Exhibit 2.1
================================================================================
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
by and among:
eBay Inc.,
a Delaware corporation;
Certain Companies Related to eBay Inc.,
▇▇▇▇▇, Inc.,
an Indiana corporation;
Certain Companies Related to ▇▇▇▇▇, Inc.,
and
Certain Stockholders of ▇▇▇▇▇, Inc. and Related Companies
__________________________
Dated as of May 17, 1999
__________________________
================================================================================
Table Of Contents
Page
SECTION 1. Description of Transaction................................. 2
1.1 Merger of Merger Subs into the Companies................... 2
1.2 Effect of the Mergers...................................... 2
1.3 Consideration.............................................. 2
1.4 Closing; Effective Time.................................... 3
1.5 Exchange of Certificates................................... 3
1.6 Tax Consequences........................................... 4
1.7 Accounting Treatment....................................... 4
1.8 Further Action............................................. 4
1.9 Articles of Incorporation and Bylaws; Directors and
Officers................................................... 4
SECTION 2. Representations and Warranties of the Companies and the
Selling Stockholders....................................... 4
2.1 Due Organization; No Subsidiaries; Etc..................... 5
2.2 Articles of Incorporation and Bylaws; Records.............. 5
2.3 Capitalization, Etc........................................ 6
2.4 Financial Statements....................................... 6
2.5 Absence of Changes......................................... 6
2.6 Title to Assets Other than Real Property Interests......... 8
2.7 Receivables................................................ 8
2.8 Equipment; Leasehold....................................... 8
2.9 Title to Real Property..................................... 9
2.10 Proprietary Assets......................................... 9
2.11 Year 2000 Compliance....................................... 10
2.12 Contracts.................................................. 10
2.13 Liabilities................................................ 12
2.14 Compliance with Legal Requirements......................... 12
2.15 Governmental Authorizations................................ 12
2.16 Tax Matters................................................ 12
2.17 Employee and Labor Matters; Benefit Plans.................. 13
2.18 Environmental Matters...................................... 15
i.
TABLE OF CONTENTS
(CONTINUED)
Page
2.19 Insurance.................................................. 15
2.20 Related Party Transactions................................. 15
2.21 Legal Proceedings; Orders.................................. 16
2.22 Authority; Binding Nature of Agreement..................... 16
2.23 Non-Contravention; Consents................................ 17
2.24 Full Disclosure............................................ 17
SECTION 3. Representations and Warranties of Parent and Merger Subs... 18
3.1 Corporate Existence and Power.............................. 18
3.2 Authority; Binding Nature of Agreement..................... 18
3.3 No Conflict; Consents...................................... 18
3.4 Valid Issuance............................................. 18
3.5 Merger Subs................................................ 19
SECTION 4. Certain Covenants of the Companies and the Selling
Stockholders............................................... 19
4.1 Access and Investigation................................... 19
4.2 Operation of the Business of the Companies................. 19
4.3 Notification; Updates to Disclosure Schedule............... 20
4.4 No Negotiation............................................. 21
SECTION 5. Additional Covenants of the Parties........................ 21
5.1 Filings and Consents....................................... 21
5.2 Antitrust Notification..................................... 22
5.3 Company Stockholders' Meetings............................. 22
5.4 Public Announcements....................................... 22
5.5 Pooling of Interests....................................... 22
5.6 Affiliate Agreements....................................... 22
5.7 Reasonable Efforts......................................... 23
5.8 Termination of Agreements.................................. 23
5.9 Employee and Related Matters............................... 23
5.10 Restriction on Mortgaging Company Real Properties.......... 23
5.11 Right of First Offer....................................... 23
ii.
TABLE OF CONTENTS
(CONTINUED)
Page
SECTION 6. Conditions Precedent to Obligations of Parent and Merger
Subs....................................................... 24
6.1 Accuracy of Representations................................ 24
6.2 Performance of Covenants................................... 25
6.3 Consents................................................... 25
6.4 Stockholder Approval....................................... 25
6.5 Antitrust Approval......................................... 25
6.6 Agreements and Documents................................... 25
6.7 Absence of Material Adverse Effect......................... 26
6.8 Share Certificates......................................... 26
6.9 FIRPTA Compliance.......................................... 27
6.10 Listing.................................................... 27
6.11 No Restraints.............................................. 27
6.12 No Legal Proceedings....................................... 27
SECTION 7. Conditions Precedent to Obligations of the Selling
Stockholders............................................... 27
7.1 Accuracy of Representations................................ 27
7.2 Performance of Covenants................................... 27
7.3 Antitrust Approval......................................... 27
7.4 Agreements and Documents................................... 27
7.5 Listing.................................................... 28
7.6 No Restraints.............................................. 28
SECTION 8. Termination................................................ 28
8.1 Termination Events......................................... 28
8.2 Termination Procedures..................................... 28
8.3 Effect of Termination...................................... 29
SECTION 9. Indemnification, Etc....................................... 29
9.1 Survival of Representations, Etc........................... 29
9.2 Indemnification by Selling Stockholders.................... 30
9.3 Exclusive Remedy........................................... 30
9.4 Satisfaction of Indemnification Claim...................... 31
iii.
TABLE OF CONTENTS
(CONTINUED)
Page
9.5 No Contribution............................................ 31
9.6 Defense of Third Party Claims.............................. 31
SECTION 10. Miscellaneous Provisions................................... 32
10.1 Selling Stockholders' Agent................................ 32
10.2 Further Assurances......................................... 32
10.3 Fees and Expenses.......................................... 32
10.4 Attorneys' Fees............................................ 32
10.5 Notices.................................................... 32
10.6 Time of the Essence........................................ 33
10.7 Headings................................................... 33
10.8 Counterparts............................................... 33
10.9 Governing Law.............................................. 33
10.10 Successors and Assigns..................................... 33
10.11 Remedies Cumulative; Specific Performance.................. 34
10.12 Waiver..................................................... 34
10.13 Amendments................................................. 34
10.14 Severability............................................... 34
10.15 Parties in Interest........................................ 34
10.16 Entire Agreement........................................... 34
10.17 Waiver of Jury Trial....................................... 34
10.18 Construction............................................... 35
iv.
EXHIBITS AND SCHEDULES
Schedules
Schedule 1 - Share Exchange Table
Schedule 2 - Capitalization Table
Exhibits
Exhibit A - Certain definitions
Exhibit B-1 - Persons to execute Affiliate Agreements
Exhibit B-2 - Form of Affiliate Agreement
Exhibit C - [reserved]
Exhibit D - [reserved]
Exhibit E - Form of FIRPTA Statement
Exhibit F - Form of Release
Exhibit G - Form of Stockholder Representation Letter
Exhibit H - Form of Registration Rights Agreement
Exhibit I - Form of Escrow Agreement
Exhibit J - Form of ▇▇▇▇▇▇ ▇▇▇▇▇ Release
Exhibit K - Form of legal opinion of counsel to the Companies
1.
$4/NOFOLIO
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization ("Agreement") is made
and entered into as of May 17, 1999, by and among: eBay Inc., a Delaware
corporation ("Parent"); Sesame Corporation Number 1, an Indiana corporation and
a wholly owned subsidiary of Parent ("Merger Sub #1"); Sesame Corporation Number
2, an Indiana corporation and a wholly owned subsidiary of Parent ("Merger Sub
#2"), Sesame Corporation Number 3, an Indiana corporation and a wholly owned
subsidiary of Parent ("Merger Sub #3"), Sesame Corporation Number 4, an Indiana
corporation and a wholly owned subsidiary of Parent ("Merger Sub #4"), Sesame
Corporation Number 5, an Indiana corporation and a wholly owned subsidiary of
Parent ("Merger Sub #5") (collectively, the "Merger Subs") and ▇▇▇▇▇, Inc., an
Indiana corporation d/b/a ▇▇▇▇▇ International ("K Inc."), Auburn Cordage, Inc.,
an Indiana corporation ("A.C., Inc."), ACD Auto Sales, Inc., an Indiana
corporation ("ACD Auto"), ▇▇▇▇▇▇▇ School of Auctioneering, Inc., an Indiana
corporation ("RA School") and Classic Advertising & Promotions, Inc., an Indiana
corporation ("Classic Promotion") (K Inc., A.C. Inc, ACD Auto, RA School and
Classic Promotion, collectively, the "Companies") and ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇
▇▇▇▇▇ (the "Selling Stockholders"). Certain other capitalized terms used in
this Agreement are defined in Exhibit A.
Recitals
A. Parent, Merger Sub #1 and K Inc. intend to effect a merger of Merger
Sub #1 into K Inc. in accordance with this Agreement and the Indiana Business
Corporation Law ("Merger #1"). Upon consummation of Merger #1, Merger Sub #1
will cease to exist, and K Inc. will become a wholly owned subsidiary of Parent.
B. Parent, Merger Sub #2 and A.C., Inc. intend to effect a merger of
Merger Sub #2 into A.C., Inc. in accordance with this Agreement and the Indiana
Business Corporation Law ("Merger #2"). Upon consummation of Merger #2, Merger
Sub #2 will cease to exist, and A.C., Inc. will become a wholly owned subsidiary
of Parent.
C. Parent, Merger Sub #3 and ACD Auto intend to effect a merger of Merger
Sub #3 into ACD Auto in accordance with this Agreement and the Indiana Business
Corporation Law ("Merger #3"). Upon consummation of Merger #3, Merger Sub #3
will cease to exist, and ACD Auto will become a wholly owned subsidiary of
Parent.
D. Parent, Merger Sub #4 and RA School intend to effect a merger of Merger
Sub #4 into RA School in accordance with this Agreement and the Indiana Business
Corporation Law ("Merger #4"). Upon consummation of Merger #4, Merger Sub #4
will cease to exist, and RA School will become a wholly owned subsidiary of
Parent.
E. Parent, Merger Sub #5 and Classic Advertising intend to effect a merger
of Merger Sub #5 into Classic Advertising in accordance with this Agreement and
the Indiana Business Corporation Law ("Merger #5"). Upon consummation of Merger
#5, Merger Sub #5
1.
will cease to exist, and Classic Advertising will become a wholly owned
subsidiary of Parent. Merger #1, Merger #2, Merger #3, Merger #4 and Merger #5
are referred to collectively as the "Mergers".
F. It is intended that the Mergers qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Mergers
be treated as a "pooling of interests."
G. This Agreement has been approved by the respective boards of directors
of Parent, each of the Merger Subs and each of the Companies.
Agreement
The parties to this Agreement agree as follows:
SECTION 1. Description of Transaction
1.1 Merger of Merger Subs into the Companies. Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as defined
in Section 1.4),
(a) Merger Sub #1 shall be merged with and into K Inc., and the
separate existence of Merger Sub #1 shall cease. K Inc. will continue as the
surviving corporation in the merger ("Surviving Corporation #1").
(b) Merger Sub #2 shall be merged with and into A.C., Inc., and the
separate existence of Merger Sub #2 shall cease. A.C., Inc. will continue as the
surviving corporation in the merger ("Surviving Corporation #2").
(c) Merger Sub #3 shall be merged with and into ACD Auto, and the
separate existence of Merger Sub #3 shall cease. ACD Auto will continue as the
surviving corporation in the merger ("Surviving Corporation #3").
(d) Merger Sub #4 shall be merged with and into RA Auction, and the
separate existence of Merger Sub #4 shall cease. RA Auction will continue as the
surviving corporation in the merger ("Surviving Corporation #4").
(e) Merger Sub #5 shall be merged with and into Classic Advertising,
and the separate existence of Merger Sub #5 shall cease. Classic Advertising
will continue as the surviving corporation in the merger ("Surviving Corporation
#5").
Surviving Corporation #1, Surviving Corporation #2, Surviving Corporation #3,
Surviving Corporation #4 and Surviving Corporation #5 are referred to
collectively as the "Surviving Corporations".
1.2 Effect of the Mergers. The Mergers shall have the effects set forth
in this Agreement and in the applicable provisions of the Indiana Business
Corporation Law.
2.
1.3 Consideration. All shares of each of the Companies issued and
outstanding immediately prior to the Effective Time shall be converted into, and
become exchangeable for, aggregate consideration equal to the Closing Date
Number of shares of Parent common stock. Such merger consideration shall be
issued in exchange for certificates representing all of the outstanding shares
of the Companies as set forth below:
(i) certificates representing that number of shares of Parent
common stock set forth in the second column of Schedule 1 shall be (A)
issued in the name of the applicable Selling Stockholder referred to in the
first column of Schedule 1 in regard to the stockholdings of such Selling
Stockholder in the Company listed in the fifth column of Schedule 1, and
(B) delivered to such Selling Stockholder in accordance with Section 1.5;
(ii) certificates representing that number of shares of Parent
common stock set forth in the third column of Schedule 1 shall be (A)
issued in the name of the applicable Selling Stockholder referred to in the
first column of Schedule 1 in regard to the stockholdings of such Selling
Stockholder in the Company listed in the fifth column of Schedule 1, and
(B) retained by Parent to be held pursuant to the Escrow Agreement (as
defined in Section 6.6(g)) (the "10% Escrow").
(iii) certificates representing that number of shares of Parent
common stock set forth in the fourth column of Schedule 1 shall be (A)
issued in the name of the applicable Selling Stockholder referred to in the
first column of Schedule 1 in regard to the stockholdings of such Selling
Stockholder in the Company listed in the fifth column of Schedule 1, and
(B) retained by Parent to be held pursuant to the Escrow Agreement (the
"Form 8300 Escrow").
(b) The number of shares of Parent common stock referred to in this
Section 1.3 shall be adjusted as appropriate to reflect stock splits, stock
dividends and other similar changes to Parent common stock from the date hereof
through the Closing Date.
(c) Schedule 1 shall be calculated prior to Closing by the parties
using a method consistent with applicable pooling rules.
1.4 Closing; Effective Time. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley Godward llp, Five ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ at 10:00 a.m.
on a date designated by Parent which date shall be as soon as practicable after
the satisfaction (or, to the extent permitted, waiver) of the conditions set
forth in Sections 6 and 7, but will in no event be earlier than May 18, 1999.
The date on which the Closing takes place is referred to in this Agreement as
the "Closing Date." Contemporaneously with or as promptly as practicable after
the Closing, properly executed agreements of merger conforming to the
requirements of the Indiana Business Corporation Law shall be filed with the
Secretary of State of the State of Indiana. The Mergers shall become effective
at the time specified in such agreements of merger as filed with the Secretary
of State of the State of Indiana (the "Effective Time").
3.
1.5 Exchange of Certificates. At the Closing, each Selling Stockholder
will surrender all of his certificates representing shares of capital stock of
any Company (a "Company Stock Certificate") (properly endorsed for transfer) in
exchange for certificates representing Parent common stock to be delivered to
such Selling Stockholder as soon as practicable after the Closing. If any
Company Stock Certificate shall have been lost, stolen or destroyed, Parent may,
in its discretion and as a condition precedent to the issuance of any
certificate representing Parent common stock, require the owner of such lost,
stolen or destroyed Company Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as Parent may reasonably direct) as
indemnity against any claim that may be made against Parent or any Surviving
Corporation with respect to such Company Stock Certificate.
1.6 Tax Consequences. For federal income tax purposes, the Mergers are
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.7 Accounting Treatment. For accounting purposes, the Mergers are
intended to be treated as a "pooling of interests."
1.8 Further Action. If, at any time after the Closing Date, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Companies or Parent with
full right, title and possession of and to all rights and property of the Merger
Subs and the Companies, the officers and directors of the Surviving Corporations
and Parent shall be fully authorized (in the name of any Merger Sub, in the name
of any Company or otherwise) to take such action.
1.9 Articles of Incorporation and Bylaws; Directors and Officers. Unless
otherwise determined by Parent and the Companies prior to the Effective Time:
(a) the Articles of Incorporation of each Surviving Corporation shall
be the Articles of Incorporation of the respective Merger Sub as in effect
immediately before the Effective Time;
(b) the Bylaws of each Surviving Corporation shall be the Bylaws of
the respective Merger Sub as in effect immediately before the Effective Time;
and
(c) the directors and officers of each Surviving Corporation
immediately after the Effective Time shall be the directors and officers of the
respective Merger Sub immediately before the Effective Time.
1.10 Effect on Capital Stock. At the Effective Time, by virtue of the
Mergers and without any action on the part of any holder of capital stock of the
Companies (a) all equity securities of the Companies will no longer be
outstanding and shall be cancelled and retired and shall cease to exist, and any
certificate formerly representing any of such shares shall thereafter represent
only the right to the merger consideration described in Section 1.3 and (b) each
share of common stock of each of the Merger Subs issued and outstanding
immediately prior to the
4.
Effective Time shall be converted into one share of common stock of the
respective Surviving Corporation.
SECTION 2. Representations and Warranties of the Companies and the Selling
Stockholders
Each of the Companies and each of the Selling Stockholders jointly
and severally represent and warrant, to and for the benefit of the Indemnitees,
as follows:
2.1 Due Organization; No Subsidiaries; Etc.
(a) Each of the Companies is a corporation duly organized, validly
existing and in good standing under the laws of the State of Indiana and has all
necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Company Contracts.
(b) None of the Companies is or has been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1(b) of the
Disclosure Schedule, except where the failure to be so qualified, authorized,
registered or licensed has not had and will not have a Material Adverse Effect
on the Companies. Each of the Companies is in good standing as a foreign
corporation in each of the jurisdictions identified in Part 2.1(b) of the
Disclosure Schedule.
(c) Part 2.1(c) of the Disclosure Schedule accurately sets forth (i)
the names of the members of the board of directors of each Company, and (ii) the
names and titles of the officers of each Company.
(d) None of the Companies owns any controlling interest in any Entity
and, except for the equity interests identified in Part 2.1(d) of the Disclosure
Schedule, none of the Companies has ever owned, beneficially or otherwise, any
shares or other securities of, or any direct or indirect equity interest in, any
Entity. None of the Companies has agreed or is obligated to make any future
investment in or capital contribution to any Entity.
2.2 Articles of Incorporation and Bylaws; Records. Each of the Companies
has delivered to Parent accurate and complete copies of: (1) the articles of
incorporation and bylaws of the Company, including all amendments thereto; (2)
the stock records of the Company; and (3) except as set forth in Part 2.2 of the
Disclosure Schedule, the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise without
a meeting) of the stockholders of the Company, the board of directors of the
Company and all committees of the board of directors of the Company. There has
not been any violation of any of the provisions of any Company's articles of
incorporation or bylaws, and none of the Companies has taken any action that is
inconsistent in any material respect with any resolution adopted by the
respective Company's stockholders, the respective Company's board of directors
or any committee of the respective Company's board of directors. The books of
account, stock records, minute books and other records of all of the Company are
accurate, up-to-date and complete in all material respects.
5.
2.3 Capitalization, Etc.
(a) Schedule 2 sets forth, for each Company, the amount of its
authorized capital stock, the amount of its outstanding capital stock and the
record and beneficial owners of its outstanding capital stock. All of the
outstanding shares of capital stock of each Company have been duly authorized
and validly issued, and are fully paid and non-assessable.
(b) There is no: (i) outstanding subscription, option, call, warrant
or right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of any of the Companies; (ii) outstanding
security, instrument or obligation that is or may become convertible into or
exchangeable for any shares of the capital stock or other securities of any of
the Companies; (iii) Contract under which any Company is or may become obligated
to sell or otherwise issue any shares of its capital stock or any other
securities; or (iv) to the best of the knowledge of the Companies and the
Selling Stockholders, condition or circumstance that may give rise to or provide
a basis for the assertion of a claim by any Person to the effect that such
Person is entitled to acquire or receive any shares of capital stock or other
securities of any Company.
(c) All outstanding shares of common stock of all of the Companies
have been issued and granted in compliance with (i) all applicable securities
laws and other applicable Legal Requirements, and (ii) all requirements set
forth in applicable Contracts.
(d) Except as set forth in Part 2.3 of the Disclosure Schedule, none
of the Companies has repurchased, redeemed or otherwise reacquired any of its
shares of capital stock or other securities. All securities so reacquired by any
Company were reacquired in compliance with (i) all applicable Legal
Requirements, and (ii) all requirements set forth in applicable Contracts.
2.4 Financial Statements.
(a) The Companies have delivered to Parent consolidated balance
sheets of the Companies as of December 31, 1998, 1997, 1996 and 1995, and the
related consolidated income statements of the Companies for the years then ended
(collectively, the "Company Financial Statements").
(b) The Company Financial Statements present fairly the financial
position of the Companies as of the respective dates thereof and the results of
operations of the Companies for the periods covered thereby, as more fully
explained in the letter (the "Letter") delivered by ▇▇▇▇ ▇. ▇▇▇▇▇ to Parent on
the date hereof. The Letter accurately reflects the expenses of the Companies in
1998.
2.5 Absence of Changes. Except as set forth in Part 2.5 of the Disclosure
Schedule, since December 31, 1998:
(a) there has not been any material adverse change in the business,
condition, operations or financial performance of the Companies, taken as a
whole, and, to the best of the knowledge of the Companies and the Selling
Stockholders, no event has occurred
6.
that will, or could reasonably be expected to, have a Material Adverse
Effect on the Companies;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the material assets of
any Company;
(c) none of the Companies has declared, accrued, set aside or paid
any dividend or made any other distribution in respect of any shares of
capital stock, nor has any Company repurchased, redeemed or otherwise
reacquired any shares of its capital stock or other securities;
(d) none of the Companies has sold, issued or authorized the issuance
of (i) any capital stock or other security, (ii) any option or right to
acquire any capital stock or any other security, or (iii) any instrument
convertible into or exchangeable for any capital stock or other security of
any Company;
(e) there has been no amendment to the articles of incorporation or
bylaws of any Company, and none of the Companies has effected or been a
party to any Acquisition Transaction, recapitalization, reclassification of
shares, stock split, reverse stock split or similar transaction;
(f) none of the Companies has formed any subsidiary or acquired any
equity interest or other interest in any other Entity;
(g) none of the Companies has made any capital expenditure that, when
added to all other capital expenditures made on behalf of the Companies
since December 31, 1998, exceeds $500,000;
(h) none of the Companies has (i) entered into or permitted any of
the assets owned or used by it to become bound by any Contract that is or
would constitute a Material Contract (as defined in Section 2.12(a)), or
(ii) amended or prematurely terminated, or waived any material right or
remedy under, any such Contract;
(i) none of the Companies has (i) acquired, leased or licensed any
right or other asset from any other Person, (ii) sold or otherwise disposed
of, or leased or licensed, any right or other asset to any other Person, or
(iii) waived or relinquished any right, except in each case for rights or
other assets acquired, leased, licensed or disposed of in the ordinary
course of business and consistent with the past practices of the Companies;
(j) none of the Companies has written off as uncollectible, or
established any extraordinary reserve with respect to, any account
receivable or other indebtedness;
(k) none of the Companies has made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of
business and consistent with the past practices of the Companies;
7.
(l) none of the Companies has (i) lent money to any Person (other
than pursuant to routine travel advances made to employees in the ordinary
course of business), or (ii) incurred or guaranteed any indebtedness for
borrowed money;
(m) none of the Companies has changed any of its methods of
accounting or accounting practices in any respect;
(n) none of the Companies has made any Tax election;
(o) none of the Companies has commenced or settled any Legal
Proceeding;
(p) none of the Companies has entered into any material transaction
or taken any other material action outside the ordinary course of business
or inconsistent with its past practices; and
(q) none of the Companies has agreed or committed to take any of the
actions referred to in clauses "(c)" through "(p)" above.
2.6 Title to Assets Other than Real Property Interests.
(a) Each of the respective Companies owns, and has good, valid and
marketable title to, all assets purported to be owned by it. Except as set forth
in Part 2.6(a) of the Disclosure Schedule, all of the assets are owned by the
respective Company free and clear of any liens or other Encumbrances, except for
(x) any lien for current taxes not yet due and payable, and (y) minor liens that
have arisen in the ordinary course of business and that do not (in any case or
in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of the Companies, taken as a whole.
(b) Part 2.6(b) of the Disclosure Schedule identifies all assets that
are material to the business of the Companies and that are being leased or
licensed to any Company.
2.7 Receivables. Part 2.7 of the Disclosure Schedule provides an
accurate and complete breakdown and aging of all accounts receivable, notes
receivable and other receivables of all of the Companies as of March 31, 1999.
Except as set forth in Part 2.7 of the Disclosure Schedule, all existing
accounts receivable of any Company (i) represent valid obligations of customers
of the Companies arising from bona fide transactions entered into in the
ordinary course of business, (ii) are current and can (with commercially
reasonable efforts) be collected in full when due, without any counterclaim or
set off (net of an allowance for doubtful accounts not to exceed $100,000 in the
aggregate).
2.8 Equipment; Leasehold.
(a) All material items of equipment and other tangible assets owned
by or leased to the Companies are adequate for the uses to which they are being
put, are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of the Companies' business in the manner in which such
business is currently being conducted.
8.
(b) None of the Companies owns any leasehold interest in real
property, except for the leaseholds created under the real property leases
identified in Part 2.9 of the Disclosure Schedule.
2.9 Title to Real Property. Part 2.9 of the Disclosure Schedule sets
forth a complete list of all real property and interests in real property owned
by the Companies ("Owned Real Property"). Part 2.9 of the Disclosure Schedule
also sets forth a complete list of all real property and interests in real
property leased by any Company ("Leased Real Property"). The applicable Company
has (i) good, marketable and insurable fee title to all Owned Real Property and
(ii) good and valid title to the leasehold estates in all Leased Real Property
(Owned Real Property or Leased Real Property being sometimes referred to herein,
individually, as a "Company Real Property" and, collectively, as "Company Real
Properties"), in each case free and clear of all Encumbrances, except (A) such
as are set forth in Part 2.9 of the Disclosure Schedule, (B) leases, subleases
and similar agreements set forth in Part 2.9 of the Disclosure Schedule, (C) any
lien for current taxes not yet due and payable, (D) easements, covenants, right
s-of-way and other similar restrictions of record that do not (in any case or in
the aggregate) materially detract from the value of the assets subject thereto
or materially impair the operations of the Companies, taken as a whole, (E) any
conditions that may be shown by a current, accurate survey or physical
inspection of any Company Real Property made prior to Closing that do not (in
any case or in the aggregate) materially detract from the value of the assets
subject thereto or materially impair the operations of the Companies, taken as a
whole and (F) minor liens that have arisen in the ordinary course of business
and have been or will be paid promptly and that do not (in any case or in the
aggregate) materially detract from the value of the assets subject thereto or
materially impair the operations of the Companies, taken as a whole.
2.10 Proprietary Assets.
(a) Part 2.10(a)(i) of the Disclosure Schedule sets forth each
trademark, trade name, service ▇▇▇▇, service name, patent, patent application
and copyright owned by any of the Companies. Part 2.10(a)(ii) of the Disclosure
Schedule identifies and provides a brief description of each trademark, trade
name, service ▇▇▇▇, service name, patent, patent application and copyright
licensed to any Company by any Person (except for any trademark, trade name,
service ▇▇▇▇, service name, patent, patent application and copyright that is
licensed to a Company under any third party software license generally available
to the public at a cost of less than $10,000), and identifies the license
agreement under which such trademark, trade name, service ▇▇▇▇, service name,
patent, patent application and copyright is being licensed to the respective
Company. Except as set forth in Part 2.10(a)(iii) of the Disclosure Schedule,
the respective Company has good, valid and marketable title to all of the
Company Proprietary Assets identified in Parts 2.10(a)(i) of the Disclosure
Schedule, free and clear of all liens and other Encumbrances, and has a valid
right to use all Proprietary Assets identified in Part 2.10(a)(ii) of the
Disclosure Schedule. Except as set forth in Part 2.10(a)(iv) of the Disclosure
Schedule, none of the Companies has developed jointly with any other Person any
Company Proprietary Asset with respect to which such other Person has any
rights.
(b) The Companies, collectively, have taken all measures and
precautions necessary to protect and maintain the confidentiality and secrecy of
all Company Proprietary
9.
Assets (except Company Proprietary Assets whose value would be unimpaired by
public disclosure) and otherwise to maintain and protect the value of all
Company Proprietary Assets. Except as set forth in Part 2.10(b) of the
Disclosure Schedule, the Company has not (other than pursuant to license
agreements identified in Part 2.12 of the Disclosure Schedule) disclosed or
delivered to any Person, or permitted the disclosure or delivery to any Person
of, (i) the source code, or any portion or aspect of the source code, of any
Company Proprietary Asset, or (ii) the object code, or any portion or aspect of
the object code, of any Company Proprietary Asset.
(c) None of the Company Proprietary Assets infringes or conflicts
with any Proprietary Asset owned or used by any other Person. None of the
Companies is infringing, misappropriating or making any unlawful use of, and
none of the Companies has at any time infringed, misappropriated or made any
unlawful use of, or received any notice or other communication of any actual or
alleged infringement, misappropriation or unlawful use of, any Proprietary Asset
owned or used by any other Person. To the best of the knowledge of the Companies
and the Selling Stockholders, no other Person is infringing, misappropriating or
making any unlawful use of, and no Proprietary Asset owned or used by any other
Person infringes or conflicts with, any Company Proprietary Asset.
(d) Except as set forth in Part 2.10(d) of the Disclosure Schedule,
(i) none of the Companies has licensed any of the Company Proprietary Assets to
any Person on an exclusive basis, and (ii) none of the Companies has entered
into any covenant not to compete or Contract limiting its ability to exploit
fully any of its Proprietary Assets or to transact business in any market or
geographical area or with any Person.
2.11 Year 2000 Compliance. Except as set forth in Part 2.11 of the
Disclosure Schedule, the computer systems and other applicable Proprietary
Assets of the Companies are Year 2000 Compliant.
2.12 Contracts.
(a) Part 2.12 of the Disclosure Schedule identifies:
(i) each Company Contract relating to the employment of, or the
performance of services by, any employee, consultant or independent
contractor;
(ii) each Company Contract imposing any restriction on the
Company's right or ability (A) to compete with any other Person or (B) to
transact business or deal in any other manner with any other Person;
(iii) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
(iv) each Company Contract relating to the acquisition, issuance
or transfer of any securities;
(v) each standard form of Contract relating to (i) the
possession of assets of third parties held by any of the Companies or (ii)
the consignment of any assets;
10.
(vi) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses,
costs or liabilities;
(vii) each Company Contract with any Related Party (as defined
in Section 2.20);
(viii) each Company Contract with a corporate or similar sponsor;
(ix) each Company Contract pursuant to which any Company has
agreed to conduct an auction in the future;
(x) any other Company Contract that contemplates or involves
(A) the payment or delivery of cash or other consideration in an amount or
having a value in excess of $100,000 in the aggregate, or (B) the
performance of services having a value in excess of $100,000 in the
aggregate, in each case other than Contracts that have a term of less than
60 days or that may be terminated by the Company (without penalty) within
60 days after the delivery of a termination notice by the Company.
(Contracts in the respective categories described in clauses "(i)" through "(x)"
above are referred to in this Agreement as "Material Contracts.")
(b) The Companies have delivered to Parent accurate and complete
copies of all written Contracts identified in Part 2.12 of the Disclosure
Schedule, including all amendments thereto. Part 2.12 of the Disclosure Schedule
provides an accurate description of the terms of each Material Contract that is
not in written form. Each Contract identified in Part 2.12 of the Disclosure
Schedule is valid and in full force and effect, and, to the best of the
knowledge of the Companies and the Selling Stockholders, is enforceable by the
respective Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
(c) Except as set forth in Part 2.12 of the Disclosure Schedule:
(i) none of the Companies has violated or breached, or
committed any default under, any Company Contract, and, to the best of the
knowledge of the Companies and the Selling Stockholders, no other Person
has violated or breached, or committed any default under, any Company
Contract;
(ii) to the best of the knowledge of the Companies and the
Selling Stockholders, no event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or
could reasonably be expected to, (A) result in a violation or breach of any
of the provisions of any Company Contract, (B) give any Person the right to
declare a default or exercise any remedy under any Company Contract, (C)
give any Person the right to accelerate the maturity or performance of any
Company Contract, or (D) give any Person the right to cancel, terminate or
modify any Company Contract;
11.
(iii) since December 31, 1998, none of the Companies has
received any notice or other communication regarding any actual or possible
violation or breach of, or default under, any Company Contract; and
(iv) none of the Companies has waived any of its material rights
under any Material Contract.
2.13 Liabilities. None of the Companies has accrued, contingent or other
liabilities of any nature, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (a)
liabilities identified as such in the "liabilities" column of the Interim
Balance Sheet; (b) accounts payable or accrued salaries that have been incurred
by any of the Companies since March 30, 1999 in the ordinary course of business
and consistent with the past practices of the Companies; (c) liabilities under
the Company Contracts identified in Part 2.12 of the Disclosure Schedule, to the
extent the nature and magnitude of such liabilities can be specifically
ascertained by reference to the text of such Company Contracts; and (d) the
liabilities identified in Part 2.13 of the Disclosure Schedule.
2.14 Compliance with Legal Requirements. Each of the Companies is, and
has at all times since December 31, 1995 been, in compliance in all material
respects with all applicable Legal Requirements. Except as set forth in Part
2.14 of the Disclosure Schedule, since December 31, 1995, none of the Companies
has received any notice or other communication from any Governmental Body
regarding any actual or possible violation of, or failure to comply with, any
Legal Requirement.
2.15 Governmental Authorizations. Part 2.15 of the Disclosure Schedule
identifies each Governmental Authorization held by any of the Companies, and the
Companies have delivered to Parent accurate and complete copies of all
Governmental Authorizations identified in Part 2.15 of the Disclosure Schedule.
The Governmental Authorizations identified in Part 2.15 of the Disclosure
Schedule are valid and in full force and effect, and collectively constitute all
Governmental Authorizations necessary to enable the Companies to conduct their
business in the manner in which their business is currently being conducted.
Each of the Companies is, and at all times since December 31, 1995 has been, in
substantial compliance with the terms and requirements of the respective
Governmental Authorizations identified in Part 2.15 of the Disclosure Schedule.
Since December 31, 1995, none of the Companies has received any notice or other
communication from any Governmental Body regarding (a) any actual or possible
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization.
2.16 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any of
the Companies with any Governmental Body with respect to any taxable period
ending on or before the Closing Date (the "Company Returns") (i) have been or
will be filed on or before the applicable due date (including any extensions of
such due date), and (ii) have been, or will be
12.
when filed, accurately and completely prepared in all material respects in
compliance with all applicable Legal Requirements. All amounts shown on the
Company Returns to be due on or before the Closing Date have been or will be
paid on or before the Closing Date. The Companies have delivered to Parent
accurate and complete copies of all Company Returns filed since December 31,
1993 that have been requested by Parent.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof. The Companies will establish, in the ordinary course of business and
consistent with its past practices, reserves adequate for the payment of all
Taxes for the period from December 31, 1998 through the Closing Date, and the
Companies will disclose the dollar amount of such reserves to Parent on or prior
to the Closing Date.
(c) Except as set forth in Part 2.16(c) of the Disclosure Schedule,
there have been no examinations or audits of any Company Return. The Companies
have delivered to Parent accurate and complete copies of all audit reports and
similar documents (to which the Companies have access) relating to the Company
Returns. Except as set forth in Part 2.16(c) of the Disclosure Schedule, no
extension or waiver of the limitation period applicable to any of the Company
Returns has been granted (by any of the Companies or any other Person), and no
such extension or waiver has been requested from any of the Companies.
(d) Except as set forth in Part 2.16(d) of the Disclosure Schedule,
no claim or Proceeding is pending or has been threatened against or with respect
to any of the Companies in respect of any Tax. There are no unsatisfied
liabilities for Taxes (including liabilities for interest, additions to tax and
penalties thereon and related expenses) with respect to any notice of deficiency
or similar document received by any of the Companies with respect to any Tax
(other than liabilities for Taxes asserted under any such notice of deficiency
or similar document that are being contested in good faith by one of the
Companies and with respect to which adequate reserves for payment have been
established). There are no liens for Taxes upon any of the assets of any of the
Companies except liens for current Taxes not yet due and payable. None of the
Companies has entered into or become bound by any agreement or consent pursuant
to Section 341(f) of the Code. None of the Companies has been, or will be,
required to include any adjustment in taxable income for any tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of any of the Companies that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the
Code. The Company is not, and has never been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or similar
Contract.
(f) ACD Auto is and at all times since its incorporation has been a
duly qualified S corporation for federal and applicable state income tax
purposes.
13.
2.17 Employee and Labor Matters; Benefit Plans.
(a) Part 2.17(a) of the Disclosure Schedule identifies each salary,
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance pay, termination pay, hospitalization, medical, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by any of the
Companies for the benefit of any employee of the Companies ("Employee").
(b) Except as set forth in Part 2.17(a) of the Disclosure Schedule,
none of the Companies maintains, sponsors or contributes to, and, to the best of
the knowledge of the Companies and the Selling Stockholders, none or the
Companies has at any time in the past maintained, sponsored or contributed to,
any employee pension benefit plan for the benefit of Employees or former
Employees (a "Pension Plan").
(c) The Companies maintain, sponsor or contribute only to those
employee welfare benefit plans for the benefit of Employees or former Employees
that are described in Part 2.17(c) of the Disclosure Schedule (the "Welfare
Plans").
(d) With respect to each Plan, the respective Company has delivered
to Parent: (i) an accurate and complete copy of such Plan (including all
amendments thereto) and (ii) an accurate and complete copy of all reports,
summary plan descriptions, material employee communications, trust or other
funding agreements, financial statements and Contract relating to or with
respect to such Plan;
(e) Except as set forth in Part 2.17(e) of the Disclosure Schedule,
no Welfare Plan provides death, medical or health benefits (whether or not
insured) with respect to any current or former Employee after any such
Employee's termination of service (other than (i) benefit coverage mandated by
applicable law, (ii) deferred compensation benefits accrued as liabilities on
the Interim Balance Sheet, and (iii) benefits the full cost of which are borne
by current or former Employees (or the Employees' beneficiaries)).
(f) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements.
(g) Except as set forth in Part 2.17(g) of the Disclosure Schedule,
neither the execution, delivery or performance of this Agreement, nor the
consummation of the Mergers or any of the other transactions contemplated by
this Agreement, will result in any payment (including any bonus, golden
parachute or severance payment) to any current or former Employee or director of
any of the Companies (whether or not under any Plan), or materially increase the
benefits payable under any Plan, or result in any acceleration of the time of
payment or vesting of any such benefits.
(h) Part 2.17(h) of the Disclosure Schedule contains a list of all
salaried employees of the Companies as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements),
14.
their dates of employment and their positions. None of the Companies is a party
to any collective bargaining contract or other Contract with a labor union
involving any of its Employees. All of the employees of the Companies are "at
will" employees.
(i) Except as set forth in Part 2.17(j) of the Disclosure Schedule,
each of the Companies has good labor relations, and none of the Selling
Stockholders has any reason to believe that (i) the consummation of the Mergers
or any of the other transactions contemplated by this Agreement will have a
material adverse effect on the labor relations of the Companies, or (ii) any of
the employees of the Companies intends to terminate his or her employment with
any of the Companies.
2.18 Environmental Matters. Each of the Companies is in compliance in
all material respects with all applicable Environmental Laws, which compliance
includes the possession by the applicable Company of all permits and other
Governmental Authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof. None of the Companies has
received any notice or other communication (in writing or otherwise), whether
from a Governmental Body, citizens group, employee or otherwise, that alleges
that the Company is not in compliance with any Environmental Law, and, to the
best of the knowledge of the Companies and Selling Stockholders, there are no
circumstances that may prevent or interfere with the compliance by the Companies
with any Environmental Law in the future. To the best of the knowledge of the
Companies and the Selling Stockholders, no current or prior owner of any
property leased or controlled by any of the Company has received any notice or
other communication (in writing or otherwise), whether from a Government Body,
citizens group, employee or otherwise, that alleges that such current or prior
owner or any of the Companies is not in compliance with any Environmental Law.
All Governmental Authorizations currently held by any of the Companies pursuant
to Environmental Laws are identified in Part 2.18 of the Disclosure Schedule.
There has been no release or discharge of any Materials of Environmental Concern
that would or would reasonably be expected to give rise to an obligation by any
Company to effect any environmental cleanup or remediation.
2.19 Insurance. Part 2.19 of the Disclosure Schedule identifies all
insurance policies maintained by, at the expense of, or for the benefit of, any
of the Companies and identifies any material claims currently being made
thereunder. Part 2.19 of the Disclosure Schedule identifies for each such
policy, the amount of insurance coverage, the type of coverage and the
applicable deductible. Each of the insurance policies identified in Part 2.19 of
the Disclosure Schedule is in full force and effect. Since December 31, 1995,
none of the Companies has received any notice or other communication regarding
any actual or possible (a) cancellation or invalidation of any insurance policy,
(b) refusal of any coverage or rejection of any claim under any insurance
policy, or (c) material adjustment in the amount of the premiums payable with
respect to any insurance policy.
2.20 Related Party Transactions.
(a) Except as set forth in Part 2.20(a) of the Disclosure Schedule:
(a) no Related Party has, and no Related Party has at any time since December
31, 1995 had, any direct or indirect interest in any material asset used in or
otherwise relating to the business of the
15.
Companies; (b) no Related Party is, or has at any time since December 31, 1995
been, indebted to any of the Companies; (c) since December 31, 1995, no Related
Party has entered into, or has had any direct or indirect financial interest in,
any material Contract, transaction or business dealing involving any of the
Companies; (d) no Related Party is competing, or has at any time since December
31, 1995 competed, directly or indirectly, with any of the Companies; and (e) no
Related Party has any claim or right against any of the Companies (other than
rights to receive compensation for services performed as an employee of the
Company). (For purposes of this Section 2.20 each of the following shall be
deemed to be a "Related Party": (i) each of the Selling Stockholders; (ii) each
individual who is, or who has at any time since December 31, 1995 been, an
officer of any of the Companies; (iii) each member of the immediate family of
each of the individuals referred to in clauses "(i)" and "(ii)" above; and (iv)
any trust or other Entity (other than one of the Companies) in which any one of
the individuals referred to in clauses "(i)", "(ii)" and "(iii)" above holds (or
in which more than one of such individuals collectively hold), beneficially or
otherwise, a material voting, proprietary or equity interest.)
(b) Part 2.20(b) of the Disclosure Schedule sets forth an accurate
description of any transfer of capital stock of any of the Companies that has
ever occurred between or among any existing or former stockholders of the
Companies.
2.21 Legal Proceedings; Orders.
(a) Except as set forth in Part 2.21 of the Disclosure Schedule,
there is no pending Legal Proceeding, and (to the best of the knowledge of the
Companies and the Selling Stockholders) no Person has threatened to commence any
Legal Proceeding: (i) that involves any of the Companies or any of the assets
owned or used by any of the Companies; or (ii) that challenges, or that may have
the effect of preventing, delaying, making illegal or otherwise interfering
with, the Mergers or any of the other transactions contemplated by this
Agreement. To the best of the knowledge of the Companies and the Selling
Stockholders, except as set forth in Part 2.21 of the Disclosure Schedule, no
event has occurred, and no claim, dispute or other condition or circumstance
exists, that will, or that could reasonably be expected to, give rise to or
serve as a basis for the commencement of any such Legal Proceeding.
(b) Except as set forth in Part 2.21 of the Disclosure Schedule, no
Legal Proceeding has ever been commenced by or has ever been pending against any
of the Companies.
(c) There is no order, writ, injunction, judgment or decree to which
any of the Companies, or any of the assets owned or used by any of the
Companies, is subject. None of the Selling Stockholders is subject to any order,
writ, injunction, judgment or decree that relates to the business of the
Companies or to any of the assets owned or used by any of the Companies.
2.22 Authority; Binding Nature of Agreement. Each of the Companies and
each of the Selling Stockholders has the absolute and unrestricted right, power
and authority to enter into and to perform its obligations under this Agreement;
and the execution, delivery and performance by each of the Companies of this
Agreement have been duly authorized by all necessary action on the part of each
of the Companies and their respective board of directors.
16.
This Agreement constitutes the legal, valid and binding obligation of each of
the Companies and Selling Stockholders, enforceable against each of the
Companies and Selling Stockholders in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
2.23 Non-Contravention; Consents. Except as set forth in Part 2.23 of the
Disclosure Schedule, neither (1) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, nor (2)
the consummation of the Mergers or any of the other transactions contemplated by
this Agreement, will directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the articles of incorporation or bylaws of any of the
Companies, or (ii) any resolution adopted by the stockholders of any of the
Companies, the board of directors of any of the Companies or any committee
of the board of directors of any of the Companies;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or
obtain any relief under, any Legal Requirement or any order, writ,
injunction, judgment or decree to which any of the Companies, or any of the
assets owned or used by any of the Companies, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by any of the Companies or that otherwise
relates to the business of any of the Companies or to any of the assets
owned or used by any of the Companies;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Company Contract that is
or would constitute a Material Contract, or give any Person the right to
(i) declare a default or exercise any remedy under any such Company
Contract, (ii) accelerate the maturity or performance of any such Company
Contract, or (iii) cancel, terminate or modify any such Company Contract;
or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by any of the
Companies (except for minor liens that will not, in any case or in the
aggregate, materially detract from the value of the assets subject thereto
or materially impair the operations of the Companies, taken as a whole).
Except as set forth in Part 2.23 of the Disclosure Schedule, none of the
Companies is, or will be, required to make any filing with, or give any notice
to, or to obtain any Consent from, any Person in connection with (x) the
execution, delivery or performance of this Agreement or any of
17.
the other agreements referred to in this Agreement, or (y) the consummation of
the Mergers or any of the other transactions contemplated by this Agreement.
2.24 Full Disclosure. This Agreement (including the Disclosure Schedule)
does not, and the Selling Stockholders' Closing Certificate will not, (i)
contain any representation, warranty or information that is false or misleading
with respect to any material fact, or (ii) omit to state any material fact or
necessary in order to make the representations, warranties and information
contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information were
or will be made or provided) not false or misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBS
Parent and each of the Merger Subs jointly and severally represent and
warrant, to and for the benefit of the Companies and the Selling Stockholders,
as follows:
3.1 Corporate Existence and Power. Parent is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Each of the Merger Subs is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Indiana.
Each of Parent and the Merger Subs has all necessary power and authority to
conduct its business as now conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the conduct of its business or
the ownership or leasing of its properties requires such qualification, except
where the failure to be so qualified would not have a material adverse effect on
Parent's business, financial condition or results of operations.
3.2 Authority; Binding Nature of Agreement. Each of Parent and the Merger
Subs has the absolute and unrestricted right, power and authority to enter into
and to perform its obligations under this Agreement; and the execution, delivery
and performance by each of Parent and the Merger Subs of this Agreement
(including the contemplated issuance of Parent common stock in the Mergers in
accordance with this Agreement) has been duly authorized by all necessary action
on the part of each of Parent and the Merger Subs and their respective boards of
directors. No vote of Parent's stockholders is needed to approve the Mergers.
This Agreement constitutes the legal, valid and binding obligation of each of
Parent and the Merger Subs, enforceable against them in accordance with its
terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
3.3 No Conflict; Consents. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by each of Parent
and the Merger Subs is not prohibited by, and will not violate or conflict with,
any provision of the Certificate of Incorporation or Bylaws of Parent or any
Merger Sub, or of any Legal Requirement or any provision of any Contract to
which Parent or any Merger Sub is a party, except where any of the foregoing
would not have, individually or in the aggregate, a material adverse effect on
the business, financial condition or results of operation, of Parent. Other than
the HSR Act filing no
18.
Consent of any Governmental Body is necessary on the part of Parent or any
Merger Sub for the consummation by Parent and Merger Subs of the transactions
contemplated by this Agreement.
3.4 Valid Issuance. The Parent common stock to be issued in the Mergers
will, when issued in accordance with the provisions of this Agreement, be
validly issued, fully paid and nonassessable.
3.5 Merger Subs. Each of the Merger Subs has been formed solely for the
purpose of executing and delivering this Agreement and consummating the
transactions contemplated hereby. None of the Merger Subs has engaged in any
business or activity other than activities related to its corporate organization
and the execution and delivery of this Agreement.
SECTION 4. CERTAIN COVENANTS OF THE COMPANIES AND THE SELLING STOCKHOLDERS
4.1 Access and Investigation. During the period from the date of this
Agreement through the Closing Date (the "Pre-Closing Period"), each of the
Companies shall, and shall cause their respective Representatives to: (a)
provide Parent and Parent's Representatives with reasonable access to the
Companies' Representatives, personnel and assets and to all existing books,
records, Tax Returns, work papers and other documents and information relating
to the Companies; and (b) provide Parent and Parent's Representatives with
copies of such existing books, records, Tax Returns, work papers and other
documents and information relating to the Companies, and with such additional
financial, operating and other data and information regarding the Companies, as
Parent may reasonably request.
4.2 Operation of the Business of the Companies. Without the prior written
consent of Parent, during the Pre-Closing Period:
(a) each of the Companies shall conduct its business and operations
in the ordinary course and in substantially the same manner as such
business and operations have been conducted prior to the date of this
Agreement;
(b) each of the Companies shall use reasonable efforts to preserve
intact its current business organization, keep available the services of
its current officers and employees and maintain its relations and good will
with all suppliers, customers, landlords, creditors, employees and other
Persons having business relationships with such Company;
(c) each of the Companies shall keep in full force all insurance
policies identified in Part 2.19 of the Disclosure Schedule;
(d) none of the Companies shall declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and none of the Companies shall repurchase, redeem or otherwise
reacquire any shares of capital stock or other securities;
(e) none of the Companies shall sell, issue or authorize the issuance
of (i) any capital stock or other security, (ii) any option or right to
acquire any capital stock or other
19.
security, or (iii) any instrument convertible into or exchangeable for any
capital stock or other security;
(f) none of the Companies nor any of the Selling Stockholders shall
amend or permit the adoption of any amendment to the articles of
incorporation or bylaws of any of the Companies, or effect or permit any of
the Companies to become a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock
split or similar transaction;
(g) none of the Companies shall form any subsidiary or acquire any
equity interest or other interest in any other Entity;
(h) none of the Companies shall make any capital expenditure, except
for capital expenditures that, when added to all other capital expenditures
made on behalf of all of the Companies during the Pre-Closing Period, do
not exceed $50,000 per month; provided that such prohibition shall not
effect the obligations of the Companies in regard to blacktopping the back
road and front parking lot at its ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇
property, each of which is less than $100,000;
(i) none of the Companies shall (i) enter into, or permit any of the
assets owned or used by it to become bound by, any Contract that is or
would constitute a Material Contract, or (ii) amend or prematurely
terminate, or waive any material right or remedy under, any Material
Contract, except in either case for Contracts described in subsections
"(v)," "(viii)" and "(ix)" of Section 2.12;
(j) none of the Companies shall (i) lend money to any Person (except
that the Companies may make routine travel advances to employees in the
ordinary course of business), or (ii) incur or guarantee any indebtedness
for borrowed money;
(k) none of the Companies shall (i) establish, adopt or amend any
Employee Benefit Plan, (ii) other than in the ordinary course of business
consistent with past practice, pay any bonus or make any profit-sharing
payment, cash incentive payment or similar payment to, or increase the
amount of the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors, officers or
employees, or (iii) hire any new employee whose aggregate annual
compensation is expected to exceed $75,000;
(l) none of the Companies shall change any of its methods of
accounting or accounting practices in any material respect;
(m) none of the Companies shall make any Tax election;
(n) none of the Companies shall commence any Legal Proceeding nor
settle any Legal Proceeding involving a payment by the Companies of more
than $10,000;
(o) none of the Companies shall agree or commit to take any of the
actions described in clauses "(e)" through "(n)" above.
20.
4.3 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, the Companies shall promptly
notify Parent in writing of: (i) the discovery by any of the Companies of any
event, condition, fact or circumstance that occurred or existed on or prior to
the date of this Agreement and that caused or constitutes an inaccuracy in or
breach of any representation or warranty made by any of the Companies or any of
the Selling Stockholders in this Agreement; (ii) any event, condition, fact or
circumstance that occurs, arises or exists after the date of this Agreement and
that would cause or constitute an inaccuracy in or breach of any representation
or warranty made by any of the Companies or any of the Selling Stockholders in
this Agreement if (A) such representation or warranty had been made as of the
time of the occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement; (iii) any breach of
any covenant or obligation of any of the Companies or any of the Selling
Stockholders; and (iv) any event, condition, fact or circumstance that would
make the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 4.3(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Companies shall promptly deliver to Parent an update to
the Disclosure Schedule specifying such change. Except as expressly set forth in
this Agreement, no such update shall be deemed to supplement or amend the
Disclosure Schedule for the purpose of (i) determining the accuracy of any of
the representations and warranties made by any of the Companies or any of the
Selling Stockholders in this Agreement, or (ii) determining whether any of the
conditions set forth in Section 6 has been satisfied.
4.4 No Negotiation. During the Pre-Closing Period, none of the Companies
nor any of the Selling Stockholders shall, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Parent) relating to a possible
Acquisition Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other
than Parent) relating to or in connection with a possible Acquisition
Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Parent) relating to a possible Acquisition Transaction.
The Companies shall promptly notify Parent in writing of any material inquiry,
proposal or offer relating to a possible Acquisition Transaction that is
received by any of the Companies or any of the Selling Stockholders during the
Pre-Closing Period.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
21.
5.1 Filings and Consents. As promptly as practicable after the execution
of this Agreement, each party to this Agreement (a) shall make all filings, if
any, and give all notices, if any, required to be made and given by such party
in connection with the Mergers and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
Consents, if any, required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Mergers and the other transactions contemplated by this Agreement. The Companies
shall (upon request) promptly deliver to Parent a copy of each such filing made,
each such notice given and each such Consent obtained by the Companies during
the Pre-Closing Period.
5.2 Antitrust Notification. If applicable, Parent, ▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ shall as promptly as practicable following the execution and
delivery of this Agreement, file with the United States Federal Trade Commission
(the "FTC") and the United States Department of Justice (the "DOJ") the
notification and report form required for the transactions contemplated hereby
pursuant to the HSR Act. Any such notification and report form shall be in
substantial compliance with the requirements of the HSR Act. Parent, each Merger
Sub, each Company and each Selling Stockholder shall furnish such necessary
information and reasonable assistance as Parent, ▇▇▇▇ ▇. ▇▇▇▇▇ or ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
may request in connection with its preparation of any filing or submission that
is necessary under the HSR Act. Parent, ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ shall
keep each other apprised of the status of any communications with, and any
inquiries or requests for additional information from, the FTC and the DOJ and
shall comply promptly with any such inquiry or request. Parent, each Merger
Sub, each Company and each Selling Stockholder shall each use reasonable efforts
to obtain any clearance required under the HSR Act for the Mergers. For the
purposes of this Section 5.2, "reasonable efforts" does not include divesting
assets, bringing or defending suit against or by the DOJ or FTC or the
requirement that a party agree to restrictions on its ownership or the operation
of its business.
5.3 Company Stockholders' Meetings. Each of Companies shall, in
accordance with its respective articles of incorporation and bylaws and the
applicable requirements of the Indiana Business Corporation Law, call and hold a
special meeting of its stockholders, or, if permitted, execute a written
stockholders' consent, as promptly as practicable for the purpose of permitting
such stockholders to consider and to vote upon and approve this Agreement and
the applicable merger (each a "Stockholders' Approval"). Each Selling
Stockholder hereby agrees to cause all shares of the capital stock of each
Company that are owned, beneficially or of record, by such Selling Stockholder
to be voted in favor of this Agreement and in favor of the applicable merger at
such meeting or in such written consent.
5.4 Public Announcements. During the Pre-Closing Period, (a) none of the
Companies nor any of the Selling Stockholders shall (and the Companies shall not
permit any of their Representatives to) issue any press release or make any
public statement regarding this Agreement or the Mergers, or regarding any of
the other transactions contemplated by this Agreement, without Parent's prior
written consent, and (b) Parent will use reasonable efforts to consult with the
Companies prior to issuing any press release or making any public statement
regarding the Mergers.
22.
5.5 Pooling of Interests. During the Pre-Closing Period, no party to this
Agreement shall take any action that could reasonably be expected to have an
adverse effect on the ability of Parent to account for the Mergers as a "pooling
of interests."
5.6 Affiliate Agreements. Each Selling Stockholder shall execute and
deliver to Parent, and each of the Companies shall use all commercially
reasonable efforts to cause each other Person identified on Exhibit B-1 (and any
other Person that could reasonably be deemed to be an "affiliate" of any of the
Companies for purposes of the Securities Act), to execute and deliver to Parent,
as promptly as practicable after the execution of this Agreement, an Affiliate
Agreement in the form of Exhibit B-2.
5.7 Reasonable Efforts. During the Pre-Closing Period, (a) each of the
Companies and each of the Selling Stockholders shall use its reasonable efforts
to cause the conditions set forth in Section 6 to be satisfied on a timely
basis, and (b) Parent and each Merger Sub shall use its reasonable efforts to
cause the conditions set forth in Section 7 to be satisfied on a timely basis.
5.8 Termination of Agreements. Prior to the Closing, the Selling
Stockholders will take the necessary steps to terminate the Buy-Sell Agreement,
dated November 29, 1991, by and among ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇.
5.9 Employee and Related Matters.
(a) As long as ▇▇▇▇ ▇. ▇▇▇▇▇ is an executive officer of Parent or any
Surviving Corporation, Parent will consult with ▇▇▇▇ ▇. ▇▇▇▇▇ in connection with
matters relating to the hiring, terminating and compensating of key employees of
any of the Surviving Corporations, including a Chief Operating Officer and
Controller of Surviving Corporation #1 (K Inc.) (it being understood that (i)
unless ▇▇▇▇ ▇. ▇▇▇▇▇ advises Parent otherwise, Parent does not expect to
terminate the employment of any Company employees as a result of the
transactions contemplated by this Agreement and (ii) neither Parent nor any
Surviving Corporation will hire any such key employee without the consent of
▇▇▇▇ ▇. ▇▇▇▇▇, such consent not to be unreasonably withheld).
(b) Prior to the Closing Date, Parent shall discuss with ▇▇▇▇ ▇.
▇▇▇▇▇ Parent's policy relating to the granting of stock options to newly hired
Parent employees, and ▇▇▇▇ ▇. ▇▇▇▇▇ shall make recommendations to Parent
regarding the grant of Options to employees of the Surviving Corporations.
Following the Closing, Parent shall make such recommendations to its board of
directors, or the appropriate board committee with authority to grant employee
options, for its consideration and action.
(c) For not less than one year following the Closing Date, Parent
shall maintain, or shall cause the Surviving Corporations to maintain,
compensation and employee benefit plans and arrangements and perquisites for
those persons who remain employees of the Surviving Corporations after the
Closing Date that, in the aggregate, are substantially comparable to (or more
favorable than) those provided pursuant to the compensation and
23.
employee benefit plans and arrangements and perquisites in effect at the
Companies on the date hereof.
5.10 Restriction on Mortgaging Company Real Properties. Until the first
anniversary of the Closing Date, Parent shall ensure that no Owned Real Property
becomes subject to a mortgage without the consent of ▇▇▇▇ ▇. ▇▇▇▇▇; provided,
however, that the restriction set forth in this Section 5.10 shall not apply to
a mortgage placed on any Owned Real Property if (a) the funds raised as a result
of the mortgage are used exclusively to fund the business of the Surviving
Corporations or (b) the mortgage is part of a general lien on a substantial
portion of the assets of Parent.
5.11 Right of First Offer. If, prior to the seventh anniversary of the
Closing Date, Parent intends to dispose of the land located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or of all or substantially all of the current assets or
business of the Companies, Parent shall notify ▇▇▇▇ ▇. ▇▇▇▇▇ of such intention
and provide ▇▇▇▇ ▇. ▇▇▇▇▇ with 30 days in which to make an offer to purchase
such property, assets or business. If Parent receives an offer from ▇▇▇▇ ▇.
▇▇▇▇▇ for such property, assets or business within such 30-day period, and such
offer is not accepted, Parent may, for 180 days after the expiration of such 30-
day period, dispose of such property, assets or business only through a bidding
process in which ▇▇▇▇ ▇. ▇▇▇▇▇ is given the opportunity to participate on an
equal footing with all other participants and in which the total consideration
received for such property, assets or business exceeds 100% of the total
consideration offered by ▇▇▇▇ ▇. ▇▇▇▇▇ in his most recent offer. If the
property, assets or business is not disposed of within such 180-day period, the
provisions of this Section 5.11 shall apply to all future proposed dispositions
that would otherwise be covered by this Section 5.11. Notwithstanding anything
to the contrary contained in this Section 5.11, the rights provided to ▇▇▇▇ ▇.
▇▇▇▇▇ in this Section 5.11 shall not apply to any transaction involving (a) the
sale or merger of Parent; (b) the sale of all or substantially all of the assets
of Parent, or (c) the sale of the automotive auction business of Parent if the
fair market value of the current assets of the Companies as of the time of the
proposed sale constitutes less than 50% of the fair market value of all of the
assets of such business as of the time of the proposed sale.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUBS
The obligations of Parent and each Merger Sub to effect the Mergers
and otherwise consummate the transactions contemplated by this Agreement are
subject to the satisfaction (or waiver by Parent), at or prior to the Closing,
of each of the following conditions:
6.1 Accuracy of Representations.
(a) Each of the representations and warranties made by the Companies
and the Selling Stockholders in Sections 2.3(a) and 2.3(b) shall have been
accurate in all respects on and as of the date of this Agreement.
(b) Each of the representations and warranties made by the Companies
and the Selling Stockholders in this Agreement and in each of the other
agreements and instruments delivered to Parent in connection with the
transactions contemplated by this Agreement shall
24.
have been accurate in all respects as of the date of this Agreement (without
giving effect to any "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications), and shall be accurate in all
respects as of the Closing Date as if made at the Closing (without giving effect
to any "Material Adverse Effect" or other materiality qualifications, or any
similar qualifications and without giving effect to any update to the Disclosure
Schedule), except to the extent such representations and warranties expressly
relate to any earlier date (in which case such representations and warranties
shall be accurate on and as of such date, without giving effect to any "Material
Adverse Effect" or other materiality qualifications, or any similar
qualifications and without giving effect to any update to the Disclosure
Schedule), and except for inaccuracies in any such representations or warranties
that have not had, and are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on the Companies.
6.2 Performance of Covenants. All of the covenants and obligations that
the Companies and the Selling Stockholders are required to comply with or to
perform at or prior to the Closing shall have been complied with and performed
in all material respects.
6.3 Consents. All Consents (i) listed in Part 6.3 of the Disclosure
Schedule, (ii) required to be obtained from any Governmental Entity and (iii)
otherwise required to be obtained, in each case in connection with the Mergers
and the other transactions contemplated by this Agreement shall have been
obtained and shall be in full force and effect, except (in the case of clause
(iii)) to the extent the failure to obtain any such Consents has not had, and is
not reasonably likely to have, a Material Adverse Effect on the Companies.
6.4 Stockholder Approval. The principal terms of each merger described
herein and this Agreement shall have been duly approved by the affirmative vote
by the stockholders of the applicable Company of at least a majority of the
shares of common stock entitled to vote with respect thereto.
6.5 Antitrust Approval. The waiting period under the HSR Act, if
applicable, shall have expired or been terminated.
6.6 Agreements and Documents. Parent and the Companies shall have
received the following agreements and documents, each of which shall be in full
force and effect:
(a) Affiliate Agreements in the form of Exhibit B-2, executed by the
Persons identified on Exhibit B-1 and by any other Person who could
reasonably be deemed to be an "affiliate" of the Companies for purposes of
the Securities Act;
(b) an Employment and Noncompetition Agreement in the form of the
draft agreement provided to ▇▇▇▇ ▇. ▇▇▇▇▇ on the date hereof, executed by
▇▇▇▇ ▇. ▇▇▇▇▇;
(c) an Employment and Noncompetition Agreement in a form reasonably
satisfactory to Parent, executed by ▇▇▇▇▇▇ ▇▇▇▇▇;
(d) an Independent Contractor and Noncompetition Agreement in the
form of the draft agreement provided to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on the date hereof,
executed by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇;
25.
(e) a FIRPTA Statement in the form of Exhibit E, executed by each of
the Companies;
(f) a Release in the form of Exhibit F, executed by each of the
Selling Stockholders;
(g) Stockholder Representation Letters in the form of Exhibit G,
executed by each of the Selling Stockholders;
(h) a Registration Rights Agreement in the form of Exhibit H,
executed by the Selling Stockholders;
(i) an escrow agreement (the "Escrow Agreement") in the form of
Exhibit I, executed by each of the Selling Stockholders;
(j) a release, in a form reasonably satisfactory to Parent, from
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ releasing any liens she has on any capital stock of any of
the Companies, executed by ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇;
(k) a release and acknowledgement, in the form of Exhibit J, executed
by ▇▇▇▇▇▇ ▇▇▇▇▇;
(l) a legal opinion of counsel to the Companies, dated as of the
Closing Date, in the form of Exhibit K;
(m) a letter from PricewaterhouseCoopers LLP, dated as of the Closing
Date, concurring with Parent's position that Parent may account for the
Mergers as a "pooling of interests" in accordance with generally accepted
accounting principles ("GAAP"), Accounting Principles Board Opinion No. 16
and all published rules, regulations and policies of the SEC;
(n) a letter from PricewaterhouseCoopers LLP, dated as of the Closing
Date, providing negative assurance as to whether or not audited
consolidated financial statements of the Companies, prepared in accordance
with GAAP, covering each of the prior three fiscal years, can be prepared.
(o) a letter from each of the Companies, dated as of the Closing
Date, confirming that no transaction entered into by any of the Companies,
and no other fact or circumstance relating to any of the Companies, will
prevent Parent from accounting for the Mergers as a "pooling of interests"
in accordance with generally accepted principles, Accounting Principles
Board Opinion No. 16 and all published rules, regulations and policies of
the SEC;
(p) a certificate executed by each of the Selling Stockholders and
containing the representation and warranty of each Selling Stockholder that
the conditions set forth in Sections 6.1, 6.2, 6.3, 6.4, 6.7, 6.9, 6.11 and
6.12 have been duly satisfied (the "Selling Stockholders' Closing
Certificate"); and
26.
(q) written resignations of all directors of all of the Companies,
effective as of the Closing Date.
6.7 Absence of Material Adverse Effect. There shall have been no change
in the business, condition, operations or financial performance of any of the
Companies since the date of this Agreement that has had or would reasonably be
expected to have a Material Adverse Effect on the Companies.
6.8 Share Certificates. Merger Subs shall have received certificates
representing all of the capital stock of all of the Companies, duly endorsed in
blank or accompanied by stock powers duly endorsed in blank in proper form for
transfer, with appropriate transfer stamps, if any, affixed and, immediately
following the Closing, Merger Subs shall own (directly or indirectly) 100% of
the outstanding capital stock and rights to acquire capital stock of all of the
Companies free and clear of any Encumbrance.
6.9 FIRPTA Compliance. Each of the Companies shall have filed with the
Internal Revenue Service the notification referred to in Section 5.16(b).
6.10 Listing. The shares of Parent common stock to be issued in the
Mergers shall have been approved for listing (subject to notice of issuance) on
the Nasdaq National Market.
6.11 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Mergers
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Mergers that makes consummation of the Mergers illegal.
6.12 No Legal Proceedings. No Governmental Body or other Person shall
have commenced or threatened to commence any Legal Proceeding (i) challenging or
seeking the recovery of a material amount of damages in connection with the
Mergers, (ii) seeking to prohibit or limit the exercise by Parent of any
material right pertaining to its ownership of stock of any Surviving Corporation
or (iii) claiming to own any capital stock of any Company or option or other
right to acquire any capital stock of any Company or right to receive any
consideration as a result of the Mergers.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING STOCKHOLDERS
The obligations of the Selling Stockholders to effect the Mergers and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction (or waiver by the Selling Stockholders' Agent on behalf of
the Selling Stockholders), at or prior to the Closing, of the following
conditions:
7.1 Accuracy of Representations. Each of the representations and
warranties made by Parent and each Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement, and shall be
accurate in all material respects as of the Closing Date as if made at the
Closing.
27.
7.2 Performance of Covenants. All of the covenants and obligations that
Parent and each Merger Sub are required to comply with or to perform at or prior
to the Closing shall have been complied with and performed in all material
respects.
7.3 Antitrust Approval. The waiting period under the HSR Act, if
applicable, shall have expired or been terminated.
7.4 Agreements and Documents. The Selling Stockholders' Agent (on behalf
of the Selling Stockholders) shall have received the following documents.
(a) a Registration Rights Agreement in the form of Exhibit H,
executed by Parent;
(b) an Employment and Noncompetition Agreement in the form of the
draft agreement provided to ▇▇▇▇ ▇. ▇▇▇▇▇ on the date hereof, executed by
Parent; and
(c) an Independent Contractor and Noncompetition Agreement in the
form of the draft agreement provided to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on the date hereof,
executed by Parent.
7.5 Listing. The shares of Parent common stock to be issued in the
Mergers shall have been approved for listing (subject to notice of issuance) on
the Nasdaq National Market.
7.6 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Mergers
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Mergers that makes consummation of the Mergers illegal.
SECTION 8. TERMINATION
8.1 Termination Events. This Agreement may be terminated prior to the
Closing:
(a) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of Parent or any Merger
Sub to comply with or perform any covenant or obligation of Parent or any
Merger Sub set forth in this Agreement or in any other agreement or
instrument delivered to the Selling Stockholders);
(b) by the Selling Stockholders' Agent if it reasonably determines
that the timely satisfaction of any condition set forth in Section 7 has
become impossible (other than as a result of any failure on the part of any
of the Companies or any of the Selling Stockholders to comply with or
perform any covenant or obligation set forth in this Agreement or in any
other agreement or instrument delivered to Parent);
(c) by Parent if the Closing has not taken place on or before July
31, 1999 (other than as a result of any failure on the part of Parent or
any Merger Sub to comply with or perform any covenant or obligation of
Parent or any Merger Sub set forth in this
28.
Agreement or in any other agreement or instrument delivered to the Selling
Stockholders);
(d) by the Selling Stockholders' Agent if the Closing has not taken
place on or before July 31, 1999 (other than as a result of the failure on
the part of any of the Companies or any of the Selling Stockholders to
comply with or perform any covenant or obligation set forth in this
Agreement or in any other agreement or instrument delivered to Parent); or
(e) by the mutual written consent of Parent and the Selling
Stockholders' Agent.
8.2 Termination Procedures. If Parent wishes to terminate this Agreement
pursuant to Section 8.1(a) or Section 8.1(c), Parent shall deliver to the
Selling Stockholders' Agent a written notice stating that Parent is terminating
this Agreement and setting forth a brief description of the basis on which
Parent is terminating this Agreement. If the Selling Stockholders' Agent wishes
to terminate this Agreement pursuant to Section 8.1(b) or Section 8.1(d), the
Selling Stockholders' Agent shall deliver to Parent a notice, in writing,
stating that the Selling Stockholders' Agent (on behalf of the Selling
Stockholders) is terminating this Agreement and setting forth a brief
description of the basis on which it is terminating this Agreement.
8.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1 and 8.2, all further obligations of the parties under this Agreement
shall terminate; provided, however, that: (a) none of the parties shall be
relieved of any obligation or liability arising from any prior willful breach by
such party of any provision of this Agreement; (b) the parties shall, in all
events, remain bound by and continue to be subject to the provisions set forth
in Section 10; and (c) each of the Companies shall, in all events, remain bound
by and continue to be subject to Section 5.3.
SECTION 9. INDEMNIFICATION, ETC.
9.1 Survival of Representations, Etc.
(a) Except as set forth in Section 9.2(c), the representations and
warranties made by the Companies and the Selling Stockholders (including the
representations and warranties set forth in Section 2) shall survive the Closing
and shall expire on the first anniversary of the Closing Date; provided,
however, that if, at any time prior to the first anniversary of the Closing
Date, any Indemnitee (acting in good faith) delivers to the Selling
Stockholders' Agent a written notice alleging the existence of an inaccuracy in
or a breach of any of the representations and warranties made by the Selling
Stockholders (and setting forth in reasonable detail the basis for such
Indemnitee's belief that such an inaccuracy or breach may exist) and asserting a
claim for recovery under Section 9.2 based on such alleged inaccuracy or breach,
then the claim asserted in such notice shall survive the first anniversary of
the Closing until such time as such claim is fully and finally resolved. All
representations and warranties made by Parent and each Merger Sub shall
terminate and expire as of the Closing Date, and any
29.
liability of Parent or any Merger Sub with respect to such representations and
warranties shall thereupon cease.
(b) The representations, warranties, covenants and obligations of the
Companies and the Selling Stockholders, and the rights and remedies that may be
exercised by the Indemnitees, shall not be limited or otherwise affected by or
as a result of any information furnished to, or any investigation made by or
knowledge of, any of the Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
the Companies and the Selling Stockholders in this Agreement.
9.2 Indemnification by Selling Stockholders.
(a) From and after the Closing Date (but subject to Section 9.1(a)),
the Selling Stockholders, jointly and severally, shall hold harmless and
indemnify each of the Indemnitees from and against, and shall compensate and
reimburse each of the Indemnitees for, any Damages that are directly or
indirectly suffered or incurred by any of the Indemnitees or to which any of the
Indemnitees may otherwise become subject (regardless of whether or not such
Damages relate to any third-party claim) and that arise from or as a result of,
or are directly or indirectly connected with: (i) any inaccuracy in or breach of
any representation or warranty set forth in Section 2 (without giving effect to
any "Material Adverse Effect" or other materiality qualification or any similar
qualification contained or incorporated directly or indirectly in such
representation or warranty, and without giving effect to any update to the
Disclosure Schedule delivered by the Companies to Parent prior to the Closing);
(ii) any inaccuracy in or breach of any representation or warranty set forth in
Section 2 as if such representation and warranty had been made on and as of the
Closing Date (without giving effect to any "Material Adverse Effect" or other
materiality qualification or any similar qualification contained or incorporated
directly or indirectly in such representation or warranty, but giving effect to
any update to the Disclosure Schedule delivered by the Companies to Parent prior
to the Closing to the extent that Parent would be entitled to terminate this
Agreement as a result of such update); (iii) any breach of any covenant or
obligation of any of the Companies or any of the Selling Stockholders (including
the covenants set forth in Sections 4 and 5); or (iv) any Legal Proceeding
relating to any inaccuracy or breach of the type referred to in clause "(i),"
"(ii)" or "(iii)" above (including any Legal Proceeding commenced by any
Indemnitee for the purpose of enforcing any of its rights under this Section 9).
(b) Deductible. Except for claims under Section 9.2(c), the Selling
Stockholders shall not be required to make any indemnification payment pursuant
to Section 9.2(a) for any inaccuracy in or breach of any of their
representations and warranties set forth in Section 2 until such time as the
total amount of all Damages (including the Damages arising from such inaccuracy
or breach and all other Damages arising from any other inaccuracies in or
breaches of any representations or warranties) that have been directly or
indirectly suffered or incurred by any one or more of the Indemnitees, or to
which any one or more of the Indemnitees
30.
has or have otherwise become subject, exceeds $300,000 in the aggregate. (If the
total amount of such Damages exceeds $300,000, then the Indemnitees shall be
entitled to be indemnified against and compensated and reimbursed only for the
portion of such Damages exceeding $300,000.)
(c) Form 8300 Filing Indemnity. From and after the Closing Date, the
Selling Stockholders, jointly and severally, shall hold harmless and indemnify
each of the Indemnitees from and against, and shall compensate and reimburse
each of the Indemnitees for, any Damages that are directly or indirectly
suffered or incurred by any of the Indemnitees or to which any of the
Indemnitees may otherwise become subject (regardless of whether or not such
Damages relate to any third-party claim) and that arise from or as a result of,
or are directly or indirectly connected with the claims by the Internal Revenue
Service that the Companies failed to make required Form 8300 filings in the
years 1990, 1991 and 1992.
9.3 Exclusive Remedy.
(a) Except as provided in Section 9.3(b), and with the exception of
claims based upon fraud, from and after the Closing, recourse of Parent to the
shares of Parent common stock held in escrow pursuant Section 1.3(ii) and the
Escrow Agreement (the 10% Escrow) shall be the sole and exclusive remedy of
Parent and the other Indemnitees for monetary damages for any inaccuracy in or
breach of any representation or warranty contained in this Agreement.
(b) Recourse for claims made under Section 9.2(c) shall first be to
the shares of Parent common stock held in escrow pursuant Section 1.3(iii) and
the Escrow Agreement (the Form 8300 Escrow) but such claims shall not be limited
to such escrowed shares.
9.4 Satisfaction of Indemnification Claim. In the event any Selling
Stockholder shall have any liability (for indemnification or otherwise) to any
Indemnitee under this Section 9 that can be satisfied by recourse against escrow
shares, such Selling Stockholder shall satisfy such liability by delivering to
such Indemnitee the number of shares of Parent common stock determined by
dividing (a) the aggregate dollar amount of such liability by (b) the Calculated
Stock Price (as adjusted as appropriate to reflect any stock split, reverse
stock split, stock dividend, recapitalization or other similar transaction
effected by Parent between the Closing Date and the date such liability is
satisfied).
9.5 No Contribution. Each Selling Stockholder waives, and acknowledges
and agrees that he shall not have and shall not exercise or assert (or attempt
to exercise or assert), any right of contribution, right of indemnity or other
right or remedy against any Surviving Corporation in connection with any
indemnification obligation or any other liability to which he may become subject
under or in connection with this Agreement.
31.
9.6 Defense of Third Party Claims. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against any
Surviving Corporation, against Parent or against any other Person) with respect
to which any of the Selling Stockholders may become obligated to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this Section 9,
Parent shall have the right, at its election, to proceed with the defense of
such claim or Legal Proceeding on its own. If Parent so proceeds with the
defense of any such claim or Legal Proceeding:
(a) all reasonable expenses relating to the defense of such claim or
Legal Proceeding shall be borne and paid exclusively by the Selling
Stockholders;
(b) each Selling Stockholder shall make available to Parent any
documents and materials in his or its possession or control that may be
necessary to the defense of such claim or Legal Proceeding; and
(c) Parent shall have the right to settle, adjust or compromise such
claim or Legal Proceeding with the consent of the Selling Stockholders'
Agent (as defined in Section 10.1); provided, however, that such consent
shall not be unreasonably withheld.
Parent shall give the Selling Stockholders' Agent prompt notice of the
commencement of any such Legal Proceeding against Parent or any Surviving
Corporation; provided, however, any failure on the part of Parent to so notify
the Selling Stockholders' Agent shall not limit any of the obligations of the
Selling Stockholders under this Section 9 (except to the extent such failure
materially prejudices the defense of such Legal Proceeding). If Parent does not
elect to proceed with the defense of any such claim or Legal Proceeding, the
Selling Stockholders' Agent may proceed with the defense of such claim or Legal
Proceeding with counsel reasonably satisfactory to Parent; provided, however,
that the Selling Stockholders' Agent may not settle, adjust or compromise any
such claim or Legal Proceeding without the prior written consent of Parent
(which consent may not be unreasonably withheld).
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 Selling Stockholders' Agent. The Selling Stockholders hereby
irrevocably appoint ▇▇▇▇ ▇. ▇▇▇▇▇ as their agent for purposes of Sections 7, 8
and 9 (the "Selling Stockholders' Agent"), and ▇▇▇▇ ▇. ▇▇▇▇▇ hereby accepts his
appointment as the Selling Stockholders' Agent. Parent shall be entitled to
deal exclusively with the Selling Stockholders' Agent on the matters indicated
in Sections 7 and 8 and on all matters relating to Section 9, and shall be
entitled to rely conclusively (without further evidence of any kind whatsoever)
on any document executed or purported to be executed on behalf of any Selling
Stockholder by the Selling Stockholders' Agent, and on any other action taken or
purported to be taken on behalf of any Selling Stockholder by the Selling
Stockholders' Agent, as fully binding upon such Selling Stockholder. If the
Selling Stockholders' Agent shall die, become disabled or otherwise be unable to
fulfill his responsibilities as agent of the Selling Stockholders, then the
Selling Stockholders shall, within ten days after such death or disability,
appoint a successor agent and, promptly thereafter, shall notify Parent of the
identity of such successor. Any such successor shall become the "Selling
Stockholders' Agent" for purposes of Sections 7, 8 and 9 and this
32.
Section 10.1. If for any reason there is no Selling Stockholders' Agent at any
time, all references herein to the Selling Stockholders' Agent shall be deemed
to refer to the Selling Stockholders.
10.2 Further Assurances. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
10.3 Fees and Expenses. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement.
10.4 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 Notices. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to Parent or any Merger Sub:
eBay Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Companies or any Surviving Corporation:
▇▇▇▇▇ International
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Selling Stockholders' Agent or any of the Selling
Stockholders:
▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
33.
10.6 Time of the Essence. For the purposes of this Agreement and the
transactions contemplated by this Agreement, time is of the essence.
10.7 Headings. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.8 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
10.9 Governing Law. This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
10.10 Successors and Assigns. This Agreement shall be binding upon each of
the parties hereto and each of their respective successors and assigns, if any.
This Agreement shall inure to the benefit of: the Companies; the Selling
Stockholders; Parent; the Merger Subs; the other Indemnitees; and the respective
successors and assigns, if any, of the foregoing. Parent may freely assign any
or all of its rights under this Agreement (including its indemnification rights
under Section 9), in whole or in part, to any other Person without obtaining the
consent or approval of any other party hereto or of any other Person.
10.11 Remedies Cumulative; Specific Performance. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this Agreement,
such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.
10.12 Waiver. No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy. No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
34.
10.13 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.14 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.15 Parties in Interest. Except for the provisions of Sections 1.3 and
9, none of the provisions of this Agreement is intended to provide any rights or
remedies to any Person other than the parties hereto and their respective
successors and assigns, if any.
10.16 Entire Agreement. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof; provided, however, that the Mutual Non-Disclosure
Agreement executed on behalf of Parent and ▇▇▇▇▇ International as of March 11,
1999 shall not be superseded by this Agreement and shall remain in effect in
accordance with its terms until the earlier of (a) the Closing Date, or (b) the
date on which such Mutual Non-Disclosure Agreement is terminated in accordance
with its terms.
10.17 Waiver of Jury Trial. Each of the parties hereto hereby irrevocably
waives any and all right to trial by jury in any legal proceeding arising out of
or related to this Agreement or the transactions contemplated hereby.
10.18 Construction.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections", "Schedules" and "Exhibits" are intended to refer to Sections of
this Agreement and Schedules and Exhibits to this Agreement.
35.
The parties hereto have caused this Agreement to be executed and delivered
as of May 17, 1999.
Parent:
------
eBay Inc.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief Executive
Officer
The Merger Subs:
---------------
Sesame Corporation Number 1,
an Indiana corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
Sesame Corporation Number 2,
an Indiana corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
Sesame Corporation Number 3,
an Indiana corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
Sesame Corporation Number 4,
an Indiana corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
36.
Sesame Corporation Number 5,
an Indiana corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
The Companies:
-------------
▇▇▇▇▇, Inc.,
an Indiana corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
Auburn Cordage, Inc.,
an Indiana corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
Classic Advertising &
Promotions, Inc.
an Indiana corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
ACD Auto Sales Inc.,
an Indiana corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
37.
▇▇▇▇▇▇▇ School of Auctioneering,
Inc., an Indiana corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
The Selling Stockholders:
------------------------
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------
▇▇▇▇ ▇. ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
38.
Exhibit A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquisition Transaction. "Acquisition Transaction" means any transaction
involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the business or assets of the Companies (taken as a
whole);
(b) the issuance, disposition or acquisition of (i) any capital stock
or other equity security of any of the Companies, (ii) any option, call,
warrant or right (whether or not immediately exercisable) to acquire any
capital stock or other equity security of any of the Companies, or (iii)
any security, instrument or obligation that is or may become convertible
into or exchangeable for any capital stock or other equity security of any
of the Companies; or
(c) any merger, consolidation, business combination, reorganization
or similar transaction involving any Company.
Agreement. "Agreement" means the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached (including the Disclosure
Schedule), as it may be amended from time to time.
Calculated Stock Price. "Calculated Stock Price" means the average closing
price of Parent common stock, as reported by Nasdaq, for the twenty trading days
immediately preceding the Closing Date.
Closing Date Number. "Closing Date Number" means the number equal to $150
million divided by the Calculated Stock Price, rounded up to the nearest even
number.
Company Contract. "Company Contract" means any Contract: (a) to which
any of the Companies is a party; (b) by which any Company or any of its assets
is or may become bound or under which any Company has, or may become subject to,
any obligation; or (c) under which any Company has or may acquire any right or
interest.
Company Proprietary Asset. "Company Proprietary Asset" means any
Proprietary Asset owned by or licensed to any of the Companies or otherwise used
by any of the Companies.
Consent. "Consent" means any approval, consent, ratification, permission,
waiver or authorization (including any Governmental Authorization).
Contract. "Contract" means any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
1.
Damages. "Damages" include any loss, damage, injury, decline in value,
lost opportunity, liability, claim, demand, settlement, judgment, award, fine,
penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
Disclosure Schedule. "Disclosure Schedule" means the schedule (dated as
of the date of the Agreement) delivered to Parent on behalf of the Companies and
the Selling Stockholders.
Encumbrance. "Encumbrance" means any lien, pledge, hypothecation, charge,
mortgage, security interest, encumbrance, claim, infringement, interference,
option, right of first refusal, preemptive right, community property interest or
restriction of any nature (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset and any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).
Entity. "Entity" means any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
Environmental Law. "Environmental Law" means any federal, state, local or
foreign Legal Requirement relating to pollution or protection of human health or
the environment (including ambient air, surface water, ground water, land
surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
Exchange Act. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
Governmental Authorization. "Governmental Authorization" means any: (a)
permit, license, certificate, franchise, permission, clearance, registration,
qualification or authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement; or (b) right under any Contract with any Governmental Body.
Governmental Body. "Governmental Body" means any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
HSR Act. "HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended.
2.
Indemnitees. "Indemnitees" means the following Persons: (a) Parent; (b)
Parent's current and future affiliates (including the Surviving Corporations);
(c) the respective Representatives of the Persons referred to in clauses "(a)"
and "(b)" above; and (d) the respective successors and assigns of the Persons
referred to in clauses "(a)", "(b)" and "(c)" above; provided, however, that the
Selling Stockholders are not deemed to be "Indemnitees."
Legal Proceeding. "Legal Proceeding" means any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, inquiry, audit, examination or
investigation commenced, brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Body or any arbitrator or arbitration
panel.
Legal Requirement. "Legal Requirement" means any federal, state, local,
municipal, foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Body.
Material Adverse Effect. A violation or other matter will be deemed to
have a "Material Adverse Effect" on the Companies if such violation or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement or
in the Selling Stockholders' Closing Certificate but for the presence of
"Material Adverse Effect" or other materiality qualifications, or any similar
qualifications, in such representations and warranties) would have a material
adverse effect on the business, condition, operations or financial performance
of the Companies, taken as a whole.
Materials of Environmental Concern. "Materials of Environmental Concern"
include chemicals, pollutants, contaminants, wastes, toxic substances, petroleum
and petroleum products and any other substance that is now or hereafter
regulated by any Environmental Law or that is otherwise a danger to health,
reproduction or the environment.
Option. "Option" means an option to purchase shares of Parent common stock.
Person. "Person" means any individual, Entity or Governmental Body.
Proprietary Asset. "Proprietary Asset" means any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service ▇▇▇▇ (whether
registered or unregistered), service ▇▇▇▇ application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; or (b) right to use or exploit any of the
foregoing.
Representatives. "Representatives" means officers, directors, employees,
agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" means the United States Securities and Exchange Commission.
3.
Securities Act. "Securities Act" means the Securities Act of 1933, as
amended.
Tax. "Tax" means any tax (including any income tax, franchise tax, capital
gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad valorem
tax, transfer tax, stamp tax, sales tax, use tax, property tax, business tax,
withholding tax or payroll tax), levy, assessment, tariff, duty (including any
customs duty), deficiency or fee, and any related charge or amount (including
any fine, penalty or interest), imposed, assessed or collected by or under the
authority of any Governmental Body.
Tax Return. "Tax Return" means any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
Year 2000 Compliant. "Year 2000 Compliant" means that the computer systems
(i) are capable of recognizing, processing, managing, representing, interpreting
and manipulating correctly date related data for dates earlier and later than
January 1, 2000; (ii) have the ability to provide date recognition for any data
element without limitation; (iii) have the ability to function automatically
into and beyond the year 2000 without human intervention and without any change
in operations associated with the advent of the year 2000; (iv) have the ability
to interpret data, dates and time correctly into and beyond the year 2000; (v)
have the ability not to produce noncompliance in existing information, nor
otherwise corrupt such data into and beyond the year 2000; (vi) have the ability
to process correctly after January 1, 2000 data containing dates before that
date; and (vii) have the ability to recognize all "leap years," including
February 29, 2000.
4.
EXHIBIT B-1
PERSONS TO EXECUTE AFFILIATE AGREEMENTS
▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
EXHIBIT B-2
FORM OF
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT ("Affiliate Agreement") is being executed and
delivered as of _____ __, 1999 by ______________ ("Affiliate") in favor of and
for the benefit of eBAY INC., a Delaware corporation ("Parent").
RECITALS
A. Affiliate is a stockholder and/or an officer and/or director of one or
more of ▇▇▇▇▇, INC., an Indiana corporation d/b/a ▇▇▇▇▇ International ("K
Inc."), AUBURN CORDAGE, INC., an Indiana corporation ("A.C., Inc."), ACD AUTO
SALES, INC., an Indiana corporation ("ACD Auto"), ▇▇▇▇▇▇▇ SCHOOL OF
AUCTIONEERING, INC., an Indiana corporation ("RA School") and CLASSIC
ADVERTISING & PROMOTIONS, INC., an Indiana corporation ("Classic Promotions")
(collectively, the "Companies").
B. Parent, SESAME CORPORATION NUMBER 1, an Indiana corporation and a
wholly owned subsidiary of Parent ("Merger Sub #1"); SESAME CORPORATION NUMBER
2, an Indiana corporation and a wholly owned subsidiary of Parent ("Merger Sub
#2"), SESAME CORPORATION NUMBER 3, an Indiana corporation and a wholly owned
subsidiary of Parent ("Merger Sub #3"), SESAME CORPORATION NUMBER 4, an Indiana
corporation and a wholly owned subsidiary of Parent ("Merger Sub #4"), SESAME
CORPORATION NUMBER 5, an Indiana corporation and a wholly owned subsidiary of
Parent ("Merger Sub #5"), K Inc., A.C., Inc, ACD Auto, RA School and Classic
Promotions have entered into an Agreement and Plan of Merger and Reorganization,
dated as of May 17, 1999 (the "Merger Agreement"), providing for the merger of
Merger Sub #1 into K Inc. ("Merger #1"), the merger of Merger Sub #2 into A.C.
Inc. ("Merger #2"), the merger of Merger Sub #3 into ACD Auto ("Merger #3"), the
merger of Merger Sub #4 into RA School ("Merger #4") and the merger of Merger
Sub #5 into Classic Promotions ("Merger #5") (collectively, the "Mergers"). The
Merger Agreement contemplates that, upon consummation of the Mergers, (i)
holders of shares of the common stock of the Companies will receive shares of
common stock of Parent ("Parent Common Stock") in exchange for their shares of
common stock of the Companies and (ii) each of the Companies will become a
wholly owned subsidiary of Parent. It is accordingly contemplated that the
stockholders of each of the Companies will receive shares of Parent Common Stock
in the Mergers.
C. Affiliate understands that he may be deemed an "affiliate" of Parent
for purposes of determining Parent's eligibility to account for the Mergers as a
"pooling of interests" under Accounting Series Releases 130 and 135, as amended,
of the Securities and Exchange Commission (the "SEC"), and under other
applicable "pooling of interests" accounting requirements.
1.
AGREEMENT
Affiliate, intending to be legally bound, agrees as follows:
1. Representations and Warranties of Affiliate. Affiliate represents and
warrants to Parent as follows:
(a) Affiliate is the holder and beneficial owner of the number of
outstanding shares of common stock of each of the Companies set forth beneath
Affiliate's signature on the signature page hereof (collectively, the "Company
Shares"), and Affiliate has good and valid title to the Company Shares, free and
clear of any liens, pledges, security interests, adverse claims, equities,
options, proxies, charges, encumbrances or restrictions of any nature. Affiliate
has the sole right to vote and to dispose of the Company Shares.
(b) Affiliate does not own any options or other rights to purchase
shares of common stock of any of the Companies or any other securities of any of
the Companies, other than the Company Shares.
(c) Affiliate has carefully read this Affiliate Agreement and, to the
extent Affiliate felt necessary, has discussed with counsel the limitations
imposed on Affiliate's ability to sell, transfer or otherwise dispose of the
Company Shares or the shares of Parent Common Stock that Affiliate is to receive
in the Mergers (the "Parent Shares"). Affiliate fully understands the
limitations this Affiliate Agreement places upon Affiliate's ability to sell,
transfer or otherwise dispose of securities of the Companies and securities of
Parent.
(d) Affiliate understands that the representations, warranties and
covenants set forth in this Affiliate Agreement will be relied upon by Parent
and its counsel and accountants for purposes of determining Parent's eligibility
to account for the Merger as a "pooling of interests" and for purposes of
determining whether Parent should proceed with the Mergers.
2. Prohibitions Against Transfer. Affiliate agrees that, during the
period from the date hereof through the date on which financial results covering
at least 30 days of post-Merger combined operations of Parent and the Companies
have been published by Parent (within the meaning of the applicable "pooling of
interests" accounting requirements):
(a) Affiliate shall not sell, transfer or otherwise dispose of, or
reduce Affiliate's interest in or risk relating to, any capital stock of
any of the Companies, except pursuant to and upon consummation of the
Mergers; and
(b) Affiliate shall not sell, transfer or otherwise dispose of, or
reduce Affiliate's interest in or risk relating to, (A) any shares of
capital stock of Parent (including without limitation the Parent Shares and
any additional shares of capital stock of Parent acquired by Affiliate,
whether upon exercise of a stock option or otherwise), or (B) any option or
other right to purchase any shares of capital stock of Parent; except in
the case of clause (A) for transfers to trusts and foundations that execute
an affiliate agreement substantially in the form of Exhibit A.
2.
3. Independence of Obligations. The covenants and obligations of Affiliate
set forth in this Affiliate Agreement shall be construed as independent of any
other agreement or arrangement between Affiliate, on the one hand, and any
Company or Parent, on the other. The existence of any claim or cause of action
by Affiliate against any Company or Parent shall not constitute a defense to the
enforcement of any of such covenants or obligations against Affiliate.
4. Specific Performance. Affiliate agrees that in the event of any breach
or threatened breach by Affiliate of any covenant, obligation or other provision
contained in this Affiliate Agreement, Parent shall be entitled (in addition to
any other remedy that may be available to Parent) to: (a) a decree or order of
specific performance or mandamus to enforce the observance and performance of
such covenant, obligation or other provision; and (b) an injunction restraining
such breach or threatened breach. Affiliate further agrees that neither Parent
nor any other person or entity shall be required to obtain, furnish or post any
bond or similar instrument in connection with or as a condition to obtaining any
remedy referred to in this Section 4, and Affiliate irrevocably waives any right
he may have to require the obtaining, furnishing or posting of any such bond or
similar instrument.
5. Other Agreements. Nothing in this Affiliate Agreement shall limit any
of the rights or remedies of Parent under the Merger Agreement, or any of the
rights or remedies of Parent or any of the obligations of Affiliate under any
agreement between Affiliate and Parent or any certificate or instrument executed
by Affiliate in favor of Parent; and nothing in the Merger Agreement or in any
other agreement, certificate or instrument shall limit any of the rights or
remedies of Parent or any of the obligations of Affiliate under this Affiliate
Agreement.
6. Notices. Any notice or other communication required or permitted to be
delivered to Affiliate or Parent under this Affiliate Agreement shall be in
writing and shall be deemed properly delivered, given and received when
delivered (by hand, by registered mail, by courier or express delivery or by
facsimile) to the address or facsimile telephone number set forth beneath the
name of such party below (or to such other address or facsimile telephone number
as such party shall have specified in a written notice given to the other
party):
if to Parent:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to Affiliate:
_________________________________
_________________________________
Attn:
Fax: (___)_______________________
3.
7. Severability. If any provision of this Affiliate Agreement or any part
of any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (c) the
invalidity or unenforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Affiliate Agreement.
Each provision of this Affiliate Agreement is separable from every other
provision of this Affiliate Agreement, and each part of each provision of this
Affiliate Agreement is separable from every other part of such provision.
8. Applicable Law; Jurisdiction. THIS AFFILIATE AGREEMENT IS MADE UNDER,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF CALIFORNIA
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. In any action between or among any of
the parties, whether arising out of this Affiliate Agreement or otherwise, each
of the parties irrevocably waives the right to trial by jury.
9. Waiver; Termination. No failure on the part of Parent to exercise any
power, right, privilege or remedy under this Affiliate Agreement, and no delay
on the part of Parent in exercising any power, right, privilege or remedy under
this Affiliate Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy. Parent shall not be deemed to have
waived any claim arising out of this Affiliate Agreement, or any power, right,
privilege or remedy under this Affiliate Agreement, unless the waiver of such
claim, power, right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of Parent; and any such waiver
shall not be applicable or have any effect except in the specific instance in
which it is given. If the Merger Agreement is terminated, this Affiliate
Agreement shall thereupon terminate.
10. Captions. The captions contained in this Affiliate Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Affiliate Agreement and shall not be referred to in connection with the
construction or interpretation of this Affiliate Agreement.
11. Further Assurances. Affiliate shall execute and/or cause to be
delivered to Parent such instruments and other documents and shall take such
other actions as Parent may reasonably request to effectuate the intent and
purposes of this Affiliate Agreement.
12. Entire Agreement. This Affiliate Agreement and the Merger Agreement
collectively set forth the entire understanding of Parent and Affiliate relating
to the subject
4.
matter hereof and thereof and supersede all other prior agreements and
understandings between Parent and Affiliate relating to the subject matter
hereof and thereof.
13. Non-Exclusivity. The rights and remedies of Parent hereunder are not
exclusive of or limited by any other rights or remedies that Parent may have,
whether at law, in equity, by contract or otherwise, all of which shall be
cumulative (and not alternative).
14. Amendments. This Affiliate Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of Parent and Affiliate.
15. Assignment. This Affiliate Agreement and all obligations of Affiliate
hereunder are personal to Affiliate and may not be transferred or delegated by
Affiliate at any time. Parent may freely assign any or all of its rights under
this Affiliate Agreement, in whole or in part, to any other person or entity
without obtaining the consent or approval of Affiliate.
16. Binding Nature. Subject to Section 15, this Affiliate Agreement will
inure to the benefit of Parent and its successors and assigns and will be
binding upon Affiliate and Affiliate's representatives, executors,
administrators, estate, heirs, successors and assigns.
[the remainder of this page has been intentionally left blank]
5.
17. Survival. Each of the representations, warranties, covenants and
obligations contained in this Affiliate Agreement shall survive the consummation
of the Mergers.
Affiliate has executed this Affiliate Agreement as of the date first
written above.
__________________________________________
(Signature)
__________________________________________
(Print Name)
NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK OF ▇▇▇▇▇, INC.
HELD BY AFFILIATE:
_______________________________
NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK OF AUBURN CORDAGE,
INC. HELD BY AFFILIATE:
_______________________________
NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK OF ACD AUTO
SALES, INC. HELD BY AFFILIATE:
_______________________________
NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK OF ▇▇▇▇▇▇▇ SCHOOL OF
AUCTIONEERING, INC. HELD BY AFFILIATE:
_______________________________
NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK OF CLASSIC ADVERTISING
& PROMOTIONS, INC. HELD BY AFFILIATE:
_______________________________
6.
EXHIBIT E
AUBURN CORDAGE, INC. STOCKHOLDER (INDIVIDUAL)
CERTIFICATE OF NONFOREIGN STATUS
This CERTIFICATE OF NONFOREIGN STATUS is being provided in connection with
the Agreement and Plan of Merger and Reorganization, dated as of ______, 1999,
by and among eBAY INC., a Delaware corporation ("Buyer"), AUBURN CORDAGE, INC.,
an Indiana corporation (the "Company"), and the other parties named therein.
I, _______, the owner of certain stock in the Company ("Seller"), hereby
state that I understand that Section 1445 of the Internal Revenue Code of 1986,
as amended, provides that a transferee of a U.S. real property interest must
withhold tax if the transferor is a foreign person. Accordingly, to inform
Buyer that withholding of tax is not required upon the disposition of a U.S.
real property interest by Seller, the undersigned hereby certifies to the
following:
1. Seller is not a nonresident alien for purposes of U.S. Income Taxation;
2. Seller's U.S. taxpayer identifying number (Social Security number) is:
________________; and
3. Seller's home address is:_____________________________________________.
Seller agrees to inform Buyer promptly if Seller becomes a nonresident
alien at any time during the three years immediately following the date of this
notice.
Seller understands that this Certification may be disclosed to the Internal
Revenue Service by Buyer and that any false statement contained therein could be
punished by fine or imprisonment, or both.
Under penalties of perjury, I declare that I have examined this
Certification and to the best of my knowledge and belief it is true, correct and
complete.
By:_________________________
Date:_______________________
State of____________)
____________________) ss:
County of___________)
Sworn to and subscribed before me this _____ day of May, 1999.
-----------------------------
Notary Public
My commission expires
May ____, 1999
VIA CERTIFIED MAIL
RETURN RECEIPT REQUESTED
Assistant Commissioner (International)
Director, Office of Compliance
OP:I:C:E: 666
950 L'Enfant Plaza South, S.W.
COMSTAT Building
Washington, D.C. 20024
Re: Notice of Non Real Property Holding Corporation Status
Dear Sir or Madam:
At the request of eBay Inc., a Delaware corporation ("eBay"), in connection with
the merger of _______, an Indiana corporation ("▇▇▇▇▇"), into a subsidiary
("Subsidiary") of eBay, whereby ▇▇▇▇▇ will be the surviving corporation, we
provided the attached statement to eBay on May _____, 1999.
(i) This notice was provided pursuant to the requirements of Treasury
Regulation Section 1.897-2(h)(2);
(ii) The following information relates to ▇▇▇▇▇ which is providing the
notice:
Name ▇▇▇▇▇, Inc.
Address 5400 CR11A
Auburn, IN 46706
(iii) Taxpayer Identification Number _____________
(iv) The following information relates to eBay which requested this
statement:
Name eBay Inc.
Address ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Taxpayer Identification Number ______________
(v) The interest in question, shares of capital stock of ▇▇▇▇▇, Inc., 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,
_____________
By: __________________________
Name:
Title:
May ______, 1999
eBay Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
In connection with your acquisition of ______ ("▇▇▇▇▇"), we are providing this
information to you in order to establish that the shares of ▇▇▇▇▇ are not a U.S.
real property interest and accordingly no withholding is required pursuant to
Internal Revenue Code Section 1445. We represent that the shares of ▇▇▇▇▇ do
not constitute a United States real property interest as of the date of this
letter.
Under penalties of perjury, the undersigned declares that the above information
is correct to the best of my knowledge and belief.
Sincerely,
_________
By: __________________________
Name:
Title:
EXHIBIT F
FORM OF RELEASE
___________, 1999
eBay Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Reference is made to that certain Agreement and Plan of Merger and
Reorganization dated as of May 17, 1999 (the "Merger Agreement"), by and among
Parent, SESAME CORPORATION NUMBER 1, an Indiana corporation ("Merger Sub #1");
SESAME CORPORATION NUMBER 2, an Indiana corporation ("Merger Sub #2"), SESAME
CORPORATION NUMBER 3, an Indiana corporation ("Merger Sub #3"), SESAME
CORPORATION NUMBER 4, an Indiana corporation ("Merger Sub #4"), SESAME
CORPORATION NUMBER 5, an Indiana corporation ("Merger Sub #5"), ▇▇▇▇▇, INC., an
Indiana corporation d/b/a ▇▇▇▇▇ International ("K Inc."), AUBURN CORDAGE, INC.,
an Indiana corporation ("A.C., Inc."), ACD AUTO SALES, INC., an Indiana
corporation ("ACD Auto"), ▇▇▇▇▇▇▇ SCHOOL OF AUCTIONEERING, INC., an Indiana
corporation ("RA School"), CLASSIC ADVERTISING & PROMOTIONS, INC., an Indiana
corporation ("Classic Promotions") (collectively, the "Companies"), ▇▇▇▇ ▇.
▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
In order to induce Parent to consummate the transactions contemplated by
the Merger Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the undersigned, intending to
be legally bound, hereby covenants and agrees as follows:
1. Release. The undersigned (on behalf of himself and each person or
entity that the undersigned has the power to bind) hereby irrevocably,
unconditionally and completely releases, acquits and forever discharges each of
the Releasees (as defined below) from any Claim (as defined below), and hereby
irrevocably, unconditionally and completely waives and relinquishes each and
every Claim that the undersigned may have had in the past, may now have or may
have in the future against any of the Releasees, relating to any written or oral
agreements or arrangements entered into, and any events, matters, causes,
things, acts, omissions or conduct, occurring or existing, at any time up to and
including the date of this letter, including, without limitation, any Claim (a)
to the effect that the undersigned is or may be entitled to any compensation,
benefits, commissions or perquisites from any of the Companies or (b) otherwise
arising (directly or indirectly) out of or in any way connected with the
undersigned's stockholdings, employment or other relationship with any of the
Companies; provided, however, that the undersigned is not releasing the
undersigned's rights, if any:
(i) under the Merger Agreement (including Section 4.2(b)
thereof);
1.
(ii) under the indemnification provisions contained in the
Certificate of Incorporation or Bylaws of any of the Companies;
(iii) with respect to salaries, bonuses, commisions and expenses
that have accrued in the ordinary course of business consistent with past
practices; or
(iv) to accrued vacation and vested benefits under the Company's
employee benefit plans.
For purposes of this Agreement, (1) the term "Releasees" means: (w) Parent; (x)
each of the Companies; (y) each other affiliate of Parent and each of the
Companies; and (z) the successors and past, present and future assigns,
directors, officers, agents, attorneys and representatives of the respective
entities identified or otherwise referred to in clauses "(w)" through "(y)" of
this clause "(1)," and (2) the term "Claim" means all past, present and future
disputes, claims, controversies, demands, rights, obligations, liabilities,
actions and causes of action of every kind and nature, including (y) any
unknown, unsuspected or undisclosed claim; and (z) any claim or right that may
be asserted or exercised by the undersigned in the undersigned's capacity as a
stockholder, director, officer or employee of any of the Companies or in any
other capacity.
2. Miscellaneous. This letter shall be governed by, and construed in
accordance with, the laws of the State of Indiana, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws. If any
legal action or other legal proceeding relating to this letter or the
enforcement of any provision of this letter is brought against any party hereto,
the prevailing party shall be entitled to recover reasonable attorneys' fees,
costs and disbursements (in addition to any other relief to which the prevailing
party may be entitled). This letter and the agreements referred to herein set
forth the entire understanding of the parties relating to the subject matter
hereof and supersede all prior agreements and understandings among or between
any of the parties relating to the subject matter hereof.
Very truly yours,
2.
EXHIBIT G
FORM OF
STOCKHOLDER REPRESENTATION LETTER
THIS STOCKHOLDER REPRESENTATION LETTER ("Letter") is being executed and
delivered as of _____ __, 1999, by the undersigned stockholder of ▇▇▇▇▇, INC.,
an Indiana corporation, and certain related Companies (collectively, the
"Companies"), to and in favor of, and for the benefit of, eBAY INC., a Delaware
corporation ("Parent") and its affiliates.
RECITALS
A. The undersigned stockholder of all or some of the Companies (the
"Stockholder") represents to Parent that he owns the number of shares of the
common stock of the various Companies set forth below the Stockholder's
signature at the end of this Letter. Said shares are referred to in this Letter
as the "Shares."
B. Pursuant to an Agreement and Plan of Merger and Reorganization, dated
as of May 17, 1999 (the "Merger Agreement"), by and among Parent, Sesame
CORPORATION NUMBER 1, an Indiana corporation ("Merger Sub #1"), SESAME
CORPORATION NUMBER 2, an Indiana corporation ("Merger Sub #2"), SESAME
CORPORATION NUMBER 3, an Indiana corporation ("Merger Sub #3"), SESAME
CORPORATION NUMBER 4, an Indiana corporation ("Merger Sub #4"), SESAME
CORPORATION NUMBER 5, an Indiana corporation ("Merger Sub #5") (collectively,
the "Merger Subs"), ▇▇▇▇▇, INC., an Indiana corporation d/b/a ▇▇▇▇▇
International ("K Inc."), AUBURN CORDAGE, INC., an Indiana corporation ("A.C.,
Inc."), ACD AUTO SALES, INC., an Indiana corporation ("ACD Auto"), ▇▇▇▇▇▇▇
SCHOOL OF AUCTIONEERING, INC., an Indiana corporation ("RA School"), CLASSIC
ADVERTISING & PROMOTIONS, INC., an Indiana corporation ("Classic Promotions")
(collectively, the "Companies"), ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ it is
contemplated that Merger Sub #1 will merge into K Inc. ("Merger #1"), Merger Sub
#2 will merge into A.C., Inc. ("Merger #2"), Merger Sub #3 will merge into ACD
Auto ("Merger #3"), Merger Sub #4 will merge into RA School ("Merger #4") and
Merger Sub #5 will merge into Classic Promotions ("Merger #5") (collectively,
the "Mergers"). Upon the consummation of the Mergers, the stockholders of each
Company are to receive shares of common stock of Parent ("Parent Common Stock")
in exchange for their shares of common stock of each Company in accordance with
the Merger Agreement and each of the Companies is to become a wholly-owned
subsidiary of Parent. Accordingly, it is contemplated that the Stockholder will
receive shares of Parent Common Stock in the Mergers.
C. Capitalized terms used in this Letter have the meaning ascribed to them
in the Merger Agreement unless otherwise stated herein.
CERTIFICATION
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The Stockholder
represents, warrants and certifies to Parent as follows:
1.
(a) The Stockholder is the holder and beneficial owner of the Shares
and has good and valid title to the Shares free and clear of any Encumbrances.
The Shares are the only shares of the capital stock of any of the Companies held
by the Stockholder. The Stockholder has the ability to vote all of the
respective Shares at any meeting of the stockholders of the applicable Company
or by written consent in lieu of any such meeting. Except pursuant to the Merger
Agreement, the Stockholder has not appointed or granted any proxy or entered
into any agreement, contract, commitment or understanding with respect to any of
the Shares that is now in force.
(b) The Stockholder has the absolute and unrestricted right, power,
authority and capacity to enter into, execute, deliver and perform all of his
obligations under the Merger Agreement and under each other agreement, document
or instrument referred to in or contemplated by the Merger Agreement to which
the Stockholder is or is to become a party.
(c) The Merger Agreement and each other agreement, document or
instrument referred to in or contemplated by the Merger Agreement to which the
Stockholder is or is to become a party (i) has been (or will when executed by
the Stockholder be) duly and validly executed by the Stockholder, and (ii)
constitutes (or will when executed by the Stockholder constitute) a valid and
binding obligation of the Stockholder, enforceable against the Stockholder in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and to rules of law governing
specific performance, injunctive relief and other equitable remedies.
(d) Neither the execution, delivery or performance of the Merger
Agreement or of any other agreement, document or instrument referred to in or
contemplated by the Merger Agreement to which the Stockholder is or is to become
a party, nor the consummation of the Mergers or any of the other transactions
contemplated by the Merger Agreement, will directly or indirectly: (i) result in
any violation or breach of any agreement or other instrument to which the
Stockholder is a party or by which the Stockholder is bound; or (ii) result in a
violation of any law, rule, regulation, order, judgment or decree to which the
Stockholder or any of the Shares is subject. No authorization, consent or
approval of, or notice to, any Person is required to be obtained or given by the
Stockholder in connection with the execution, delivery or performance of the
Merger Agreement or of any other agreement, document or instrument referred to
in or contemplated by the Merger Agreement to which the Stockholder is or is to
become a party.
(e) There is no Legal Proceeding by or before any Governmental Body
pending or, to the knowledge of the Stockholder, threatened against the
Stockholder that challenges or would challenge the execution and delivery of the
Merger Agreement or of any other agreement, document or instrument referred to
in or contemplated by the Merger Agreement to which the Stockholder is or is to
become a party or the taking of any of the actions required to be taken by the
Stockholder under the Merger Agreement or under any other agreement, document or
instrument referred to in or contemplated by the Merger Agreement to which the
Stockholder is or is to become a party.
(f) The Stockholder is aware (i) that the Parent Common Stock to be
issued to the Stockholder in the Mergers will not be issued pursuant to a
registration statement under the Securities Act of 1933, as amended (the "Act"),
but will instead be issued in reliance on the
2.
exemption from registration set forth in Section 4(2) of the Act and in
Regulation D under the Act, and (ii) that neither the Mergers nor the issuance
of such Parent Common Stock has been approved or reviewed by the SEC or by any
other Governmental Body.
(g) The Stockholder is aware that the Parent Common Stock to be issued
in the Mergers cannot be resold unless such Parent Common Stock is registered
under the Act or unless an exemption from registration is available. The
Stockholder is also aware that: (i) except pursuant to the Registration Rights
Agreement and the Merger Agreement, Parent is under no obligation to file a
registration statement with respect to the Parent Common Stock to be issued to
the Stockholder in the Mergers; and (ii) the provisions of Rule 144 under the
Act will permit resale of the Parent Common Stock to be issued to the
Stockholder in the Mergers only under limited circumstances, and such Parent
Common Stock must be held by the Stockholder for at least one year before it can
be sold pursuant to Rule 144.
(h) The Parent Common Stock to be issued to the Stockholder in the
Mergers will be acquired by the Stockholder for investment and for his own
account, and not with a view to, or for resale in connection with, any
unregistered distribution thereof.
(i) The Stockholder has received and examined Parent's Final
Prospectus dated September 24, 1998, Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998, Annual Report on Form 10-K for the year ended
December 31, 1998 and Final Prospectus dated April 12, 1999, including the risk
factors described therein. Without limiting the generality of the foregoing, the
Stockholder specifically acknowledges that the stock price of Parent Common
Stock has been, and will likely continue to be, extremely volatile, and the
Stockholder unconditionally and forever waives and discharges any rights he may
have against Parent or any other Person relating to any changes in the price of
Parent Common Stock.
(j) The Stockholder has been given the opportunity: (i) to ask
questions of, and to receive answers from, persons acting on behalf of the
Companies and Parent concerning the terms and conditions of the Mergers and the
contemplated issuance of Parent Common Stock in the Mergers, and the business,
properties, prospects and financial condition of the Companies and Parent; and
(ii) to obtain any additional information (to the extent the Companies or Parent
possesses such information or is able to acquire it without unreasonable effort
or expense and without breach of confidentiality obligations) that is necessary
to verify the accuracy of the information set forth in the documents, provided
or made available to the Stockholder.
(k) The Stockholder is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments in
securities presenting investment decisions like that involved in the
Stockholder's contemplated investment in the Parent Common Stock to be issued in
the Mergers.
(l) The Stockholder is an "accredited investor" (as such term is
defined in Rule 501 under the Act).
(m) The Stockholder understands that stop transfer instructions will
be given to Parent's transfer agent with respect to the Parent Common Stock to
be issued to the Stockholder in the Mergers, and that there will be placed on
the certificate or certificates
3.
representing such Parent Common Stock a legend identical or similar in effect to
the following legend (together with any other legend or legends required by
applicable state securities laws or otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE."
2. RELIANCE. The Stockholder acknowledges that Parent will rely on his
representations, warranties and certifications set forth in Section 1 above for
purposes of determining his suitability as an investor in Parent Common Stock
and for purposes of confirming the availability of an exemption from the
registration requirements of the Act.
3. PROHIBITIONS AGAINST TRANSFER. The Stockholder shall not effect any
sale, transfer or other disposition of any of the Parent Common Stock that he is
to receive in the Mergers unless:
(a) such sale, transfer or other disposition has been registered under
the Act;
(b) such sale, transfer or other disposition is made in conformity
with the requirements of Rule 144 under the Act, as evidenced by a broker's
letter and a representation letter executed by the Stockholder (satisfactory in
form and content to Parent) stating that such requirements have been met;
(c) counsel reasonably satisfactory to Parent shall have advised
Parent in a written opinion letter (satisfactory in form and content to Parent),
upon which Parent may rely, that such sale, transfer or other disposition will
be exempt from registration under the Act; or
(d) an authorized representative of the SEC shall have rendered
written advice to the Stockholder to the effect that the SEC would take no
action, or that the staff of the SEC would not recommend that the SEC take
action, with respect to such sale, transfer or other disposition, and a copy of
such written advice and all other related communications with the SEC shall have
been delivered to Parent.
4.
The Stockholder has executed and delivered this Letter as of the date first
written above.
By: _______________________________
Print Name:________________________
State of Residence: Indiana
NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK OF ▇▇▇▇▇, INC.
HELD BY STOCKHOLDER:
_______________________________
NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK OF AUBURN CORDAGE,
INC. HELD BY STOCKHOLDER:
_______________________________
NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK OF ACD AUTO
SALES, INC. HELD BY STOCKHOLDER:
_______________________________
NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK OF ▇▇▇▇▇▇▇ SCHOOL OF
AUCTIONEERING, INC. HELD BY STOCKHOLDER:
_______________________________
NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK OF CLASSIC ADVERTISING
& PROMOTIONS, INC. HELD BY STOCKHOLDER:
_______________________________
5.
EXHIBIT H
FORM OF
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is made and entered into
as of ______ __, 1999, by and among: EBAY INC., a Delaware corporation
("Parent"); ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Stockholders").
RECITALS
A. Parent, SESAME CORPORATION NUMBER 1, an Indiana corporation ("Merger
Sub #1"); SESAME CORPORATION NUMBER 2, an Indiana corporation ("Merger Sub #2"),
SESAME CORPORATION NUMBER 3, an Indiana corporation ("Merger Sub #3"), SESAME
CORPORATION NUMBER 4, an Indiana corporation ("Merger Sub #4"), SESAME
CORPORATION NUMBER 5, an Indiana Corporation ("Merger Sub #5), ▇▇▇▇▇, INC., an
Indiana corporation d/b/a K International ("K Inc."), AUBURN CORDAGE, INC., an
Indiana corporation ("A.C., Inc."), ACD AUTO SALES, INC., an Indiana corporation
("ACD Auto"), ▇▇▇▇▇▇▇ SCHOOL OF AUCTIONEERING, INC., an Indiana corporation ("RA
School") and CLASSIC ADVERTISING & PROMOTIONS, INC., an Indiana corporation
("Classic Promotions") (collectively, the "Companies"), ▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ have entered into an Agreement and Plan of Merger and
Reorganization, dated as of May 17, 1999 (the "Merger Agreement"), pursuant to
which Merger Sub #1 will merger into K Inc. ("Merger #1"), Merger Sub #2 will
merge into A.C., Inc. ("Merger #2"), Merger Sub #3 will merge into ACD Auto
("Merger #3"), Merger Sub #4 will merge into RA School ("Merger #4") and Merger
Sub #5 will merge into Classic Promotions ("Merger #5") (collectively, the
"Mergers"). As a result of the Mergers, ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ will
have the right to receive shares of common stock of Parent.
B. Parent has agreed to provide the Stockholders with certain registration
rights as more fully described herein.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
SECTION 1: Registration
1.1 Registerable Shares. As used in this Agreement, "Registerable Shares"
means the shares of Parent Common Stock issued to the Stockholders pursuant to
the Merger Agreement and any shares of Parent Common Stock issued in respect
thereof as a result of any stock split, stock dividend, share exchange, merger,
consolidation or similar recapitalization; provided, however, that Registerable
Shares shall cease to be Registerable Shares when (i) a registration statement
covering such Registerable Shares shall have become effective under the
Securities Act of 1933, as amended (the "1933 Act"), and such Registerable
Shares shall have been disposed of in accordance with such registration
statement, or (ii) such Registerable Shares may be transferred pursuant to Rule
144 under the 1933 Act, as such rule may be amended from time to time, or any
successor rule or regulation ("Rule 144"); and provided further, that
Registerable Shares shall not include any shares of Parent Common Stock held in
any "Escrow Account"
pursuant to the Escrow Agreement (as defined in the Merger Agreement).
Stockholders desiring to sell shares pursuant to Rule 144 shall provide such
Rule 144 representation letters in usual and customary form as may reasonably be
requested by Parent's counsel to provide a Rule 144 opinion.
1.2 Registration.
(a) On or prior to September 30, 1999, or as soon as practicable
thereafter, Parent shall prepare and file with the Securities and Exchange
Commission ("SEC") a registration statement on Form S-3 (the "Registration
Statement") covering the resale of _______ [number of shares issued to
Stockholders, excluding escrow shares] of the shares of Parent Common Stock
issued to the Stockholders pursuant to the Merger Agreement and any shares of
Parent Common Stock issued in respect thereof as a result of any stock split,
stock dividend, share exchange, merger, consolidation or similar
recapitalization after the Closing Date (the "Registerable Shares"). Parent
shall use its reasonable efforts to have the Registration Statement declared
effective on or before October 31, 1999, but shall be under no obligation to
have such Registration Statement declared effective prior to the second trading
day after its announcement of its quarterly financial results for the quarter
ended September 30, 1999.
(b) The Stockholders shall furnish such information as Parent may
reasonably request in connection with the preparation of the Registration
Statement. Upon registration of the resale of the Registerable Shares with the
SEC pursuant to the terms of this Agreement, the Registerable Shares may be sold
in accordance with the Registration Statement under the 1933 Act. Parent shall
use its reasonable efforts to cause the Registration Statement to remain
effective until the earliest of (i) the date on which all Registerable Shares
covered by the Registration Statement have been sold to the public pursuant to
the Registration Statement, (ii) one year after the effective date of the
Registration Statement and (iii) the date on which all of the Registerable
Shares may be sold in any 3-month period pursuant to Rule 144.
1.3 Other Shares. Parent may include in the Registration Statement
referred to in Section 1.2 any other shares of Parent Common Stock (including
issued and outstanding shares of Parent Common Stock as to which the holders
thereof have contracted with Parent for "piggyback" registration rights).
SECTION 2: Parent's Obligations
In connection with the Registration Statement referred to in Section
1.2, Parent shall:
2.1 Registration Statement. Prepare and file with the SEC a registration
statement with respect to the Registerable Shares and thereafter use its
reasonable efforts to cause such Registration Statement to become and remain
effective for the period set forth in Section 1.2(b).
2.2 Amendments and Supplements. Prepare and file with the SEC such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep such Registration Statement
effective for the period set forth in Section 1.2(b) and to comply with the
provisions of the 1933 Act with respect to the sale or other disposition of the
shares of Parent Common Stock covered by the Registration Statement.
2.
2.3 Copies of Offering Documents. Furnish to the Stockholders such
numbers of copies of the Registration Statement, prospectus, and any amendments
and supplements thereto, in conformity with the requirements of the 1933 Act,
such documents incorporated by reference in the Registration Statement and such
other documents as the Stockholders reasonably request, in order to facilitate
the public sale or other disposition of the Registerable Shares.
2.4 Misleading Prospectus. Promptly notify each Stockholder, at any time
when the prospectus relating thereto covered by the Registration Statement is
required to be delivered under the 1933 Act, upon Parent becoming aware that the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and immediately
thereafter use reasonable efforts to prepare and file with the SEC and furnish
to such Stockholder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registerable Shares, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they are made.
2.5 Rule 144. Use its reasonable efforts to file in a timely manner any
reports required to be filed by it under the 1933 Act and the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and take such further action
as the Stockholders may reasonably request, all from time to time to enable each
such Stockholder to sell the Registerable Shares owned by him (and any shares of
Parent Common Stock deposited in escrow on his behalf pursuant to the Merger
Agreement that are released from escrow to such Stockholder) without
registration under the 1933 Act pursuant to the exemption provided by Rule 144.
2.6 Blue Sky Filings. Use its reasonable efforts to register and qualify
the securities covered by the Registration Statement under the Blue Sky laws of
such jurisdictions as shall be reasonably requested by the Stockholders,
provided that Parent shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
SECTION 3: The Stockholder's Obligations
In connection with the Registration Statement referred to in Section 1.2,
the Stockholders shall each:
3.1 Other Documents and Information. Complete, execute, acknowledge
and/or deliver such questionnaires, indemnification agreements, custody
agreements, underwriting agreements (if the registration is underwritten) and
other documents, certificates and instruments as are reasonably required by
Parent or any underwriter(s) or are otherwise necessary in connection with the
registration and offering. Each Stockholder shall promptly provide to Parent
such information concerning such Stockholder, his ownership of Parent's
securities, the intended method of distribution and such other information as
may be required by applicable law or regulation or as may be reasonably
requested by Parent.
3.
3.2 Cessation of Offering. Upon receipt of any notice from Parent of the
happening of any event of the kind described in Section 2.4, immediately
discontinue disposition of the Registerable Shares pursuant to the Registration
Statement covering such shares until the Stockholders' receipt of the copies of
the supplemented or amended prospectus contemplated by Section 2.4, and, if so
directed by Parent, deliver to Parent all copies of the prospectus covering such
Registerable Shares in such Stockholder's possession at the time of receipt of
such notice.
3.3 No Preliminary Prospectus. No Stockholder and no person or entity
acting on any Stockholder's behalf (other than an underwriter selected by Parent
or approved by Parent) shall offer any Registerable Shares by means of any
preliminary prospectus.
SECTION 4: Limitations
4.1 Other Transactions. Parent shall not be obligated to effect a
registration pursuant to Section 1, or to file any amendment or supplement
thereto, and may suspend the Stockholders' rights to make sales pursuant to an
effective registration pursuant to Section 1, at any time when Parent, in the
good faith judgment of its Board of Directors, reasonably believes that the
filing thereof at the time requested, or the offering of securities pursuant
thereto, would (i) materially and adversely affect a pending or proposed
acquisition, merger, recapitalization, consolidation, reorganization or similar
transaction, or negotiations, discussions or pending proposals related thereto,
or (ii) be seriously detrimental to Parent and its stockholders, in which event
(under clause (i) or (ii) above) Parent's sole relief from its registration
obligations is the right to defer filing of the Registration Statement (or to
suspend the Stockholders' rights to make sales pursuant to the Registration
Statement if it is already effective) for a period of not more than 60 days;
provided, however, that Parent shall not utilize the right described in this
Section 4.1 more than twice in any 12-month period.
SECTION 5: Expenses and Indemnification
5.1 Certain Fees and Commissions. Parent shall pay its own general legal
and accounting fees and all printing fees in connection with the Registration
Statement. Parent shall reimburse the Stockholders, in the aggregate, up to a
total of $5,000 for reasonable legal fees and costs incurred by the Stockholders
in connection with the initial preparation and filing of the Registration
Statement and up to $2,500 for reasonable legal fees and costs incurred by the
Stockholders in connection with any amendment or supplement to the Registration
Statement. The Stockholders shall pay any additional fees and costs of their own
counsel and all underwriting discounts, commissions and expenses of underwriters
or brokers incurred in connection with the offering and sale of the Registerable
Shares.
5.2 Other Expenses. Parent shall pay all registration and filing fees
attributable to the Registerable Shares and the listing fee payable to the
Nasdaq National Market.
5.3 Indemnification. In the event any Registerable Shares are included in
a registration statement under Section 1:
(a) Indemnification by Parent. To the extent permitted by law,
Parent will indemnify and hold harmless each Stockholder, such Stockholder's
heirs, successors and assigns, any underwriter (as defined in the ▇▇▇▇ ▇▇▇) for
such Stockholder (if selected by Parent or
5.
approved by Parent), and each person, if any, who controls such Stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act, against any
losses, claims, damages, liabilities or actions to which they may become subject
under the 1933 Act, the 1934 Act or other federal or state law, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus (not prohibited by Section 3.3) or final prospectus contained therein
or any amendments or supplements thereto, or arising out of or based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the context in
which made, not misleading; and Parent will reimburse each such Stockholder,
such Stockholder's heirs, successors and assigns, underwriter (if selected by
Parent or approved by Parent) or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnification and other rights provided for in this Section 5.3(a)
shall not apply (i) to any such loss, claim, damage, liability, or action
insofar as it arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, preliminary prospectus or final prospectus or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any
Stockholder or (ii) if the person asserting any such loss, claim, damage,
liability or action who purchased the Registerable Shares that are the subject
thereof did not receive a copy of an amended preliminary prospectus or the final
prospectus (or the final prospectus as amended or supplemented) at or prior to
the written confirmation of the sale of such Registerable Shares to such person
because of the failure of such Stockholder or underwriter to so provide such
amended preliminary or final prospectus and the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact made in such
preliminary prospectus was corrected in the amended preliminary prospectus or
the final prospectus (or the final prospectus as amended and supplemented). Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Stockholder, underwriter or controlling person and
shall survive the transfer of the Registerable Shares by such Stockholder.
(b) Indemnification by Stockholders. To the extent permitted by law,
each Stockholder will severally (but not jointly and pro rata with the other
Stockholders) indemnify and hold harmless Parent, its successors and assigns,
its officers and directors, any underwriter (as defined in the ▇▇▇▇ ▇▇▇) with
respect to the Registerable Shares, and each person, if any, who controls Parent
or any such underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages, liabilities or actions (joint or several)
to which they may become subject under the 1933 Act, the 1934 Act or other
federal or state law, arising out of or based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, or arising out of or based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the context
in which made, not misleading; provided that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished by such Stockholder expressly
for use in such registration by such Stockholder, or (ii) the failure of such
Stockholder or any underwriter with respect to the Registerable Shares held by
such Stockholder at or prior to the written confirmation of the sale of the
Registerable Shares held by such Stockholder to send
5.
or arrange delivery of a copy of an amended preliminary prospectus or the final
prospectus (or the final prospectus as amended or supplemented) to the person
asserting any such loss, claim, damage, liability or action who purchased the
Registerable Shares which is the subject thereof and the untrue statement or
alleged untrue statement or omission or alleged omission of a material fact made
in such preliminary prospectus was corrected in the amended preliminary
prospectus or the final prospectus (or the final prospectus as amended and
supplemented). Each Stockholder will reimburse Parent and each such officer or
director or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of Parent or any
such officer, director, underwriter or controlling person and shall survive the
transfer of the Registerable Shares by such Stockholder.
(c) Indemnification Procedures. Promptly after receipt by a person
who may be entitled to indemnification under this Section 5.3 (an "indemnified
party") of notice of the commencement of any action (including any governmental
action) for which indemnification may be available under this Section 5.3, such
indemnified party will, if a claim in respect thereof is to be made against any
person who must provide indemnification under this Section 5.3 (an "indemnifying
party"), deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly notified, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel (and the
reasonable fees of such counsel shall be paid by the indemnifying party) and
assume its own defense if (i) the retention of such counsel has been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party has failed to promptly assume the defense and employ
experienced counsel reasonably acceptable to the indemnified party after the
indemnifying party has received the notice of the indemnification matter from
the indemnified party, or (iii) the named parties to any such action include
both the indemnified party and the indemnifying party, and the representation of
both parties by the same counsel would be inappropriate due to a conflict of
interest between them. It is understood, however, that the indemnifying party
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for all
indemnified parties unless the indemnified parties in good faith conclude and
are advised by their counsel that there is an actual or potential conflict of
interest among the indemnified parties. No indemnification provided for in
Section 5.3(a) or Section 5.3(b) shall be available to any party who shall fail
to give notice as provided in this Section 5.3(c) to the extent that the party
to whom notice was not given was unaware of the proceeding to which such notice
would have related and was materially prejudiced by the failure to give such
notice.
SECTION 6: Other Provisions
6.1 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
6.
6.2 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth in Section 10.5 of the Merger
Agreement (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto).
6.3 Headings. The underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
6.4 Counterparts. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
6.5 Governing Law. This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
6.6 Successors and Assigns. This Agreement shall be binding upon each of
the parties hereto and each of their respective permitted successors and
assigns, if any. No Stockholder may assign such Stockholder's rights under this
Agreement without the express prior written consent of Parent, provided,
however, that (i) upon the death of a Stockholder, such Stockholder's rights
under this Agreement shall be transferred to the person(s) who receive such
Stockholder's Parent Common Stock under the laws of descent and distribution,
(ii) a Stockholder may assign such Stockholder's rights under this Agreement to
any organization qualified under Section 501(c)(3) of the Internal Revenue Code
to which the Stockholder transfers Registerable Shares or in connection with an
estate planning transaction, and (iii) such Stockholder may transfer its rights
under this Agreement to any transferee of 50,000 or more of the Registerable
Shares (subject to appropriate adjustment based on stock dividends, stock splits
and other similar transactions after the date hereof) who agrees in writing to
be bound by the terms of this Agreement to the same extent as if such transferee
were a Stockholder hereunder and subject to such Stockholder's prior delivery to
Parent of an opinion of counsel in form reasonably satisfactory to the Parent to
the effect that the transfer of Registerable Shares was made in compliance with
all applicable federal and state securities laws. Nothing in this Agreement is
intended to confer, or shall be deemed to confer, any rights or remedies upon
any person or entity other than the parties hereto and their permitted
successors and assigns. This Agreement shall inure to the benefit of: the
Stockholders; Parent; and the respective successors and assigns, if any, of the
foregoing.
6.7 Waiver. No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy. No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and
7.
delivered on behalf of such Person; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
6.8 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
6.9 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
6.10 Parties in Interest. Except for the provisions of Section 5.3, none
of the provisions of this Agreement is intended to provide any rights or
remedies to any Person other than the parties hereto and their respective
successors and assigns, if any.
6.11 Entire Agreement. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.
6.12 Waiver of Jury Trial. Each of the parties hereto hereby irrevocably
waives any and all right to trial by jury in any Legal Proceeding (as defined in
the Merger Agreement) arising out of or related to this Agreement or the
transactions contemplated hereby.
6.13 Construction.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
8.
The parties hereto have caused this Agreement to be executed and delivered
as of the date first written above.
eBAY INC.
a Delaware corporation
By:____________________________
Name:
Title:
By:____________________________
▇▇▇▇ ▇. ▇▇▇▇▇
By:____________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
9.
EXHIBIT I
FORM OF
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") is made and entered into as of ____ __,
1999, by and among: EBAY INC., a Delaware corporation ("Parent"); ▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Stockholders") and ▇▇▇▇ ▇. ▇▇▇▇▇, as Stockholders' Agent
(the "Stockholders' Agent").
RECITALS
A. Parent, SESAME CORPORATION NUMBER 1, an Indiana corporation ("Merger
Sub #1"); SESAME CORPORATION NUMBER 2, an Indiana corporation ("Merger Sub #2"),
SESAME CORPORATION NUMBER 3, an Indiana corporation ("Merger Sub #3"), Sesame
CORPORATION NUMBER 4, an Indiana corporation ("Merger Sub #4"), SESAME
CORPORATION NUMBER 5, an Indiana corporation ("Merger Sub #5"), ▇▇▇▇▇, INC., an
Indiana corporation d/b/a ▇▇▇▇▇ International ("K Inc."), AUBURN CORDAGE, INC.,
an Indiana corporation ("A.C., Inc."), ACD AUTO SALES, INC., an Indiana
corporation ("ACD Auto"), ▇▇▇▇▇▇▇ AUCTION SCHOOL, an Indiana corporation ("RA
School") and CLASSIC ADVERTISING & PROMOTIONS, INC., an Indiana corporation
("Classic Promotions") (collectively, the "Companies"), ▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ have entered into an Agreement and Plan of Merger and
Reorganization, dated as of May 17, 1999 (the "Merger Agreement"), pursuant to
which Merger Sub #1 will merger into K Inc., Merger Sub #2 will merge into A.C.,
Inc., Merger Sub #3 will merge into ACD Auto, Merger Sub #4 will merge into RA
School and Merger Sub #5 will merge into Classic Promotions (collectively, the
"Mergers") and as a result of the Mergers ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ will
have the right to receive shares of common stock of Parent.
B. The Merger Agreement contemplates the establishment of an escrow
arrangement to secure the indemnification and other obligations of the
Stockholders under the Merger Agreement.
D. Pursuant to Section 10.1 of the Merger Agreement, the Stockholders have
irrevocably appointed ▇▇▇▇ ▇. ▇▇▇▇▇ to serve as the Selling Stockholders' Agent
for, among other things, all matters set forth in Section 9 of the Merger
Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given to them in the Merger Agreement,
a copy of which is attached hereto.
2. Escrow and Indemnification.
(a) Shares and Stock Powers Placed in Escrow. At the Effective Time:
(i) Parent shall issue a certificate for ______ [10% of shares to be
received by ▇▇▇▇ ▇▇▇▇▇] shares of Parent Common Stock in the name of the
▇▇▇▇ ▇. ▇▇▇▇▇ and a certificate for ______ [10% of shares to be received by
▇▇▇▇▇▇▇▇ ▇▇▇▇▇] shares of Parent Common Stock in the name of
1.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (or any trust or foundation into which ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ transfers
such escrow shares), evidencing the shares of Parent Common Stock to be held in
escrow in accordance with this Agreement and Section 1.3(ii) of the Merger
Agreement (the "10% Escrow"), (ii) Parent shall issue a certificate for ______
[2% of shares to be received by ▇▇▇▇ ▇▇▇▇▇] shares of Parent Common Stock in the
name of the ▇▇▇▇ ▇. ▇▇▇▇▇ and a certificate for ______ [2% of shares to be
received by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇] shares of Parent Common Stock in the name of
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (or any trust or foundation into which ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ transfers
such escrow shares), evidencing the shares of Parent Common Stock to be held in
escrow in accordance with this Agreement and Section 1.3(iii) of the Merger
Agreement (the "Form 8300 Escrow") and (iii) the applicable Stockholder (or in
the case of a transfer to a trust or foundation, such trust or foundation) shall
deliver to Parent five original "assignments separate from certificate" ("Stock
Powers") for each certificate described above, each such Stock Power endorsed by
the applicable stockholder in blank with his or its signature guaranteed by a
commercial bank or by a member firm of the New York Stock Exchange. The shares
of Parent Common Stock being held in escrow pursuant to this Agreement (the
"Escrow Shares") shall constitute an escrow fund (the "Escrow Fund") with
respect to the indemnification obligations of the Stockholders under the Merger
Agreements. The Escrow Fund shall be held as a trust fund and shall not be
subject to any lien, attachment, trustee process or any other judicial process
of any creditor of any Stockholder or of any party hereto. Parent agrees to act
as the escrow agent and agrees to accept delivery of the Escrow Fund and to hold
the Escrow Fund in an escrow account (the "Escrow Account") subject to the terms
and conditions of this Agreement.
(b) Voting of Escrow Shares. The record owner of the Escrow Shares
shall be entitled to exercise all voting rights with respect to such Escrow
Shares.
(c) Dividends, Etc. Parent and each Stockholder agree among
themselves, for the benefit of Parent as escrow agent, that any cash, securities
or other property distributable (whether by way of dividend, stock split or
otherwise) in respect of or in exchange for any Escrow Shares shall not be
distributed to the record owners of such Escrow Shares, but rather shall be
distributed to and held by Parent in the Escrow Account. Unless and until Parent
shall actually receive such cash, securities or other property, it may assume
without inquiry that the Escrow Shares currently being held by it in the Escrow
Account are all that Parent is required to hold. At the time any Escrow Shares
are required to be released from the applicable escrow to any Person pursuant to
this Escrow Agreement, any cash, securities or other property previously
received by Parent in respect of or in exchange for such Escrow Shares shall be
released from the applicable escrow to such Person.
(d) Transferability. The interests of the applicable Stockholder in
the applicable escrow and in the Escrow Shares shall not be assignable or
transferable, other than by operation of law and except for transfers to trusts
or foundations that agree to be bound by the terms of this Agreement (including
the designation of the Stockholders' Agent as its agent for the purposes
described herein). No transfer of any of such interests, including by operation
of law, shall be recognized or given effect until Parent shall have received
written notice of such transfer.
(e) Fractional Shares. No fractional shares of Parent Common Stock
shall be retained in or released from the applicable escrow pursuant to this
Escrow Agreement. In connection with any release of Escrow Shares from either
escrow, Parent shall "round down" in
2.
order to avoid retaining any fractional share in the applicable escrow and in
order to avoid releasing any fractional share from the applicable escrow. When
shares are "rounded down", no cash-in-lieu payments need to be made.
3. Administration of Escrow Account. Except as otherwise provided herein,
Parent shall administer the Escrow Account as follows:
(a) If any Indemnitee has or claims to have incurred or suffered
Damages for which it is or may be entitled to indemnification, compensation or
reimbursement under Section 9.2(a) of the Merger Agreement, such Indemnitee may,
on or prior to the first anniversary of the Closing Date (the "10% Escrow
Termination Date"), deliver a claim notice (a "Claim Notice") to each of the
Stockholders and to Parent. Each Claim Notice shall state that such Indemnitee
believes that there is or has been a breach of a representation, warranty or
covenant contained in the Merger Agreement or that such Indemnitee is otherwise
entitled to indemnification, compensation or reimbursement under the Merger
Agreement and contain a brief description of the circumstances supporting such
Indemnitee's belief that there is or has been such a breach or that such
Indemnitee is so entitled to indemnification, compensation or reimbursement and
shall, to the extent possible, contain a non-binding, preliminary estimate of
the amount of Damages such Indemnitee claims to have so incurred or suffered
(the "Claimed Amount").
(b) If any Indemnitee has or claims to have incurred or suffered
Damages for which it is or may be entitled to indemnification, compensation or
reimbursement under Section 9.2(c) of the Merger Agreement, such Indemnitee may,
on or prior to the date that all claims under Section 9.2(c) of the Merger
Agreement relating to the alleged failure of the Companies to make required Form
8300 filings in the years 1990, 1991 and 1992 are fully and finally resolved
(the "Form 8300 Escrow Termination Date"), deliver a Claim Notice to each of the
Stockholders and to Parent. Each such Claim Notice shall state that such
Indemnitee believes that such Indemnitee is entitled to indemnification,
compensation or reimbursement under Section 9.2(c) of the Merger Agreement and
contain a brief description of the circumstances supporting such Indemnitee's
belief that it is entitled to indemnification, compensation or reimbursement and
shall, to the extent possible, contain a non-binding, preliminary estimate of
the Claimed Amount.
(c) Indemnification claims based on Section 9.2(a) of the Merger
Agreement are limited to the 10% Escrow. Indemnification claims based on Section
9.2(c) of the Merger Agreement shall be satisfied first out of the Form 8300
Escrow but such claims shall not be limited to the Form 8300 Escrow.
(d) Within 20 business days after receipt by Parent of a Claim Notice,
the Stockholders' Agent may deliver to the Indemnitee who delivered the Claim
Notice and to Parent a written response (the "Response Notice") in which the
Stockholders' Agent: (i) agrees that a whole number of Escrow Shares having a
"Stipulated Value" (as defined below) equal to the full Claimed Amount may be
released from the applicable escrow to the Indemnitee; (ii) agrees that Escrow
Shares having a Stipulated Value equal to part, but not all, of the Claimed
Amount (the "Agreed Amount") may be released from the applicable escrow to the
Indemnitee; or (iii) indicates that no part of the Claimed Amount may be
released from the applicable escrow to the Indemnitee. Any part of the Claimed
Amount that is not to be released to the Indemnitee
3.
shall be the "Contested Amount." If a Response Notice is not received by Parent
within such 20 business-day period, then the Stockholders' Agent shall be deemed
to have agreed that Escrow Shares having a Stipulated Value equal to the full
Claimed Amount may be released to the Indemnitee from the applicable escrow.
(e) If the Stockholders' Agent delivers a Response Notice agreeing
that Escrow Shares having a Stipulated Value equal to the full Claimed Amount
may be released from the applicable escrow to the Indemnitee, or if the
Stockholders' Agent does not deliver a Response Notice in accordance with
Section 3(d), Parent shall promptly following the receipt of the Response Notice
(or, if the Stockholders' Agent has not delivered a Response Notice, promptly
following the expiration of the 20 business-day period referred to in Section
3(d)), deliver to such Indemnitee such Escrow Shares.
(f) If the Stockholders' Agent delivers a Response Notice agreeing
that Escrow Shares having a Stipulated Value equal to part, but not all, of the
Claimed Amount may be released from the applicable escrow to the Indemnitee,
Parent shall promptly following the receipt of the Response Notice deliver to
such Indemnitee Escrow Shares having a Stipulated Value equal to the Agreed
Amount.
(g) If the Stockholders' Agent delivers a Response Notice indicating
that there is a Contested Amount, the Stockholders' Agent and the Indemnitee
shall attempt in good faith to resolve the dispute related to the Contested
Amount. If the Indemnitee and the Stockholders' Agent shall resolve such
dispute, such resolution shall be binding on both Stockholders and a settlement
agreement shall be signed by the Indemnitee and the Stockholders' Agent and sent
to Parent, who shall, upon receipt thereof, release Escrow Shares from the
applicable escrow in accordance with such agreement.
(h) If the Stockholders' Agent and the Indemnitee are unable to
resolve the dispute relating to any Contested Amount within 30 business days
after the delivery of the Claim Notice, then the claim described in the Claim
Notice shall be settled by binding arbitration in the County of Santa ▇▇▇▇▇ in
the State of California in accordance with the Commercial Arbitration Rules then
in effect of the American Arbitration Association (the "AAA Rules"). Three
arbitrators will conduct the arbitration; one selected by Parent, one selected
by the Stockholders' Agent and the third selected by the first two arbitrators.
If the Stockholders' Agent fails to select an arbitrator prior to the expiration
of the 30-business day period referred to in the first sentence of this Section
3(h), then Parent shall be entitled to select the second arbitrator. The parties
agree to use all reasonable efforts to cause the arbitration hearing to be
conducted within 60 calendar days after the appointment of the last of the three
arbitrators and to use all reasonable efforts to cause the arbitrators' decision
to be furnished within 95 calendar days after the appointment of the last of the
three arbitrators. The parties further agree that discovery shall be completed
at least 20 business days prior to the date of the arbitration hearing. The
arbitrators' decision shall relate solely to whether the Indemnitee is entitled
to recover the Contested Amount (or a portion thereof), and the portion of such
Contested Amount the Indemnitee is entitled to recover. The final decision of
the arbitrators shall be furnished to the Stockholders' Agent, the Indemnitee
and Parent in writing and shall constitute a conclusive determination of the
issue in question, binding upon the Stockholders, the Indemnitee and Parent and
shall not be contested by any of them. The non-prevailing party in any
arbitration shall pay the reasonable expenses (including attorneys' fees and
expenses) of the prevailing party and the fees and expenses associated with
4.
the arbitration (including the arbitrators' fees and expenses). For purposes of
this Section 3(h), the non-prevailing party shall be deemed to be the Indemnitee
if it is entitled to recover less than 50% of the Contested Amount; otherwise it
shall be the Stockholders.
(i) Parent shall release Escrow Shares from the applicable escrow in
connection with any Contested Amount within 5 business days after the delivery
to it of: (i) a copy of a settlement agreement executed by the Indemnitee and
the Stockholders' Agent setting forth instructions to Parent as to the number of
Escrow Shares, if any, to be released from the applicable escrow, with respect
to such Contested Amount; or (ii) a copy of the award of the arbitrators
referred to and as provided in Section 3(h) setting forth instructions to Parent
as to the number of Escrow Shares, if any, to be released from the applicable
escrow, with respect to such Contested Amount.
4. Release of Escrow Shares. Parent is not the stock transfer agent for
the Parent Common Stock. Accordingly, if a distribution of a number of shares of
Parent Common Stock less than all of the Escrow Shares in the applicable escrow
is to be made, Parent must requisition the appropriate number of shares from
such stock transfer agent, delivering to it the appropriate stock certificates
and related Stock Powers. For the purposes of this Agreement, Parent shall be
deemed to have delivered Parent Common Stock to the Person entitled to it when
Parent has delivered such certificates and Stock Powers to such stock transfer
agent with instructions to deliver it to the appropriate Person. Distributions
of Parent Common Stock shall be made to Parent or the Stockholders, as
appropriate, at the addresses described in Section 9(b). Whenever a distribution
is to be made to Stockholders, pro rata distributions shall be made to each
applicable Stockholder based on the number of Escrow Shares held in the
applicable escrow (either the 10% Escrow or the Form 8300 Escrow) with respect
to the applicable Stockholder. Within five business days after the termination
date of the applicable escrow (either the 10% Escrow Termination Date or the
Form 8033 Escrow Termination Date), Parent shall distribute or cause the stock
transfer agent for the Parent Common Stock to distribute to each applicable
Stockholder such Stockholder's pro-rata portion of the Escrow Shares in the
applicable escrow then held in escrow; provided, however, that notwithstanding
the foregoing, if, prior to the applicable termination date, any Indemnitee has
given a Claim Notice containing a claim that has not been resolved prior to the
applicable termination date in accordance with Section 3, Parent shall retain in
the applicable escrow after the applicable termination date Escrow Shares having
a Stipulated Value equal to 100% of the Claimed Amount or Contested Amount, as
the case may be, with respect to all claims that have not then been resolved.
5. Valuation of Escrow Shares, Etc.
(a) Stipulated Value. For purposes of this Agreement, the "Stipulated
Value" of each Escrow Share shall be deemed to be equal to $______ [the
Calculated Stock Price (the average closing price of Parent common stock for the
twenty trading days immediately preceding the Closing Date)].
(b) Stock Splits. All numbers contained in, and all calculations
required to be made pursuant to, this Agreement shall be adjusted as appropriate
to reflect any stock split, reverse stock split, stock dividend or similar
transaction effected by Parent after the date hereof; provided, however, that
Parent shall have received the appropriate number of additional shares of Parent
Common Stock or other property pursuant to Section 2(c) hereof.
5.
6. Exclusive Remedy. Subject to Section 9.3 of the Merger Agreement, and
Section 3(c) of this Agreement, from and after the Closing, the Escrow Shares
(adjusted as appropriate to reflect any stock split, reverse stock split, stock
dividend or similar transaction effected by Parent after the date hereof) shall
be the sole and exclusive remedy of Parent and the other Indemnitees for
monetary damages for any inaccuracy in or breach of any representation or
warranty contained in this Agreement.
7. Limitation of Parent's Liability as Escrow Agent. Parent shall incur no
liability as escrow agent with respect to any action taken by it or for any
inaction on its part in reliance upon any notice, direction, instruction,
consent, statement or other document believed by it to be genuine and duly
authorized, nor for any other action or inaction as escrow agent except for its
own willful misconduct or negligence. Parent, as escrow agent, may rely on and
use the Stock Powers and shall not be liable in connection therewith.
8. Termination. This Agreement shall terminate on the later to occur of
(i) the 10% Escrow Termination Date and (ii) the Form 8300 Escrow Termination
Date or, if earlier, upon the release by Parent of the entire Escrow Fund in
accordance with this Agreement; provided, however, that if Parent has received
from any Indemnitee a Claim Notice setting forth a claim that has not been
resolved by the later termination date in connection with a claim under that
escrow, then this Agreement shall continue in full force and effect until the
claim has been resolved and the Escrow Shares released in accordance with this
Agreement.
9. Miscellaneous.
(a) Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
(b) Notices. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth in Section 10.5 of the Merger
Agreement (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto).
(c) Headings. The headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
(d) Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
(e) Governing Law. This Agreement shall be construed in accordance
with, and governed in all respects by, the internal laws of the State of
California (without giving effect to principles of conflicts of laws).
6.
(f) Successors and Assigns. This Agreement shall be binding upon each
of the parties hereto and each of their respective permitted successors and
assigns, if any. No Stockholder may assign such Stockholder's rights under this
Agreement without the express prior written consent of Parent, provided,
however, that (i) upon the death of a Stockholder, such Stockholder's rights
under this Agreement shall be transferred to the person(s) who receive such
Stockholder's Parent Common Stock under the laws of descent and distribution,
and (ii) a Stockholder may assign such Stockholder's rights under this Agreement
to any organization qualified under Section 501(c)(3) of the Internal Revenue
Code to which the Stockholder transfers Escrow Shares or in connection with an
estate planning transaction. Nothing in this Agreement is intended to confer, or
shall be deemed to confer, any rights or remedies upon any person or entity
other than the parties hereto and their permitted successors and assigns. This
Agreement shall inure to the benefit of: the Stockholders; Parent and the
respective successors and assigns, if any, of the foregoing.
(g) Waiver. No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. No Person shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
(h) Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of each of the parties hereto; provided, however, that any
amendment duly executed and delivered by the Stockholders' Agent shall be deemed
to have been duly executed and delivered by each of the Stockholders.
(i) Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
(j) Parties in Interest. None of the provisions of this Agreement is
intended to provide any rights or remedies to any Person other than the parties
hereto and their respective successors and assigns, if any.
(k) Entire Agreement. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.
7.
(l) Waiver of Jury Trial. Each of the parties hereto hereby irrevocably
waives any and all right to trial by jury in any Legal Proceeding arising out of
or related to this Agreement or the transactions contemplated hereby.
(m) Tax Reporting Information and Certification of Tax Identification
Numbers.
(i) The parties hereto agree that, for tax reporting purposes,
all on or other income, if any, attributable to the Escrow Shares or any other
amount held in escrow by Parent pursuant to this Agreement shall be allocable in
equal shares to the Stockholders.
(ii) Each of the Stockholders agree to provide Parent with
certified tax identification numbers for each of them by furnishing appropriate
forms W-9 (or Forms W-8, in the case of non-U.S. persons) and other forms and
documents that Parent may reasonably request (collectively, "Tax Reporting
Documentation") to Parent within 30 days after the date hereof. The parties
hereto understand that, if such Tax Reporting Documentation is not so certified
to Parent, Parent may be required by the Internal Revenue Code, as it may be
amended from time to time, to withhold a portion of any interest or other income
earned on the investment of monies or other property held by Parent pursuant to
this Escrow Agreement.
(iii) Parent need not make any distribution of Escrow Shares to any
Person until such Person has furnished to Parent such Tax Reporting
Documentation as Parent may reasonably require.
(n) Construction.
(i) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(ii) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
8.
(iii) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
and year first above written.
EBAY INC.
By:________________________________
Name:
Title:
STOCKHOLDERS' AGENT:
___________________________________
▇▇▇▇ ▇. ▇▇▇▇▇
STOCKHOLDERS:
By:________________________________
▇▇▇▇ ▇. ▇▇▇▇▇
By:________________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
9.
EXHIBIT J
FORM OF ▇▇▇▇▇▇ ▇▇▇▇▇ RELEASE
___________, 1999
eBay Inc. ("Parent")
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Reference is made to that certain Stock Sale Agreement, dated December 29,
1997 (the "Sale Agreement"), by and among ▇▇▇▇▇, Inc., Auburn Cordage, Inc.,
▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇ ▇▇▇▇▇ wherein (y) ▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Purchasers") agreed to pay $200,000 to ▇▇▇▇▇▇ ▇▇▇▇▇ for all
of his stock in ▇▇▇▇▇ Inc. and in Auburn Cordage, Inc. (the "Shares"), and (z)
▇▇▇▇▇ Inc. and Auburn Cordage, Inc. agreed to pay $240,142.13 to ▇▇▇▇▇▇ ▇▇▇▇▇ in
connection with a noncompetition provision in the Sale Agreement. ▇▇▇▇▇ Inc.
and Auburn Cordage, Inc., together with ACD Auto Sales, Inc., ▇▇▇▇▇▇▇ School of
Auctioneering, Inc., Classic Advertising & Promotions, Inc., collectively, are
referred to as the "Companies".
I acknowledge the concurrent payment to me of $200,000, plus interest, on
the date hereof from the Purchasers in regard to their purchase of my Shares on
December 29, 1997 pursuant to the Sale Agreement. I also acknowledge the prior
payment to me by ▇▇▇▇▇, Inc. and Auburn Cordage, Inc. of $100,000 (including
interest of $15,211.19), and the concurrent payment to me of $155,353.32, plus
interest, in connection with the noncompetition provision in the Sale Agreement.
As a result of such payments, I acknowledge that I have no lien on any shares of
capital stock of ▇▇▇▇▇, Inc. nor Auburn Cordage, Inc. nor any of the other
Companies.
In order to induce Parent to take measures to accelerate payment of the
moneys owing to me under the noncompetition provision, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned, intending to be legally bound, hereby covenants
and agrees as follows:
1. Release. The undersigned (on behalf of himself and each person or
entity that the undersigned has the power to bind) hereby irrevocably,
unconditionally and completely releases, acquits and forever discharges each of
the Releasees (as defined below) from any Claim (as defined below), and hereby
irrevocably, unconditionally and completely waives and relinquishes each and
every Claim that the undersigned may have had in the past, may now have or may
have in the future against any of the Releasees, relating to any written or oral
agreements or arrangements entered into, and any events, matters, causes,
things, acts, omissions or conduct, occurring or existing, at any time up to and
including the date of this letter, including, without limitation, any Claim (a)
to the effect that the undersigned is or may be entitled to any compensation,
benefits, commissions or perquisites from any of the Companies or any of its
direct or indirect subsidiaries, or (b) otherwise arising (directly or
indirectly) out of or in any way connected with the undersigned's stockholdings,
employment or other relationship with any of the Companies or any of its
stockholders; provided, however, that the undersigned is not releasing the
undersigned's rights, if any:
(i) under the indemnification provisions contained in the
Certificate of Incorporation or Bylaws of any of the Companies; or
(ii) with respect to salaries, bonuses, commissions and expenses
that have accrued in the ordinary course of business consistent with past
practices.
For purposes of this Agreement, (1) the term "Releasees" means: (w) Parent; (x)
each of the Companies; (y) each other affiliate of Parent and each of the
Companies; and (z) the successors and past, present and future assigns,
directors, officers, agents, attorneys and representatives of the respective
entities identified or otherwise referred to in clauses "(w)" through "(y)" of
this clause "(1)," and (2) the term "Claim" means all past, present and future
disputes, claims, controversies, demands, rights, obligations, liabilities,
actions and causes of action of every kind and nature, including (y) any
unknown, unsuspected or undisclosed claim; and (z) any claim or right that may
be asserted or exercised by the undersigned in the undersigned's capacity as a
stockholder, director, officer or employee of any of the Companies or in any
other capacity.
2. Miscellaneous. This letter shall be governed by, and construed in
accordance with, the laws of the State of Indiana, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws. If any
legal action or other legal proceeding relating to this letter or the
enforcement of any provision of this letter is brought against any party hereto,
the prevailing party shall be entitled to recover reasonable attorneys' fees,
costs and disbursements (in addition to any other relief to which the prevailing
party may be entitled). This letter and the agreements referred to herein set
forth the entire understanding of the parties relating to the subject matter
hereof and supersede all prior agreements and understandings among or between
any of the parties relating to the subject matter hereof.
Very truly yours,
EXHIBIT K
Form of Opinion of Counsel to the Companies
[Customary Assumptions and Qualifications to be Included.]
1. Each of the Companies is a corporation duly organized, validly existing
and in good standing under the laws of the State of Indiana.
2. Each of the Companies has the requisite corporate power and authority
to own its property and assets and to conduct its business as it is currently
being conducted and to enter into the Merger Agreement and to consummate the
transactions contemplated thereby.
3. All corporate action, including approval by the Board of Directors and
stockholders of each Company, required to be taken on the part of each Company
to authorize the Merger Agreement and consummate the Mergers has been taken.
4. The Merger Agreement has been duly and validly authorized, executed and
delivered by each Company and each Stockholder and constitutes a valid and
binding agreement of each Company and each Stockholder enforceable against each
Company and each Stockholder in accordance with its terms, except as enforcement
may be limited by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting creditors' rights, and
subject to general equity principles and to limitations on availability of
equitable relief, including specific performance.
90