL AUTHORIZATIONS AND LICENSES.
----------------------------------------
PerfectMarket is the holder of all licenses, authorizations, permits,
concessions, certificates and other franchises of any Governmental Entity
required to operate its business (collectively, the "PerfectMarket Licenses")
and is in compliance with the terms, conditions, limitations, restrictions,
standards, prohibitions, requirements and obligations of such PerfectMarket
Licenses. The PerfectMarket Licenses are in full force and effect. There is
not now pending, or to the best knowledge of PerfectMarket is there threatened
in writing, any action, suit, investigation or proceeding against PerfectMarket
before any Governmental Entity with respect to the Licenses, nor is there any
issued or outstanding notice, order or complaint with respect to the violation
by PerfectMarket of the terms of any License or any rule or regulation
applicable thereto.
L ENVIRONMENTAL MATTERS.
---------------------
i. No Hazardous Material is present in, on or under any property
that PerfectMarket has at any time owned, operated, occupied or leased.
ii. PerfectMarket does not and has not transported, stored, used,
manufactured, released or exposed its employees or any other person to any
Hazardous Material in violation of any applicable statute, rule, regulation,
order or law.
iii. No permits, consents, waivers, exemptions, licenses, approvals
and other authorizations are required to be obtained by it under Environmental
Laws. PerfectMarket is in compliance in all material respects with all other
limitations, restrictions, conditions, standards,
-28-
prohibitions, requirements, obligations, schedules and timetables contained in
the Environmental Laws or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder. PerfectMarket has not received any notice and is not aware
of any past or present condition or practice of the businesses conducted by
PerfectMarket which forms or could be reasonably expected to form the basis of
any material claim, action, suit, proceeding, hearing or investigation against
PerfectMarket, arising out of the manufacture, processing, distribution, use,
treatment, storage, spill, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any Hazardous
Material by PerfectMarket..
M LABOR MATTERS. PerfectMarket is in compliance in all material
-------------
respects with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of employment and
wages and hours and occupational safety and health and employment practices, and
is not engaged in any unfair labor practice. PerfectMarket has not received any
notice from any Governmental Entity, and, there has not been asserted before any
Governmental Entity, any claim, action or proceeding to which PerfectMarket is a
party or involving PerfectMarket, and there is neither pending nor, to
PerfectMarket's best knowledge, threatened any investigation or hearing
concerning PerfectMarket arising out of or based upon any such laws, regulations
or practices.
N QUESTIONABLE PAYMENTS. Neither PerfectMarket nor any director,
---------------------
officer or other employee of PerfectMarket has: (i) made any payments or
provided services or other favors in the United States of America or in any
foreign country in order to obtain preferential treatment or consideration by
any Governmental Entity with respect to any aspect of the business of
PerfectMarket; or (ii) made any political contributions which would not be
lawful under the laws of the United States (including the Foreign Corrupt
Practices Act) or the foreign country in which such payments were made. None of
Neither PerfectMarket, nor any director, officer or other employee of
PerfectMarket nor, to PerfectMarket's or the best knowledge, any supplier of
PerfectMarket has been the subject of any inquiry or investigation by any
Governmental Entity in connection with payments or benefits or other favors to
or for the benefit of any governmental or armed services official, agent,
representative or employee with respect to any aspect of the business of
PerfectMarket or with respect to any political contribution.
O IMPORT/EXPORT. PerfectMarket has not violated any United States and
-------------
foreign import and export control laws and regulations, export licensing laws
and regulations and customs regulations applicable to PerfectMarket.
PerfectMarket has not been cited by the United States Department of Commerce,
the United States Customs Service or any other relevant Governmental Entity for
any material violation of United States laws or regulations relating to
importing or exporting of products, materials or services. All goods imported
into the United States or any other country by PerfectMarket ("Perfect Market
Imported Goods") have with such exceptions as are not material to PerfectMarket
been properly valued and classified in accordance with applicable tariff laws,
rules and regulations and all proper duties, tariffs or excise taxes have been
paid with respect to the PerfectMarket Imported Goods. No penalties have been
assessed, asserted or claimed with respect to any PerfectMarket Imported Goods.
All PerfectMarket Imported Goods have been properly marked as to country of
origin, content and material.
-29-
P BROKERS; FINDERS. PerfectMarket has made no commitments to pay any
----------------
Broker's or Finder's fee to any agent, broker, investment banker or other firm
or person.
Q DISCLOSURE. No representation or warranty made by PerfectMarket,
----------
nor any financial statement, other written financial information or schedule,
certificate, schedule or exhibit prepared and furnished or to be prepared and
furnished by PerfectMarket, Sub or their representatives pursuant hereto or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished. There is no event, fact or condition that has caused, or that
reasonably could be expected to cause, a Material Adverse Effect, that has not
been set forth in this Agreement or the MetroBeat Disclosure Schedule.
SECTION 5
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE
TIME; ADDITIONAL AGREEMENTS
A CONDUCT OF BUSINESS OF METROBEAT. During the period from the date of
--------------------------------
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, MetroBeat shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as conducted
prior to the date of this Agreement and, to the extent consistent with such
business, use all commercially reasonable efforts consistent with past practice
and policies to preserve intact its present business organization, keep
available the services of its present officers and key employees and preserve
its relationships with customers, suppliers, distributors, licensors, licensees,
and others having business dealings with it, with the objective that its
goodwill and ongoing business shall be unimpaired at the Effective Time.
MetroBeat shall promptly notify PerfectMarket of any event or occurrence not in
the ordinary course of business of MetroBeat, and any event which has had, or
could reasonably be expected to have, a Material Adverse Effect, subject to
MetroBeat's continuing operating losses consistent with its operating plan as
provided to PerfectMarket. Except as expressly contemplated by this Agreement
or as set forth on Schedule 5.1, MetroBeat shall not, without the prior written
------------
consent of PerfectMarket:
i. Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock, or
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or repurchase or otherwise acquire, directly or
indirectly, any shares of its capital stock;
ii. Issue, deliver or sell, authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of its
capital stock or securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities or
authorize or propose any change in its equity capitalization;
-30-
iii. Solicit approval for or effect any amendments to MetroBeat's
Certificate of Incorporation or Bylaws;
iv. Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to MetroBeat;
v. Sell, lease, license, pledge or otherwise dispose of or encumber
any of its properties or assets except in the ordinary course of business
consistent with past practice (including any indebtedness owed to it or any
claims held by it);
vi. Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee, endorse or
otherwise become responsible for the obligations of others, or make loans or
advances;
vii. Pay, discharge or satisfy in an amount in excess of $5,000 in
any one case any claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business consistent with past practice of
liabilities reflected or reserved against in the MetroBeat's Financial
Statements or those incurred after the Balance Sheet Date in the ordinary course
of business;
vii. Adopt or amend any Plan, enter into or amend any employment,
severance or termination contract with or pay any special bonus or special
remuneration, including any severance or termination pay to, any director,
employee or consultant, or increase the salaries or wage rates of its employees;
ix. Commence a lawsuit other than for the routine collection of
bills;
x. Except for end-user licenses granted in the ordinary course of
business, transfer to any person or create entitlement to any rights to the
MetroBeat Intellectual Property Rights or enter into or amend any agreements
pursuant to which any other party is granted marketing or other similar rights
of any type or scope with respect to any products of MetroBeat;
xi. Violate, amend or otherwise modify the terms of any of
MetroBeat's material contracts binding on MetroBeat set forth in Schedule 3.15;
-------------
xii. Revalue any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable other than in the ordinary
course of business and consistent with past practice;
-31-
xiii. Make any Tax election other than in the ordinary course of
business and consistent with past practice, change any Tax election, adopt any
Tax accounting method other than in the ordinary course of business and
consistent with past practice, change any tax accounting method, file any Tax
return (other than any estimated tax returns, payroll tax returns or sale tax
returns or other returns in the ordinary course of business) or any amendment to
a Tax return, enter into any closing agreement, settle any Tax claim or
assessment, or consent to any Tax claim or assessment, without the prior written
consent of PerfectMarket, which consent will not be unreasonably withheld;
xiv. Engage in any activities or transactions that are outside the
ordinary course of its business consistent with past practice;
xv. Fail to pay or otherwise satisfy its monetary obligations as
they become due, except such as are being contested in good faith; or waive or
commit to waive any rights of substantial value; or cancel, materially amend or
renew any insurance policy;
xvi. Pay or agree to pay any bonuses out of the ordinary course of
business to any employee, officer, consultant, director or other agent of
MetroBeat; or
xvii. Take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 5.1(a) through (p) above, or any action which
would make any of the representations or warranties of MetroBeat contained in
this Agreement untrue or incorrect or result in any of the conditions to the
Merger set forth in Section 6 not being satisfied.
B. EXCLUSIVITY; ACQUISITION PROPOSALS. Unless and until this Agreement
----------------------------------
shall have been terminated by either party pursuant to Section 8.1, neither
MetroBeat nor the Principal Shareholder shall, directly or indirectly, through
any officer, director, shareholder, employee, representative, agent or
otherwise, solicit, initiate, entertain or encourage any proposals or offers
from any third party relating to any possible acquisition of MetroBeat or any of
its subsidiaries (whether by way of merger, purchase of capital stock, purchase
of assets or otherwise) (an "Alternative Acquisition"), or engage in any sale of
equity interests in MetroBeat's (other than pursuant to the exercise of
outstanding options or warrants) (an "Equity Transaction"); nor will MetroBeat
participate in any negotiations regarding, or furnish to any person any
information with respect to, or otherwise cooperate with, facilitate or
encourage any effort or attempt by any person to do or seek any Alternative
Acquisition or Equity Transaction. In addition, (a) MetroBeat will maintain the
confidentiality of its confidential information, including information with
respect to its financial and operating condition, and (b) without
PerfectMarket's written consent, MetroBeat and its representatives will not
disclose to any other person (other than its accountants, lawyers and other
professional advisers) the nature of the discussions or negotiations taking
place concerning the proposed transaction involving the parties or any of the
terms, conditions or other facts with respect thereto (including the status
thereof). In the event MetroBeat or the Principal Shareholder receive from any
third party any offer or indication of interest (whether made in writing or
otherwise) regarding an Alternative Transaction or an Equity Transaction, or any
request for information about MetroBeat with respect to any of the foregoing,
then MetroBeat shall promptly communicate to PerfectMarket the material terms of
each such offer, indication of interest, or request, including the
-32-
identity of the third party. The Principal Shareholder further agrees not to
transfer, sell, exchange, pledge or otherwise dispose of or encumber any shares
of MetroBeat Common Stock or to discuss, negotiate, or make any offer or
agreement relating thereto, at any time prior to the earliest to occur of the
termination of this Agreement and the Effective Time.
C. METROBEAT SHAREHOLDERS' APPROVAL. MetroBeat shall either (i) call a
--------------------------------
meeting of its shareholders (the "Shareholders' Meeting") to be held as promptly
as practicable (the date on which such meeting is scheduled is referred to as
the "Shareholders' Meeting Date") or (ii) solicit shareholder approval by
written consent in accordance with applicable law, for the purpose of obtaining
the shareholder approval required in connection with the transactions
contemplated hereby, by the Plan of Merger and the Certificate of Merger, and
shall use its best efforts to obtain such approval. If a Shareholders' meeting
is called, MetroBeat shall not change the Shareholders' Meeting Date without the
prior written consent of PerfectMarket, nor shall MetroBeat adjourn the
Shareholders' Meeting without the prior consent of PerfectMarket, unless such
adjournment is due to the lack of a quorum, in which case the Chairman of the
Shareholders' Meeting shall announce at such meeting the time and place of the
adjourned meeting. As soon as practicable after the execution of this
Agreement, MetroBeat shall prepare and distribute to its shareholders a Proxy or
Information Statement for purposes of soliciting the approval of the
shareholders of MetroBeat of this Agreement, the Plan of Merger or the
Certificate of Merger and the transactions contemplated hereby and thereby.
MetroBeat shall use its best efforts to cause the Proxy or Information Statement
to comply with applicable federal and state securities law requirements. The
Proxy or Information Statement shall be subject to prior review and approval by
PerfectMarket. The Proxy or Information Statement shall contain the unanimous
recommendation of the Board of Directors of MetroBeat that the MetroBeat
shareholders approve the Merger and this Agreement and the conclusion of the
Board of Directors that the terms and conditions of the Merger are fair and
reasonable to the shareholders of MetroBeat.
D. NOTIFICATION OF CERTAIN MATTERS. MetroBeat and the Principal
-------------------------------
Shareholder shall give prompt notice to PerfectMarket, and PerfectMarket and Sub
shall give prompt notice to MetroBeat, of the occurrence, or pending or
threatened occurrence or failure to occur, of any event, which occurrence or
failure to occur would be likely to cause (a) any representation or warranty
contained in this Agreement to be untrue or inaccurate at any time from the date
of this Agreement to the Effective Time, or (b) any material failure of
MetroBeat or PerfectMarket and Sub (as the case may be), or of any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement. Each party shall use all reasonable efforts to prevent or promptly
remedy such breach or inaccuracy.
E. CONSENTS. Each of PerfectMarket and MetroBeat shall promptly apply
--------
for or otherwise seek, and use all reasonable efforts to obtain, all consents
and approvals, including all MetroBeat Third-Party Consents, required to be
obtained by it for the consummation of the Merger and the transactions
contemplated by this Agreement and to enable the Surviving Corporation to
conduct and operate the business of MetroBeat substantially as presently
conducted and as contemplated to be conducted.
F. REASONABLE EFFORTS.
------------------
-33-
i. MetroBeat and the Principal Shareholder shall each use its or his
reasonable efforts to effect the transactions contemplated hereby and to fulfill
and cause to be fulfilled the conditions to Closing under this Agreement.
MetroBeat shall take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on MetroBeat with respect to the
Merger and will promptly cooperate with and furnish information to PerfectMarket
in connection with any such requirements imposed upon PerfectMarket, Sub or any
other subsidiary of PerfectMarket in connection with the Merger. MetroBeat
shall take all reasonable actions to obtain (and to cooperate with PerfectMarket
and its subsidiaries in obtaining) any consent, authorization, order or approval
of, or any exemption by, any Governmental Entity, required to be obtained or
made by MetroBeat (or by PerfectMarket or its subsidiaries) in connection with
the Merger or the taking of any action contemplated thereby, by this Agreement,
by the Plan of Merger or the Certificate of Merger, and to defend all lawsuits
or other legal proceedings challenging this Agreement, the Plan of Merger or the
Certificate of Merger, or the consummation of the transactions contemplated
hereby and thereby, to lift or rescind any injunction or restraining order or
other order adversely affecting the ability or the parties to consummate the
transactions contemplated hereby and thereby, and to effect all necessary
registrations and filings and submissions or information required by any
Governmental Entity, and to fulfill all conditions to this Agreement.
ii. Each of PerfectMarket and Sub shall take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
them with respect to the Merger and will promptly cooperate with and furnish
information to MetroBeat and the Principal Shareholder in connection with any
such requirement imposed upon MetroBeat in connection with the Merger.
PerfectMarket and Sub shall take all reasonable actions to obtain (and to
cooperate with MetroBeat in obtaining) any consent, authorization, order or
approval of, or exemption by, any Governmental Entity required to be obtained or
made by PerfectMarket or any of its subsidiaries (or by MetroBeat) in connection
with the Merger or the taking of any action contemplated by this Agreement, by
the Plan of Merger or the Certificate of Merger, and to defend all lawsuits or
other legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby and by the Plan of Merger and the Certificate
of Merger, to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby and by the Plan of Merger and the Certificate of Merger, and
to effect all necessary registrations and filings and submissions of information
requested by any Governmental Entity, and to fulfill all conditions to this
Agreement.
G. PUBLIC ANNOUNCEMENTS. Each party will consult in advance with the
--------------------
other concerning the timing and content of any announcements, press releases and
public statements concerning the Merger and will not make any such announcement,
release or statement without the other's consent; provided, however, that
-------- -------
PerfectMarket may make any public statement concerning the Merger without
MetroBeat's consent if, in the opinion of counsel for PerfectMarket, such
statement or announcement is required or advisable to comply with applicable
law.
-34-
H. TAX RETURNS AND INCOME TAX LIABILITY. The Principal Shareholder shall
------------------------------------
timely file all federal and state income tax returns for taxable periods ending
on or prior to the Effective Time and have paid or will pay all Taxes
attributable to such periods. Such returns will be prepared and filed in
accordance with applicable law and in a manner consistent with past practices
and shall be subject to review and approval by PerfectMarket. After the
Effective Time, PerfectMarket and MetroBeat, on the one hand, and the former
shareholders of MetroBeat, on the other hand, will make available to the other,
as reasonably requested, all information, records or documents relating to the
liability for Taxes of MetroBeat for all periods prior to or including the
Effective Time and will preserve such information, records or documents until
the expiration of any applicable statute of limitations or extensions thereof.
-35-
I. SUPPORT OF EVENT LISTINGS BUSINESS. After the Closing, PerfectMarket
----------------------------------
agrees to commit to providing to the MetroBeat operations design, technical and
marketing resources, including an initial agreement by PerfectMarket to provide
$1.5 million in funding for the events listing business. In connection
therewith, PerfectMarket acknowledges that it intends, after the Closing, to
perform the following:
i. to spend not less than $5,000 per month for a period of four
months and up to $10,000 per month in both Los Angeles and San Francisco in
fiscal 1996 to set the ground work for future entry in those markets, including
performing the photography and site information collection to reduce the time
necessary to launch an events listing service, if PerfectMarket so determines,
in those markets;
ii. to provide up to $75,000 in order to complete the
development, testing and debugging of MetroBeat 2.0 and to put the MetroBeat
service on a faster computer platform, and provide reasonably necessary computer
support and database administration to accomplish this objective;
iii. to support with PerfectMarket staff the design and interface
design for the development of MetroBeat 2.0 and an integrated
MetroBeat/PerfectMarket offering; and
iv. to cooperate with the Principal Shareholder in the development
of a dynamic event listings in markets targeted by PerfectMarket in its sole
discretion.
J. PAYMENT OF LIABILITIES. Within thirty (30) days after the
----------------------
Closing, PerfectMarket agrees to pay the liabilities of MetroBeat to Davies,
▇▇▇▇▇▇ ▇▇▇▇▇ and the American Broadcasting Corporation in the aggregate amount
not to exceed $[*].
K. PAYMENT OF LEGAL EXPENSES. Within thirty (30) days after the
-------------------------
Closing, PerfectMarket agrees to pay the reasonable legal expenses of MetroBeat
incurred by it in connection with the transactions contemplated by this
Agreement, the Plan of Merger and the Certificate of Merger.
L. "METROBEAT" ▇▇▇▇. In the event that the Principal Shareholder's
----------------
employment is terminated by either party for any reason under the Employment
Agreement, PerfectMarket shall assign the ▇▇▇▇ "MetroBeat" to the Principal
Shareholder on the first anniversary of such termination, provided, that,
-------- ----
PerfectMarket shall have failed to use such ▇▇▇▇ for at least three years prior
thereto.
-------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
-36-
SECTION 6
CONDITIONS PRECEDENT
A. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
----------------------------------------------------------
respective obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing of the following conditions:
i. Shareholder Approval. This Agreement, the Plan of Merger and
--------------------
the Certificate of Merger and all the transactions contemplated hereby and
thereby shall have been approved and adopted by the affirmative vote of the
holders of the outstanding shares of MetroBeat Common Stock as required by
applicable law and by MetroBeat's Certificate of Incorporation and Bylaws.
ii. Legal Action. No temporary restraining order, preliminary
------------
injunction or permanent injunction or other order preventing the consummation of
the Merger or the transactions contemplated by this Agreement shall have been
issued by any Governmental Entity and remain in effect, and no litigation
seeking the issuance of such an order or injunction, or seeking relief against
MetroBeat, the Surviving Corporation or PerfectMarket if the Merger is
consummated, shall be pending which, in the good faith judgment of MetroBeat's
or PerfectMarket's Board of Directors (acting upon the written opinion of their
respective outside counsel) has a reasonable probability of resulting in such
order, injunction or relief and such order, injunction or relief would have a
Material Adverse Effect on MetroBeat. In the event any such order or injunction
shall have been issued, each party agrees to use commercially reasonable efforts
to have any such order or injunction lifted.
iii. Statutes. No action shall have been taken, and no statute,
--------
rule, regulation or order shall have been enacted, promulgated or issued or
deemed applicable to the Merger by any Governmental Entity which would (i) make
the consummation of the Merger illegal, (ii) prohibit PerfectMarket's or
MetroBeat's ownership or operation of all or a material portion of the business
or assets of MetroBeat, or PerfectMarket and its subsidiaries taken as a whole,
or compel PerfectMarket or MetroBeat to dispose of or hold separate all or a
material portion of the business or assets of MetroBeat, or PerfectMarket and
its subsidiaries taken as a whole, as a result of the Merger or (iii) render
PerfectMarket, Sub, MetroBeat or the Principal Shareholder unable to consummate
the Merger.
iv. Financing PerfectMarket shall have closed its next round of
---------
equity financing.
B. CONDITIONS TO OBLIGATIONS OF PERFECTMARKET AND SUB. The obligations
--------------------------------------------------
of PerfectMarket and Sub to effect the Merger are subject to the satisfaction of
the following conditions, unless waived by PerfectMarket and Sub:
i. Representations and Warranties. The representations and
------------------------------
warranties of MetroBeat and the Principal Shareholder set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date, and PerfectMarket shall
-37-
have received a certificate signed by the Principal Shareholder in his
individual capacity and each of the President and Treasurer of MetroBeat on
behalf of MetroBeat to such effect on the Closing Date.
ii. No Material Adverse Effect. There shall have been no Material
--------------------------
Adverse Effect on MetroBeat from the date of this Agreement through the Closing
Date, and PerfectMarket shall have received a certificate signed by the
Principal Shareholder in his individual capacity and each of the President and
Treasurer of MetroBeat on behalf of MetroBeat to such effect on the Closing
Date.
iii. Opinion of Counsel to MetroBeat. PerfectMarket shall have
-------------------------------
received written opinions dated as of the Closing Date of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or
▇▇▇ ▇▇▇▇▇▇, counsel to MetroBeat, substantially in the form attached as Exhibit
-------
E hereto.
-
iv. Performance of Obligations of MetroBeat. MetroBeat and the
---------------------------------------
Principal Shareholder shall have performed all obligations and covenants
required to be performed by it under this Agreement, the Plan of Merger and the
Certificate of Merger prior to the Closing Date, and PerfectMarket shall have
received a certificate signed by the Principal Shareholder in his individual
capacity and each of the President and Treasurer of MetroBeat on behalf of
MetroBeat to such effect on the Closing Date.
v. Approvals and Consents. All authorizations, consents, orders or
----------------------
approvals of, or declarations or filings with, any Governmental Entity necessary
for the consummation of the transactions contemplated by this Agreement shall
have been filed, occurred or been obtained, and PerfectMarket shall have
received duly executed copies of all MetroBeat Third-Party Consents in form and
substance satisfactory to PerfectMarket.
vi. FIRPTA. PerfectMarket shall have received a properly executed
------
Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") Notification
Letter, which states that shares of capital stock of MetroBeat do not constitute
"United States real property interests" under Section 897(c) of the Code, for
purposes of satisfying PerfectMarket's obligations under Treasury Regulation
Section 1.1445-2(c)(3). In addition, simultaneously with delivery of such
Notification Letter, MetroBeat shall have provided to PerfectMarket 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
PerfectMarket to deliver such notice to the Internal Revenue Service on behalf
of MetroBeat. Such FIRPTA Notification Letter and form of notice shall be in
substantially the form attached hereto as Exhibit F.
---------
vii. Resignation of Officers and Directors. The officers and directors
-------------------------------------
of MetroBeat in office immediately prior to the Effective Time shall have
resigned as officers and directors of the Surviving Corporation effective as of
the Effective Time.
viii. Employment Agreements. All employment agreements entered into by
---------------------
MetroBeat with any of its employees shall have been terminated in full and be of
no further force and
-38-
effect as of the Effective Time and no payments shall be due thereunder. Such
terminations shall be pursuant to documentation reasonably satisfactory to
PerfectMarket .
ix. Employee Retention. PerfectMarket shall be satisfied in its sole
------------------
discretion (exercised reasonably and in good faith) that a sufficient core group
of employees (including the Principal Shareholder) at MetroBeat are ready,
willing and able to remain with MetroBeat and PerfectMarket following the
transaction to enable the continued operation of MetroBeat's business.
x. Employment and Noncompetition Agreement. PerfectMarket shall have
---------------------------------------
received the executed employment and noncompetition agreement, substantially in
the form attached hereto as Exhibit G (the "Employment Agreement"), of the
---------
Principal Shareholder.
xi. Shareholder's Representation Statement. All shareholders of
--------------------------------------
MetroBeat shall have executed and delivered a Shareholder's Representation
Statement, substantially in the form attached hereto as Exhibit H.
---------
xii. Hells Kitchen Systems. PerfectMarket shall have received
---------------------
clarification to its satisfaction of the status of Hells Kitchen Systems, Inc.
as a shareholder of MetroBeat .
C. CONDITIONS TO OBLIGATIONS OF METROBEAT. The obligation of MetroBeat
--------------------------------------
to effect the Merger is subject to the satisfaction of the following conditions,
unless waived by MetroBeat:
i. Representations and Warranties. The representations and
------------------------------
warranties of PerfectMarket and Sub set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date. MetroBeat shall have received a certificate signed by an
officer of each of PerfectMarket and Sub to such effect on the Closing Date.
ii. Performance of Obligations of PerfectMarket and Sub.
---------------------------------------------------
PerfectMarket and Sub shall have performed all obligations and covenants
required to be performed by them under this Agreement, the Plan of Merger and
the Certificate of Merger prior to the Closing Date, and MetroBeat shall have
received a certificate signed by an officer of PerfectMarket to such effect on
the Closing Date.
iii. Approvals and Consents. All authorizations, consents, orders or
----------------------
approvals of, or declarations or filings with, any Governmental Entity necessary
for the consummation of the transactions contemplated by this Agreement shall
have been filed, occurred or been obtained.
iv. No Material Adverse Effect. There shall have been no Material
--------------------------
Adverse Effect on PerfectMarket from the date of this Agreement through the
Closing Date, and MetroBeat shall have received a certificate signed by the
Chief Executive Officer of PerfectMarket to such effect on the Closing Date.
-39-
SECTION 7
INDEMNIFICATION
A. INDEMNIFICATION. From and after the Closing Date, PerfectMarket, Sub
---------------
and the Surviving Corporation, and the respective officers, directors,
employees, shareholders, assigns and successors and the affiliates of the
foregoing persons and entities (individually, an "Indemnified Person" and
collectively,"Indemnified Persons"), shall be held harmless from and against and
in respect of any and all claims, demands, lawsuits, actions, causes of actions,
administrative proceedings (including informal proceedings), losses,
assessments, costs, damages, punitive damages, judgments, liabilities (including
sums paid in settlement of claims), penalties, fines, interest (including
interest from the date of such damages), and costs and expenses including
reasonable legal fees and disbursements of every kind, nature and description
(collectively "Damages") that arise or result from or relate to, directly or
indirectly, any breach of any of the representations, warranties, and covenants
given or made by MetroBeat and the Principal Shareholder in this Agreement or
any certificate, document, or instrument delivered by or on behalf of MetroBeat
pursuant hereto.
B. PROCEDURES. The Indemnified Person shall promptly notify Mr. ▇▇▇▇
----------
Davies, as agent of the shareholders of MetroBeat hereunder (the "Shareholder's
Agent"), in writing of the existence of any claim, demand or other matter (a
"Claim") involving Damages to which the indemnification obligations in this
Section 7 would apply. The Shareholders' Agent and each Indemnified Person
agrees to cooperate with the other in determining the validity of any such
Claim. If such Claim relates to a claim or demand asserted by a third party, the
Shareholders' Agent shall have the right at its expense to employ counsel to
defend such claim or demand and the Indemnified Person shall have the right at
its expense, but not the obligation, to participate in the defense of any such
claim or demand. So long as the Shareholders' Agent is defending such Claim in
good faith, the Indemnified Person will not settle such claim or demand without
the consent of the Shareholders' Agent, which consent shall not be unreasonably
withheld. The Indemnified Person shall make available to the Shareholders' Agent
all records and other materials reasonably required by it in contesting a claim
or demand asserted by a third party against the Indemnified Person and shall
cooperate in the defense thereof.
C. RIGHT OF SET-OFF. To the extent, but only to the extent, that any
----------------
Indemnified Person would be entitled to indemnification for Damages under this
Section 7, PerfectMarket shall have an express right of set-off of such Damages
against any future obligations of PerfectMarket to make any payments under this
Agreement to the former shareholders of MetroBeat. In the event that on a
Payment Date there are Claims pending under this Section 7, the payment to be
made on such Payment Date shall be deferred, to the extent of such pending
Claims, until resolution of such pending Claims. The Company agrees that it
shall first seek to recover indemnification for any Damages under this Section 7
by seeking to secure shares of Series B Preferred issued to the former
shareholders of MetroBeat pursuant to this Agreement and thereafter to seek
recovery against any other assets of such shareholders.
D. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. For purposes
-----------------------------------------------------
of asserting Claims under this Section 7, all representations, warranties and
covenants made by MetroBeat in or pursuant to this Agreement or in any document
delivered pursuant hereto will survive the Closing and
-40-
will remain in effect until (i) the First Anniversary or (ii) with respect to
the representations, warranties and covenants set out in Section 3.16 (Taxes)
and Section 3.22 (Environmental Matters), until expiration of the applicable
statute of limitations; provided, however, that the indemnification obligations
under this Section 7 shall continue in effect after the applicable termination
date with respect to any Claim pending as of such date until the final
resolution of any such pending Claim. All representations, warranties and
covenants made by PerfectMarket pursuant to this Agreement or in any document
delivered pursuant hereto shall survive for a period of one year after the
Closing.
SECTION 8.
TERMINATION
A. TERMINATION.
-----------
i. This Agreement may be terminated at any time prior to the
Effective Time:
(1 by mutual agreement of the Boards of Directors of
PerfectMarket and MetroBeat;
(2 by PerfectMarket on or after the tenth business day
following delivery of written notice thereof to MetroBeat, if there has been a
material breach by MetroBeat or the Principal Shareholder of any representation,
warranty, covenant or agreement set forth in this Agreement on the part of
MetroBeat that remains uncured as of such sixth business day;
(3 by MetroBeat on or after the tenth business day following
delivery of written notice thereof to PerfectMarket, if there has been a
material breach by PerfectMarket or Sub of any representation, warranty,
covenant or agreement set forth in this Agreement on the part of PerfectMarket
or Sub that remains uncured as of such sixth business day;
(4 by PerfectMarket or MetroBeat, if the Merger shall not have
been consummated on or before July 31, 1996; or
(5 by PerfectMarket or MetroBeat if any permanent injunction
or other order of a court or other competent authority preventing the Merger
shall have become final and nonappealable.
ii. Where action is taken to terminate this Agreement pursuant to
this Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors of the party taking such action.
B. EXPENSES. Whether or not the Merger is consummated, except as
--------
otherwise set forth herein all costs and expenses incurred in connection with
this Agreement, the Plan of Merger, the Certificate of Merger and the
transactions contemplated hereby and thereby shall be paid by the party
incurring such expense.
-41-
C. PROCEDURE AND EFFECT OF TERMINATION. In the event of termination of
-----------------------------------
this Agreement as provided in this Section 8, the terminating party shall
provide written notice of such termination to the other party and the provisions
of this Agreement shall forthwith become void, except that the agreements
contained or referred to in the Non-Disclosure Agreement and in Sections 3.29
(Brokers; Finders), 4.5 (Brokers; Finders), 5.7 (Public Announcements), 8
(Termination) and 9 (General Provisions) of this Agreement shall survive.
Notwithstanding the foregoing, in the event of a termination of this Agreement
by any party hereto, nothing herein shall limit the remedies at law or in equity
of any party with respect to any breaches hereof by any other party.
SECTION 9
GENERAL PROVISIONS
A. AMENDMENT. This Agreement may be amended by the parties hereto at any
---------
time prior to the Closing, provided that, no amendment shall be made which by
law requires the further approval of the shareholders of MetroBeat without
obtaining such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
B. EXTENSION; WAIVER. At any time prior to the Effective Time, each of
-----------------
MetroBeat and PerfectMarket, by action taken by its Board of Directors, may, to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations or other acts of the other, (ii) waive any inaccuracies in the
representations and warranties made to it contained herein or in any document
delivered pursuant hereto and (iii) waive compliance with any of the agreements
or conditions for the benefit of it contained herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
C. ARBITRATION. All disputes or controversies (whether of law or fact)
-----------
of any nature whatsoever arising from or relating to this Agreement and the
transactions contemplated hereby shall be decided by arbitration by the American
Arbitration Association (the "Association") in accordance with the Commercial
Arbitration Rules of the Association. The arbitrators shall be selected as
follows: PerfectMarket and the Shareholders' Agent shall, within 30 days of the
date of demand by either party for arbitration, each select one independent,
qualified arbitrator and the two arbitrators so selected shall select the third
arbitrator within 30 days after their appointment as party arbitrators. Each
party reserves the right to object to any individual arbitrator who shall be
employed by or affiliated with a competing organization. In the event objection
is made, the Association shall resolve any dispute regarding the propriety of an
individual arbitrator acting in that capacity. The parties shall each bear the
expenses of the arbitrator chosen by it, and shall bear one-half the expenses of
the independent arbitrator. Hearings in the proceeding shall commence within
120 days of the selection of the neutral arbitrator. Arbitration shall take
place in Los Angeles County, California. At the request of
vote, shall be able to decree any and all relief of an equitable and legal
nature, including but not limited to such relief as a temporary restraining
order, a temporary and/or a permanent injunction, and shall also be able to
award damages, with or without an accounting and costs. The decree or award
rendered by the arbitrators may be entered as a final and binding judgment in
any court having jurisdiction thereof. Reasonable notice of the time and place
of arbitration shall be given to all persons, other than the parties, as shall
be required by law, in which case such persons or those authorized
representatives shall have the right to attend and/or participate in all the
arbitration hearings in such manner as the law shall require. The resolution of
conflicts procedures set forth in this Section 9.3 are the parties' sole and
exclusive methods for resolving disputes arising out of this Agreement. Except
as expressly set forth above, the parties agree to waive all rights to commence
any action in law or equity arising out of this Agreement.The arbitrators shall
be entitled to award the costs and expenses of the arbitration proceeding
(including the arbitrators' fees and attorneys' fees) to the prevailing party.
D. NOTICES. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) or sent by telecopy,
confirmation received, to the parties at the following addresses and telecopy
numbers (or at such other address or number for a party as shall be specified by
like notice):
i. If to PerfectMarket or Sub, to:
PerfectMarket, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wilson, Sonsini, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
-43-
ii. if to MetroBeat or the Principal Shareholder, to:
MetroBeat, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Law Offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
E. BROKER'S OR FINDER'S FEES. MetroBeat agrees to indemnify
-------------------------
PerfectMarket and Sub for any Broker's or Finder's Fees incurred by MetroBeat or
any Shareholder in connection with the transactions contemplated by this
Agreement, the Plan of Merger and the Certificate of Merger. PerfectMarket
agrees to indemnify MetroBeat and the Principal Shareholder for any Broker's or
Finder's Fees incurred by PerfectMarket or Sub in connection with the
transactions contemplated by this Agreement, the Plan of Merger and the
Certificate of Merger.
F. INTERPRETATION. When a reference is made in this Agreement to
--------------
Sections, Schedules or Exhibits, such references shall be to a Section of or
Schedule or Exhibit 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 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.
G. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
H. ENTIRE AGREEMENT. This Agreement (including the Exhibits and the
----------------
Schedules), the Non-Disclosure Agreement and the documents and instruments and
other agreements among the parties delivered pursuant hereto 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 and are not intended to
confer upon any other person any rights or remedies hereunder except as
otherwise expressly provided herein.
-44-
I. NO TRANSFER. This Agreement and the rights and obligations set forth
-----------
herein may not be transferred or assigned by operation of law or otherwise
without the consent of each party hereto, provided that Sub may assign all or
any portion of its rights hereunder to any other newly-formed, wholly-owned
subsidiary of PerfectMarket. This Agreement is binding upon and will inure to
the benefit of the parties hereto and their respective successors and permitted
assigns.
J. SEVERABILITY. If any provision of this Agreement, or the
------------
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
K. 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.
L. 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 reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement.
M. ABSENCE OF THIRD-PARTY BENEFICIARY RIGHTS. No provision of
-----------------------------------------
this Agreement is intended, nor will be interpreted, to provide or create any
third-party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, employee, partner or any party hereto or any
other person or entity, and all provisions hereof will be personal solely
between the parties to this Agreement.
N. MUTUAL DRAFTING. This Agreement is the joint product of
---------------
PerfectMarket and MetroBeat, and each provision of this Agreement has been
subject to the mutual consultation, negotiation and agreement of PerfectMarket
and MetroBeat, and shall not be construed for or against any party hereto.
O. GOVERNING LAW. This Agreement shall be governed in all
-------------
respects, including validity, interpretation and effect, by the laws of the
State of New York (without giving effect to its choice of law principles).
P. EMPLOYEES. The Company agrees that the employees of MetroBeat,
---------
for so long as they remain employees of PerfectMarket or any subsidiary of
PerfectMarket subsequent to the Closing, shall be entitled to benefits
(including stock options) comparable to the benefits received by other employees
of PefectMarket or such subsidiaries who hold positions of comparable levels.
-45-
IN WITNESS WHEREOF, PerfectMarket, Sub and MetroBeat have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
and the Principal Shareholder have signed this Agreement in their respective
individual capacities, all as of the date first written above.
PERFECTMARKET, INC.
By:_____________________________________
Name:
Title:
MB ACQUISITION CORPORATION
By:_____________________________________
Name:
Title:
METROBEAT, INC.
By:_____________________________________
Name:
Title:
PRINCIPAL SHAREHOLDER
________________________________________
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
-46-
CERTIFICATE OF MERGER
OF
MB ACQUISITION CORPORATION
A NEW YORK CORPORATION,
INTO
METROBEAT, INC.
A NEW YORK CORPORATION
UNDER SECTION 904 OF THE BUSINESS CORPORATION LAW
ARTICLE I
A. The names of the constituent corporations are MB Acquisition
Corporation (the "Merged Corporation" or "Sub") and MetroBeat, Inc.
("MetroBeat")
B. The surviving corporation shall be MetroBeat and following the Merger
its name shall be MetroBeat, Inc. Metrobeat, as it exists from and after the
effective time of the Merger shall be referred to as the "Surviving Corporation"
C. As to the Merged Corporation, the number of shares outstanding which
are entitled to vote on the merger is as follows:
Common Stock 1,000 shares outstanding
D. As to Metrobeat, the number of shares of outstanding which are
entitled to vote on the merger is as follows:
Common Stock 198 shares outstanding
E. At the effective time of the Merger, the Articles of Incorporation of
MetroBeat, Inc. prior to the effective time shall be the Articles of
Incorporation of the Surviving Corporation.
ARTICLE II
A. The effective date of the merger shall be the date of filing of this
certificate of merger.
ARTICLE III
A. The certificate of incorporation of Sub was filed by the Department of
State of the State of New York on May 8, 1996.
B. The certificate of incorporation of MetroBeat was filed by the
Department of State of the State of New York on May 2, 1995.
ARTICLE IV
A. The merger was approved by Action of Unanimous Written Consent of the
Board of Directors of Sub on May 21, 1996 and by Action by Written Consent of
Sole Stockholder of Sub on May 21, 1996.
B. The merger was approved by Action of Unanimous Written Consent of the
Board of Directors of MetroBeat on May 20, 1996 and by Written Consent of the
Shareholders of MetroBeat on May 20, 1996.
C. This Certificate of Merger may be signed in counterparts.
-2-
We affirm the statements contained herein as true under penalties of perjury.
Executed on June 21, 1996
MB ACQUISITION CORPORATION
a New York corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: President
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
METROBEAT, INC.
a New York corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Secretary
CORRECTED AND RESTATED CERTIFICATE OF INCORPORATION
OF
PERFECTMARKET, INC.
A DELAWARE CORPORATION
PerfectMarket, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of Delaware, hereby corrects the
previously filed Restated Certificate of Incorporation as follows: (i) the
phrase "thirty million, four hundred thirty nine thousand, seven hundred
eighteen (30,439,718)" in the third and fourth lines of the first paragraph of
Article IV shall be deleted and the phrase "thirty million, four hundred thirty
one thousand, seven hundred eighteen (30,431,718)" shall be inserted in lieu
thereof; (ii) the phrase "five million, four hundred thirty nine thousand seven
hundred eighteen (5,439,718)" in the fifth and sixth line of the first paragraph
of Article IV shall be deleted and the phrase "five million, four hundred thirty
one thousand, seven hundred eighteen (5,431,718)" shall be inserted in lieu
thereof; and (iii) the number "3,198,540" in the third line of the second
paragraph of Article IV shall be deleted and the phrase "3,190,540" shall be
inserted in lieu thereof. The Corrected and Restated Certificate of
Incorporation shall read as follows:
EXHIBIT C
---------
RESTATED CERTIFICATE OF INCORPORATION
OF
PERFECTMARKET, INC.
A DELAWARE CORPORATION
PerfectMarket, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of Delaware (the "Corporation"), does
hereby certify as follows:
FIRST: The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on September 20,
1995, amended by the Certificate of Amendment of Certificate of Incorporation
filed with the Secretary of State of the State of Delaware on November 27, 1995.
SECOND: This Restated Certificate of Incorporation has been duly adopted
in accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors of the
Corporation.
THIRD: This Restated Certificate of Incorporation was approved by written
consent of the stockholders pursuant to Section 228 of the General Corporation
Law of the State of Delaware.
FOURTH: The Restated Certificate of Incorporation, of this Corporation is
amended and restated in its entirety to read as follows:
I.
The name of the Corporation is PerfectMarket, Inc..
II.
The address of the Corporation's registered office in the State of Delaware
is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
III.
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
IV.
The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock" all of which
shall have a par value of $0.01 per share. The total number of shares which the
Corporation is authorized to issue is thirty million, four hundred thirty one
thousand, seven hundred eighteen (30,431,718) shares. Twenty five million
(25,000,000) shares shall be Common Stock and five million, four hundred thirty
one thousand seven hundred eighteen (5,431,718) shares shall be Preferred Stock.
1,791,178 shares of Preferred Stock shall be designated "Series A
Preferred Stock" (hereinafter "Series A Preferred"), [*] shares of Preferred
Stock shall be designated "Series B Preferred Stock" (hereinafter "Series B
Preferred"), and 3,190,540 shares of Preferred Stock shall be designated "Series
C Preferred Stock" (hereinafter "Series C Preferred" and together with the
Series A Preferred and Series B Preferred, the "Preferred Stock"). The rights,
preferences, restrictions and other matters relating to the Preferred Stock are
as follows:
1. LIQUIDATION PREFERENCE. (a) At any time, in the event of any of
----------------------
the following occurrences (a "Transaction"):
(i) Any dissolution of the Corporation, followed by the
liquidation and winding up of the Corporation;
(ii) Any liquidation or winding up of the Corporation as a result
of a bankruptcy, reorganization or similar proceeding;
(iii) Any foreclosure by creditors of the Corporation on all or
substantially all of the assets or equity interests in the Corporation; or
(iv) An acquisition, merger or consolidation of the Corporation
in which more than 50% of the outstanding capital stock of the Company is being
acquired for cash and the price per share of Common Stock (on a fully diluted
basis) is below the Conversion Price (as defined in Section 2 below) then in
effect;
the Corporation shall take appropriate steps in connection with such Transaction
to ensure that the assets of the Corporation available for distribution shall be
distributed at the closing of the Transaction in the order and priority as
follows:
-------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
(i) the holders of the Preferred Stock shall receive ratably (based
on their respective preference amounts) an amount per share equal to the price
for which such share of Preferred Stock was originally issued, as adjusted for
any stock dividends, combinations or splits with respect to such shares, plus
any declared and unpaid dividends on the Preferred Stock; and
(ii) all remaining assets available for distribution shall be
distributed pro rata among the holders of the Common Stock based on the number
of shares held by each.
If upon the occurrence of a Transaction, the assets and funds thus distributed
among the holders of Preferred Stock shall be insufficient to permit the payment
to such holders of the full aforesaid preferential amount, then the entire
assets and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of Preferred Stock in proportion to the
liquidation preference amount each holder is otherwise entitled.
(b) With respect to any Transaction, if the consideration received by
the Corporation is other than cash, its value will be deemed its fair market
value. Any securities shall be valued as follows:
(i) Securities not subject to investment letter or other similar
restrictions on free marketability:
(A) If traded on a securities exchange or through Nasdaq,
the value shall be deemed to be the average of the closing prices of the
securities on such exchange over the thirty-day period ending three (3) days
prior to the closing;
(B) If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices (whichever is
applicable) over the thirty-day period ending three (3) days prior to the
closing; and
(C) If there is no active public market, the value shall be
the fair market value thereof, as mutually determined by the Corporation and the
holders of at least a majority of the voting power of all then outstanding
shares of Preferred Stock.
(ii) The method of valuation of securities subject to investment
letter or other restrictions on free marketability (other than restrictions
arising solely by virtue of a stockholder's status as an affiliate or former
affiliate) shall be to make an appropriate discount from the market value
determined as above in (i)(A), (B) or (C) to reflect the approximate fair market
value thereof, as mutually determined by the Corporation and the holders of at
least a majority of the voting power of all then outstanding shares of such
Preferred Stock.
(c) In the event the requirements of this Section 1 are not complied
with, this Corporation shall forthwith either:
3
(i) cause such closing to be postponed until such time as the
requirements of this Section 1 have been complied with; or
(ii) cancel such Transaction, in which event the rights, preferences
and privileges of the holders of the Preferred Stock shall revert to and be the
same as such rights, preferences and privileges existing immediately prior to
the date of the first notice referred to in Section 1(d) hereof.
(d) The Corporation shall give each holder of record of Preferred Stock
written notice of such impending Transaction not later than twenty (20) days
prior to the stockholder's meeting called to approve such Transaction, or twenty
(20) days prior to the closing of such Transaction, whichever is earlier, and
shall also notify such holders in writing of the final approval of such
Transaction. The first of such notices shall describe the material terms and
conditions of the impending Transaction and the provisions of this Section 1,
and the Corporation shall thereafter give such holders prompt notice of any
material changes. The Transaction shall in no event take place sooner than
twenty (20) days after the Corporation has given the first notice provided for
herein or sooner than ten (10) days after the Corporation has given notice of
any material changes provided for herein; provided, however, that such periods
may be shortened upon the written consent of the holders of Preferred Stock that
are entitled to such notice rights or similar notice rights and that represent
at least a majority of the voting power of all then outstanding shares of such
Preferred Stock.
2. CONVERSION. The holders of the Preferred Stock have conversion
----------
rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
----------------
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable shares
of Common Stock as is determined: in the case of the Series A Preferred, by
dividing $0.90446 by the Series A Conversion Price, determined as hereinafter
provided, in effect at the time of the conversion; in the case of the Series B
Preferred, by dividing $3.4665 by the Series B Conversion Price, determined as
hereinafter provided, in effect at the time of the conversion; and in the case
of Series C Preferred, by dividing $3.4665 by the Series C Conversion Price,
determined as hereinafter provided, in effect at the time of the conversion.
The price at which shares of Common Stock shall be deliverable upon conversion
of the Series A Preferred (the "Series A Conversion Price") shall initially be
$0.90446 per share of Common Stock. The price at which shares of Common Stock
shall be deliverable upon conversion of the Series B Preferred (the "Series B
Conversion Price") shall initially be $3.4665 per share of Common Stock. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series C Preferred (the "Series C Conversion Price") shall initially be
$3.4665 per share of Common Stock. The term "Conversion Price," as used herein
shall refer to the respective Conversion Price of each series of Preferred
Stock. Each such Conversion Price shall be subject to adjustment as hereinafter
provided. Upon conversion, all declared and unpaid dividends on the Preferred
Stock shall be paid, to the extent funds are legally available therefor, either
in cash or in shares of Common Stock of the Corporation, at the election of the
Corporation, wherein the shares of Common Stock
4
shall be valued at the fair market value at the time of such conversion, as
determined in good faith by the Board.
(b) Automatic Conversion. Each share of Preferred Stock shall
--------------------
automatically be converted into shares of Common Stock at the then effective
Conversion Price upon: (i) the closing of a firm underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of shares of the Corporation's
Common Stock with an aggregate net proceeds (after deduction of underwriter's
discounts and commissions and offering expenses) to the Company of not less than
$20,000,000, the price per share to the public of which was not less than $7.70
per share (a "Qualified IPO"); or (ii) the written election of holders of not
less than a majority of the then outstanding Preferred Stock and a majority of
the then outstanding Series C Preferred. In the event of the automatic
conversion of the Preferred Stock upon a public offering as aforesaid, the
person(s) entitled to receive the Common Stock issuable upon such conversion of
Preferred Stock shall not be deemed to have converted such Preferred Stock until
immediately prior to the closing of such sale of securities.
(c) Mechanics of Conversion. No fractional shares of Common Stock
-----------------------
shall be issued upon conversion of Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled (after aggregating all
shares of Preferred Stock held by such holder such that the maximum number of
whole shares of Common Stock is issued to such holder upon conversion), the
Corporation shall pay cash equal to such fraction multiplied by the then fair
market value of a share of Common Stock. Before any holder of Preferred Stock
shall be entitled to convert the same into full shares of Common Stock and to
receive certificates therefor, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Preferred Stock, and shall give written notice to the
Corporation at such office that such holder elects to convert the same;
provided, however, that in the event of an automatic conversion pursuant to
paragraph (b) hereof, the outstanding shares of Preferred Stock shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Corporation or its transfer agent, and provided further that the Corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such automatic conversion unless the certificates evidencing
such shares of Preferred Stock are either delivered to the Corporation or its
transfer agent as provided above, or the holder notifies the Corporation or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such certificates.
The Corporation shall, as soon as practicable after such delivery, or after
such agreement and indemnification, issue and deliver at such office to such
holder of Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which the holder shall be entitled as aforesaid and a
check payable to the holder in the amount of any cash amounts payable as the
result of a conversion into fractional shares of Common Stock. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the
5
shares of Preferred Stock to be converted, or, in the case of automatic
conversion, on the date of closing of the offering or the date of written
election to convert, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on such date.
(d) Adjustments of the Conversion Price.
-----------------------------------
(i) If the number of shares of Common Stock outstanding at any
time after the date upon which any shares of Series C Preferred were first
issued (the "Original Issue Date") is increased by split or subdivision of the
outstanding shares of Common Stock or the receipt by holders of Common Stock of
a dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the number of shares of Common Stock issuable on conversion of each share of
Preferred Stock shall be increased in proportion to such increase in outstanding
shares.
(ii) If the number of shares of Common Stock outstanding at any
time after the Original Issue Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the number of shares of Common Stock issuable on conversion of each
share of Preferred Stock shall be decreased in proportion to such decrease in
outstanding shares.
(iii) If at any time or from time to time the Corporation
distributes to all holders of the Corporation evidences of indebtedness or
assets of the Corporation (other than cash dividends), the holders of the
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Preferred Stock the amount of such evidences of indebtedness or assets of the
Corporation as such holders of Preferred Stock would have been entitled to
receive had they converted their shares of Preferred Stock into shares of Common
Stock immediately prior to such distribution.
(e) Adjustments for Certain Corporate Transactions. If the Common Stock
----------------------------------------------
issuable upon conversion of the Preferred Stock shall be changed into the same
or a different number of shares of any other class or classes of stock of the
Corporation or another corporation, whether by merger, consolidation, sale of
all or substantially all of the assets of the Corporation, liquidation, capital
reorganization, reclassification or otherwise (other than a dividend,
subdivision, combination or consolidation of shares provided for above) (a
"Reorganization"), the Conversion Price then in effect shall, concurrently with
the effectiveness of such Reorganization, be proportionately adjusted such that
the Preferred Stock shall be convertible into, in lieu of the number of shares
of Common Stock which the holders would otherwise have been entitled to receive,
a number of shares of such other class or classes of stock of the Corporation or
other
6
corporation, as the case may be, equivalent to the number of shares of Common
Stock that would have been subject to receipt by the holders upon conversion of
such shares of Preferred Stock immediately before such Reorganization.
Furthermore, in the event of an acquisition, merger or consolidation of the
Corporation whereby the Corporation's stockholders of record immediately prior
to such acquisition, merger or consolidation hold less than 50% of the voting
power of the surviving entity immediately after such acquisition, merger or
consolidation and (i) such acquisition, merger or consolidation shall be
effected in such a way that the holders of the Corporation's Common Stock shall
be entitled to receive stock, securities or assets other than cash and (ii) the
surviving entity is not subject to the periodic reporting requirements of
Sections 12(g) or 15(d) of the Securities Act of 1934, as amended, immediately
after such acquisition, merger or consolidation, appropriate provisions shall be
made with respect to the rights and interests of holders of Preferred Stock to
the end that the rights, preferences and privileges of the Preferred Stock as
set forth in this Restated Certificate, as applicable (including without
limitation provisions for adjustments of the Conversion Price), shall thereafter
be incorporated into any shares of stock or securities thereafter deliverable
upon the exercise of such conversion rights.
(f) Adjustment of Series C Conversion Price. Upon conversion of any
---------------------------------------
shares of Series C Preferred to Common Stock in accordance with this Section 2,
the Series C Conversion price shall be adjusted to the extent necessary to an
amount equal to the following:
Series C Conversion Price = $45 million
--------------------------------------
Measurement Shares plus Option Shares
For purposes of this Section 2(f), (i) the term "Measurement Shares" shall equal
10,690,196 shares of Common Stock (as adjusted for stock splits, stock dividends
or similar recapitalizations after the Original Issue Date) and (ii) the term
"Option Shares" shall equal the 2,291,181 shares of Common Stock issuable upon
exercise of stock options ("Original Issue Date Options") outstanding as of the
Original Issue Date less such number of Option Shares that were subject to
Original Issue Date Options that were canceled as a result of the termination of
employment or consulting services on or prior to the date of conversion of the
Series C Preferred (as adjusted for stock splits, stock dividends or similar
recapitalizations after the Original Issue Date).
(g) No Fractional Shares as to Adjustments. No fractional shares shall
--------------------------------------
be issued upon the conversion of any share or shares of the Preferred Stock, and
the number of shares of Common Stock to be issued shall be rounded down to the
nearest whole share. Whether fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of shares of
Preferred Stock the holder is at the time converting into Common Stock and the
number of shares of Common Stock issuable upon such aggregate conversion.
(h) No Impairment. The Corporation will not, by amendment of its
-------------
Restated Certificate of Incorporation or through any Reorganization, issue or
sell securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in
7
the carrying out of all the provisions of this Section 2 and in the taking of
all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Preferred Stock against impairment.
(i) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment of the Conversion Price pursuant to this Section 2, the Corporation
at its expense shall promptly compute such adjustment in accordance with the
terms hereof and furnish to each holder of Preferred Stock a certificate setting
forth such adjustment and showing in detail the facts upon which such adjustment
is based. The Corporation shall, upon the written request at any time of any
holder of Preferred Stock, furnish or cause to be furnished to such holder a
like certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of such holder's shares of Preferred Stock.
3. MANDATORY REDEMPTION.
--------------------
(a) The Corporation shall redeem, from any source of funds legally
available therefor, all then outstanding shares of Series C Preferred on the
ten-year anniversary date (the "Redemption Date") of the Original Issue Date.
The Corporation shall effect such redemption on the Redemption Date by paying in
exchange for the outstanding shares of Series C Preferred Stock cash in the
amount equal to the liquidation value of such shares pursuant to Section 1 above
(the "Redemption Price").
(b) At least fifteen (15) but no more than thirty (30) days prior to the
Redemption Date, written notice shall be mailed, first class postage prepaid, to
each holder of record (at the close of business on the business day next
preceding the day on which notice is given) of the Series C Preferred, at the
address last shown on the records of the Corporation for such holder, notifying
such holder of the redemption to be effected, specifying the Redemption Date,
the Redemption Price, the place at which payment may be obtained and calling
upon such holder to surrender to the Corporation, in the manner and at the place
designated, his or her certificate or certificates representing the Series C
Preferred (the "Redemption Notice"). Except as provided in Section 3(c) below,
on or after the Redemption Date, each holder of Series C Preferred shall
surrender to the Corporation the certificate or certificates representing such
shares, in the manner and at the place designated in the Redemption Notice, and
thereupon the Redemption Price of such shares shall be payable to the order of
the person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be canceled.
(c) From and after the Redemption Date, unless there shall have been a
default in the payment of the Redemption Price, all rights of the holders of
shares of Series C Preferred (except the right to receive the Redemption Price
without interest upon surrender of their certificate or certificates) shall
cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the Corporation legally available for
redemption of shares of Series C Preferred on the
8
Redemption Date are insufficient to redeem the total number of shares of Series
C Preferred, those funds which are legally available will be used to redeem the
maximum possible number of such shares ratably among the holders of Series C
Preferred based on their holdings of Series C Preferred. The shares of Series C
Preferred not redeemed shall remain outstanding and entitled to all the rights
and preferences provided herein. At any time thereafter when additional funds of
the Corporation are legally available for the redemption of shares of Series C
Preferred such funds will immediately be used to redeem the balance of the
shares to the extent of such additional funds until all shares of Series C
Preferred are redeemed.
(d) At least ten days prior to the Redemption Date, the Corporation
shall deposit the Redemption Price of all shares of Series C Preferred with a
bank or trust corporation having aggregate capital and surplus in excess of
$100,000,000 as a trust fund for the benefit of the respective holders of the
Series C Preferred, with irrevocable instructions and authority to the bank or
trust corporation to pay the Redemption Price for such shares to their
respective holders on or after the Redemption Date upon receipt of notification
from the Corporation that such holder has surrendered his or her share
certificate to the Corporation pursuant to Section 3(b) above. As of the
Redemption Date, the deposit shall constitute full payment of the shares to
their holders, and from and after the Redemption Date the shares of Series C
Preferred shall be redeemed and shall be deemed to be no longer outstanding, and
the holders thereof shall cease to be stockholders with respect to such shares
and shall have no rights with respect thereto except the rights to receive from
the bank or trust corporation payment of the Redemption Price of the shares,
without interest, upon surrender of their certificates therefor. Such
instructions shall also provide that any moneys deposited by the Corporation
pursuant to this Section 3(d) for the redemption of shares thereafter converted
into shares of the Corporation's Common Stock pursuant to Section 2 hereof prior
to the Redemption Date shall be returned to the Corporation forthwith upon such
conversion. The balance of any moneys deposited by the Corporation pursuant to
this Section 3(d) remaining unclaimed at the expiration of two years following
the Redemption Date shall thereafter be returned to the Corporation upon its
request expressed in a resolution of its Board of Directors.
(e) Notwithstanding anything to the contrary in this Section 3, in the
event the Corporation is precluded by applicable law from redeeming any of the
Series C Preferred hereunder, the Corporation shall redeem such Series C
Preferred at the earliest date permitted under applicable law.
(f) The provisions of this Section 3 shall terminate upon the closing of
a Qualified IPO.
4. VOTING RIGHTS.
-------------
(a) General. Except as otherwise provided herein or required by law,
-------
the holder of each share of Common Stock issued and outstanding shall have one
vote and the holder of each share of Preferred Stock shall be entitled to the
number of votes equal to the number of shares of Common Stock into which such
share of Preferred Stock could be converted at the record date for
9
determination of the stockholders entitled to vote on such matters, or, if no
such record date is established, at the date such vote is taken or any written
consent of stockholders is solicited, such votes to be counted together with all
other shares of stock of the Corporation having a general voting power and not
separately as a class. Holders of Common Stock and Preferred Stock shall be
entitled to notice of any stockholders' meeting in accordance with the Bylaws of
the Corporation. Fractional votes by the holders of Preferred Stock shall not,
however, be permitted and any fractional voting rights shall (after aggregating
all shares into which shares of Preferred Stock held by each holder could be
converted) be rounded to the nearest whole number.
(b) The holders of Series C Preferred voting together as a separate
class shall have the right to elect one (1) member of the Board of Directors
until the earlier of (i) a Qualified IPO or (ii) at such time as the outstanding
Series C Preferred (including shares of Common Stock issuable upon conversion of
the Series C Preferred) shall be less than five percent (5%) of the then
outstanding Common Stock of the Company (including shares of Common Stock
issuable upon conversion, exchange or exercise of securities convertible into or
exercisable for or exchangeable for Common Stock). In the event that the Board
of Directors is increased after the Original Issue Date to a number of members
greater than ten (10), then for purposes of the preceding sentence, the holders
of Series C Preferred voting together as a separate class shall have the right
(i) to elect two (2) members of the Board of Directors so long as the total
number shall be between 11 and 13 and (iii) to elect a number of directors
equivalent to the number of directors that could be elected by the holders of
Series C Preferred by cumulative voting in the event the total number of
directors exceeds 13.
(c) Protective Provisions. So long as any shares of Series C Preferred
---------------------
remain outstanding, the Corporation shall not, without the vote or written
consent of not less than a majority of such outstanding shares of Series C
Preferred voting together as a single class:
(i) Increase or decrease the total number of authorized shares of
Series C Preferred;
(ii) Alter or change by amendment to this Restated Certificate of
Incorporation or otherwise the terms and provisions of the Series C Preferred or
any other terms so as to affect adversely the rights, preferences or privileges
of the Series C Preferred; or
(iii) Create or issue any new shares or any other securities
convertible into equity securities of the Corporation having a preference senior
to the Series C Preferred with respect to voting, dividends, redemption or upon
liquidation.
5. STATUS OF CONVERTED STOCK. In case any shares of Preferred Stock shall
-------------------------
be converted pursuant to Section 2 hereof, the shares so converted shall be
canceled and shall not be issuable by the Corporation. From time to time, this
Restated Certificate of Incorporation shall be appropriately revised to reflect
the corresponding reduction in the Corporation's authorized capital stock.
10
V.
The Board is expressly authorized to make, alter or repeal Bylaws of the
Corporation, but the stockholders may make additional Bylaws and may alter or
repeal any Bylaw whether adopted by them or otherwise.
VI.
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the Corporation.
VII.
(a) To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
(b) The Corporation shall indemnify to the fullest extent permitted by
law any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of
the Corporation or any predecessor of the Corporation or serves or served at any
other enterprise as a director, officer or employee at the request of the
Corporation or any predecessor to the Corporation.
(c) Neither any amendment nor repeal of this Article VII, nor the
adoption of any provision of the Corporation's Restated Certificate of
Incorporation inconsistent with this Article VII, shall eliminate or reduce the
effect of this Article VII in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article VII, would accrue
or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.
FIFTH: That thereafter, pursuant to a resolution of its Board of
Directors, the foregoing resolutions were submitted to the stockholders of the
Corporation for their approval by written consent in accordance with Section 228
of the General Corporation Law of the State of Delaware, by which written
consent the necessary number of shares as required by statute were voted in
favor of the amendment.
SIXTH: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
SEVENTH: That written notice of said amendment was duly given to the
stockholders of this corporation who did not consent in writing to the foregoing
resolutions.
11
IN WITNESS WHEREOF, PerfectMarket, Inc. has caused this Restated
Certificate of Incorporation to be signed by its President and Chief Executive
Officer and attested to by its Secretary this ______ day of May, 1996.
_____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇
President and Chief Executive Officer
ATTEST:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Secretary
13
METROBEAT, INC.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
June 7, 1996
Assistant Commissioner (International)
Director, Office of Compliance
OP:I:C:E:666
▇▇▇ ▇'▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.
COMSAT Building
Washington, D.C. 20024
Re: Notice Required Under Treasury Regulation Section 1.897-2(h)(2)
---------------------------------------------------------------
Gentlemen:
At the request of PerfectMarket, Inc. ("PerfectMarket"), in connection with
their acquisition of MetroBeat, Inc. ("MetroBeat"), we provided the attached
statement to PerfectMarket on June 7, 1996.
(i) This notice is provided pursuant to the requirements of Treasury
Regulation Section 1.897-2(h)(2);
(ii) The following information relates to the corporation providing the
notice:
Name MetroBeat, Inc.
Address ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Taxpayer Identification
Number
(iii) The attached statement was not requested by a foreign interest
holder. It was voluntarily provided by MetroBeat in response to a
request from PerfectMarket in accordance with Treasury Regulation
Section 1.1445-2(c)(3)(i). The following information relates to
PerfectMarket which requested the attached statement:
Name PerfectMarket, Inc.
Address ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Taxpayer Identification
Number ▇▇-▇▇▇▇▇▇▇
(iv) The interest in question (capital stock and rights to acquire
capital stock of MetroBeat) is not a U.S. real property interest.
Under penalties of perjury, the undersigned declares that the above notice
(including the attachment hereto) is correct to my knowledge and belief.
Sincerely,
▇▇▇▇ ▇▇▇▇▇▇
President
Enclosure
EMPLOYMENT AND NONCOMPETITION AGREEMENT
Agreement made on June 21, 1996, between PerfectMarket, Inc., a Delaware
corporation (the "Company"), and ▇▇▇▇ ▇▇▇▇▇▇ ("Executive") and for purposes of
Sections 1(d)(i) and 1(e) only, ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Shareholder").
RECITALS
--------
A. The Company, MetroBeat, Inc., a New York corporation ("MetroBeat"), MB
Acquisition Corporation, a New York corporation and wholly-owned subsidiary of
the Company ("Sub"), and the Executive have executed and delivered an Agreement
and Plan of Reorganization dated May 31, 1996 (the "Reorganization Agreement"),
providing for the acquisition of MetroBeat by the Company which became effective
on the date hereof pursuant to a merger of Sub with and into MetroBeat.
B. The Company and Executive desire to enter into certain agreements
providing for Executive's employment with the Company on the terms hereinafter
set forth.
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Employment. The Company agrees to employ Executive and Executive
----------
accepts such employment for the period beginning as of the date hereof and
ending upon the earlier of (i) termination pursuant to paragraph 1(d) or 1(e)
hereof or (ii) the date two (2) years from the date of this Agreement (the
"Employment Period").
(a) Services. During the Employment Period, Executive will render
--------
such services of an executive and administrative character to the Company and
its affiliates as the Chief Executive Officer, President or Chief Operating
Officer (or any officer of the Company who reports directly to any such
person)(collectively, the "Senior Officers") may from time to time direct.
Executive will devote his best efforts and substantially all of his business
time and attention (except for vacation periods and reasonable periods of
illness or other incapacity) to the business of the Company and its affiliates
and will faithfully and diligently carry out such duties and have such
responsibilities as are customary among persons employed in substantially
similar capacities for similar companies. Executive will report to the Chief
Executive Officer, or such other officer designated by the Chief Executive
Officer, and shall faithfully and diligently comply with all of its reasonable
and lawful directives. For purposes of this Agreement, the term "affiliates"
means any corporation, limited partnership, limited liability company or other
entity
engaged in the same business as the Company or a related business, which is
controlled by or under common control with the Company.
(b) Salary. During the Employment Period and thereafter as provided
------
in paragraph (d) below, the Company will pay Executive a base salary at the rate
of not less than $[*] per annum (or such higher amount as the Board may
-------------
establish from time to time). Executive's salary will be consistent with other
officers of the Company with a similar level of responsibility and performance.
Executive's base salary for any partial year will be prorated based upon the
number of days elapsed in such year and will be payable in accordance with the
Company's customary payroll practices.
(c) Benefits. In addition to the compensation described above in
--------
this paragraph 1, Executive will be entitled during the Employment Period to the
following benefits:
(i) such health insurance and other benefits as are
available from time to time to the executive officers employees
generally;
(ii) vacation, sick leave and personal time in accordance
with the Company's vacation and absence policies as in effect
from time to time;
(iii) reimbursement, upon submission of documentation in
accordance with the Company's regular expense policies, for
reasonable business expenses incurred on the Company's behalf by
Executive; and
(iv) participation in any savings plan, 401(k) plan,
profit sharing plan or pension plan as the Company may establish
in the future for the Company's salaried employees generally.
(d) Termination. Executive's employment with the Company will
-----------
continue until terminated by Executive's death, disability which cannot be
reasonably accommodated, or termination of Executive's employment pursuant to
any of the following provisions:
(i) Termination by the Company without Cause;
-----------------------------------------
Constructive Termination. The Company may at any time
------------------------
terminate Executive's employment without Cause (as defined below)
by giving Executive notice of the effective date of termination
(which effective date may be the date of such notice). In the
event of such termination or a Constructive Termination (as
defined below), the Company shall be obligated to pay Executive
continuing payments of base salary in accordance with paragraph
(b) above at the rate in effect at the effective date of such
termination for a period of twelve (12) months following the
effective date of such termination (the "Salary Severance") and
Executive and the other former shareholders of MetroBeat shall
receive any remaining payments due to them under Section
-------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2.2(e) of the Reorganization Agreement (without regard to Section
2.2(h) thereto) (the "Merger Payments"); provided that, in the
event that Executive breaches any of the representations,
warranties and covenants set forth in paragraphs 2 and 4 below,
(x) with respect to the Salary Severance, the Company will have
no further obligation to make payments of the base salary
following knowledge of such breach and may pursue all other
available remedies, and the Executive shall be obligated to repay
the Company the amount of Salary Severance within ten (10) days
following delivery by the Company to Executive of written
confirmation of such breach, and (y) (if the termination occurs
within 24 months after the date hereof), with respect to the
Merger Payments, Section 2.2(h) of the Reorganization Agreement
shall apply and the Shareholder shall be obligated to return to
the Company any shares required to be returned as set forth in
said Section 2.2(h) of the Reorganization Agreement.
As used in this Agreement, "Constructive Termination" shall mean
the termination of Executive's employment by Executive if, during
the Employment Period, one or more of the following events have
occurred:
(A) without Executive's express written consent, the
assignment to Executive of any duties or the reduction of
Executive's duties, either of which results in a significant
diminution in Executive's position or responsibilities with the
Company in effect immediately prior to such assignment, or the
removal of Executive from such position and responsibilities; or
(B) any material breach by the Company of any material
provision of this Agreement.
(ii) Termination by the Company for Cause. A majority of
------------------------------------
the Board shall have the right to terminate Executive's
employment at any time for any of the following reasons (each of
which is referred to herein as "Cause") by giving Executive
written notice of the Cause and Executive shall have fifteen (15)
days from the receipt of such notice to cure such Cause, to the
extent such cause is curable. If the cause is not cured within
fifteen days or the Cause is not curable, the Company shall give
Executive written notice of the effective date of termination
(which effective date may be the date of such notice):
(A) the willful breach of any provision of paragraphs
1(a), 2 or 4 (including but not limited to a refusal to follow
reasonable and lawful directives of the Board of Directors or the
Senior Officers);
-3-
(B) any act of fraud or dishonesty with respect to any
aspect of the Company's or any affiliate's business;
(C) continued use of illegal drugs;
(D) as a result of Executive's gross negligence or
willful misconduct, Executive shall violate, or cause the Company
to violate, any applicable federal or state securities or banking
law or regulation and as a result of such violation, shall
become, or shall cause the company or any affiliate to become the
subject of any legal action or administrative proceeding seeking
an injunction from further violations or a suspension of any
right or privilege;
(E) as a result of Executive's gross negligence or
willful misconduct, Executive shall commit any act that causes,
or shall knowingly fail to take reasonable and appropriate action
to prevent, any material injury to the financial condition or
business reputation of the Company or any affiliate; or
(F) indictment for a felony.
If a majority of the Board terminates Executive's employment for
any of the reasons set forth above in this paragraph 1(d)(ii), the
Company shall have no further obligations hereunder from and after the
effective date of termination and shall have all other rights and
remedies available under this or any other agreement and at law or in
equity.
(e) Voluntary Termination by Executive. In the event that
----------------------------------
Executive's employment with the Company is terminated by Executive (except as
set forth in paragraph 1(d)(i)), the Company shall have no further obligations
hereunder from and after the date of such termination. Upon termination of
Executive's employment under this Section 1(e) within the Employment Period,
Executive and the Shareholder shall relinquish their right to receive certain
shares of the Company's capital stock or return shares to the Company, as the
case may be, pursuant to Section 2.2(h) of the Reorganization Agreement.
2. Nondisclosure. During the Employment Period and thereafter, Executive
-------------
shall not, without the prior written consent of the Board of Directors, disclose
or use for any purpose (except in the course of his employment under this
Agreement and in furtherance of the business of the Company or any of its
affiliates or subsidiaries) any confidential or proprietary data of the Company.
As an express condition of Executive's employment with the Company, Executive
agrees to execute confidentiality agreements as requested by the Company,
including but not limited to the Company's form of Employee Inventions and
Confidentiality Agreement which is attached hereto as Exhibit A and incorporated
---------
herein by reference.
-4-
3. Other Businesses. During the Employment Period, Executive agrees that
----------------
he will not, directly or indirectly except with the express written consent of
the Board, become engaged in, render services for, or permit his name to be used
in connection with, or directly or indirectly counsel or consult with, any
business other than the business of the Company and its affiliates.
4. Noncompetition.
--------------
(a) Executive agrees that, with respect to the Current Restricted
Business (as defined on Exhibit B hereto):
---------
(i) During the term he performs services for the Company
and for a period of [*] after the termination thereof (for any
reason), he will not interfere with the relationship of the
Company and any employee, agent or representative.
(ii) During the term he performs services for the Company
and for a period of [*] after the termination thereof (for any
reason), he will not directly or indirectly interfere with the
relationships of the Company with customers, dealers,
distributors, vendors or sources of supply.
(iii) Executive further agrees that during the term he
performs services for the Company and for a period of [*] after
the termination thereof (for any reason) he will not directly or
indirectly own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership,
management, operation or control of, any Current Restricted
Business worldwide.
(b) Executive agrees that, with respect to an Alternative Restricted
Business (as defined on Exhibit B hereto):
---------
(i) During the term he performs services for the Company
and for a period of [*] after the termination thereof (for any
reason), he will not interfere with the relationship of the
Company and any employee, agent or representative.
(ii) During the term he performs services for the Company
and for a period of [*] after the termination thereof (for any
reason), he will not directly or indirectly interfere with the
relationships of the Company with customers, dealers,
distributors, vendors or sources of supply.
(iii) Executive further agrees that during the term he
performs services for the Company and for a period of [*] after
the termination thereof (for any reason) he will not directly or
indirectly own, manage,
-------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
-5-
operate, control, be employed by, participate in, or be connected
in any manner with the ownership, management, operation or
control of, any Alternative Restricted Business worldwide.
(c) After discussing the matter with Executive, the Company shall
have the right, subject to applicable law, to inform any other third party that
the Company reasonably believes to be, or to be contemplating, participating
with Executive or receiving from Executive assistance in violation of this
Agreement, of the terms of this Agreement and of the rights of the Company
hereunder, and that participation by any such third party with Executive in
activities in violation of this Section 4 may give rise to claims by the Company
against such third party.
5. Right of First Offer.
--------------------
(a) If, during the two (2) year period from the date thereof, the Company
shall desire to effect a sale, disposition or other transfer (a "Transfer") of
the New York operations of the Company consisting of the business of MetroBeat
as currently being, or as may in the future be, conducted (the "New York
Operations"), then the Company shall first submit a notice (the "Offering
Notice") to the Executive specifying all of the material terms of the proposed
Transfer, including the price being requested and the name and address of the
proposed transferee (if any).
(b) Within 15 days after receipt of an Offering Notice, Executive shall
give notice to the Company stating whether Executive elects to acquire all of
the New York Operations on the terms set forth in the Offering Notice. If
Executive does not elect to acquire all of the New York Operations on the terms
set forth in the Offering Notice, the Company may, for a period of 180 days from
the end of such 15-day period, effect a Transfer of the New York Operations to a
third party on terms no more favorable than the terms set forth in the Offering
Notice. If the Company fails to effect such a Transfer to a third party within
such 180-day period, the Company shall thereafter be required to submit another
Offering Notice in order to effect any Transfer of the New York Operations under
this Section 5.
(c) The right of first offer set forth in this Section 5 shall be
nonassignable by Executive.
(d) Notwithstanding anything to the contrary in this Section 5, Perfect
Market shall not be under any obligation to effect a Transfer.
6. Termination of Agreement. This Agreement shall terminate on the
------------------------
second anniversary of the date hereof.
7. General Provisions.
------------------
(a) Notices. Any notice provided for in this Agreement must be in
-------
writing and must be either personally delivered, or mailed by first class mail
(postage prepaid and return
-6-
receipt requested) or sent by reputable overnight courier service, to the
recipient at the address below indicated:
To the Company:
PerfectMarket, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
To Executive:
At Executive's last known
address as listed with
the Company
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or if mailed, five days after so mailed.
(b) Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision in any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein except that
any court having jurisdiction shall have the power to reduce the duration, area
or scope of such invalid, illegal or unenforceable provision and, in its reduced
form, it shall be enforceable.
(c) Complete Agreement. This Agreement (with all exhibits hereto)
------------------
and the Reorganization Agreement, which agreement is incorporated herein by
reference, embodies the complete agreement and understanding between the parties
and supersedes and preempts any prior understandings, agreements or
representations by or between the parties, written or oral, which may have
related to the subject matter hereof in any way.
(d) Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Executive and the Company [and,
with respect to Sections 1(d)(i) and 1(e), the Shareholder], except that
Executive may not assign any of his rights or obligations under this Agreement.
The Company may assign its rights under this Agreement, as security, to any
lender to the Company, and in the event of a sale of the stock, or substantially
all of the stock, of the Company, or consolidation or merger of the Company into
another corporation
-7-
or entity, or the sale of substantially all of the operating assets of the
Company to another corporation, entity or individual, the Company may assign its
rights and obligations under this Agreement to its successor-in-interest, in
which event such successor-in-interest shall be deemed to have acquired all
rights and assumed all obligations of the Company hereunder.
(e) CHOICE OF LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
-------------
VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL
LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF CALIFORNIA.
(f) Remedies. Each of the parties to this Agreement will be entitled
--------
to enforce his or its rights under this Agreement specifically, to recover
damages (including, without limitation, reasonable fees and expenses of counsel)
by reason of any breach of any provision of this Agreement and to exercise all
other rights existing in his or its favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach or
threatened breach of the provisions of this Agreement and that any party may in
his or its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief in order to
enforce or prevent any violations of the provisions of this Agreement.
(g) Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of Executive and a
majority of the Board.
(h) Absence of Conflicting Agreements. Executive hereby warrants and
---------------------------------
covenants that his employment by the Company does not result in a breach of the
terms, conditions or provisions of any agreement to which Executive is subject.
(i) Survival. No termination of Executive's employment by either or
--------
both parties shall reduce or terminate Executive's covenants and agreements in
paragraphs 2 and 4.
-8-
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered on the day and year first above written.
PERFECTMARKET, INC.
By:____________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: President
EXECUTIVE
_______________________________
▇▇▇▇ ▇▇▇▇▇▇
SHAREHOLDER
_______________________________
▇▇▇▇▇▇ ▇▇▇▇▇
(EMPLOYMENT AGREEMENT SIGNATURE PAGE - ▇▇▇▇ ▇▇▇▇▇▇)
-9-
EXHIBIT A
EMPLOYEE INVENTIONS AND CONFIDENTIALITY AGREEMENT
-10-
EXHIBIT B
DEFINITIONS OF CURRENT RESTRICTED BUSINESS
AND ALTERNATIVE RESTRICTED BUSINESS
As used in Section 4, the term "Current Restricted Business" shall mean the
business of providing business directory listings, events listings and community
and civic information in electronic form or any other business in which the
Company actively engages as of the date of this Agreement.
As used in Section 4, the term "Alternative Restricted Business" shall mean
any business in which the Company may actively engage from time to time during
the Employment Period, but which is not included in the definition of Current
Restricted Business above.
-11-
EXHIBIT I
---------
INVESTMENT REPRESENTATION STATEMENT
Pursuant to the Agreement and Plan of Reorganization by and among
PerfectMarket, Inc., a Delaware corporation ("PerfectMarket"), MB Acquisition
Corporation, a New York corporation and wholly-owned subsidiary of PerfectMarket
("Sub"), MetroBeat, Inc., a New York corporation ("MetroBeat"), and a
shareholder of MetroBeat, PerfectMarket is acquiring MetroBeat in a merger of
Sub with and into MetroBeat (the "Merger") and the former shareholders of
MetroBeat are acquiring certain securities of PerfectMarket and rights to
acquire securities (the "Securities") of PerfectMarket upon the occurrence of
certain events. In connection with the acquisition of the Securities in the
Merger, the undersigned shareholder of MetroBeat (the "Shareholder") represents
to PerfectMarket as follows:
(a) Shareholder is aware of PerfectMarket's business affairs and
financial condition and has acquired sufficient information about PerfectMarket
to reach an informed and knowledgeable decision to acquire the Securities.
Shareholder is acquiring these Securities for investment for Shareholder's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(b) Shareholder acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Shareholder's investment intent as expressed herein. In this
connection, Shareholder understands that, in the view of the Securities and
Exchange Commission, the statutory basis for such exemption may be unavailable
if Shareholder's representation was predicated solely upon a present intention
to hold these Securities for the minimum capital gains period specified under
tax statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Shareholder further understands that the Securities must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Shareholder
further understands that no public market currently exists for the securities of
PerfectMarket, and that even if a public market exists at the time the
Shareholder wishes to sell the Securities, PerfectMarket may not be satisfying
the current public information requirements of Rule 144 as promulgated under the
Securities Act. Shareholder further acknowledges and understands that
PerfectMarket is under no obligation to register the Securities. Shareholder
understands that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel
satisfactory to PerfectMarket and any other legend required under applicable
state securities laws.
(c) Shareholder is familiar with the provisions of Rule 144 which,
in substance, permit limited public resale of "restricted securities"
acquired, directly or indirectly from the issuer thereof, in a non-public
offering subject to the satisfaction of certain conditions set forth in Rule
144, which requires the resale to occur not less than two years after the
later of the date the Securities were sold by PerfectMarket or the date the
Securities were sold by an affiliate of PerfectMarket, within the meaning of
Rule 144; and, in the case of acquisition of the Securities by an affiliate,
or by a non-affiliate who subsequently holds the Securities less than three
years.
(e) Shareholder further understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
are not exclusive, the Staff of the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that
such persons and their respective brokers who participate in such transactions
do so at their own risk. Shareholder understands that no assurances can be
given that any such other registration exemption will be available in such
event.
Signature of Shareholder:
/s/ ▇▇▇▇ ▇▇▇▇▇▇
___________________________________
Date: June 12, 1996
(c) Shareholder is familiar with the provisions of Rule 144 which,
in substance, permit limited public resale of "restricted securities"
acquired, directly or indirectly from the issuer thereof, in a non-public
offering subject to the satisfaction of certain conditions set forth in Rule
144, which requires the resale to occur not less than two years after the
later of the date the Securities were sold by PerfectMarket or the date the
Securities were sold by an affiliate of PerfectMarket, within the meaning of
Rule 144; and, in the case of acquisition of the Securities by an affiliate,
or by a non-affiliate who subsequently holds the Securities less than three
years.
(e) Shareholder further understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
are not exclusive, the Staff of the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that
such persons and their respective brokers who participate in such transactions
do so at their own risk. Shareholder understands that no assurances can be
given that any such other registration exemption will be available in such
event.
Signature of Shareholder:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
___________________________________
Date: June 5, 1996
AMENDMENT #1 TO
AGREEMENT AND PLAN OF REORGANIZATION
This Amendment (the "Amendment") to the Agreement and Plan of
Reorganization, dated May 31, 1996, by and among PerfectMarket, Inc., a
Delaware corporation ("PerfectMarket"), MB Acquisition Corporation, a New
York corporation ("MB Acquisition"), MetroBeat, Inc., a New York corporation
("MetroBeat"), ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Agreement"), is made as of
June 21, 1996 among the same parties.
RECITAL
-------
WHEREAS, the parties entered into the Agreement pursuant to which MB
Acquisition shall be merged with and into MetroBeat such that MetroBeat
becomes a wholly-owned subsidiary of PerfectMarket; and
WHEREAS, the Agreement provided for the issuance by PerfectMarket of
Series B Preferred Stock and/or cash with an aggregate value of [*] ("Purchase
Price"); and
WHEREAS, the parties desire to amend the Agreement to provide that the
Purchase Price shall be decreased to [*].
NOW, THEREFORE, in consideration of the foregoing, the parties agree
as follows:
1. AMENDMENTS TO THE AGREEMENT. The parties hereby agree that the
---------------------------
Agreement shall be amended as follows:
1.1 Amendment to Section 2.2(e)(i). Section 2.2(e)(i) of the
------------------------------
Agreement shall be deleted in its entirety and the following shall be
substituted in lieu thereof:
"(i) Subject to Section 2.2(e)(iii) below, the Aggregate
Consideration to be paid by PerfectMarket pursuant to the Merger shall
[*]."
-------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
1.2 Amendment to Section 2.2(e)(iii). Section 2.2(e)(iii)
--------------------------------
of the Agreement shall be deleted in its entirety and the following shall be
substituted in lieu thereof.
"(i) PerfectMarket shall issue a minimum of [*] shares
and a maximum of [*] shares of its capital stock (as adjusted for
stock splits, stock dividends and similar recapitalizations of
PerfectMarket) to the shareholders of MetroBeat pursuant to this
Section 2.2. If the shareholders elect cash for any portion of the
Final Payment pursuant to Section 2.2(e)(ii), then both the minimum of
[*] shares and the maximum of [*] shares shall be reduced by the
number of shares equal to such minimum or maximum multiplied by the
percentage equal to the amount of the cash payment elected by the
shareholders as the numerator, and $[*] as the denominator. Such an
adjustment shall not be applicable to any portion of the Final Payment
PerfectMarket elects to make in cash. At the time PerfectMarket shall
be obligated to deliver a cumulative aggregate amount to the
shareholders of MetroBeat of [*] shares of capital stock in accordance
with the provisions of this Section 2.2(e), all payment obligations
of PerfectMarket in excess of such amount shall immediately terminate.
In the event that PerfectMarket's payment obligations as calculated
through the Final Payment shall be less than [*] shares of capital
stock, PerfectMarket shall issue as part of the Final Payment such
additional number of shares of capital stock as required such that the
cumulative aggregate shares issued pursuant to this Section 2.2(e)
shall equal [*] shares."
1.3 Amendment to Section 5.10. Section 5.10 of the Agreement
-------------------------
shall be deleted in its entirety and the following shall be substituted in
lieu thereof:
"Within thirty (30) days after the Closing, PerfectMarket agrees to
pay the liabilities of MetroBeat to Davies, ▇▇▇▇▇▇ ▇▇▇▇▇ and the
American Broadcasting Corporation in the aggregate amount not to
exceed $[*]
2. MISCELLANEOUS.
-------------
2.1 Successors and Assigns. Except as otherwise expressly
----------------------
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
2.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS ENTERED INTO AND WHOLLY TO BE PERFORMED WITHIN THE STATE OF
CALIFORNIA BY CALIFORNIA RESIDENTS.
2.3 Waivers and Amendments. The rights and obligations of
----------------------
the parties under this Agreement may be amended, waived or discharged (either
generally or in a particular instance, either retroactively or prospectively,
and either for a specified period of time or indefinitely) only by a written
instrument effecting such amendment, waiver or discharge signed by the Company
and by Purchasers holding at least a majority of the Shares. Any amendment or
waiver effected in
-------------
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
-2-
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities and the Company.
2.4 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
2.5 Severability of this Agreement. If any provision of this
------------------------------
Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
2.6 Delays or Omissions. It is agreed that no delay or omission to
-------------------
exercise any right, power or remedy accruing to any party upon any breach or
default of any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any such breach
or default, or any acquiescence therein, or of 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. It is further agreed that any waiver, permit, consent or approval
of any kind or character of any breach or default under this Agreement, or any
waiver of any provisions or conditions of this Agreement must be in writing
and shall be effective only to the extent specifically set forth in writing
and that all remedies, either under this Agreement, by law or otherwise, shall
be cumulative and not alternative.
2.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
-3-
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
PERFECTMARKET, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇, III
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇, President and Chief
Executive Officer
MB ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇, III
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇, President
METROBEAT, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇, President
PRINCIPAL SHAREHOLDER
/s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
[AMENDMENT]
-4-