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AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF
JUNE 30, 1999
AMONG
IVILLAGE INC.,
CODE STONE ACQUISITION CORPORATION,
CODE STONE TECHNOLOGIES, INC.
AND
THE SOLE STOCKHOLDER OF CODE STONE TECHNOLOGIES, INC.
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TABLE OF CONTENTS
Page
ARTICLE 1. GENERAL....................................................................................1
1.1. The Merger.....................................................................................1
1.2. The Effective Time of the Merger...............................................................1
1.3. Effect of Merger...............................................................................1
1.4. Charter and By-Laws of the Surviving Corporation...............................................2
1.5. Taking of Necessary Action.....................................................................2
1.6. Tax-Free Reorganization........................................................................2
1.7. Closing........................................................................................2
ARTICLE 2. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES...................................................................3
2.1. Total Consideration; Effect on Capital Stock...................................................3
(a) Payment of Consideration.....................................................3
(b) Effect on Capital Stock of Acquisition Sub...................................3
(c) Cancellation of Certain Shares of Company Common Stock.......................3
(d) Exchange of Company Common Stock.............................................3
(e) Terms, Etc...................................................................4
2.2. Escrow Deposit; Exchange of Certificates.......................................................4
(a) Escrow Agreement.............................................................4
(b) Escrow Deposit...............................................................4
(c) Procedure for Exchange.......................................................4
(d) Fractional Shares............................................................5
(e) No Further Ownership Rights in Company Common Stock..........................5
(f) No Liability.................................................................5
(g) Lost, Stolen or Destroyed Company Certificates...............................5
(h) Authorization of the Merger, this Agreement, the Agreement of Merger,
the Escrow Agreement and the Escrow Agent....................................5
ARTICLE 3. REPRESENTATIONS AND WARRANTIES.............................................................6
3.1. Representations and Warranties of the Company and the Stockholder..............................6
(a) Organization; Good Standing; Qualification and Power.........................6
(b) Equity Investments...........................................................6
(c) Capital Stock; Securities....................................................6
(d) Authority; No Consents.......................................................7
(e) Financial Information........................................................8
(f) Absence of Undisclosed Liabilities...........................................8
(g) Absence of Changes...........................................................9
(h) Tax Matters.................................................................10
(i) Title to Assets, Properties and Rights and Related Matters..................12
(j) Real Property-Owned or Leased...............................................12
(k) Intellectual Property.......................................................13
(l) Company Software............................................................15
(m) Agreements, Etc.............................................................16
i
(n) No Defaults.................................................................18
(o) Litigation, Etc.............................................................18
(p) Accounts and Notes Receivable...............................................19
(q) Accounts and Notes Payable..................................................19
(r) Compliance; Governmental Authorizations.....................................20
(s) Environmental Matters.......................................................20
(t) Labor Relations; Employees..................................................20
(u) Employee Benefit Plans and Contracts........................................21
(v) Certain Agreements..........................................................23
(w) Insurance...................................................................23
(x) Bank Accounts; Powers of Attorney...........................................23
(y) Brokers.....................................................................24
(z) Related Transactions........................................................24
(aa) Minute Books................................................................24
(bb) Other Names.................................................................24
(cc) Business Generally..........................................................24
(dd) Vote Required...............................................................24
(ee) Information Supplied........................................................24
(ff) Company Not an Interested Securityholder or an Acquiring Person.............25
(gg) Company Expenses............................................................25
(hh) Officers....................................................................25
(ii) Disclosure..................................................................25
(jj) Knowledge Definition........................................................25
(kk) No Discrimination...........................................................25
3.2. Several Representations and Warranties of the Stockholder.....................................25
(a) Title; Absence of Certain Agreements........................................25
(b) Authority - General.........................................................26
(c) Investment Representations..................................................26
(d) Brokers.....................................................................28
(e) Representation by Legal Counsel.............................................28
3.3. Representations and Warranties of Parent and Acquisition Sub..................................28
(a) Organization; Good Standing; Qualification and Power........................28
(b) Capital Stock...............................................................28
(d) Authority...................................................................28
(e) SEC Documents...............................................................29
(f) Brokers.....................................................................30
ARTICLE 4. RELATED AGREEMENTS........................................................................30
4.1. Related Agreements............................................................................30
(a) Employee Confidentiality and Assignment of Inventions Agreement.............30
(b) Escrow Agreement............................................................31
(c) Release Agreement...........................................................31
(d) Stockholders' Agreement.....................................................31
(e) Registration Rights Agreement...............................................31
ii
ARTICLE 5. CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS...................31
5.1. Access to Records and Properties of Each Party; Confidentiality...............................31
5.2. Operation of Business of the Company..........................................................31
5.3. Negotiations With Others......................................................................32
5.4. Stockholder's Approval........................................................................32
5.5. Advice of Changes.............................................................................33
5.6. Financial Information Update..................................................................33
5.7. Legal Conditions to Merger....................................................................34
5.8. Consents......................................................................................34
5.9. Efforts to Consummate.........................................................................34
5.10. Notice of Breach..............................................................................34
5.11. Support of Merger by Officers and Directors...................................................34
5.12. Support of Merger by Stockholder..............................................................34
5.13. Transactions Costs............................................................................35
ARTICLE 6. CONDITIONS PRECEDENT......................................................................35
6.1. Conditions to Each Party's Obligations........................................................35
(a) Stockholder Approval; Agreement of Merger...................................35
(b) Approvals...................................................................35
(c) Legal Action................................................................35
(d) Legislation.................................................................35
6.2. Conditions to Obligations of Parent and Acquisition Sub.......................................35
(a) Representations and Warranties of the Company...............................35
(b) Performance of Obligations of the Company and the Stockholder...............36
(c) Delivery of Certificates....................................................36
(d) Employee Confidentiality Agreement..........................................36
(e) Opinion of the Company's and Stockholder's Counsel..........................36
(f) Consents and Approvals......................................................36
(g) Government Consents, Authorizations, Etc....................................36
(h) Company Expenses............................................................36
(i) Escrow Agreement............................................................36
(j) Release.....................................................................36
(k) Related Agreements..........................................................37
(l) Satisfaction of Closing Conditions under the Online Psych
Reorganization Agreement....................................................37
6.3. Conditions to Obligations of the Company......................................................37
(a) Representations and Warranties of Parent....................................37
(b) Performance of Obligations of Parent and Acquisition Sub....................37
(c) Government Consents, Authorizations, Etc....................................37
(d) Purchase Price..............................................................37
(e) Escrow Agreement............................................................38
(f) Registration Rights Agreement...............................................38
ARTICLE 7. ADDITIONAL AGREEMENTS.....................................................................38
iii
7.1. Restrictions on Transfer......................................................................38
7.2. Confidentiality...............................................................................40
ARTICLE 8. INDEMNIFICATION...........................................................................40
8.1. Definitions...................................................................................40
(a) "Affiliate".................................................................40
(b) "Event of Indemnification"..................................................40
(c) "Indemnified Persons".......................................................41
(d) "Indemnifying Persons"......................................................41
(e) "Losses"....................................................................42
8.2. Indemnification Generally.....................................................................42
8.3. Assertion of Claims...........................................................................42
8.4. Notice and Defense of Third Party Claims......................................................42
8.5. Survival of Representations and Warranties....................................................43
8.6. Limitation on Indemnification.................................................................44
ARTICLE 9. TERMINATION; AMENDMENT, MODIFICATION AND WAIVER...........................................45
9.1. Termination...................................................................................45
9.2. Effect of Termination.........................................................................45
ARTICLE 10. MISCELLANEOUS.............................................................................45
10.1. Expenses......................................................................................45
10.2. Entire Agreement..............................................................................46
10.3. Descriptive Headings..........................................................................46
10.4. Public Announcements..........................................................................46
10.5. Notices.......................................................................................46
10.6. Counterparts..................................................................................47
10.7. Governing Law.................................................................................48
10.8. Benefits of Agreement.........................................................................48
10.9. Pronouns......................................................................................48
10.10. Amendment, Modification and Waiver............................................................48
10.11. Severability..................................................................................48
10.12. Further Assurances............................................................................48
10.13. Consent to Jurisdiction; Waivers..............................................................48
10.14. Waiver of Jury Trial..........................................................................49
10.15. Attorneys' Fees; Disputes.....................................................................49
EXHIBIT A FORM OF AGREEMENT OF MERGER.......................................A-1
EXHIBIT B FORM OF ESCROW AGREEMENT..........................................B-1
EXHIBIT C [INTENTIONALLY OMITTED]...........................................C-1
EXHIBIT D FORM OF EMPLOYEE CONFIDENTIALITY AGREEMENT........................D-1
EXHIBIT E FORM OF RELEASE AGREEMENT.........................................E-1
iv
EXHIBIT F FORM OF STOCKHOLDERS' AGREEMENT...................................F-1
EXHIBIT G FORM OF REGISTRATION RIGHTS AGREEMENT.............................G-1
EXHIBIT H FORM OF OPINION FOR COUNSEL TO THE COMPANY AND THE
STOCKHOLDER...................................................H-1
v
EXHIBITS
--------
Exhibit A Form of Agreement of Merger
Exhibit B Form of Escrow Agreement
Exhibit C [Intentionally Omitted]
Exhibit D Form of Employee Confidentiality Agreement
Exhibit E Form of Release Agreement
Exhibit F Form of Stockholder's Agreement
Exhibit G Form of Registration Rights Agreement
Exhibit H Form of Opinion of Counsel for the Company and the
Stockholder
NOTE: Copies of the above-listed Exhibits to this Agreement and Plan of
Reorganization have been intentionally omitted pursuant to Item 601(b)(2)
of Regulation S-K. iVillage Inc. agrees to furnish supplementally a copy
of any omitted Exhibit to the Securities and Exchange Commission upon its
request.
GLOSSARY
The following terms used in this Agreement are defined in the following
Sections:
Term Section or Other Location
---- -------------------------
Acquisition Sub................................ Recitals
Acquisition Transaction........................ 5.3
Action......................................... 10.13
Affiliate...................................... 8.1(a)
Aggregate Cash Consideration................... 2.1(a)(i)
Aggregate Purchase Price....................... 2.1(a)(ii)
Agreement of Merger............................ Recitals
Audit Adjustments.............................. 7.3
Audited Financial Statements................... 6.2(n)
Basket Amount.................................. 8.6(a)
Benefit Arrangements........................... 3.1(u)(iv)
best knowledge................................. 3.1(ii)
Business Day................................... 5.7(a)
Charter........................................ 3.1(a)
Closing........................................ 1.7
Closing Date................................... 1.7
Code........................................... 1.6(a)
Company........................................ Recitals
Company Common Stock........................... Recitals
Company Disclosure Schedule.................... 3.1
Company Expenses............................... 10.1
Company Unaudited Financial Statements......... 3.1(e)(i)
Company Interim Balance Sheet.................. 3.1(e)(i)(1)
Company Interim Financial Statements........... 3.1(e)(i)(1)
Company Returns................................ 3.1(h)
Company Rights................................. 3.1(k)(i)
Company Stock Fraction......................... 2.1(e)(i)
Confidentiality Agreements..................... 3.1(k)(v)
Constituent Corporations....................... 1.1
Current Year-End Balance Sheet................. 3.1(f)
Current Year-End Balance Sheet Date............ 3.1(f)
Delaware Statute............................... Recitals
Derivative Work................................ 3.1(k)(vii)
Designated Persons............................. 3.1(o)
Disclosing Party............................... 7.2
Effective Time................................. 1.2
Employee....................................... 3.1(u)(i)
Employee Confidentiality Agreement............. 4.1(a)
Employee Plans................................. 3.1(u)(i)
Encumbrances................................... 3.1(i)
2
Environmental Laws............................. 3.1(s)
Equity Rights.................................. 2.1(a)
ERISA.......................................... 3.1(u)(i)
ERISA Affiliate................................ 3.1(u)(i)
Escrow Agent................................... 2.2(a)
Escrow Agreement............................... 2.2(a)
Escrowed Shares................................ 2.2(b)
Event of Indemnification....................... 8.1(b)
Exchange Act................................... 3.3(d)
Executory Period............................... 5.1
FAS No. 5...................................... 3.1(f)
Final Prospectus............................... 3.3.(e)(i)
Fully Diluted Company Shares................... 2.1(a)
GAAP........................................... 3.1(e)(ii)
Governmental Authority......................... 3.1(o)
Hazardous Materials............................ 3.1(s)
Indemnified Persons............................ 8.1(c)
Indemnifying Persons........................... 8.1(d)
Intellectual Property Rights................... 3.1(k)(xi)
Leased Real Property........................... 3.1(j)
Leases......................................... 3.1(j)
Liability...................................... 3.1(f)
Licensed Software.............................. 3.1(l)(i)
Losses......................................... 8.1(e)
material....................................... 3.1(m)(xviii)
Material Adverse Effect........................ 3.1(a)
Merger......................................... 1.1
Merger Shares.................................. 2.1(d)
Most Recent 10-Q............................... 3.3(b)
Multiemployer Plan............................. 3.1(u)(iii)
New Certificates............................... 2.2(c)
No-Shop Period................................. 5.3
Old Certificate................................ 2.2(c)
Online Psych................................... 6.2(o)
Online Psych Reorganization Agreement.......... 6.2(o)
Online Psych Stockholders...................... 6.2(o)
Owned Software................................. 3.1(l)(i)
Parent......................................... Recitals
Parent Common Stock............................ Recitals
Parent's SEC Documents......................... 3.3(e)(i)
Pension Plans.................................. 3.1(u)(i)
Per Share Cash Payment......................... 2.1(e)(ii)
Purchase Price Adjustment...................... 7.3
Receiving Party................................ 7.2
Registration Rights Agreement.................. 4.1(f)
Related Agreements............................. 4.1
3
Release Agreement.............................. 4.1(c)
Restricted Securities.......................... 7.1(a)
Schedule of Expenses........................... 6.2(i)
Software....................................... 3.1(l)(i)
Stockholder.................................... Recitals
Stockholder Action............................. 5.4
Stockholders' Agreement........................ 4.1(d)
Stockholder's Materials 5.4
Stockholder's Meeting 5.4
Stock Option Agreements........................ 4.1(g)
Subsidiary..................................... 3.1(b)
Survival Date.................................. 8.5
Surviving Corporation.......................... 1.1
Tax............................................ 3.1(h)
Taxes.......................................... 3.1(h)
Third Party Claim.............................. 8.4
Total Parent Share Amount...................... 2.1(a)(ii)
Transaction Costs.............................. 10.1
Transfer....................................... 7.1(a)
Year 2000 Compliant............................ 3.1(l)(vi)
4
AGREEMENT AND PLAN OF REORGANIZATION
dated as of June 30, 1999 among IVILLAGE
INC., a Delaware corporation ("Parent"), CODE
STONE ACQUISITION CORPORATION, a Delaware
corporation and a direct, wholly-owned
subsidiary of Parent ("Acquisition Sub"),
CODE STONE TECHNOLOGIES, INC., a Delaware
corporation (the "Company"), and Xxxxx Xxxx,
the sole stockholder of the Company (the
"Stockholder").
The Boards of Directors of Parent and Acquisition Sub and the
sole Stockholder of the Company have each duly approved and adopted this
Agreement, the Agreement of Merger, in substantially the form of EXHIBIT A
attached hereto (the "Agreement of Merger"), and the proposed merger of
Acquisition Sub with and into the Company in accordance with this Agreement, the
Agreement of Merger and the Delaware General Corporation Law (the "Delaware
Statute"), whereby, among other things, the issued and outstanding shares of
common stock, $0.00 par value per share, of the Company (the "Company Common
Stock"), will be exchanged and converted into the right to receive cash and
shares of common stock, $.01 par value per share, of Parent (the "Parent Common
Stock") in the manner set forth in Article 2 hereof and in the Agreement of
Merger, upon the terms and subject to the conditions set forth in this Agreement
and the Agreement of Merger.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and the Agreement of Merger and the representations,
warranties, covenants, agreements, conditions and promises contained herein and
therein, the parties hereto hereby agree as follows:
ARTICLE 1.
GENERAL
1.1. THE MERGER. In accordance with the provisions of this Agreement,
the Agreement of Merger and the Delaware Statute, Acquisition Sub shall be
merged with and into the Company (the "Merger"), which at and after the
Effective Time shall be, and is sometimes herein referred to as, the "Surviving
Corporation". Acquisition Sub and the Company are sometimes referred to as the
"Constituent Corporations".
1.2. THE EFFECTIVE TIME OF THE MERGER. Subject to the provisions of
this Agreement, the Agreement of Merger shall be executed and delivered to and
filed with the Secretary of State of the State of Delaware by each of the
Constituent Corporations on the Closing Date in the manner provided under
Section 251 of the Delaware Statute. The Merger shall become effective (the
"Effective Time") upon the filing of the Agreement of Merger with the Secretary
of State of the State of Delaware.
1.3. EFFECT OF MERGER. At the Effective Time, the separate existence of
Acquisition Sub shall cease and Acquisition Sub shall be merged with and into
the Surviving Corporation,
and the Surviving Corporation shall succeed, without other transfer, to all of
the rights, property, privileges, powers and franchises of each of the
Constituent Corporations, and shall be subject to all of the debts and
liabilities of the Constituent Corporations in the same manner as if the
Surviving Corporation had itself incurred them, and be subject to all of the
restrictions, disabilities and duties of each of the Constituent Corporations as
provided in Section 251 of the Delaware Statute.
1.4. CHARTER AND BY-LAWS OF THE SURVIVING CORPORATION. From and after
the Effective Time and pursuant to the Agreement of Merger: (i) the Charter of
the Surviving Corporation shall be the Charter of Acquisition Sub, unless and
until altered, amended or repealed as provided in the Delaware Statute and such
Charter, (ii) the by-laws of the Surviving Corporation shall be the by-laws of
Acquisition Sub, unless and until altered, amended or repealed as provided in
the Delaware Statute, the Charter or such by-laws, (iii) the directors of the
Surviving Corporation shall be the directors of Acquisition Sub, unless and
until removed, or until their respective terms of office shall have expired, in
accordance with the Delaware Statute, the Charter and the by-laws of the
Surviving Corporation, as applicable and (iv) the officers of the Surviving
Corporation shall be the officers of Acquisition Sub, unless and until removed,
or until their terms of office shall have expired in accordance with the
Delaware Statute, the Charter and the by-laws of the Surviving Corporation, as
applicable.
1.5. TAKING OF NECESSARY ACTION. Prior to the Effective Time, the
parties hereto shall do or cause to be done all such acts and things as may be
necessary or appropriate in order to effectuate the Merger as expeditiously as
reasonably practicable, in accordance with this Agreement, the Agreement of
Merger and the Delaware Statute.
1.6. TAX-FREE REORGANIZATION. For Federal income tax purposes, the
parties intend that the merger be treated as a tax-free reorganization within
the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"), by reason of Section 368(a)(2)(E) of the Code, and that
this Agreement shall be, and is hereby, adopted as a plan of reorganization for
purposes of Section 368 of the Code. No party shall take a position on any tax
return or reports inconsistent with this Section 1.6 and each party shall use
its reasonable best efforts to maintain such reporting in the context of an
audit. Each party shall take no action which would cause the Merger not to be
treated as a tax free reorganization within the meaning of Section 368(a)(1)(A)
of the Code, by reason of Section 368(a)(2)(E) of the Code. Each party shall
give the other parties prompt notice of any challenges or investigations
undertaken by any taxing agency in connection with such reporting and shall keep
such other parties fully informed of all aspects of such ongoing challenge or
investigation.
1.7. CLOSING. Unless this Agreement shall have been terminated and the
transactions contemplated by this Agreement abandoned pursuant to the provisions
of Article 9, and subject to the provisions of Article 6, the closing of the
Merger (the "Closing") will take place at 10:00 a.m. (Eastern Standard Time) on
a date (the "Closing Date") to be mutually agreed upon by the parties, which
date shall be not later than July 30, 1999, unless another date is agreed to in
writing by the parties. The Closing shall take place at the offices of Xxxxxx,
Xxxxxxxxxx & Xxxxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless
another place is agreed to in writing by the parties.
2
ARTICLE 2.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1. TOTAL CONSIDERATION; EFFECT ON CAPITAL STOCK
(a) PAYMENT OF CONSIDERATION. The entire consideration payable
by Parent with respect to all outstanding shares of capital stock of the Company
and for all options, warrants, rights, calls, commitments, agreements or
arrangements of any character to which the Company is a party or by which it is
bound calling for the issuance of shares of capital stock of the Company or any
securities convertible into or exercisable or exchangeable for, or representing
the right to purchase or otherwise receive, directly or indirectly, any such
capital stock, or other arrangement to acquire, at any time or under any
circumstance, capital stock of the Company or any such other securities (such
options, warrants, rights, calls, commitments, agreements and arrangements being
sometimes hereinafter collectively referred to as "Equity Rights"; and the
Equity Rights, together with all such outstanding shares of capital stock of the
Company being sometimes hereinafter collectively referred to as the "Fully
Diluted Company Shares"), shall, subject to Section 7.3, be an aggregate
consideration payable as follows:
(i) An aggregate of $15,000 in cash (the "Aggregate Cash
Consideration"); and
(ii) A number of shares of Parent Common Stock equal to
$235,000 divided by the Average Parent Trading Price (the "Total Parent Share
Amount" and, together with the Aggregate Cash Consideration, the "Aggregate
Purchase Price"). The Aggregate Purchase Price is subject to adjustment prior to
the Closing pursuant to Section 7.3 hereof. For purposes of this Agreement and
the Agreement of Merger, the Average Parent Trading Price shall mean the average
closing price per share of Parent Common Stock on The NASDAQ Stock Market (as
reported in The Wall Street Journal, or, if not reported therein, any other
authoritative source) for the twenty (20) consecutive trading days ending one
(1) trading day preceding the Effective Time.
(b) EFFECT ON CAPITAL STOCK OF ACQUISITION SUB. Each issued
and outstanding share of common stock, par value $.001 per share, of Acquisition
Sub shall remain outstanding as one share of common stock, par value $.001 per
share, of the Surviving Corporation.
(c) CANCELLATION OF CERTAIN SHARES OF COMPANY COMMON STOCK.
Each share of capital stock of the Company that is authorized but unissued shall
cease to exist and no Parent Common Stock or other consideration shall be
delivered in exchange therefor.
(d) EXCHANGE OF COMPANY COMMON STOCK. Subject to Section 2.2,
each share of Company Common Stock issued and outstanding at the Effective Time,
including all accrued and unpaid dividends thereon, shall be exchanged and
converted into the right to receive:
3
(i) the Company Stock Fraction (as hereinafter defined)
of a share of Parent Common Stock, deliverable at the Closing; and
(ii) the Per Share Cash Payment as defined below, which
shall be payable at the Closing.
For convenience of reference, the shares of Parent Common Stock to
be issued upon the exchange and conversion of Company Common Stock in accordance
with this Section 2.1(d) are sometimes hereinafter collectively referred to as
the "Merger Shares".
(e) TERMS, ETC. For purposes of this Agreement,
(i) the term "Company Stock Fraction" shall be equal to
the fraction obtained by dividing (x) the Total Parent Share Amount by (y) the
aggregate number of shares of Company Common Stock held by the Stockholder;
(ii) the term "Per Share Cash Payment" shall mean the
quotient of (x) $15,000 divided by (y) the aggregate number of shares of Company
Common Stock held by the Stockholder; and
(iii) All calculations under this Section 2.1 shall be
rounded to the nearest one millionth (.0001).
2.2. ESCROW DEPOSIT; EXCHANGE OF CERTIFICATES
(a) ESCROW AGREEMENT. Reference is hereby made to the Escrow
Agreement to be dated as of the Effective Time among the Stockholder, the Online
Psych Stockholders, Parent and a mutually agreeable escrow agent (the "Escrow
Agent") in the form of EXHIBIT B hereto (the "Escrow Agreement"). The Escrow
Agreement is to be entered into for the purpose of securing the indemnification
obligations of the Stockholder under Article 8 hereof and the indemnification
obligations of the Online Psych Stockholders under Article 8 of the Online Psych
Reorganization Agreement.
(b) ESCROW DEPOSIT. At the Effective Time, Parent shall cause
to be deposited with the Escrow Agent to be held by the Escrow Agent and
distributed subject to the terms of the Escrow Agreement a certificate
evidencing, in the aggregate, ten percent (10.0%) of the total number of Merger
Shares being issued in the Merger to the Stockholder (collectively, the
"Escrowed Shares") with a stock power executed in blank by the Stockholder
attached thereto and the Stockholder, by his execution and delivery of this
Agreement, hereby authorizes and directs Parent to make such deposit on his
behalf.
(c) PROCEDURE FOR EXCHANGE. Immediately following the
Effective Time, Parent shall deliver to the Stockholder certificates ("New
Certificates") representing that number of Merger Shares (other than the
Escrowed Shares) which the Stockholder has the right to receive pursuant to
Section 2.1(d)(i) in exchange for the certificate representing all of the issued
and outstanding shares of Company Common Stock (the "Old Certificate") against
receipt by Parent of (i) such Old Certificate for cancellation and (ii) an
executed letter of transmittal, and the Old Certificate so surrendered shall
forthwith be cancelled (the certificates
4
representing the Escrowed Shares having concurrently been deposited on behalf of
the Stockholder into escrow as contemplated by Section 2.2(b) hereof). Until
surrendered as contemplated by this Section 2.2, the Old Certificate shall be
deemed, on and after the Effective Time, to represent only the right to receive
upon such surrender New Certificates representing the Merger Shares (other than
the Escrowed Shares) as contemplated by Section 2.1(d)(i), and the Per Share
Cash Payment, without interest, as contemplated by Section 2(d)(ii). All
Escrowed Shares shall be held by, and distributed in accordance with, the terms
and provisions of the Escrow Agreement.
(d) FRACTIONAL SHARES. No fractional shares of Parent Common
Stock will be issued in connection with the Merger (with all fractions rounded
to the nearest whole share) and the Stockholder hereby irrevocably waives any
right to receive cash in lieu of fractional shares.
(e) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
shares of Parent Common Stock issued upon the surrender or exchange of shares of
Company Common Stock in accordance with the terms of this Article 2 shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock.
(f) NO LIABILITY. None of Parent, Acquisition Sub or the
Company shall be liable to any holder of shares of Company Common Stock or
Parent Common Stock, as the case may be, for shares (or dividends or
distributions with respect thereto) of Parent Common Stock to be issued in
exchange for Company Common Stock pursuant to this Section 2.2, if, on or after
the expiration of six (6) months following the Effective Time, such shares are
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(g) LOST, STOLEN OR DESTROYED COMPANY CERTIFICATES. In the
event the Old Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit to that effect by the Stockholder and, if required by
Parent, the posting by the Stockholder of a bond in such amount as Parent may
reasonably direct as indemnity against any claim that may be made against it
with respect to the Old Certificate, Parent will issue in exchange for such
lost, stolen or destroyed Old Certificate the Merger Shares and the Per Share
Cash Payment deliverable in respect thereof pursuant to Section 2.1(d) of this
Agreement.
(h) AUTHORIZATION OF THE MERGER, THIS AGREEMENT, THE AGREEMENT
OF MERGER, THE ESCROW AGREEMENT AND THE ESCROW AGENT. In the event the Merger
shall be approved by the Stockholder, as required by the Delaware Statute and as
contemplated by this Agreement, such approval shall constitute approval and
ratification by the Stockholder of (i) the Merger, as required by the Delaware
Statute, (ii) the provisions of this Agreement and the Agreement of Merger, and
(iii) the designation of the Escrow Agent and the approval and ratification by
the Stockholder of the terms and provisions of the Escrow Agreement.
5
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER.
The Company and the Stockholder jointly and severally represent and warrant to
Parent and Acquisition Sub that, except as disclosed in the disclosure schedule,
dated the date hereof, certified by the Chief Executive Officer of the Company
and delivered by the Company to Parent and Acquisition Sub simultaneously
herewith (which disclosure schedule shall contain specific references to the
representations and warranties to which the disclosures contained therein
relate) (the "Company Disclosure Schedule"):
(a) ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. The
Company (i) is a close corporation (as such term is defined in Section 342(a) of
the Delaware Statute) duly organized, validly existing and in good standing
under the laws of the State of Delaware, (ii) has all requisite corporate power
and authority to (A) own, lease and operate its properties and assets and to
carry on its business as now being conducted and as proposed to be conducted,
(B) to enter into this Agreement and the Agreement of Merger, (C) to perform its
obligations hereunder and thereunder, and (D) to consummate the transactions
contemplated hereby and thereby, and (iii) is duly qualified and in good
standing to do business in those jurisdictions listed in Section 3.1(a) of the
Company Disclosure Schedule and in all other jurisdictions in which the failure
to be so qualified and in good standing could reasonably be expected to have a
material adverse effect on the Company or its business, properties, condition
(financial or otherwise), assets, Liabilities, operations, results of
operations, prospects or affairs (a "Material Adverse Effect"). The Company has
delivered to Parent true and complete copies of the Charter and by-laws of the
Company, in each case as amended to the date hereof. As used herein, "Charter"
shall mean, with respect to any corporation, those instruments that at the time
constitute its corporate charter as filed or recorded under the general
corporation law of the jurisdiction of its incorporation, including the articles
or certificate of incorporation or organization as the same may have been
restated, and any amendments thereto (including any articles or certificates of
merger or consolidation, certificate of correction or certificates of
designation or similar instruments which effect any such amendment) which became
effective after the most recent such restatement.
(b) EQUITY INVESTMENTS. The Company has never had, nor does it
currently have, any subsidiaries, nor has it ever owned, nor does it currently
own, any capital stock or other proprietary interest, directly or indirectly, in
any corporation, association, trust, partnership, joint venture or other entity.
As used herein, a "subsidiary" of any corporation means another corporation an
amount of whose voting securities sufficient to elect at least a majority of its
Board of Directors is owned directly or indirectly by such corporation.
(c) CAPITAL STOCK; SECURITIES. The authorized capital stock of
the Company consists solely of 1,500 shares of Company Common Stock, all of
which are outstanding. There are no outstanding rights, subscriptions, calls,
options, warrants, preemptive rights, conversion rights, commitments or
agreements granted or issued by or binding upon the Company for the purchase or
acquisition (contingent or otherwise) from the Company of any shares of its
capital stock or any other securities or any securities convertible into or
exercisable
6
or exchangeable for, or representing the right to purchase or otherwise receive,
any such capital stock, or other arrangement to acquire, at any time or under
any circumstance, capital stock of the Company or any such other securities,
except in accordance with this Agreement. The Company is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any security convertible into or
exchangeable for any shares of its capital stock. All outstanding shares of
Company Common Stock are validly issued and outstanding, fully paid and
non-assessable and not subject to preemptive rights. The Stockholder owns of
record and beneficially all of the issued and outstanding shares of Company
Common Stock. Except as set forth in Section 3.1(c) of the Company Disclosure
Schedule, there are no voting trusts, voting agreements, proxies, first refusal
rights, first offer rights, co-sale rights, options, transfer restrictions or
other agreements, instruments or understandings (whether written or oral, formal
or informal) with respect to the voting, transfer or disposition of Company
Common Stock to which the Company is a party or by which it is bound, or, to the
best knowledge of the Company and the Stockholder, among or between any persons
other than the Company. All shares of Company capital stock and all other
securities previously issued by the Company have been issued in compliance with
and pursuant to an exemption from all applicable federal and state securities or
"blue sky" laws.
(d) AUTHORITY; NO CONSENTS. The execution, delivery and
performance by the Company of this Agreement and the Agreement of Merger and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of the
Company; and this Agreement and the Agreement of Merger when executed and
delivered by the Company will be, duly and validly executed and delivered by the
Company; and this Agreement is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, and the Agreement
of Merger, when executed and delivered by the Company, will be a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms. Except as set forth in Section 3.1(d) of the Company Disclosure
Schedule, neither the execution, delivery and performance of this Agreement or
the Agreement of Merger nor the consummation by the Company of the transactions
contemplated hereby or thereby nor compliance by the Company with any provision
hereof or thereof will (A) conflict with, (B) result in any violation of, (C)
cause a default under (with or without due notice, lapse of time or both), (D)
give rise to any right of termination, amendment, cancellation or acceleration
of any obligation contained in or the loss of any material benefit under or (E)
result in the creation of any Encumbrance on or against any assets, rights or
property of the Company under any term, condition or provision of (x) any
instrument, contract or agreement to which the Company is a party, or by which
the Company or any of its properties, assets or rights may be bound, (y) any
law, statute, rule, regulation, order, writ, injunction, decree, permit,
concession, license or franchise of any Governmental Authority applicable to the
Company or any of its properties, assets or rights or (z) the Company's Charter
or by-laws. Except as set forth on Section 3.1(d) of the Company Disclosure
Schedule, no permit, authorization, consent or approval of or by, or any
notification of or filing with, any Governmental Authority or other person is
required in connection with the execution, delivery and performance by the
Company of this Agreement or the Agreement of Merger or the consummation by the
Company of the transactions contemplated hereby or thereby, except for (i) the
filing of the Agreement of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other states
in which the Company is qualified to do business, and (ii) such other consents,
waivers,
7
authorizations, filings, approvals and registrations which if not obtained or
made are not reasonably likely to result in a Material Adverse Effect or impair
the ability of the Company and the Stockholder to consummate the transactions
contemplated by this Agreement or the Agreement of Merger, including, without
limitation, the Merger (each of which actions reflected in clauses (i) and (ii)
above is to be taken by the Company on a timely basis).
(e) FINANCIAL INFORMATION
(i) Attached as Section 3.1(e) to the Company Disclosure
Schedule are the following financial statements (collectively, the "Company
Unaudited Financial Statements"):
(1) the unaudited balance sheet of the Company as at
March 31, 1999 (the "Company Interim Balance Sheet") and the related statements
of operations, cash flow and stockholder's equity for the three-month period
then ended, prepared by the Company (the "Company Interim Financial
Statements"); and
(2) the unaudited balance sheets of the Company as
at December 31, 1998, and the related unaudited statements of operations, cash
flow and stockholder's equity for the years then ended, prepared by the Company.
(ii) The Company Unaudited Financial Statements (A) are
in accordance with the books and records of the Company and (B) fairly present
the financial condition of the Company as at the respective dates indicated and
the results of operations of the Company for the respective periods indicated.
The Company's Audited Financial Statements (as defined in Section 6.2(n)), when
delivered to Parent pursuant to Section 7.3, (A) shall be in accordance with the
books and records of the Company, (B) shall fairly present the financial
condition of the Company as at the respective dates indicated and the results of
operations of the Company for the respective periods indicated and (C) shall be
prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"), except as indicated therein.
(f) ABSCENCE OF UNDISCLOSED LIABILITIES. Except as set forth
in Section 3.1(f) of the Company Disclosure Schedule, at December 31, 1998, with
respect to the Company's Balance Sheet as of such date (the "Current Year-End
Balance Sheet"; and the date thereof being the "Current Year-End Balance Sheet
Date"), and at March 31, 1999, with respect to the Company Interim Balance
Sheet, respectively, (i) the Company had no liability or obligation of any
nature (whether known or unknown, matured or unmatured, fixed or contingent,
secured or unsecured, accrued, absolute or otherwise ("Liability")) required to
be set forth on the Current Year-End Balance Sheet or the Company Interim
Balance Sheet, respectively, in order for the Current Year-End Balance Sheet and
the Company Interim Balance Sheet, respectively, to fairly present the financial
condition of the Company at the respective dates thereof, which was not provided
for or disclosed thereon, and (ii) all liability reserves established by the
Company and set forth thereon were adequate for all such Liabilities at the
respective dates thereof. There were no material loss contingencies (as such
term is used in Statement of Financial Accounting Standards No. 5 issued by the
Financial Accounting Standards Board in March 1975 ("FAS No. 5")) which were not
adequately provided for on the
8
Current Year-End Balance Sheet and the Company Interim Balance Sheet,
respectively, as required by FAS No. 5.
(g) ABSENCE OF CHANGES. Except as set forth in Section 3.1(g)
of the Company Disclosure Schedule, since the Company Current Year-End Balance
Sheet Date, the Company has been operated in the ordinary course, consistent
with past practice, and there has not been:
(i) any adverse change in the business, assets,
properties, Liabilities, operations, results of operations, condition (financial
or otherwise), prospects or affairs of the Company;
(ii) any damage, destruction or loss, whether or not
covered by insurance, having or which are reasonably likely to result in a
Material Adverse Effect;
(iii) any Liability in excess of $10,000 created,
assumed, guaranteed or incurred, or any material transaction, contract or
commitment entered into, by the Company, other than the license, sale or
transfer of the Company's products to customers in the ordinary course of
business;
(iv) any payment, discharge or satisfaction of any
material Encumbrance or Liability by the Company or any cancellation by the
Company of any material debts or claims or any amendment, termination or waiver
of any rights of material value to the Company;
(v) any declaration, setting aside or payment of any
dividend or other distribution of any assets of any kind whatsoever with respect
to any shares of the capital stock of the Company, or any direct or indirect
redemption, purchase or other acquisition of any such shares of the capital
stock of the Company;
(vi) any stock split, reverse stock split, combination,
reclassification or recapitalization of any Company Common Stock, or any
issuance of any other security in respect of or in exchange for any shares of
Company Common Stock;
(vii) any issuance by the Company of any shares of its
capital stock or any debt security or any Equity Rights;
(viii) any license, sale, transfer, pledge, mortgage or
other disposition of any material tangible or intangible asset (including any
Intellectual Property Rights) of the Company, other than in the ordinary course
of business;
(ix) any termination of, or written indication of an
intention to terminate or not renew, any material contract, license, commitment
or other agreement between the Company and any other person;
(x) any material write-down or write-up of the value of
any asset of the Company, or any material write-off of any accounts receivable
or notes receivable of the Company or any portion thereof;
9
(xi) any increase in or modification of compensation
payable or to become payable to any officer, employee, consultant or agent of
the Company, or the entering into of any employment contract with any officer or
employee;
(xii) any increase in or modification or acceleration of
any benefits payable or to become payable under any bonus, pension, severance,
insurance or other benefit plan, payment or arrangement (including, but not
limited to, the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any officer, employee, consultant or
agent of the Company;
(xiii) any loan, advance or capital contribution to or
investment in any person or the engagement in any transaction with any employee,
officer or securityholder of the Company, other than advances to employees in
the ordinary course of business for travel and similar business expenses;
(xiv) any change in the accounting methods or practices
followed by the Company or any change in depreciation or amortization policies
or rates theretofore adopted;
(xv) any change in the manner in which the Company
extends discounts or credit to customers or otherwise deals with customers;
(xvi) any termination of employment of any officer or key
employee of the Company or any expression of intention by any officer or key
employee of the Company to resign from such office or employment with the
Company;
(zvii) any amendments or changes in the Company's Charter
or by-laws;
(xviii) any labor dispute or any union organizing
campaign;
(xix) the commencement of any litigation or other action
by or against the Company or any threat of commencement of any litigation or
other action against the Company; or
(xx) any agreement, understanding, authorization or
proposal, whether in writing or otherwise, for the Company to take any of the
actions specified in items (i) through (xix) above.
(h) TAX MATTERS. Except as set forth in Section 3.1(h) of the
Company Disclosure Schedule, the Company and each other corporation (if any)
included in any consolidated or combined tax return in which the Company has
been included (i) have filed and will file, in a timely and proper manner,
consistent with applicable laws, all Federal, state and local Tax returns and
Tax reports required to be filed by them through the Closing Date (the "Company
Returns") with the appropriate governmental agencies in all jurisdictions in
which Company Returns are required to be filed and have timely paid or will
timely pay all amounts shown thereon to be due; (ii) have paid and shall timely
pay all Taxes of the Company (or such other corporation) required to have been
paid by the Company (or such other corporation) on or
10
before the Closing Date; and (iii) currently are not the beneficiary of an
extension of time within which to file any Tax return or Tax report. Except as
set forth in Section 3.1(h) of the Company Disclosure Schedule, all such Company
Returns were and will be correct and complete at the time of filing. Except as
set forth in Section 3.1(h) of the Company Disclosure Schedule, all Taxes of the
Company attributable to all taxable periods ending on or before the Closing
Date, to the extent not required to have been previously paid, have been
adequately provided for on the Current Year-End Balance Sheet and the Company
Interim Balance Sheet (as appropriate) and the Company will not accrue a Tax
Liability from the date of the Current Year-End Balance Sheet up to and
including the Closing Date, other than a Tax Liability accrued in the ordinary
course of business. The Company has not been notified by the Internal Revenue
Service or any state, local or foreign taxing authority that any issues have
been raised (and are currently pending) in connection with any Company Return,
and no waivers of statutes of limitations have been given with respect to the
Company that are still in effect. Except as contested in good faith and
disclosed in Section 3.1(h) of the Company Disclosure Schedule, any deficiencies
asserted or assessments (including interest and penalties) made as a result of
any examination by the Internal Revenue Service or by any other taxing
authorities of any Company Return have been fully paid or are adequately
provided for on the Current Year-End Balance Sheet and the Company Interim
Balance Sheet (as appropriate) and the Company has received no notification that
any proposed additional Taxes have been asserted or proposed. The Company is,
has always been, and immediately prior to the Closing will be, an S corporation
within the meaning of Section 1361 of the Code. The Company has not made an
election to be treated as a "consenting corporation" under Section 341(f) of the
Code. The Company has not agreed to, nor is it required to, make any adjustment
under Section 481(a) of the Code by reason of a change in accounting method or
otherwise. The Company will not incur a Tax Liability resulting from the Company
ceasing to be a member of a consolidated or combined group that had previously
filed consolidated, combined or unitary Tax returns. The Company is not a party
to any agreement or contract with any "disqualified individual" (as defined in
Section 280G(c) of the Code) that, by reason of the transactions contemplated
hereby and occurring on or prior to the Closing Date or taking into account any
other agreements or contracts currently in effect between the Company and such
disqualified individual, will result in the disallowance of any deduction for
any payment under such agreement or contract as an "excess parachute payment"
(as defined in Section 280G(b)(1) of the Code). The Company is not, and has not
been during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code, a United States real property holding corporation within the meaning of
Section 897(c) of the Code. The Stockholder is a citizen of the United States.
As used in this Agreement, "Tax" means any of the Taxes and "Taxes"
means, with respect to any entity, (A) all income taxes (including any tax on or
based upon net income, gross income, income as specially defined, earnings,
profits or selected items of income, earnings or profits) and all gross
receipts, sales, use, ad valorem, transfer, franchise, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property or
windfall profits taxes, alternative or add-on minimum taxes, customs duties and
other taxes, fees, assessments or charges of any kind whatsoever, together with
all interest and penalties, additions to tax and other additional amounts
imposed by any taxing authority (domestic or foreign) on such entity and (B) any
liability for the payment of any amount of the type described in the immediately
preceding clause (A) as a result of being a "transferee" (within the meaning of
11
Section 6901 of the Code or any other applicable law) of another entity or a
member of an affiliated or combined group.
(i) TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED
MATTERS. The Company has good and valid title to all assets, properties and
interests in properties, real, personal or mixed, reflected, respectively, on
the Current Year-End Balance Sheet and/or the Company Interim Balance Sheet or
acquired after the Company Current Year-End Balance Sheet Date (except (A)
inventory or other property sold or otherwise disposed of since the Company
Current Year-End Balance Sheet Date, or March 31, 1999, as the case may be, in
the ordinary course of business and (B) accounts receivable and notes receivable
paid in full subsequent to the Company Current Year-End Balance Sheet Date, or
March 31, 1999, as the case may be, or not so reflected therein but used or
useful in the conduct or operation of the Company's business, free and clear of
all Encumbrances, of any kind or character, except for (i) those Encumbrances
set forth in Section 3.1(i) of the Company Disclosure Schedule, and (ii) liens
for current taxes not yet due and payable. The assets, properties and interests
in properties of the Company are in good operating condition and repair in all
material respects (ordinary wear and tear excepted). The assets, properties and
interests in properties of the Company to be owned, leased or licensed by the
Surviving Corporation at the Effective Time shall include all assets, properties
and interests in properties (real, personal and mixed, tangible and intangible)
and all rights, leases, licenses and other agreements necessary to enable the
Surviving Corporation to carry on the business of the Company as presently
conducted by the Company or as proposed to be conducted. As used herein, the
term "Encumbrances" shall mean and include security interests, mortgages, liens,
pledges, guarantees, charges, easements, reservations, restrictions, clouds,
equities, rights of way, options, rights of first refusal and all other
encumbrances, whether or not relating to the extension of credit or the
borrowing of money.
(j) REAL PROPERTY-OWNED OR LEASED. The Company does not
currently own, nor has it or any of its predecessors ever owned, any real
property. Section 3.1(j) of the Company Disclosure Schedule contains a list and
brief description of (i) all real property leased by the Company, together with
all buildings and other structures and material improvements located on such
real property (the "Leased Real Property"), and (ii) with respect to each lease
covering the Leased Real Property (collectively, the "Leases"), (A) the name of
the lessor, (B) any requirement of consent of the lessor to assignment
(including assignment by way of merger or change of control), (C) the
termination date of the Lease, (D) the notice requirements with respect to
termination, (E) the annual rental thereunder, and (F) any renewal or purchase
terms thereof. The Company is the owner and holder of all the leasehold estates
purported to be granted by each Lease and all Leases are in full force and
effect and constitute valid and binding obligations of the Company. The Company
has made available to Parent true and complete copies of all Leases. Except as
set forth in Section 3.1(j) of the Company Disclosure Schedule, all improvements
included in the Leased Real Property are in good operating condition and repair
in all material respects (ordinary wear and tear excepted) and there does not
exist any condition which interferes with the economic value or use of such
property and improvements.
12
(k) INTELLECTUAL PROPERTY
(i) The Company has good and valid title to, and (except
with respect to Licensed Software) owns free and clear of all Encumbrances, has
the exclusive right to use, sell, transfer, license (or sublicense), transmit,
broadcast, deliver (electronically or otherwise) and dispose of, and has the
right to bring actions for the infringement of, all Intellectual Property Rights
necessary or required for the conduct of its business as currently conducted and
as proposed to be conducted (collectively, the "Company Rights").
(ii) Except as disclosed in Section 3.1(k)(ii) of the
Company Disclosure Schedule, the execution, delivery and performance of this
Agreement and the consummation of the Merger and the consummation of the other
transactions contemplated hereby will not breach, violate or conflict with any
instrument or agreement governing any Company Rights, will not cause the
forfeiture or termination or give rise to a right of forfeiture or termination
of any Company Right or in any way impair the right of the Company or the
Surviving Corporation to use, sell, license (or sublicense), transmit,
broadcast, deliver (electronically or otherwise) or dispose of, or to bring any
action for the infringement of, any Company Right or portion thereof.
(iii) There are no royalties, honoraria, fees or other
payments payable by the Company to any person by reason of the ownership, use,
license (or sublicense), transmission, broadcast, delivery (electronically or
otherwise), sale, or disposition of the Company Rights, other than sales
commissions paid in the ordinary course of business.
(iv) Neither the manufacture, marketing, license (or
sublicense), sale, transmission, delivery (electronically or otherwise), or use
of any product or service currently or proposed to be licensed, sold, marketed,
transmitted, broadcast, delivered (electronically or otherwise) or used by the
Company or currently under development by the Company, violates any license (or
sublicense) or agreement of the Company with any third party or, to the best
knowledge of the Company and the Stockholder, infringes any common law or
statutory rights of any other party, including, without limitation, rights
relating to defamation, contractual rights, Intellectual Property Rights and
rights of privacy or publicity; nor, to the best knowledge of the Company and
the Stockholder, is any third party infringing upon, or violating any license
(or sublicense), transmission, broadcast, delivery (electronically or otherwise)
or agreement with the Company relating to any Company Right; and there is no
pending or, to the best knowledge of the Company and the Stockholder, threatened
claim or litigation contesting the validity, ownership or right to use,
manufacture, sell, license (or sublicense), transmit, broadcast, deliver
(electronically or otherwise) or dispose of any Company Right, nor is there any
basis for any such claim, nor has the Company received any notice asserting that
any Company Right or the proposed use, manufacture, sale, license (or
sublicense), transmission, broadcast, delivery (electronically or otherwise) or
disposition thereof conflicts or will conflict with the rights of any other
party, nor, is there any basis for any such assertion.
(v) All current and past officers, employees and
consultants of or to the Company have executed and delivered to and in favor of
the Company an agreement regarding the protection of confidential and
proprietary information and the assignment to the Company of all Intellectual
Property Rights arising from the services performed for the
13
Company by such persons (collectively, the "Confidentiality Agreements", the
form of which is attached to Section 3.1(k)(v) of the Company Disclosure
Schedule). The Company has taken and will continue through the Effective Time to
take all steps necessary, appropriate or desirable to safeguard and maintain the
secrecy and confidentiality of, and its proprietary rights in, all Company
Rights.
(vi) Except as set forth in Section 3.1(k)(vi) of the
Company Disclosure Schedule, all works that were created, prepared or delivered
by consultants, independent contractors or other third parties for or on behalf
of Company (including any materials and elements created, prepared or delivered
by such parties in connection therewith) (A) are and shall constitute "works
made for hire" specially ordered or commissioned by the Company within the
meaning of United States' copyright law, or (B) all right, title and interest
therein (including any materials and elements created, prepared or delivered by
such parties in connection therewith) have been assigned to the Company.
(vii) No licenses or rights have been granted by the
Company, or by any employee, consultant, officer, agent or affiliate of the
Company or by anyone other than the foregoing, to distribute the source code of,
or to use source code to create Derivative Works of, any product currently
marketed by, commercially available from or under development by the Company for
which the Company possesses the source code. As used herein, "Derivative Work"
shall mean a work that is based upon one or more preexisting works, such as a
revision, enhancement, modification, abridgment, condensation, expansion or any
other form in which such preexisting works may be recast, transformed or adapted
and which, if prepared without authorization of the owner of the copyright in
such preexisting work, would constitute a copyright infringement. For purposes
herein, a "Derivative Work" shall also include any compilation that incorporates
such a preexisting work as well as translations from one type of code to
another.
(viii) Except as disclosed in Section 3.1(k)(viii) of the
Company Disclosure Schedule, no person has any marketing rights to any of the
Intellectual Property Rights of the Company (excluding Intellectual Property
Rights licensed to the Company by third parties).
(ix) Section 3.1(k)(ix) of the Company Disclosure
Schedule contains a true and complete list of all (A) of the Company's patents,
patent applications, trademarks, trademark applications, trade names, service
marks, service xxxx applications, copyrights, copyright registrations and
copyright applications and Internet domain names and applications therefor and
(B) other filings and formal actions made or taken pursuant to Federal, state,
local and foreign laws by the Company to perfect or protect its interest
therein.
(x) Section 3.1(k)(x) of the Company Disclosure Schedule
contains a true and complete list of all options, licenses or other agreements
of any kind by which Intellectual Property Rights have been granted to the
Company from, or granted by the Company to, any other person (except for those
licenses identified in Section 3.1(l)(i) of the Company Disclosure Schedule).
14
(XI) As used herein, the term "Intellectual Property
Rights" shall mean all industrial and intellectual property rights, including,
without limitation, patents, patent applications, patent rights, trademarks,
trademark applications, trade names, service marks, service xxxx applications,
copyrights, copyright registrations, copyright applications, franchises,
licenses, databases, "URL's" and Internet domain names and applications therefor
(and all interest therein), computer programs and other computer software
(including, but not limited to, the Software), user interfaces, know-how, trade
secrets, customer lists, proprietary technology, processes and formulae, source
code, object code, algorithms, architecture, structure, display screens,
layouts, development tools, instructions, templates, marketing materials,
inventions, trade dress, logos and designs and all documentation and media
constituting, describing or relating to the foregoing.
(l) COMPANY SOFTWARE
(i) Section 3.1(l)(i) of the Company Disclosure Schedule
sets forth a true and complete list and description of all software programs,
systems and applications (A) designed or developed or under development by the
Stockholder or employees of the Company or by consultants on the Company's
behalf including all documentation therefor (the "Owned Software") or (B)
licensed by the Company from any third party, other than software constituting
"off-the-shelf" software (the "Licensed Software"), in each case that is
manufactured or used by the Company in the operation of its business or
marketed, licensed or sold or proposed to be marketed, licensed or sold by the
Company to third parties (collectively, the "Software") and, in the case of
Licensed Software, Section 3.1(l)(i) of the Company Disclosure Schedule
identifies each license agreement with respect thereto.
(ii) All of the Owned Software are original works of
authorship and are protected by the copyright laws of the United States. The
Company owns all right, title and interest in and to the Owned Software, and all
copyrights thereto, free and clear of any Encumbrance and, except as disclosed
in Section 3.1(l)(ii) of the Company Disclosure Schedule, has not sold,
assigned, licensed, distributed or in any other way disposed of or subjected the
Owned Software to any Encumbrance.
(iii) The Licensed Software is validly held and used by
the Company and is fully utilizable by the Company pursuant to the applicable
license agreement with respect thereto without the consent of or notice to any
third party and is fully and freely utilizable by the Surviving Corporation or
Parent without the consent of or notice to any third party. All of the Company's
computer hardware has validly licensed software installed therein and the
Company's use thereof does not conflict with or violate any such license.
(iv) The Owned Software and, to the best knowledge of the
Company and the Stockholder, the Licensed Software, is free from any significant
software defect or programming or documentation error, operates and runs in a
reasonable and efficient business manner, substantially conforms to the
specifications thereof, and, with respect to the Owned Software, the
applications can be compiled from their associated source code without undue
burden.
15
(v) The Software does not contain any bugs or viruses not
consistent with commercially reasonable industry standards acceptable for bugs.
The Company has furnished Parent with all documentation relating to the use,
maintenance and operation of the Software listed on Section 3.1(l)(v) of the
Company Disclosure Schedule, all of which is true and accurate.
(vi) Except as disclosed in Section 3.1(l)(vi) of the
Company Disclosure Schedule, the Company's products, hardware, databases,
firmware, embedded control systems, Owned Software and Licensed Software
(including existing products Software and technology and Software and technology
currently under development) used in the operation of the business as presently
conducted and as proposed to be conducted have been designed, written and tested
to, and will at all times (i) record, store, process, calculate, manage,
manipulate and present calendar dates falling before, on and after (and if
applicable, spans of time including) December 31, 1999, including, without
limitation, single-century formulas and multi-century formulas and (ii) create,
calculate, recognize, accept, display, store, retrieve, accent, compare, sort,
manipulate, or process any information dependent on or relating to such dates or
otherwise provide use of dates or date-dependent or date-related data,
including, but not limited to, century recognition, day-of-the week recognition,
leap years, date values and interfaces of date functionalities, without loss of
accuracy, functionality, data integrity and performance and will provide that
all date-related data and user interface functionalities and data fields include
the indication of century (collectively, "Year 2000 Compliant"). Section
3.1(l)(vi) of the Company Disclosure Schedule describes all software, hardware,
databases or embedded control systems not owned or developed by the Company that
is or are licensed for or otherwise used by the Company in the operation of its
business as presently conducted and as proposed to be conducted and the nature
and extent of the Company's knowledge and inquiry regarding the degree to which
all such hardware, software, databases or embedded control systems are Year 2000
Compliant.
(vii) Since the inception of the Company, the Company has
not, to any material extent, (A) defaulted under any software or development
contract, (B) failed to meet any product specifications or characteristics or
software or development milestones and standards thereunder, (C) failed to
properly interface any computer software program with the intended operating
system software or related hardware designs applicable thereto, or (D) had any
party to any software or development contract terminate said contract or notify
the Company that such party intends to terminate any such contract.
(m) AGREEMENTS, ETC. Section 3.1(m) of the Company Disclosure
Schedule sets forth a true and complete list of all written or oral contracts,
agreements and other instruments not made in the ordinary course of business to
which the Company is a party, or made in the ordinary course of business and
referred to in clauses (i) through (xvii) of this Section 3.1(m). Except as set
forth in Section 3.1(m), the Company is not a party to any agreement,
arrangement or understanding, whether written or oral, formal or informal,
relating to:
(i) agreements for the development, modification or
enhancement of computer software or multimedia products;
16
(ii) any material distributorship, dealer, sales,
advertising, agency, manufacturer's representative, franchise or similar
contract or relationship or any other contract relating to the payment of a
commission or other fee calculated as or by reference to a percentage of the
profits or revenues of the Company or of any business segment of the Company;
(iii) any joint venture, partnership or other agreement
or arrangement for the sharing of profits;
(iv) any collective bargaining contract or other contract
with or commitment to any labor union;
(v) the future purchase, sale or license of products,
material, supplies, equipment or services requiring payments to or from the
Company in an amount in excess of $10,000 per annum, which agreement,
arrangement or understanding is not terminable on thirty (30) days' notice
without cost or other liability at or at any time after the Effective Time, or
in which the Company has granted or received manufacturing rights, most favored
nations pricing provisions or exclusive marketing or other rights relating to
any product, group of products, services, technology, assets or territory;
(vi) any license (whether as licensor or licensee), or
sublicense, royalty, permit, or franchise agreement, including, without
limitation, any agreement pursuant to which the Company licenses any Company
Rights to any third party (other than ordinary course licenses to end-users);
(vii) the content or delivery of its computer software or
multimedia products and services (including the transmission or other
performance (electronically or otherwise));
(viii) the employment of any officer, employee,
consultant or agent or any other type of contract, commitment or understanding
with any officer, employee, consultant or agent which (except as otherwise
generally provided by applicable law) is not immediately terminable without cost
or other liability at or at any time after the Effective Time;
(ix) profit-sharing, bonus, stock option, stock
appreciation right, pension, retirement, disability, stock purchase,
hospitalization, insurance or similar plan or agreement, formal or informal,
providing benefits to any current or former officer, employee, agent or
consultant;
(x) indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing of money, for a
line of credit or for a leasing transaction of a type required to be capitalized
in accordance with Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board;
(xi) any agreement, instrument or other arrangement
granting or permitting any Encumbrance on any of the properties, assets or
rights of the Company;
17
(xii) any lease for real property (whether as lessor or
lessee) or any other lease or agreement under which the Company is lessee of or
holds or operates any items of tangible personal property owned by any third
party;
(xiii) contract or commitment for charitable
contributions;
(xiv) contract or commitment for capital expenditures
individually or in the aggregate in excess of $10,000;
(xv) any agreement or contract with a "disqualified
individual" (as defined in Section 280G(c) of the Code), which could result in a
disallowance of the deduction for any "excess parachute payment" (as defined in
Section 280G(b)(i) of the Code) under Section 280G of the Code as a result of
the transactions contemplated hereby;
(xvi) agreement or arrangement for the sale of any
assets, properties or rights having a value in excess of $10,000;
(xvii) agreement which restricts the Company from
engaging in any aspect of its business or competing in any line of business in
any geographic area; or
(xviii) any other agreement, contract or commitment which
is material to the Company.
For purposes of this Section 3.1(m), the term "material" shall mean and refer to
those agreements, contracts, instruments or arrangements (as applicable) that
involve payments or expenditures by or to the Company, or otherwise have an
aggregate value, of at least $10,000. The Company has furnished to Parent true
and complete copies of all such agreements listed in Section 3.1(m) of the
Company Disclosure Schedule and (x) each such agreement (A) is the legal, valid
and binding obligation of the Company and, to the best knowledge of the Company
and the Stockholder, the legal, valid and binding obligation of each other party
thereto, in each case enforceable in accordance with its terms, (B) is in full
force and effect and (y) to the best knowledge of the Company and the
Stockholder, except as set forth in Section 3.1(m) of the Company Disclosure
Schedule, the other party or parties thereto is or are not in material default
thereunder.
(n) NO DEFAULTS. The Company has in all material respects
performed all the obligations required to be performed by it to date and is not
in default or alleged to be in default under (i) its Charter or by-laws or (ii)
any material agreement, lease, license, contract, commitment, instrument or
obligation to which the Company is a party or by which any of its properties,
assets or rights are or may be bound or affected and, to the best knowledge of
the Company and the Stockholder, there exists no event, condition or occurrence
which, with or without due notice or lapse of time, or both, would constitute
such a default by it of any of the foregoing.
(o) LITIGATION, ETC. There are no (i) actions, suits, claims,
investigations or legal or administrative or arbitration proceedings pending, or
to the best knowledge of the Company and the Stockholder, threatened against the
Company nor, to the best knowledge of the Company and the Stockholder, except as
set forth on Section 3.1(o) of the
18
Company Disclosure Schedule, any basis therefor, whether at law or in equity, or
before or by any Federal, state, local, municipal, foreign or other governmental
court, department, commission, board, bureau, agency or instrumentality
("Governmental Authority"), (ii) judgments, decrees, injunctions or orders of
any Governmental Authority or arbitrator against the Company or (iii) disputes
with customers or vendors. There are no Actions pending or, to the best
knowledge of the Company and the Stockholder, threatened, nor, to the best
knowledge of the Company and the Stockholder, any basis therefor, with respect
to (A) the current employment by, or association with, the Company, or future
employment by, or association with, Parent or the Surviving Corporation, of any
of the present officers or employees of, or consultants to, the Company
(collectively, the "Designated Persons") or (B) the use, in connection with any
business presently conducted or proposed to be conducted by the Company or the
Surviving Corporation, of any information, techniques or processes presently
utilized or proposed to be utilized by the Company, Parent, the Surviving
Corporation or any of the Designated Persons, that the Company, Parent, the
Surviving Corporation or any of the Designated Persons are or would be
prohibited from using as the result of a violation or breach of, or conflict
with any agreements or arrangements between any Designated Person and any other
person, or any legal considerations applicable to unfair competition, trade
secrets or confidential or proprietary information. The Company has delivered to
Parent all material documents and correspondence relating to such matters
referred to in Section 3.1(o) of the Company Disclosure Schedule (including, in
the case of clause (iii) of the first sentence of this Section 3.1(o), any
correspondence evidencing material customer dissatisfaction with the Company or
its products or services).
(p) ACCOUNTS AND NOTES RECEIVABLE. All the accounts receivable
and notes receivable owing to the Company as of the date hereof constitute, and
as of the Effective Time will constitute, valid and enforceable claims arising
from bona fide transactions in the ordinary course of business, and there are no
known or asserted claims, refusals to pay or other rights of set-off against any
thereof. There is (i) no account debtor or note debtor delinquent in its payment
by more than thirty (30) days except as disclosed in Section 3.1(p) of the
Company Disclosure Schedule, (ii) no account debtor or note debtor that has
refused (or, to the best knowledge of the Company and the Stockholder,
threatened to refuse) to pay its obligations for any reason, (iii) to the best
knowledge of the Company and the Stockholder, no account debtor or note debtor
that is insolvent or bankrupt and (iv) no account receivable or note receivable
which is pledged to any third party by the Company. Except to the extent of a
reserve which the Company has established specifically for doubtful accounts
receivable and notes receivable (which reserve is set forth on the Current
Year-End Balance Sheet and Company Interim Balance Sheet, is reasonable under
the circumstances and is consistent with past practice), all of the accounts
receivable of the Company existing at the Effective Time shall be paid in full
by not later than the ninetieth (90th) day after the Effective Time and all of
the notes receivable shall be paid in accordance with the terms thereof.
(q) ACCOUNTS AND NOTES PAYABLE. Except as set forth in Section
3.1(q) of the Company Disclosure Schedule, all accounts payable and notes
payable by the Company to third parties as of the date hereof arose, and as of
the Closing will have arisen, in the ordinary course of business, and, except as
set forth in Section 3.1(q) of the Company Disclosure Schedule, there is no such
account payable or note payable delinquent in its payment, except
19
those contested in good faith and already disclosed in Section 3.1(q) of the
Company Disclosure Schedule.
(r) COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS. The Company has
complied and is presently in compliance in all material respects with all
Federal, state, local or foreign laws, ordinances, regulations and orders
applicable to it or its business (including, without limitation, laws,
ordinances, regulations and orders applicable to labor, employment and
employment practices, terms and conditions of employment and wages and hours).
Except as set forth in Section 3.1(r) of the Company Disclosure Schedule, the
Company has all Federal, state, local and foreign governmental authorizations,
consents, approvals, licenses and permits necessary in the conduct of its
business as presently conducted or as proposed to be conducted, such
authorizations, consents, approvals, licenses and permits are in full force and
effect, no violations are or have been recorded in respect of any thereof and no
proceeding is pending or, to the best knowledge of the Company and the
Stockholder, threatened to revoke or limit any thereof. Section 3.1(r) of the
Company Disclosure Schedule contains a true and complete list of all such
governmental licenses, authorizations, consents, approvals, permits, orders,
decrees and other compliance agreements under which the Company is operating or
bound, the Company is not in default or alleged to be in default under any
thereof and the Company has furnished to Parent true and complete copies
thereof. Except as set forth in Section 3.1(r) of the Company Disclosure
Schedule, none of such authorizations, consents, approvals, licenses and permits
shall be affected in any material respect by the Merger or the transactions
contemplated hereby.
(s) ENVIRONMENTAL MATTERS. The Company is in compliance with
all federal, state, local and foreign laws, common law, rules, codes,
administrative orders and regulations relating to pollution or protection of
human health, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including without limitation, laws, common law, rules, codes, administrative
orders and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws") and, to the best knowledge of the Company and the
Stockholder, there are no events or circumstances that could form the basis of
an order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the Company
relating to any Hazardous Materials or the violation of any Environmental Law.
(t) LABOR RELATIONS; EMPLOYEES.
(i) Section 3.1(t) of the Company Disclosure Schedule
sets forth the name, title, department, start date, salary for 1998 and 1999,
option grant, any special benefits and termination dates, if applicable, for
each employee of the Company since its inception. The Company has no employees
other than the Stockholder. Except as set forth in Section 3.1(t) of the Company
Disclosure Schedule, (A) the Company is not delinquent in payments to any of its
employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed by them to date or amounts required to
be reimbursed to such employees, (B) upon termination of the employment of any
such employees, neither the Company, Parent, Acquisition Sub nor the Surviving
Corporation will by reason of anything
20
done prior to the Closing be liable to any of such employees for so-called
"severance pay" or any other payments, (C) there is no unfair labor practice
complaint against the Company pending before the National Labor Relations Board
or any comparable Governmental Authority, (D) there is no labor strike, dispute,
slowdown or stoppage actually pending or, to the best knowledge of the Company
and the Stockholder, threatened against or involving the Company, (E) no labor
union has taken any action with respect to organizing the employees of the
Company, (F) neither any grievance nor any arbitration proceeding arising out of
or under collective bargaining agreements is pending and no claim therefor has
been asserted against the Company and (G) no employee has informed any officer
of the Company that such employee will terminate his or her employment or
engagement with the Company or the Surviving Corporation and the Company has no
reason to believe that the key employees that accept employment with the
Surviving Corporation will not remain employees of the Surviving Corporation for
at least ninety (90) days after the Closing. No employee of the Company is in
violation of any term of any employment contract, patent disclosure agreement or
any other contract or agreement relating to the relationship of such employee
with the Company or any other party because of the nature of the business
conducted or proposed to be conducted by the Company or the execution and
delivery of the Confidentiality Agreement by such employee.
(u) EMPLOYEE BENEFIT PLANS AND CONTRACTS
(i) Section 3.1(u) of the Company Disclosure Schedule
identifies each "employee benefit plan", as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and all
other written or formal plans or agreements involving direct or indirect
compensation (including any employment agreements entered into between the
Company and any Employee, but excluding workers' compensation, unemployment
compensation, other government-mandated programs and the Company's salary and
wage arrangements) currently or previously maintained, contributed to or entered
into by the Company or any ERISA Affiliate thereof for the benefit of any
Employee or former Employee under which the Company or any ERISA Affiliate
thereof has any present or future material obligation or liability (the
"Employee Plans"). The Company has made available to Parent true and complete
copies of all Employee Plans (and, if applicable, related trust agreements) and
all amendments thereto and written interpretations thereof. For purposes of the
preceding sentence, "ERISA Affiliate" shall mean any entity which is a member of
(A) a "controlled group of corporations", as defined in Section 414(b) of the
Code, (B) a group of entities under "common control", as defined in Section
414(c) of the Code or (C) an "affiliated service group", as defined in Section
414(m) of the Code or treasury regulations promulgated under Section 414(o) of
the Code, any of which includes the Company. Any Employee Plans that
individually or collectively would constitute an "employee pension benefit
plan", as defined in Section 3(2) of ERISA, but which are not Multiemployer
Plans (collectively, the "Pension Plans"), are identified as such in the Company
Disclosure Schedule. For purposes of Section 3.1(u), "Employee" means any common
law employee, consultant or officer of the Company.
(ii) Each Employee Plan that is intended to be qualified
under Section 401(a) of the Code is so qualified and has been so qualified
during the period from its adoption to the date hereof, and each trust forming a
part thereof is exempt from tax pursuant to Section 501(a) of the Code. The
Company has made available to Parent copies of the most recently filed Internal
Revenue Service Form 5500, the most recent annual or periodic
21
accounting of plan assets and provided Parent with copies of the most recent
Internal Revenue Service determination letters with respect to any such Employee
Plan. Each Employee Plan has been maintained substantially in compliance with
its terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations, including, without limitation, ERISA and the Code, which
are applicable to such Employee Plans.
(iii) Except as set forth in Section 3.1(u) of the
Company Disclosure Schedule, no Employee Plan constitutes or since the enactment
of ERISA has constituted a "multiemployer plan", as defined in Section 3(37) of
ERISA (a "Multiemployer Plan"), (B) a plan covered under Title IV of ERISA, or
(C) a "multiple employer plan," as defined in Section 413(c) of the Code. The
Company has not within the past five years incurred any material liability under
Title IV of ERISA arising in connection with the termination of any Pension Plan
or the complete or partial withdrawal from any Multiemployer Plan. Except as
disclosed in Schedule 3.1 (u) of the Company Disclosure Schedule, if a "complete
withdrawal" by the Company were to occur as of the Closing with respect to all
Multiemployer Plans, the Company would not incur any withdrawal liability under
Title IV of ERISA.
(iv) Section 3.1(u) of the Company Disclosure Schedule
lists each employment, severance or other similar contract, arrangement or
policy and each plan or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements), workers' benefits, vacation
benefits, retirement benefits, deferred compensation, profit-sharing, bonuses,
stock options, stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (A) is not an Employee
Plan, (B) is entered into, maintained or contributed to, as the case may be, by
the Company on behalf of any Employee, (C) covers any Employee or former
Employee, and (D) under which the Company or any ERISA Affiliate has any present
or future obligation or liability (excluding workers' compensation, unemployment
compensation or other government-mandated programs and the Company's salary and
wage arrangements). Such contracts, plans and arrangements as are described
above, are hereinafter referred to collectively as the "Benefit Arrangements".
Each Benefit Arrangement has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all material laws,
statutes, rules, regulations, orders and judgments which are applicable to such
Benefit Arrangements.
(v) Each Employee Plan which is a "group health plan" (as
defined in Section 5000 of the Code) has to the extent applicable been
maintained in compliance with Section 4980B of the Code and Title I, Subtitle B,
Part 6 of ERISA, and no tax payable on account of Section 4980B of the Code has
been or is expected to be incurred with respect to any current or former
Employees of the Company.
(vi) All contributions due and payable on or before the
Closing Date in respect of any Employee Plan or Benefit Arrangement have been
made in full and proper form, or adequate accruals have been provided for in the
Company Financial Statements for all other contributions or amounts in respect
of the Employee Plans or Benefit Arrangements for periods ending on the Closing
Date.
(vii) Except as required by Section 4980B of the Code and
Section 601 of ERISA, no Employee Plan or Benefit Arrangement currently or
previously
22
maintained by the Company or its ERISA Affiliates provides any post-retirement
health or life insurance benefits, and neither the Company nor its ERISA
Affiliates maintains any obligations to provide any post-retirement benefits in
the future.
(viii) The consummation of the transactions contemplated
by this Agreement will not (A) entitle any individual to severance or separation
pay, or (B) except as set forth in the Section 3.1(u)(viii) of the Company
Disclosure Schedule, accelerate the time of payment or vesting, or increase the
amount, of compensation due to any individual. No payment made or contemplated
under any Employee Plan or Benefit Arrangement constitutes an "excess parachute
payment" within the meaning of Section 280G of the Code.
(ix) Except as set forth in Section 3.1(u)(ix) of the
Company Disclosure Schedule, with respect to each Employee Plan and Benefit
Arrangement: (A) no breach of fiduciary duty has occurred with respect to which
the Company or any such plan or arrangement may be liable or otherwise
materially damaged; (B) no disputes are pending or, to the best knowledge of the
Company and the Stockholder, threatened; (C) no prohibited transaction has
occurred with respect to which the Company or any such plan or arrangement may
be liable or otherwise materially damaged; (D) the Company has expressly
reserved in itself the right to amend, modify or terminate any such written plan
or arrangement, or any portion of it; and (E) the Company has satisfied any bond
coverage requirement of ERISA.
(v) CERTAIN AGREEMENTS. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
(i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due to
any officer or employee of the Company from the Company, under any Employee
Plan, Benefit Arrangement or otherwise, (ii) with respect to any current or
former officer or key employee of the Company materially increase any benefits
otherwise payable under any Employee Plan or the Benefit Arrangement or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits.
(w) INSURANCE. Section 3.1(w) of the Company Disclosure
Schedule contains a list of all policies of liability, theft, fidelity, fire,
product liability, errors and omissions, workmen's compensation, indemnification
of officers and other forms of insurance held by the Company (specifying the
insurer, the amount of coverage, the type of insurance, the policy number and
any pending claims thereunder) and a history of all claims made by the Company
thereunder and the status thereof. All such policies of insurance are in full
force and effect and all premiums with respect thereto are currently paid and,
to the best knowledge of the Company and the Stockholder, no basis exists for
termination of any thereof on the part of the insurer. The Company has not,
since its inception, been denied or had revoked or rescinded any policy of
insurance.
(x) BANK ACCOUNTS; POWERS OF ATTORNEY. Section 3.1(x) of the
Company Disclosure Schedule sets forth a true and complete list of (i) all bank
accounts and safe deposit boxes of the Company and all persons who are
signatories thereunder or who have access thereto and (ii) the names of all
persons, firms, associations, corporations or business organizations holding
general or special powers of attorney from the Company and a summary of the
terms thereof.
23
(Y) BROKERS. The Company has not, nor have any of its
officers, securityholders or employees, employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
(z) RELATED TRANSACTIONS. Except as disclosed in Section
3.1(z) of the Company Disclosure Schedule, no current or former officer or
securityholder of the Company that is an affiliate of the Company or any
associate (as defined in the rules promulgated under the Exchange Act) thereof,
is now, or has been since the inception of the Company, a party to any
transaction with the Company (including, but not limited to, any contract,
agreement or other arrangement providing for the furnishing of services by, or
rental of real or personal property from, or borrowing money from, or otherwise
requiring payments to, any such officer or affiliated stockholder of the Company
or associate thereof), or the direct or indirect owner of an interest in any
corporation, firm, association or business organization which is a present or
potential competitor, supplier or customer of the Company (other than
non-affiliated holdings in publicly-held companies), nor does any such person
receive income from any source other than the Company which relates to the
business of, or should properly accrue to, the Company.
(aa) MINUTE BOOKS. The minute books of the Company provided to
Parent for review contain a complete summary of all meetings of and actions by
the Stockholder of the Company from the time of its incorporation to the date of
such review and reflect all actions referred to in such minutes accurately in
all material respects.
(bb) OTHER NAMES. Except as set forth on Section 3.1(bb) of
the Company Disclosure Schedule, the business conducted by the Company prior to
the date hereof has not been conducted under any corporate, trade or fictitious
name.
(cc) BUSINESS GENERALLY. There have been no events or
transactions, or information which has come to the attention of the Company or
any officer, or key employee thereof that is reasonably likely to result in a
Material Adverse Effect, and the Company is not obligated under any contractor
agreement or subject to any Charter or other corporate restriction which is
reasonably likely to result in a Material Adverse Effect.
(dd) VOTE REQUIRED. The affirmative vote of at least a
majority of the outstanding shares of Company Common Stock approving this
Agreement, the Merger and the Agreement of Merger is the only vote of the
holders of any class or series of the Company's capital stock necessary to
approve this Agreement, the Merger and the Agreement of Merger and the
transactions contemplated hereby and thereby.
(ee) INFORMATION SUPPLIED. None of the information supplied or
to be supplied by the Company or any Stockholder for inclusion or incorporation
by reference in the Stockholder's Materials will, at the dates delivered to the
Stockholders and at the effective date of the Stockholder Action, contain any
untrue statement of a material fact. The Stockholder's Materials will comply as
to form in all material respects with the provisions of all applicable laws,
rules and regulations of all Governmental Authorities.
24
(ff) COMPANY NOT AN INTERESTED SECURITYHOLDER OR AN ACQUIRING
PERSON. As of the date of this Agreement, neither the Company nor, to the best
knowledge of the Company and the Stockholder, any of its Affiliates is an
"Interested Securityholder" of Parent as such term is defined in Section 203 of
the Delaware Statute.
(gg) COMPANY EXPENSES. The Schedule of Expenses being
delivered at the Closing sets forth a true, correct and complete schedule of all
Company Expenses that have been incurred or paid by or on behalf of the Company
(whether or not theretofore billed) through the Effective Time and there are no
Company Expenses other than as set forth therein.
(hh) OFFICERS. Set forth on Section 3.1(ii) of the Company
Disclosure Schedule is a list of the current officers of the Company.
(ii) DISCLOSURE. Neither Section 3.1 of this Agreement
(including the Company Disclosure Schedule) nor any document, written
information, statement, financial statement, certificate or exhibit furnished or
to be furnished to Parent or Acquisition Sub by or on behalf of the Company or
any securityholder pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to make
the statements or facts contained herein and therein not misleading in light of
the circumstances under which they were made. There is no fact internal to the
business of the Company known to the Company or the Stockholder that has not
been disclosed to Parent in writing that (i) is reasonably likely to result in a
Material Adverse Effect or (ii) adversely affects or could adversely affect the
ability of the Company or the Stockholder to perform its or his respective
obligations under this Agreement or the Related Agreements.
(jj) KNOWLEDGE DEFINITION. As used in this Article 3, the term
"best knowledge" and like phrases shall mean and include (i) actual knowledge
and (ii) that knowledge which the Stockholder and the officers and key employees
of the Company could have obtained in the management of his or her business
affairs after making due inquiry and exercising due diligence with respect
thereto. In connection therewith, the knowledge (both actual and constructive)
of the Stockholder or any officer or key employee of the Company shall be
imputed to be the knowledge of the Company.
(kk) NO DISCRIMINATION. The Company has not and does not in
any manner or form discriminate, xxxxxx discrimination or permit discrimination
against any person, whether as to race, sex, religion, or other legally
protected classes of persons.
3.2. SEVERAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder represents and warrants to Parent and Acquisition Sub with respect
to himself or herself as follows:
(a) TITLE; ABSENCE OF CERTAIN AGREEMENTS. The Stockholder is the lawful
and record and beneficial owner of, and has good and marketable title to, all of
the issued and outstanding shares of Company Common Stock, with the full power
and authority to vote such Company Common Stock and transfer and otherwise
dispose of such Company Common Stock, and any and all rights and benefits
incident to the ownership thereof free and clear of all
25
Encumbrances, and there are no agreements or understandings between the
Stockholder and the Company or any other person with respect to the voting, sale
or other disposition of Company Common Stock or any other matter relating to
Company Common Stock.
(b) AUTHORITY - GENERAL. The Stockholder has full and absolute
power and authority to enter into this Agreement and each Related Agreement to
which the Stockholder is a party and this Agreement and each Related Agreement
to which the Stockholder is a party have been duly executed and delivered by the
Stockholder, and are valid and binding obligations of the Stockholder,
enforceable against the Stockholder in accordance with their respective terms.
Neither the execution, delivery and performance of this Agreement and each
Related Agreement to which the Stockholder is a party, nor the consummation of
the transactions contemplated hereby or thereby nor compliance by the
Stockholder with any of the provisions hereof or thereof will (i) (A) conflict
with, (B) result in any violations of, (C) cause a default under (with or
without due notice, lapse of time or both), (D) give rise to any right of
termination, amendment, cancellation or acceleration of any obligation contained
in or the loss of any material benefit under or (E) result in the creation of
any Encumbrance upon or against any assets, rights or property of the Company
(or against any Company Common Stock, Parent capital stock or common stock of
the Surviving Corporation), under any term, condition or provision of (x) any
agreement or instrument to which the Stockholder is a party, or by which the
Stockholder or any of his properties, assets or rights may be bound, or (y) any
law, statute, rule, regulation, order, writ, injunction, decree, permit,
concession, license or franchise of any Governmental Authority applicable to the
Stockholder or any of his properties, assets or rights, which conflict, breach,
default or violation or other event would prevent the consummation of the
transactions contemplated by this Agreement, the Agreement of Merger or any
Related Agreement to which the Stockholder is a party. Except as set forth in
Section 3.2(b) of the Company Disclosure Schedule (which, if so disclosed shall
have been effectively made or obtained (as the case may be) on or prior to the
Closing, unless otherwise waived by Parent) no permit, authorization, consent or
approval of or by, or any notification of or filing with, any Governmental
Authority or other person is required in connection with the execution, delivery
and performance by the Stockholder of this Agreement and each Related Agreement
to which the Stockholder is a party or the consummation by the Stockholder of
the transactions contemplated hereby or thereby.
(c) INVESTMENT REPRESENTATIONS. The Stockholder:
(i) is acquiring the Merger Shares being issued to the
Stockholder for investment and for the Stockholder's own account and not as a
nominee or agent for any other person and with no present intention of
distributing or reselling such shares or any part thereof in any transactions
that would be in violation of the Securities Act or any state securities or
"blue-sky" laws;
(ii) understands (A) that the Merger Shares to be issued
to him have not been registered for sale under the Securities Act or any state
securities or "blue-sky" laws in reliance upon exemptions therefrom, which
exemptions depend upon, among other things, the bona fide nature of the
investment intent of the Stockholder as expressed herein, (B) that such Merger
Shares must be held indefinitely and not sold until such shares are registered
under the Securities Act and any applicable state securities or "blue-sky" laws,
unless an
26
exemption from such registration is available, (C) that, except as provided in
the Registration Rights Agreement, Parent is under no obligation to so register
such Merger Shares and (D) that the certificates evidencing such Merger Shares
will be imprinted with a legend in the form set forth in Section 7.2(b) that
prohibits the transfer of such shares, except as provided in Section 7.2;
(iii) has been furnished with, and has read and reviewed,
the Parent's SEC Documents;
(iv) has had an opportunity to ask questions of and has
received satisfactory answers from the officers of Parent or persons acting on
Parent's behalf concerning Parent and the terms and conditions of an investment
in Parent Common Stock;
(v) is aware of Parent's business affairs and financial
condition and has acquired sufficient information about Parent to reach an
informed and knowledgeable decision to acquire the Merger Shares to be issued to
the Stockholder;
(vi) can afford to suffer a complete loss of his
investment in such Merger Shares;
(vii) is familiar with the provisions of Rule 144
promulgated under the Securities Act which, in substance, permits limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof, in a non-public offering subject to the satisfaction of certain
requirements, including, among other things: (A) the availability of certain
public information about the issuer, (B) the resale occurring not less than one
year after the party has purchased, and made full payment for, within the
meaning of Rule 144, the securities to be sold; and, in the case of an
affiliate, or of a non-affiliate who has held the securities less than two
years, the amount of securities being sold during any three month period not
exceeding the specified limitations stated therein, if applicable and (C) the
sale being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a "market maker" (as such term is defined under the
Exchange Act);
(viii) understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 is
not exclusive, the staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial burden
of proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk;
(ix) has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of
acquiring and holding shares of Parent Common Stock; and
(x) The Stockholder is an "accredited investor" within
the meaning of Rule 501(a) under the Securities Act.
27
(d) BROKERS. The Stockholder has not employed any broker or
finder or incurred any liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated hereby.
(e) REPRESENTATION BY LEGAL COUNSEL. The Stockholder has been
advised by legal counsel in connection with the negotiation, execution and
delivery of this Agreement and the Related Agreements and the performance of the
transactions contemplated hereby and thereby.
3.3. REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB.
Parent and Acquisition Sub represent and warrant to the Company and the
Stockholder as follows:
(a) ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. Each
of Parent and Acquisition Sub (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and (ii)
has all requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as now being conducted, to
enter into this Agreement and each of the Related Agreements to which it is a
party, to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Parent has delivered to the
Company true and complete copies of the Charter and by-laws of each of Parent
and Acquisition Sub.
(b) CAPITAL STOCK. Parent's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999 filed with the SEC (the "Most Recent 10-Q")
sets forth a true and complete description of the authorized and outstanding
shares of capital stock of Parent as of May 13, 1999. Since May 13, 1999, Parent
has not (a) increased the number of shares of Parent capital stock reserved
under its stock option plans, or (b) issued in excess of 50,000 shares of
capital stock except pursuant to the exercise of options to purchase Parent
capital stock. All outstanding shares of capital stock of Parent are validly
issued, fully paid and non-assessable and not subject to preemptive rights and
Encumbrances created by Parent (other than Encumbrances created by or resulting
from the Escrow Agreement or the Stockholders' Agreement). All such shares of
capital stock have been issued in compliance with and pursuant to an exemption
from all applicable federal and state securities or "blue sky" laws. Parent has
filed an application to approve the Merger Shares for listing on NASDAQ.
(c) Parent has duly authorized and reserved for issuance the
Merger Shares and, when issued in accordance with the terms of Article 2, the
Merger Shares will be validly issued, fully paid and nonassessable and free of
preemptive rights and Encumbrances created by Parent. Parent owns all the
outstanding shares of capital stock of Acquisition Sub and all of such shares
are validly issued, fully paid and nonassessable and not subject to preemptive
rights and Encumbrances created by Parent.
(d) AUTHORITY. The execution, delivery and performance by
Parent of this Agreement and each of the Related Agreements to which it is a
party and the execution, delivery and performance of this Agreement and the
Agreement of Merger by Acquisition Sub and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Parent and Acquisition Sub, respectively. This
Agreement and each of the Related Agreements to which Parent is a party are
28
valid and binding obligations of Parent, enforceable against Parent in
accordance with their respective terms; and this Agreement is a valid and
binding obligation of Acquisition Sub, enforceable against Acquisition Sub in
accordance with its terms; and the Agreement of Merger, when executed and
delivered by Acquisition Sub, will be a valid and binding obligation of
Acquisition Sub, enforceable against Acquisition Sub in accordance with its
terms. Neither the execution, delivery and performance by Parent of this
Agreement and the Related Agreements to which Parent is a party, the execution,
delivery and performance of this Agreement and the Agreement of Merger by
Acquisition Sub, nor the consummation of the transactions contemplated hereby or
thereby, will in any material respect (A) conflict with, (B) result in any
material violation of, (C) cause a material default under (with or without due
notice, lapse of time or both), (D) give rise to any material right of
termination, amendment, cancellation or acceleration of any obligation contained
in or the loss of any material benefit under, (E) result in the creation of any
material Encumbrance on or against any assets, rights or property of Parent or
Acquisition Sub, as the case may be, under any term, condition or provision of
(x) any material instrument or agreement to which Parent or Acquisition Sub is a
party, or by which Parent or Acquisition Sub or any of their respective
properties, assets or rights may be bound, (y) any material law, statute, rule,
regulation, order, writ, injunction, decree, permit, concession, license or
franchise of any Governmental Authority applicable to Parent or Acquisition Sub
or any of their respective properties, assets or rights or (z) Parent's or
Acquisition Sub's Charter or by-laws, as amended through the date hereof,
respectively, in each case, which conflict, breach, default or violation or
other event would prevent the consummation of the transactions contemplated by
this Agreement, the Agreement of Merger or any Related Agreement to which Parent
or Acquisition Sub is a party. Except as contemplated by this Agreement, no
permit, authorization, consent or approval of or by, or any notification of or
filing with, any Governmental Authority or other person is required in
connection with the execution, delivery and performance by Parent or Acquisition
Sub of this Agreement, the Agreement of Merger (in the case of Acquisition Sub)
or the Related Agreements to which they are a party or the consummation of the
transactions contemplated hereby or thereby, other than (i) the filing with the
SEC of such reports and information under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations promulgated by
the SEC thereunder, as may be required in connection with this Agreement and the
transactions contemplated hereby, (ii) the filing of such documents with, and
the obtaining of such orders from, various state securities and blue-sky
authorities as are required in connection with the transactions contemplated
hereby, (iii) the filing of the Agreement of Merger with the Secretary of State
of the State of Delaware and (iv) such other consents, waivers, authorizations,
filings, approvals and registrations which if not obtained or made would
materially impair the ability of Parent or Acquisition Sub to consummate the
transactions contemplated by this Agreement, including, without limitation, the
Merger (each of the filings set forth in clauses (i), (ii) and (iii) have been
or will be made by Parent when due).
(e) SEC DOCUMENTS
(i) Parent has furnished or made available to the Company
and the Stockholder a correct and complete copy of the Final Prospectus filed
with the SEC on March 19, 1999 pursuant to Rule 424(b)(1) of the Securities Act
(the "Final Prospectus"), the Most Recent 10-Q, and each other report, schedule,
registration statement and definitive proxy statement filed by Parent with the
SEC on or after the date of filing of the Final Prospectus which
29
are all the documents (other than preliminary material) that Parent was required
to file (or otherwise did file) with the SEC in accordance with Sections 13, 14
and 15(d) of the Exchange Act on or after the date of filing with the SEC of the
Final Prospectus (collectively, the "Parent's SEC Documents"). As of their
respective filing dates, or in the case of registration statements, their
respective effective dates, the Parent's SEC Documents complied when filed, or
in the case of registration statements, as of their respective effective dates,
in all material respects with the then applicable requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations
promulgated by the SEC thereunder.
(ii) As of their respective filing dates, or in the case
of registration statements, their respective effective dates, none of the
Parent's SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(iii) The financial statements (including the notes
thereto) of Parent included in the Most Recent 10-Q complied as to form in all
material respects with the then applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with GAAP during the periods involved (except as may have been
indicated in the notes thereto), are in accordance with the books and records of
Parent, and fairly present the financial position of Parent as at the dates
thereof and the results of its operations, stockholders' equity and cash flows
for the period then ended.
(iv) Since the date of the Most Recent 10-Q, no event has
occurred as of the date hereof which is required to be reported by Parent by
filing a Current Report on Form 8-K under the Exchange Act.
(F) BROKERS. Neither Parent, Acquisition Sub, nor any of their
respective officers, directors or employees have employed any broker or finder
or incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated hereby.
ARTICLE 4.
RELATED AGREEMENTS
4.1. RELATED AGREEMENTS. At the Closing, the following agreements (such
agreements being herein collectively referred to as the "Related Agreements")
will be executed and delivered by the respective parties thereto:
(a) EMPLOYEE CONFIDENTIALITY AND ASSIGNMENT OF INVENTIONS
AGREEMENT. The Stockholder is entering into a non-competition, confidentiality
and assignment of inventions agreement with Parent, effective as of the
Effective Time, in the form of EXHIBIT D attached hereto (the "Employee
Confidentiality Agreement"), providing for, among other things, restrictions
upon the Stockholder from competing with the business of Parent and the
Surviving Corporation, non-disclosure of confidential information and ownership
of proprietary information and rights.
30
(b) ESCROW AGREEMENT. Parent, the Stockholder, the Online
Psych Stockholders and the Escrow Agent are entering into the Escrow Agreement.
(c) RELEASE AGREEMENT. The Stockholder is entering into a
Release Agreement, effective as of the Effective Time, in the form of EXHIBIT E
attached hereto (the "Release Agreement"), providing for, among other things,
release of the Company, Parent, the Surviving Corporation and Parent's
affiliates from any and all claims, known and unknown, that the Stockholder may
have against the Company through the Effective Time.
(d) STOCKHOLDERS' AGREEMENT. The Stockholder is entering into
the Stockholders' Agreement with Parent and the Online Psych Stockholders,
effective as of the closing date, in the form of EXHIBIT F attached hereto (the
"Stockholders' Agreement"), pursuant to which, among other things, the
Stockholder shall agree not to transfer his shares of Parent Common Stock except
in accordance with the Stockholders' Agreement.
(e) REGISTRATION RIGHTS AGREEMENT. Parent, the Stockholder and
the Online Psych Stockholders are entering into a registration rights agreement,
substantially in the form attached hereto as EXHIBIT G (the "Registration Rights
Agreement").
ARTICLE 5.
CONDUCT AND TRANSACTIONS PRIOR
TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS
5.1. ACCESS TO RECORDS AND PROPERTIES OF EACH PARTY; CONFIDENTIALITY.
From and after the date hereof until the Effective Time or the earlier
termination of this Agreement pursuant to Section 9.1 hereof (the "Executory
Period"), the Company shall afford: (i) to the officers, independent certified
public accountants, counsel and other representatives of Parent and Acquisition
Sub, free and full access at all reasonable times upon reasonable notice to all
properties, books and records (including tax returns filed and those in
preparation) of the Company, in order that Parent and Acquisition Sub may have a
full opportunity to make such investigations as they shall reasonably desire to
make of the business and affairs of the Company; and (ii) to the independent
certified public accountants of Parent or Acquisition Sub, free and full access
at all reasonable times upon reasonable notice to the work papers of the
independent certified public accountants of the Company. Additionally, the
Company will permit Parent and Acquisition Sub to make such reasonable
inspections of the Company and its operations during normal business hours upon
reasonable notice as Parent or Acquisition Sub may reasonably require and the
Company will cause its officers to furnish to Parent and Acquisition Sub such
additional financial and operating data and other information relating to the
business and properties of the Company as Parent or Acquisition Sub shall from
time to time reasonably request. No investigation pursuant to this Section 5.1,
or made prior to the date hereof, shall affect or otherwise diminish or obviate
in any respect any of the representations and warranties of the Company or the
Stockholder.
5.2. OPERATION OF BUSINESS OF THE COMPANY. During the Executory Period,
the Company will operate its business as now operated and only in the normal and
ordinary course and, consistent with such operation, will use its best efforts
to preserve intact its present business
31
organization, to keep available the services of its officers and employees and
to maintain satisfactory relationships with licensors, franchisees, licensees,
suppliers, contractors, distributors, customers and other persons having
business dealings with it. Without limiting the generality of the foregoing,
during the Executory Period the Company shall not, without the prior written
consent of Parent, (a) take any action that would result in any of the
representations and warranties of the Company herein becoming untrue or in any
of the conditions to the Merger not being satisfied, or (b) take or cause to
occur any of the actions or transactions described in Section 3.1(g) hereof, in
each case other than in the ordinary course of business consistent with past
practice.
5.3. NEGOTIATIONS WITH OTHERS. Until the Effective Time or the
earlier termination of this Agreement pursuant to Section 9.1 hereof (the time
period beginning on the date hereof and ending on such date being hereinafter
referred to as the "No-Shop Period"), neither the Company nor the Stockholder
shall, nor shall the Company authorize any of its employees, officers,
stockholders or agents to, directly or indirectly, solicit, initiate or engage
in discussions or negotiations with, or provide any information to, or take any
other action to facilitate the efforts of, any third party with respect to a
financing of, or investment in, the Company (including by way of the purchase of
any capital stock or other securities from the Company or the Stockholder) or
the acquisition of the Company (including by way of merger, purchase of capital
stock or purchase of assets) or any of its assets by such third party, or that
would otherwise be inconsistent with the terms of this Agreement, or that would
prohibit the performance of the Company's obligations hereunder or that could be
expected to diminish the likelihood of or render impracticable the consummation
of the transactions contemplated hereby (each as described above (other than the
Merger and the transactions contemplated herein), an "Acquisition Transaction"),
or enter into any agreement or arrangement with respect to, or authorize or
consummate, an Acquisition Transaction. If the Company or any employee, officer,
stockholder or agent of the Company receives an unsolicited offer or proposal to
enter negotiations relating to an Acquisition Transaction, such party shall
immediately notify Parent of such offer or proposal and shall immediately reject
such offer. Upon the execution and delivery of this Agreement, the Company and
the Stockholder shall terminate any and all discussions, if any, it or he may be
having with respect to an Acquisition Transaction. During the No-Shop Period,
neither the Company nor the Stockholder shall, nor shall the Company authorize
any of its employees, officers, stockholders or agents to, directly or
indirectly, negotiate or discuss with any person or entity that provides or
proposes to provide online services, the provision of financing to the Company
by such person or entity or any merger, consolidation, business combination or
similar transaction with any such person or entity, directly or indirectly.
5.4. STOCKHOLDER'S APPROVAL. The Company shall (a) obtain in
compliance with applicable law and the Company's Charter and By-laws the
requisite approval of the Stockholder either pursuant to the written consent of
the Stockholder or at a special Stockholder's meeting (the "Stockholder's
Meeting") within ten (10) days (or such other period as may be required by
applicable law and the Company's Charter and By-laws) after the mailing of the
Stockholder's Materials, in either case for the purpose of obtaining the
approval of the Merger, this Agreement and the transactions contemplated hereby
(in either case, the "Stockholder Action"), (b) take or cause to be taken all
such other action as may be required by the Delaware Statute and any other
applicable law and the Company's Charter and By-laws in connection with the
Merger and this Agreement, in each case as promptly as possible and (c)
reasonably cooperate with and assist
32
Parent and its representatives in taking any such actions as may reasonably be
required to consummate the Merger, including obtaining the consent and approval
of any third parties or governmental agencies. Unless the Company obtains the
written consent of the Stockholder, the Stockholder's Meeting shall be called,
held and conducted, and any proxies therefor shall be solicited, in compliance
with applicable law and the Company's Charter and By-laws. The Company shall not
change the date of the Stockholder Meeting (if it holds a Stockholder Meeting)
without the prior written consent of Parent, nor shall the Company adjourn the
Stockholder Meeting prior to obtaining such Stockholder approval of the
transactions contemplated hereby without the prior written consent of Parent,
unless such adjournment is due to the lack of a quorum, in which case the
chairman of the meeting shall announce at such Stockholder Meeting the time and
place of the adjourned meeting. The Company shall prepare and distribute any
written notice and other materials relating to the Stockholder's Action, the
Merger or any other transaction relating to or contemplated by this Agreement
(collectively, the "Stockholder's Materials") in accordance with the Charter and
By-laws of the Company, the Delaware Statute and any other Federal and state
laws; provided, however, that Parent and its counsel shall have the opportunity
to review all Stockholder's Materials prior to delivery to the Stockholders, and
all Stockholder's Materials shall be in form and substance reasonably
satisfactory to Parent and its counsel; provided, further, that if any event
occurs that should be set forth in an amendment or supplement to any
Stockholder's Materials, the Company shall promptly inform Parent thereof (or,
if such event relates solely to Parent, Parent shall promptly inform the Company
thereof), and the Company shall promptly prepare an amendment or supplement in
form and substance satisfactory to Parent in accordance with the Charter and
By-laws of the Company, the Delaware Statute and any other Federal or state
laws.
5.5. ADVICE OF CHANGES. The Company shall confer on a regular and
frequent basis with Parent, report on operational matters and promptly advise
Parent orally and in writing of any change, event or circumstance having or
which is reasonably likely to result in a Material Adverse Effect or which could
impair (negatively or positively) its financial projections, forecasts or
prospects.
5.6. FINANCIAL INFORMATION UPDATE. During the Executory Period, the
Company shall:
(a) prepare and deliver to Parent, within ten (10) Business
Days after the end of each calendar month during the Executory Period, its
unaudited balance sheet as at the end of such calendar month and the related
statements of operations, cash flow and stockholder's equity for the period then
ended, which shall (i) be in accordance with the books and records of the
Company, and (ii) fairly present in all material respects the financial
condition of the Company as at the respective dates indicated and the results of
operations of the Company for the respective periods indicated. As used herein,
the term "Business Day" shall mean any day other than a Saturday, Sunday or day
on which banks are permitted to close in the State of New York;
(b) prepare and deliver on a weekly basis a summary of the
material developments (if any) in the business or prospects of the Company
occurring during such period; and
33
(c) furnish such other financial information as is available
to management of the Company.
5.7. LEGAL CONDITIONS TO MERGER. Each party hereto shall take all
reasonable actions necessary to comply promptly with all legal requirements that
may be imposed on such party with respect to the Merger and will take all
reasonable action necessary to cooperate with and furnish information to the
other party in connection with any such requirements imposed upon such other
party in connection with the Merger. Each party hereto shall take all reasonable
actions necessary (a) to obtain (and will take all reasonable actions necessary
to promptly cooperate with the other party in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Authority, or other third party, required to be obtained or made by such party
(or by the other parties) in connection with the Merger or the taking of any
action contemplated by this Agreement, (b) to defend, lift, rescind or mitigate
the effect of any lawsuit, order, injunction or other action adversely affecting
the ability of such party to consummate the transactions contemplated hereby and
(c) to fulfill all conditions precedent applicable to such party pursuant to
this Agreement.
5.8. CONSENTS. Each party hereto shall use its best efforts, and the
other parties shall cooperate with such efforts, to obtain any consents and
approvals of, or effect the notification of or filing with, each person or
authority, whether private or governmental, whose consent or approval is
required in order to permit the consummation of the Merger and the transactions
contemplated hereby and to enable the Surviving Corporation to conduct and
operate the business of the Company as presently conducted and as proposed to be
conducted.
5.9. EFFORTS TO CONSUMMATE. Subject to the terms and conditions herein
provided, the parties hereto shall use their best efforts to do or cause to be
done all such acts and things as may be necessary, proper or advisable,
consistent with all applicable laws and regulations, to consummate and make
effective the transactions contemplated hereby and to satisfy or cause to be
satisfied all conditions precedent that are set forth in Article 6 as soon as
reasonably practicable. Without limiting the generality of the foregoing, the
Company agrees to cooperate with, and to take all actions reasonably requested
by, Parent's Accountants in connection with the audit of the Audited Financial
Statements.
5.10. NOTICE OF BREACH. Within a reasonable time period following such
event, each party hereto shall notify the other parties in writing upon the
occurrence of any act, event, circumstance or thing that would cause or result
in a representation or warranty hereunder being untrue at the Closing, the
failure of a closing condition to be achieved at the Closing, or any other
breach or violation hereof or default hereunder.
5.11. SUPPORT OF MERGER BY OFFICERS AND DIRECTORS. Each party hereto
shall use its best efforts to cause all of its officers and directors to support
the Merger and to take all actions and execute all documents reasonably
requested by the other parties hereto to carry out the intent of the parties
with respect to the transactions contemplated hereby.
5.12. SUPPORT OF MERGER BY STOCKHOLDER. The Stockholder shall use all
reasonable efforts to cause the Company to duly observe and perform its
obligations under this Agreement.
34
5.13. TRANSACTIONS COSTS. Within one (1) business day after the Closing
Date, the Stockholder shall deliver evidence satisfactory to Parent and
Acquisition Sub that, except as provided in Section 10.1, the Company has paid
the amount of the Company Expenses.
ARTICLE 6.
CONDITIONS PRECEDENT
6.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The obligations of each
party hereto to perform this Agreement and to effect the Merger are subject to
the satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by all parties hereto:
(a) STOCKHOLDER APPROVAL; AGREEMENT OF MERGER. This Agreement
and the Merger shall have been duly and validly approved and adopted by the
Stockholder in accordance with the Delaware Statute and the Company's Charter
and By-laws, and the Agreement of Merger shall have been executed and delivered
by Acquisition Sub and the Company and filed with and accepted by the Secretary
of State of the State of Delaware.
(b) APPROVALS. All authorizations, consents, orders or
approvals of, or declarations or filings with or expiration of waiting periods
imposed by, any Governmental Authority necessary for the consummation of the
transactions contemplated hereby shall have been obtained or made or shall have
occurred.
(c) LEGAL ACTION. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Merger shall have been issued by any Federal or state court or other
Governmental Authority and remain in effect.
(d) LEGISLATION. No Federal, state, local or foreign statute,
rule or regulation shall have been enacted which prohibits, restricts or delays
the consummation of the transactions contemplated by this Agreement or any of
the conditions to the consummation of such transactions.
6.2. CONDITIONS TO OBLIGATIONS OF PARENT AND ACQUISITION SUB. The
obligations of Parent to perform this Agreement and of Acquisition Sub to
perform this Agreement and the Agreement of Merger are subject to the
satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by Parent and Acquisition Sub at the Closing:
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
representations and warranties of the Company and the Stockholder set forth in
Sections 3.1 and 3.2 hereof shall have been true and correct in all material
respects on the date of this Agreement (except for any representation or
warranty that by its terms is qualified by materiality, in which case it shall
be true and correct in all respects) and shall, individually and in the
aggregate, be true and correct in all material respects as of the Closing Date
as though made at and as of such dates, respectively, and Parent and Acquisition
Sub shall have received a certificate signed by the President of the Company to
that effect.
35
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDER. The Company and the Stockholder shall have performed in all
material respects the obligations required to be performed by them under this
Agreement prior to or as of the Closing Date, and Parent and Acquisition Sub
shall have received a certificate signed by the President of the Company to that
effect.
(c) DELIVERY OF CERTIFICATES. The Old Certificate shall have
been delivered to Parent in the manner and otherwise in accordance with Section
2.2 hereof.
(d) EMPLOYEE CONFIDENTIALITY AGREEMENT. The Stockholder shall
have executed and delivered to Parent the Employee Confidentiality Agreement,
effective as of the Effective Time, in the form of EXHIBIT D attached hereto,
providing for, among other things, non-disclosure of confidential information
and restrictions upon such person from competing with the Surviving Corporation
and Parent as provided therein.
(e) OPINION OF THE COMPANY'S AND STOCKHOLDER'S COUNSEL. A
favorable opinion dated the Closing Date shall have been delivered by Xxxx
Xxxxxxx Xxxxx & Xxxxxxxxxx, counsel to the Company and the Stockholder, in favor
of Parent and Acquisition Sub, in the form attached hereto as EXHIBIT I.
(f) CONSENTS AND APPROVALS. Duly executed copies of all
consents and approvals contemplated by this Agreement or the Company Disclosure
Schedule, in form and substance satisfactory to Parent and Acquisition Sub,
shall have been delivered by the Company.
(g) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. Copies of all
consents, authorizations, orders or approvals of, and filings or registrations
with, any Governmental Authority which are required for or in connection with
the execution and delivery by the Company and the Stockholder of this Agreement,
the Agreement of Merger and the Related Agreements and the consummation by the
Company and the Stockholder of the transactions contemplated hereby, shall have
been delivered by the Company.
(h) COMPANY EXPENSES. A true, correct and complete schedule
(the "Schedule of Expenses") of all Company Expenses paid or incurred by or on
behalf of the Company or the Stockholder through the Closing Date, accompanied
by a certificate signed by the Chief Executive Officer of the Company certifying
the accuracy and completeness thereof, shall have been delivered by the Company.
(i) ESCROW AGREEMENT. The Stockholder shall have executed and
delivered the Escrow Agreement and the Escrowed Shares shall have been delivered
by Parent to the Escrow Agent.
(j) RELEASE. A written instrument in the form of EXHIBIT E
attached hereto shall have been delivered by the Stockholder pursuant to which
the Stockholder shall have released the Company, Parent, the Surviving
Corporation and their respective Affiliates and successors and assigns thereof
from and against any and all claims, known or unknown, that he may have against
the Company through the Effective Time.
36
(k) RELATED AGREEMENTS. Each of the Related Agreements shall
be in full force and effect as of the Effective Time and become effective in
accordance with the respective terms thereof and the actions required to be
taken thereunder by the parties thereto immediately prior to the Effective Time
shall have been taken, and each person or entity who or which is required or
contemplated by the parties hereto to be a party to any Related Agreement who or
which did not theretofore enter into such Related Agreement shall execute and
deliver such Related Agreement.
(l) SATISFACTION OF CLOSING CONDITIONS UNDER THE ONLINE PSYCH
REORGANIZATION AGREEMENT. Online Psychological Services, Inc., a Delaware
corporation ("Online Psych"), and the holders of all of the issued and
outstanding capital stock of Online Psych (the "Online Psych Stockholders"),
shall have (i) performed in all material respects the obligations required to be
performed by them on or prior to the Closing Date under that certain Agreement
and Plan of Reorganization, dated as of the date hereof (the "Online Psych
Reorganization Agreement"), by and among Online Psych, Online Psych Acquisition
Corporation, a Delaware corporation, and the Online Psych Stockholders, and (ii)
delivered to Parent a certificate signed by the President of Online Psych to
that effect.
6.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company and the Stockholder to perform this Agreement, the Agreement of Merger
and the Related Agreements to which they are a party are subject to the
satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by the Company:
(a) REPRESENTATIONS AND WARRANTIES OF PARENT. The
representations and warranties of Parent and Acquisition Sub set forth in
Section 3.3 hereof shall be true and correct in all material respects (except
for any representation or warranty that by its terms is qualified by
materiality, in which case it shall be true and correct in all respects) as of
the date of this Agreement, and as of the Closing Date as though made at and as
of such dates, respectively, and the Company shall have received a certificate
signed by the Chief Executive Officer of Parent and the President of Acquisition
Sub to that effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND ACQUISITION SUB.
Parent and Acquisition Sub shall have performed in all material respects their
respective obligations required to be performed by them under this Agreement and
the Agreement of Merger prior to or as of the Closing Date and the Company shall
have received a certificate signed by the Chief Executive Officer of Parent and
the President of Acquisition Sub to that effect.
(c) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. Copies of all
consents, authorizations, orders or approvals of, and filings or registrations
with, any Governmental Authority which are required for or in connection with
the execution and delivery by Parent and Acquisition Sub of this Agreement, the
Agreement of Merger and the Related Agreements and the consummation by Parent
and Acquisition Sub of the transactions contemplated hereby or thereby, shall
have been delivered by Parent.
(d) PURCHASE PRICE. The delivery of the New Certificates
(representing the Merger Shares (other than the Escrowed Shares)) and the cash
consideration
37
deliverable at the Effective Time in the manner and otherwise in accordance with
Article 2 hereof (and concurrent delivery of the Escrowed Shares to the Escrow
Agent in accordance with Section 2.2 hereof), shall have been made by Parent.
(e) ESCROW AGREEMENT. Parent shall have executed and
delivered the Escrow Agreement and delivered, on behalf of the Stockholder, the
Escrowed Shares to the Escrow Agent as provided in Section 2.2 hereof.
(f) REGISTRATION RIGHTS AGREEMENT. Parent shall have executed
and delivered the Registration Rights Agreement.
ARTICLE 7.
ADDITIONAL AGREEMENTS
7.1. RESTRICTIONS ON TRANSFER
(a) The shares of Parent Common Stock to be issued to the
Stockholder at the Effective Time pursuant to the Merger and any shares of
capital stock or other securities received with respect thereto (collectively,
the "Restricted Securities") shall not be sold, transferred, assigned, pledged,
encumbered or otherwise disposed of (each, a "Transfer") except upon the
conditions specified in this Section 7.1, which conditions are intended to
insure compliance with the provisions of the Securities Act. The Stockholder
shall observe and comply with the Securities Act and the rules and regulations
promulgated by the SEC thereunder as now in effect or hereafter enacted or
promulgated, and as from time to time amended, in connection with any Transfer
of Restricted Securities beneficially owned by the Stockholder.
(b) Each certificate representing the Restricted Securities
issued to a Stockholder and each certificate for such securities issued to
subsequent transferees of any such certificate shall (unless otherwise permitted
by the provisions of Sections 7.1(c) and 7.1(d) hereof) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES OR "BLUE-SKY"
LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM. ADDITIONALLY, THE TRANSFER OF THESE
SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN SECTION 7.1 OF THE
AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF JUNE 30, 1999 AMONG
IVILLAGE INC., CODE STONE ACQUISITION CORPORATION AND CODE STONE
TECHNOLOGIES, INC. AND THE OTHER SIGNATORIES THERETO AND NO TRANSFER OF
THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE
BEEN
38
FULFILLED. UPON THE FULFILLMENT OF CERTAIN OF SUCH CONDITIONS, IVILLAGE
INC. HAS AGREED TO DELIVER TO THE HOLDER HEREOF A NEW CERTIFICATE, NOT
BEARING THIS LEGEND, FOR THE SECURITIES REPRESENTED HEREBY REGISTERED
IN THE NAME OF THE HOLDER HEREOF. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF IVILLAGE INC."
(c) The Stockholder agrees, prior to any Transfer of
Restricted Securities, to give written notice to Parent of the Stockholder's
intention to effect such Transfer and to comply in all other respects with the
provisions of this Section 7.1. Each such notice shall describe the manner and
circumstances of the proposed Transfer and shall be accompanied by the written
opinion, addressed to Parent, of counsel for the holder of such Restricted
Securities, stating that in the opinion of such counsel (which opinion and
counsel shall be reasonably satisfactory to Parent) such proposed transfer does
not involve a transaction requiring registration or qualification of such
Restricted Securities under the Securities Act or the securities or "blue-sky"
laws of any relevant state of the United States. The holder thereof shall
thereupon, with the written consent of Parent, be entitled to Transfer such
Restricted Securities in accordance with the terms of the notice delivered by it
to Parent. Each certificate or other instrument evidencing the securities issued
upon the Transfer of any such Restricted Securities (and each certificate or
other instrument evidencing any untransferred balance of such Restricted
Securities) shall bear the legend set forth in Section 7.1(b) unless (x) in such
opinion of counsel of Parent registration of any future Transfer is not required
by the applicable provisions of the Securities Act or (y) Parent shall have
waived the requirement of such legends. The Stockholder shall not Transfer any
Restricted Securities until such opinion of counsel has been given (unless
waived by Parent or unless such opinion is not required in accordance with the
provisions of this Section 7.1(c)).
(d) Notwithstanding the foregoing provisions of this Section
7.1, the restrictions imposed by this Section 7.1 upon the transferability of
Restricted Securities shall cease and terminate when (i) any such shares are
sold or otherwise disposed of pursuant to an effective registration statement
under the Securities Act or as otherwise contemplated by Section 7.1(c) and,
pursuant to Section 7.1(c), the securities so transferred are not required to
bear the legend set forth in Section 7.1(b) or (ii) the holder of such
Restricted Securities has met the requirements for Transfer of such Restricted
Securities pursuant to Rule 144. Whenever the restrictions imposed by this
Section 7.1 shall terminate, as herein provided, the holder of Restricted
Securities as to which such restrictions have terminated shall be entitled to
receive from Parent, without expense, a new certificate not bearing the
restrictive legend set forth in Section 7.1(b) and not containing any other
reference to the restrictions imposed by this Section 7.1.
(e) The Stockholder understands and agrees that Parent, at its
discretion, may cause stop transfer orders to be placed with its transfer agent
with respect to certificates for Restricted Securities owned by the Stockholder
but not as to certificates for such shares of Parent Common Stock as to which
the legend set forth in Section 7.1(b) is no longer required because one or more
of the conditions set forth in Section 7.2(d) shall have been satisfied.
39
7.2. CONFIDENTIALITY. Each party hereto agrees that any information
obtained by such party (the "Receiving Party") pursuant to or in connection with
this Agreement, the Related Agreements and the transactions contemplated hereby
and thereby which may be proprietary or otherwise confidential to any other
party hereto (the "Disclosing Party") will not be disclosed by the Receiving
Party without the prior written consent of the Disclosing Party. Each party
further acknowledges and understands that any information obtained which may be
considered "inside" non-public information will not be utilized by such party in
connection with purchases and/or sales of the Parent Common Stock except in
compliance with applicable state and federal anti-fraud statutes. The provisions
of this Section 7.2 shall not be in limitation of any rights which the Parent
may have with respect to the books and records of the Company, or to inspect its
properties or discuss its affairs, finances and accounts, under the laws of the
jurisdiction in which it is incorporated.
ARTICLE 8.
INDEMNIFICATION
8.1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
(a) "AFFILIATE" as to any person means any entity, directly or
indirectly, through one or more intermediaries, controlling, controlled by or
under common control with such person.
(b) "EVENT OF INDEMNIFICATION" shall mean the following:
(i) the untruth, inaccuracy or breach of any
representation or warranty of the Company or the Stockholder (including the fact
and circumstances underlying such untruth, inaccuracy or breach) contained in
Section 3.1 of this Agreement, or in the Company Disclosure Schedule, any
Exhibit or Schedule hereto or any other document delivered in connection
herewith or therewith (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);
(ii) the untruth, inaccuracy or breach of any
representation or warranty of the Stockholder (including the fact and
circumstances underlying such untruth, inaccuracy or breach) contained in
Section 3.2 of this Agreement, or in the Company Disclosure Schedule, any
Exhibit or Schedule hereto or any other document delivered in connection
herewith or therewith (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);
(iii) the breach of any agreement or covenant of the
Company or the Stockholder contained in this Agreement, the Related Agreements
(except the Employment Agreements or the Stockholders' Agreement) or in the
Company Disclosure Schedule, any Exhibit hereto or any other document delivered
in connection herewith or therewith;
40
(iv) any claim, demand, liability or obligation of any
nature whatsoever, which arose or was incurred on or before the Closing Date, or
which was based on events occurring on or before the Closing Date, or which was
based on products sold or services performed by the Company or the Stockholder
on or before the Closing Date, notwithstanding that the date on which the claim,
demand, liability or obligation may arise or become manifest is after the
Closing Date, other than liabilities or obligations of the Company arising after
the Closing Date under contracts and agreements entered into prior to the
Closing Date that are disclosed on the Company Disclosure Schedule, including,
without limitation, any claim, demand, liability or obligation of any nature
whatsoever by or to employees, independent contractors or volunteers of the
Company for unpaid compensation or other employment related benefits;
(v) any claim, demand, liability or obligation sustained
or suffered by the Company, Parent or the Surviving Corporation, or any of them,
arising from or in connection with (A) the action of the Stockholder required to
approve the transactions contemplated by this Agreement, the Agreement of Merger
and the Related Agreements, or (B) any assertion of impropriety by the
Stockholder against the Company, Parent or the Surviving Corporation, or any of
them, with respect to any actions or transactions of or involving the Company
prior to or at the Effective Time (including, without limitation, the actions
and transactions contemplated by this Agreement, the Agreement of Merger and the
Related Agreements);
(vi) the untruth, inaccuracy or breach of any
representation or warranty of Parent and Acquisition Sub (including the fact and
circumstances underlying such untruth, inaccuracy or breach) contained in
Section 3.3 of this Agreement, or in the Parent Disclosure Schedule, any Exhibit
or Schedule hereto or any other document delivered in connection herewith
(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, other than the representation and
warranty set forth in Section 3.3 (e) (ii)); or
(vii) the breach of any agreement or covenant of Parent
or Acquisition Sub contained in this Agreement, the Related Agreements (except
the Employment Agreements) or in the Parent Disclosure Schedule, any Exhibit
hereto or any document delivered in connection herewith.
(c) "INDEMNIFIED PERSONS" shall mean and include (A) with
respect to an Indemnification Event described in subsections 8.1(b)(i) through
8.1(b)(v) hereof, Parent, Acquisition Sub and the Surviving Corporation and
their respective Affiliates, successors and assigns, and the respective
officers, directors and agents of each of the foregoing, or (B) with respect to
an Indemnification Event described in subsections 8.1(b)(vi) and 8.1(b)(vii)
hereof, the Stockholder and the Company and the Affiliates, successors and
assigns, and the respective officers, directors and agents of each of the
foregoing.
(d) "INDEMNIFYING PERSONS" shall mean and include (A) with
respect to an Indemnification Event described in subsections 8.1(b)(i),
8.1(b)(iii), 8.1(b)(iv) and 8.1(b)(v) hereof (1) prior to Closing, the Company
and the Stockholder and the respective
41
successors, assigns, heirs and legal representatives and estates of the Company
and the Stockholder, as the case may be, (2) on and after the Closing, the
Stockholder and his successors, assigns, heirs and legal representatives and
estates, as the case may be, (B) with respect to an Indemnification Event
described in Section 8.1(b)(ii) hereof, the Stockholder, and (C) with respect to
an Indemnification Event described in subsections 8.1(b)(vi) and 8.1(b)(vii)
hereof, Parent and Acquisition Sub and the respective successors and assigns of
Parent and Acquisition Sub, as the case may be.
(e) "LOSSES" shall mean any and all losses, claims, shortages,
damages, liabilities, expenses (including reasonable attorneys', accountants'
and experts' fees), assessments, or Taxes (including interest or penalties
thereon) sustained, suffered or incurred by any Indemnified Person arising from
or in connection with any such matter that is the subject of indemnification
under Section 8.2 hereof. With respect to any Indemnification Event, "Losses"
shall also include the amount necessary to ensure that the amount payable in
connection with such Indemnification Event (the "Indemnity Payment"), less an
amount equal to all Taxes payable by the Indemnified Persons as a result of the
receipt of the Indemnity Payment, equals the amount of the loss suffered by the
Indemnified Persons.
8.2. INDEMNIFICATION GENERALLY. Subject to Section 8.6 hereof, the
Indemnifying Persons shall jointly and severally indemnify the Indemnified
Persons for, and hold each of them harmless from and against, any and all Losses
arising from or in connection with any Event of Indemnification. The
indemnification obligations set forth herein of the Stockholder shall be secured
pursuant to and in accordance with the Escrow Agreement. Any claims for Losses
hereunder may be satisfied pursuant to and in accordance with the terms of the
Escrow Agreement, notwithstanding the foregoing allocations of responsibilities.
8.3. ASSERTION OF CLAIMS. No claim shall be brought under Section 8.2
hereof unless the Indemnified Persons, or any of them, at any time prior to the
applicable Survival Date, give the Stockholder (a) written notice of the
existence of any such claim, specifying the nature and basis of such claim and
the amount thereof, to the extent known, or (b) written notice pursuant to
Section 8.4 of any third party claim, the existence of which might give rise to
such a claim but the failure so to provide such notice to the Stockholder will
not relieve the Indemnifying Persons from any liability that they may have to
the Indemnified Persons under this Agreement or otherwise (unless and only to
the extent that such failure results in the loss or compromise of any rights or
defenses of the Indemnifying Persons and they were not otherwise aware of such
action or claim). Upon the giving of such written notice as aforesaid, the
Indemnified Persons, or any of them, shall have the right to commence legal
proceedings prior or subsequent to the Survival Date for the enforcement of
their rights under Section 8.2 hereof.
8.4. NOTICE AND DEFENSE OF THIRD PARTY CLAIMS. Losses resulting from
the assertion of liability by third parties (each, a "Third Party Claim") shall
be subject to the following terms and conditions:
(a) The Indemnified Persons shall promptly give written notice
to the Stockholder of any Third Party Claim that might give rise to any Loss by
the Indemnified Persons, or any of them, stating the nature and basis of such
Third Party Claim, and the amount thereof, to the extent known. Such notice
shall be accompanied by copies of all relevant
42
documentation with respect to such Third Party Claim, including, without
limitation, any summons, complaint or other pleading that may have been served,
any written demand or any other document or instrument. Notwithstanding the
foregoing, the failure to provide notice as aforesaid to the Stockholder will
not relieve the Indemnifying Persons from any liability which they may have to
the Indemnified Persons under this Agreement or otherwise (unless and only to
the extent that such failure results in the loss or compromise of any rights or
defenses of the Indemnifying Person and they were not otherwise aware of such
action or claim).
(b) If the Indemnifying Person acknowledges in writing its
obligation to indemnify the Indemnified Persons hereunder against any Losses
that may result from such Third Party Claims, then the Indemnifying Person shall
be entitled, at its option, to assume and control the defense of such Third
Party Claim at its expense and through counsel of its reasonable choice if it
gives notice to the Indemnified Persons within twenty (20) calendar days of the
receipt of notice of such Third Party Claim from the Indemnified Persons of its
intention to do so. If the Indemnifying Person elects to assume and control the
defense of any such Third Party Claim, the Indemnified Persons shall have the
right to employ separate counsel and to participate in (but not control) the
defense, compromise or settlement of the Third Party Claim, but the fees and
expenses of such counsel will be at the expense of the Indemnified Persons,
unless (i) the Indemnifying Person has agreed to pay such fees and expenses, or
(ii) the Indemnified Persons has been advised by its counsel that there may be
one or more defenses reasonably available to it which are different from or
additional to those available to the Indemnifying Person, and in any such case
that portion of the fees and expenses of such separate counsel that are
reasonably related to matters covered by the indemnification provided by this
Article 8 will be paid by the Indemnifying Person. Expenses of counsel to the
Indemnified Persons shall be reimbursed on a current basis by the Indemnifying
Person if there is no dispute as to the obligation of the Indemnifying Person to
pay such amounts pursuant to this Article 8. In the event the Indemnifying
Person exercises its right to undertake the defense against any such Third Party
Claim as provided above, the Indemnified Persons shall cooperate with the
Indemnifying Person in such defense and make available to the Indemnifying
Person, at the Indemnifying Person's expense, all witnesses, pertinent records,
materials and information in its possession or under its control relating
thereto as is reasonably required by the Indemnifying Person. Similarly, in the
event the Indemnified Persons is, directly or indirectly, conducting the defense
against any such Third Party Claim, the Indemnifying Person shall cooperate with
the Indemnified Persons in such defense and make available to it, at the
Indemnifying Person's expense, all such witnesses, records, materials and
information in its possession or under its control relating thereto as is
reasonably required by the Indemnified Persons. No such Third Party Claim,
except the settlement thereof which involves the payment of money only (by a
party or parties other than the Indemnified Persons) and for which the
Indemnified Persons is released by the third party claimant and is totally
indemnified by the Indemnifying Person, may be settled by the Indemnifying
Person without the written consent of the Indemnified Persons. No Third Party
Claim which is being defended in good faith by the Indemnifying Person shall be
settled by the Indemnified Persons without the written consent of the
Indemnifying Person.
8.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to the further
provisions of this Section 8.5, the respective representations and warranties of
(a) the Stockholder set forth in Sections 3.1 and 3.2 shall survive the
Effective Time until fourteen (14) months following the Closing Date, except
that the representations and warranties contained in (i) Section 3.2(a) (Title;
43
Absence of Certain Agreements) shall not so terminate but shall survive the
Closing indefinitely and (ii) Section 3.1(h) (Tax Matters) shall not so
terminate but shall survive the Closing until sixty (60) days after the
applicable statute of limitations shall have expired with respect to all matters
referenced therein and (b) the Company, Acquisition Sub and Parent shall survive
the Effective Time until fourteen (14) months following the Closing Date. For
convenience of reference, the date upon which any representation or warranty
contained herein shall terminate is referred to herein as the "Survival Date."
All covenants and agreements of Parent or the Stockholder contained herein shall
survive the Closing in accordance with their respective terms. Anything
contained herein to the contrary notwithstanding, the representations and
warranties of the Company contained in this Agreement (including, without
limitation, the Company Disclosure Schedule) (i) are being given by the Company
on behalf of the Stockholder and for the purpose of binding the Stockholder to
the terms and provisions of this Article 8 and the Escrow Agreement, and as an
inducement to Parent and Acquisition Sub to enter into this Agreement and to
approve the Merger (and the Company and the Stockholder acknowledge that Parent
and Acquisition Sub have expressly relied thereon) and (ii) are solely for the
benefit of the Indemnified Persons and each of them. Accordingly, no third party
(including, without limitation, the Stockholder or anyone acting on behalf of
any thereof) other than the Indemnified Persons, and each of them, shall be a
third party or other beneficiary of such representations and warranties and no
such third party shall have any rights of contribution against the Company or
the Surviving Corporation with respect to such representations or warranties or
any matter subject to or resulting in indemnification under this Article 8 or
otherwise.
8.6. LIMITATION ON INDEMNIFICATION
(a) Anything to the contrary contained in this Article 8
notwithstanding, the Indemnifying Persons shall not be obligated to indemnify
the Indemnified Persons pursuant to this Article 8 with respect to any Losses
pursuant to Section 8.2 until the aggregate amount of such Losses exceeds thirty
thousand dollars ($30,000) (the "Basket Amount"), whereupon the Indemnifying
Persons shall be obligated to indemnify the Indemnified Persons for all Losses
in excess of the Basket Amount; provided, however, that the Indemnified Persons
shall be obligated to indemnify the Indemnified Persons for the first dollar of
all Losses arising out of or related to a breach of the representations and
warranties contained in Sections 3.1(c), 3.1(y), 3.1(gg), and 3.2(a); provided,
further, that the aggregate maximum indemnification liability of the
Indemnifying Persons pursuant to this Article 8 with respect to any Losses
pursuant to an Event of Indemnification under Section 8.2, together with any
losses pursuant to an "Event of Indemnification" under Section 8.2 of the Online
Psych Reorganization Agreement, shall not exceed $15,000,000.
(b) For purposes of satisfying an indemnification obligation
of the Stockholder under this Article 8, each share of Parent Common Stock
tendered by or on behalf of the Stockholder in satisfaction of any
indemnification of the Stockholder under this Article 8 shall have a value
determined as set forth in the Escrow Agreement.
44
ARTICLE 9.
TERMINATION; AMENDMENT, MODIFICATION AND WAIVER
9.1. TERMINATION. This Agreement may be terminated, and the Merger
abandoned, notwithstanding the approval by Parent, Acquisition Sub and the
Company of this Agreement, at any time prior to the Effective Time, by:
(a) the mutual consent of Parent, Acquisition Sub and the
Company; or
(b) Parent and Acquisition Sub if the conditions set forth in
Sections 6.1 or 6.2 hereof shall not have been met by July 30, 1999, except if
such conditions have not been met solely as a result of the action or inaction
of Parent or Acquisition Sub; or
(c) the Company if the conditions set forth in Sections 6.1 or
6.3 hereof shall not have been met by July 30, 1999, except if such conditions
have not been met solely as a result of the action or inaction of the Company or
the Stockholder; or
(d) Parent, Acquisition Sub or the Company if such party shall
have determined in its sole discretion, exercised in good faith, that the Merger
contemplated by this Agreement has become impracticable by reason of the
institution of any litigation, proceeding or investigation to restrain or
prohibit the consummation of the Merger, or which questions the validity or
legality of the transactions contemplated by this Agreement; or
(e) Parent and Acquisition Sub if any statute, rule,
regulation or other legislation shall have been enacted which, in the sole
discretion of Parent and Acquisition Sub, exercised in good faith, is reasonably
likely to result in a Material Adverse Effect. Any termination pursuant to this
Section 9.1 (other than a termination pursuant to Section 9.1(a) hereof) shall
be effected by written notice from the party or parties so terminating to the
other parties hereto.
9.2. EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 9.1, this Agreement shall be of no further
force or effect, except for Section 7.2, Article 8, this Section 9.2, and
Article 10, each of which shall survive the termination of this Agreement;
provided, however, that the liability of any party for any breach by such party
of the representations, warranties, covenants or agreements of such party set
forth in this Agreement occurring prior to the termination of this Agreement
shall survive the termination of this Agreement.
ARTICLE 10.
MISCELLANEOUS
10.1. EXPENSES. As used in this Agreement, "Transaction Costs" shall
mean (a) with respect to Parent or Acquisition Sub, all actual, out-of-pocket
expenses incurred by such party to third parties, in connection with this
Agreement, the Merger Agreement, the Related
45
Agreements, the Merger and all other transactions provided for herein and
therein, and (b) with respect to the Company or the Stockholder, all actual,
out-of-pocket expenses incurred by such party to third parties, in connection
with (i) this Agreement, the Merger Agreement, the Related Agreements, the
Merger and all other transactions provided for herein and therein or (ii) the
Online Psych Reorganization Agreement, the ancillary agreements executed in
connection therewith and the transactions contemplated thereby; but shall not in
any event include general overhead; the time spent by employees of such party
internally; postage, telephone, telecopy, photocopy and delivery expenses of
such party; permit and filing fees; and other non-material expenses that are
incidental to the ordinary course of business. Each party hereto shall bear its
own fees and expenses in connection with the transactions contemplated hereby;
provided, however, that in the event the Merger shall be consummated, Parent and
Acquisition Sub shall bear (a) all Transaction Costs of Parent and Acquisition
Sub and (b) $30,000 of the Transaction Costs of the Stockholders, Online Psych
and the Company, whether or not such fees and expenses have been paid by the
Company on or before the Closing Date and whether or not such fees and expenses
are reflected in the Company Disclosure Schedule or the Schedule of Expenses
(such Transaction Costs of the Company and the Stockholders being herein
collectively referred to as the "Company Expenses").
10.2. ENTIRE AGREEMENT. This Agreement (including the Company
Disclosure Schedule and the Exhibits attached hereto), the Agreement of Merger,
the Related Agreements and the other writings referred to herein contain the
entire agreement among the parties hereto with respect to the transactions
contemplated hereby and supersede all prior or contemporaneous agreements or
understandings, written or oral, among the parties with respect thereto,
including, but not limited to, the letter of intent, dated May 12, 1999, by and
among Parent, Online Psych and the Company.
10.3. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience
only and shall not control or affect the meaning or construction of any
provision of this Agreement.
10.4. PUBLIC ANNOUNCEMENTS. The parties hereto agree that, to the
maximum extent feasible, but subject, in the case of Parent, to its public
disclosure and, as to all parties, other legal and regulatory obligations, they
shall advise and confer with each other prior to the issuance (and provide
copies to the other party prior to issuance) of any public announcements,
reports, statements or releases pertaining to the Merger.
10.5. NOTICES
All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by nationally-recognized overnight courier or by registered or certified
mail, postage prepaid, return receipt requested, or by facsimile, with
confirmation as provided above addressed as follows:
46
(a) if to Parent or Acquisition Sub, to:
iVillage Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000;
with a copy (not constituting notice) to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000;
(B) if to the Company or the Stockholder, to:
Code Stone Technologies, Inc.
000 Xxxx Xxxx Xx. X.X.
Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000;
with a copy (not constituting notice) to:
Xxxx Xxxxxxx Xxxxx & Xxxxxxxxxx
0000 Xxxxxxxxxxxxx Xxxxx
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000;
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such notices
or communications shall be deemed to be received (i) in the case of personal
delivery or facsimile, on the date of such delivery, (ii) in the case of
nationally-recognized overnight courier, on the next Business Day after the date
when sent and (iii) in the case of mailing, on the third Business Day following
the date on which the piece of mail containing such communication was posted.
10.6. COUNTERPARTS. This Agreement may be executed in any number of
counterparts by original or facsimile signature, each such counterpart shall be
an original instrument, and all such counterparts together shall constitute one
and the same agreement.
47
10.7. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed wholly therein (without regard to principles of
conflicts of laws).
10.8. BENEFITS OF AGREEMENT. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
10.9. PRONOUNS. As used herein, all pronouns shall include the
masculine, feminine, neuter, singular and plural thereof whenever the context
and facts require such construction.
10.10. AMENDMENT, MODIFICATION AND WAIVER. This Agreement shall not be
altered or otherwise amended except pursuant to an instrument in writing signed
by (i) Parent, (ii) the Company and (iii) the Stockholder; provided, however,
that any party to this Agreement may waive any obligation owed to it by any
other party under this Agreement. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
10.11. SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the greatest extent possible.
10.12. FURTHER ASSURANCES. Each party agrees to cooperate
fully with the other parties and to execute such further instruments, documents
and agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement.
10.13. CONSENT TO JURISIDICTION; WAIVERS. Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of
the State of New York, New York County, and (b) the United States District Court
for the Southern District of New York, for the purposes of any Action (as
defined below) arising out of this Agreement, the Agreement of Merger or any
Related Agreement or any transaction contemplated hereby or thereby. Each of the
parties hereto agrees to commence any Action relating hereto either in the
United States District Court for the Southern District of New York or if such
Action may not be brought in such court for jurisdictional reasons, in the
Supreme Court of the State of New York, New York County. Each of the parties
hereto further agrees that service of any process, summons, notice or document
by U.S. registered mail to such party's respective address set forth in Section
10.5 shall be effective service of process for any Action in New York with
respect to any matters to which it has submitted to jurisdiction in this Section
10.13. Each of the parties hereto irrevocably and unconditionally waives any
objection to the laying of venue of any Action arising out of this
48
Agreement, the Agreement of Merger or any Related Agreement or any transaction
contemplated hereby or thereby in (i) the Supreme Court of the State of New
York, New York County, or (ii) the United States District Court for the Southern
District of New York, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such Action brought
in any such court has been brought in an inconvenient forum. For purposes of
this Agreement, "Action" means any claim, action, suit or arbitration, or any
other proceeding, in each instance by or before any Governmental Authority or
any nongovernmental arbitration, mediation or other nonjudicial dispute
resolution body.
10.14. WAIVER OF JURY TRIAL. Each of the parties hereto irrevocably and
unconditionally waives trial by jury in any Action relating to this Agreement,
the Related Agreements, the Agreement of Merger or any transaction contemplated
hereby or thereby, and for any counterclaim with respect thereto.
10.15. ATTORNEYS' FEES; DISPUTES. If any party to this Agreement or any
of the agreements contemplated hereby brings an Action against another party
hereto or thereto, the prevailing party shall be entitled to reasonable
attorneys' fees and costs incurred in such Action.
49
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement and Plan of Reorganization to be executed on its behalf as of the day
and year first above written.
IVILLAGE INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President and
Assistant Secretary
CODE STONE ACQUISITION CORPORATION
By: /s/ Xxxxxxx Xxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President
CODE STONE TECHNOLOGIES, INC.
By: /s/ Xxxxx Xxxx
-----------------------------------
Name: Xxxxx Xxxx
Title: President
STOCKHOLDER:
/s/ Xxxxx Xxxx
-------------------------------------
Xxxxx Xxxx
[SIGNATURE PAGE TO CODE STONE AGREEMENT AND
PLAN OF REORGANIZATION]
