EXHIBIT 2.3
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AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JANUARY 8, 1999
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TABLE OF CONTENTS
Page
SECTION 1 THE MERGER 1
1.1 Merger; Effective Time................................................. 1
1.2 Closing................................................................ 1
1.3 Effects of the Merger.................................................. 2
1.4 Articles of Incorporation; Bylaws; Directors; Officers................. 2
1.5 Tax-Free Reorganization................................................ 2
SECTION 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES..................... 2
2.1 Effect on Capital Stock................................................ 2
2.2 Exchange of Certificates............................................... 6
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................... 8
3.1 Organization, Standing and Corporate Power............................. 8
3.2 Company Capital Structure.............................................. 8
3.3 Subsidiaries........................................................... 9
3.4 Authority/Noncontravention............................................. 9
3.5 Financial Statements; No Undisclosed Liabilities....................... 11
3.6 Absence of Certain Changes or Events................................... 11
3.7 Litigation............................................................. 12
3.8 Contracts.............................................................. 12
3.9 Compliance With Laws................................................... 12
3.10 Absence of Changes in Benefit Plans; Employment Agreements; Labor
Relations.............................................................. 12
3.11 ERISA Compliance....................................................... 14
3.12 Taxes 14
3.13 No Excess Parachute Payments........................................... 15
3.14 Title to Properties.................................................... 15
3.15 Intellectual Property.................................................. 16
3.16 Year 2000 Compliance................................................... 17
3.17 Voting Requirements.................................................... 17
3.18 Payments............................................................... 17
3.19 Transactions with Related Parties...................................... 18
3.20 Restrictions on Business Activities.................................... 18
3.21 Accounts Receivable; Inventory......................................... 18
3.22 Minute Books........................................................... 19
3.23 Environmental Matters.................................................. 19
3.24 Insurance.............................................................. 20
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3.25 Warranties; Indemnities................................................ 20
3.26 Representations Complete............................................... 20
SECTION 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB....................... 20
4.1 Organization, Standing and Corporate Power............................. 21
4.2 Authority/Noncontravention............................................. 21
4.3 SEC Documents; Parent Financial Statements............................. 22
4.4 Parent Common Stock.................................................... 22
SECTION 5 COVENANTS.............................................................. 22
5.1 Conduct of Business of the Company..................................... 22
5.2 No Solicitation........................................................ 24
5.3 Shareholder Approval................................................... 25
5.4 Access to Information.................................................. 25
5.5 Confidentiality........................................................ 26
5.6 Expenses............................................................... 26
5.7 Public Disclosure...................................................... 26
5.8 Consents............................................................... 26
5.9 FIRPTA Compliance...................................................... 26
5.10 Reasonable Efforts..................................................... 27
5.11 Notification of Certain Matters........................................ 27
5.12 Blue Sky Laws.......................................................... 27
5.13 Noncompetition and Employment Agreements............................... 27
5.14 Investment Representation Agreements................................... 27
5.15 Appointment............................................................ 28
5.16 Stock Options.......................................................... 28
SECTION 6 CONDITIONS TO THE MERGER............................................... 28
6.1 Conditions to Obligations of Each Party to Effect the Merger........... 28
6.2 Additional Conditions to the Obligations of Parent and Sub............. 29
6.3 Additional Conditions to Obligations of Company........................ 30
SECTION 7 INDEMNIFICATION........................................................ 31
7.1 General Indemnification................................................ 31
7.2 Limitation and Expiration.............................................. 32
7.3 Indemnification Procedures............................................. 32
7.4 Shareholders' Representative........................................... 36
7.5 Survival of Representations, Warranties and Covenants.................. 37
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SECTION 8 TERMINATION, AMENDMENT AND WAIVER...................................... 37
8.1 Termination............................................................ 37
8.2 Effect of Termination.................................................. 38
8.3 Amendment.............................................................. 38
8.4 Extension; Waiver...................................................... 38
8.5 Notice of Termination.................................................. 38
SECTION 9 MISCELLANEOUS.......................................................... 38
9.1 Notices................................................................ 38
9.2 Interpretation......................................................... 40
9.3 Counterparts........................................................... 41
9.4 Entire Agreement; Assignment........................................... 41
9.5 Severability........................................................... 41
9.6 Other Remedies......................................................... 41
9.7 Governing Law.......................................................... 41
9.8 Further Assurances..................................................... 41
9.9 Absence of Third Party Beneficiary Rights.............................. 42
9.10 Mutual Drafting........................................................ 42
9.11 Further Representations................................................ 42
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INDEX OF EXHIBITS
Exhibit A Agreement of Merger
Exhibit B Allocation of Employee Stock Options
Exhibit C Form of Noncompetition Agreement
Exhibit D Form of Investment Representation Agreement
Exhibit E Form of Legal Opinion of Counsel to the Company
Exhibit F Form of Registration Rights Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made and
entered into as of January 8, 1999 among Ticketmaster Online - CitySearch, Inc.,
a Delaware corporation ("PARENT"), Nero Acquisition Corporation, a California
corporation and a wholly-owned subsidiary of Parent ("Sub"), CityAuction, Inc.,
a California corporation (the "COMPANY"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇,
individuals and principal shareholders of the Company (the "PRINCIPAL
SHAREHOLDERS").
RECITAL
The Boards of Directors of each of the Company, Parent and Sub believe it
is in the best interests of each company and their respective shareholders that
the Company and Sub combine into a single company through the merger of Sub with
and into the Company (the "MERGER") pursuant to the terms of this Agreement and,
in furtherance thereof, have approved the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the parties agree
as follows:
SECTION 1
THE MERGER
1.1 MERGER; EFFECTIVE TIME. Subject to the terms and conditions of this
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Agreement and the Agreement of Merger attached as Exhibit A (the "MERGER
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AGREEMENT"), Sub will be merged into the Company (the "MERGER") in accordance
with the California Corporation Code (the "CALIFORNIA CODE"). The Merger
Agreement provides, among other things, the mode of effecting the Merger and the
manner and basis of converting each issued and outstanding share of capital
stock of the Company into shares of Class B common stock, $.01 par value, of
Parent ("PARENT COMMON STOCK").
Subject to the provisions of this Agreement and the Merger Agreement,
the Merger Agreement, together with required officers' certificates, shall be
filed in accordance with the California Code on the Closing Date (as defined in
Section 1.2). The Merger shall become effective upon confirmation of such
filing of the Merger Agreement and such officers' certificates (the date of
confirmation of such filing is referred to as the "EFFECTIVE DATE" and the time
of confirmation of such filing is referred to as the "EFFECTIVE TIME").
1.2 CLOSING. The closing of the Merger (the "CLOSING") will take place
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as soon as practicable on the first business day after satisfaction or waiver of
the latest to occur of the
conditions set forth in Section 6 (the "CLOSING DATE"), at the offices of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
unless a different date or place is agreed to in writing by the parties hereto.
1.3 EFFECTS OF THE MERGER. At the Effective Time, the separate existence
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of Sub shall cease and Sub shall be merged with and into the Company, and the
effects of the Merger shall be as provided in this Agreement, the Merger
Agreement and the applicable provisions of the California Code. The Company
after the Merger is sometimes referred to as the "SURVIVING CORPORATION."
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
the Company and Sub shall vest in the Surviving Corporation, and all debts,
liabilities, obligations and duties of the Company and Sub shall become the
debts, liabilities, obligations and duties of the Surviving Corporation.
1.4 ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS. At the
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Effective Time, (i) the Articles of Incorporation of the Company shall be the
Articles of Incorporation of the Surviving Corporation; (ii) the Bylaws of the
Company as in effect immediately prior to the Effective Time shall be the Bylaws
of the Surviving Corporation until altered, amended or repealed; (iii) the
directors of Sub shall be the initial directors of the Surviving Corporation and
will hold office from the Effective Time until their respective successors are
duly elected or appointed and qualified in the manner provided in the Articles
of Incorporation and Bylaws of the Surviving Corporation, as the same may be
amended from time to time or otherwise as provided by law; and (iv) the officers
of the Company shall be the initial officers of the Surviving Corporation.
1.5 TAX-FREE REORGANIZATION. The Merger is intended to be a
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reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE"). The parties have consulted with their own tax
advisors regarding the Merger.
SECTION 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of the
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Merger and without any action on the part of the holder of any shares of capital
stock of the Company:
(a) Capital Stock of Sub. Each issued and outstanding share of
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capital stock of Sub shall continue to be issued and outstanding and shall be
converted into one share of validly issued, fully paid and non-assessable Common
Stock of the Surviving Corporation. Each stock certificate of Sub evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
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(b) Cancellation of Certain Shares of Capital Stock of the Company.
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All shares of capital stock of the Company that are owned directly or indirectly
by the Company shall be canceled and no stock of Parent or other consideration
shall be delivered in exchange therefor.
(c) Conversion of Capital Stock of the Company. Subject to Sections
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2.1(d), (e), (f), (g) and (h) below, each issued and outstanding share of common
stock of the Company, .01 par value ("COMPANY COMMON STOCK") (other than shares
to be canceled pursuant to Section 2.1(b)), that are issued and outstanding
immediately prior to the Effective Time shall automatically be canceled and
extinguished and converted, without any action on the part of the holder
thereof, into the right to receive 0.28195 shares of Parent Common Stock. All
such shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to receive the shares
of Parent Common Stock to be issued or paid in consideration therefor upon the
surrender of such certificate in accordance with Section 2.2 of this Agreement.
The ratio pursuant to which each share of Company Common Stock will be exchanged
for shares of Parent Common Stock, determined in accordance with the foregoing
provisions, is referred to as the "EXCHANGE RATIO."
(d) Adjustment of Exchange Ratio. If, between the date of this
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Agreement and the Effective Time, the outstanding shares of Parent Common Stock
(or, subject to Section 5.1 below, Company Common Stock) shall have been changed
into a different number of shares or a different class by reason of any
reclassification, split-up, stock dividend, stock combination, then the Exchange
Ratio shall be correspondingly adjusted.
(e) Dissenters' Rights. Any shares of Company Common Stock held by a
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holder who has properly exercised dissenters' rights for such shares in
accordance with the California Code and who, as of the Effective Time, has not
effectively withdrawn or lost such dissenters' rights ("DISSENTING SHARES")
shall not be converted into Parent Common Stock but shall be converted into the
right to receive such consideration as may be determined to be due with respect
to such Dissenting Shares pursuant to the California Code. The Company shall
give Parent prompt notice of any demand received by the Company to require the
Company to purchase shares of Company Common Stock, and Parent shall have the
right to participate in all negotiations and proceedings with respect to such
demand. The Company agrees that, except with the prior written consent of
Parent, or as required under the California Code, it will not voluntarily make
any payment with respect to, or settle or offer to settle, any such purchase
demand. Each holder of Dissenting Shares (a "DISSENTING SHAREHOLDER") who,
pursuant to the provisions of the California Code, becomes entitled to payment
of the value of shares of Company Common Stock shall receive payment therefor
(but only after the value therefor shall have been agreed upon or finally
determined pursuant to such provisions). In the event of legal obligation,
after the Effective Time, to deliver shares of Parent Common Stock to any holder
of shares of Company Common Stock who shall have failed to make an effective
purchase demand or shall have lost its status as a
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Dissenting Shareholder, Parent shall issue and deliver, upon surrender by such
Dissenting Shareholder of such holder's certificate or certificates representing
shares of capital stock of the Company, the shares of Parent Common Stock to
which such Dissenting Shareholder is then entitled under this Section 2.1 and
the Merger Agreement.
(f) Fractional Shares. No fractional shares of Parent Common Stock
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shall be issued, but in lieu thereof each holder of shares of Company Common
Stock who would otherwise be entitled to receive a fraction of a share of Parent
Common Stock shall receive from Parent an amount of cash equal to the per share
market value of Parent Common Stock (based on the last sales price of Parent
Common Stock as reported on the Nasdaq National Market on the Effective Date)
multiplied by the fraction of a share of Parent Common Stock to which such
holder would otherwise be entitled. The fractional share interests of each
shareholder of the Company shall be aggregated, so that no Company shareholder
shall receive cash in an amount greater than the value of one full share of
Parent Common Stock.
(g) Maximum Merger Consideration. The maximum consideration to be
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paid by Parent (including Parent Common Stock to be reserved for issuance upon
exercise of the Company's options assumed by Parent pursuant to Section 5.16)
pursuant to the Merger shall be equal to (i) 800,000 shares of Parent Common
Stock (plus any additional shares of Parent Common Stock exchanged in the Merger
at the Exchange Ratio for shares of capital stock of the Company issued upon
exercise of the Warrant (as defined in section 3.2)) plus (ii) an additional
200,000 shares of Parent Common Stock to be reserved for issuance upon exercise
of options to purchase Parent Common Stock to be granted to the employees of
CityAuction as set forth in Section 2.1 (i)(b) below. No adjustment shall be
made in the aggregate consideration to be paid in the Merger as a result of any
cash proceeds received by the Company from the date of this Agreement to the
Closing Date pursuant to the exercise of currently outstanding options to
acquire Company Common Stock.
(h) Pledged Shares.
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(i) As collateral security for the payment of any
indemnification obligations of the shareholders of the Company (the
"SHAREHOLDERS") pursuant to Section 7 of this Agreement, at the Closing the
Company shall, and by execution hereof does hereby, transfer, pledge and assign
to Parent, for the benefit of Parent, a security interest in the following
assets:
(A) 75,000 shares of Parent Common Stock issuable by
Parent in the Merger pursuant to Section 2.1 (the "PLEDGED SHARES"), as well as
the certificates and instruments representing or evidencing the Pledged Shares,
and all non-cash dividends and other property at any time received or otherwise
distributed in respect of or in exchange or substitution for any or all of the
Pledged Shares; and in the event the Company or any Shareholder receives any
such property, the Company and such Shareholder shall immediately deliver such
property to Parent as part of the Pledged Shares; and
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(B) all rights, titles, interests, privileges and
preferences appertaining or incident to the foregoing property, except as
provided for in Section 1.2(h)(iii).
The Pledged Shares shall be withheld from the shareholders
in relation to the prorated percentage of shares of Company Common Stock
issuable to such shareholders in the Merger as set forth in Section 2.1 (c).
(ii) Each certificate evidencing the Pledged Shares issued in
the names of the Shareholders in the Merger, shall, at the Closing, be delivered
to Parent, together with an undated stock power duly signed in blank by each
such Shareholder, such certificate bearing no restrictive or cautionary legend
other than those imprinted by the Transfer Agent at Parent's request.
(iii) The Shareholders shall be entitled to exercise any voting
powers incident to the Pledged Shares until such time, if ever, that they are
demanded to be transferred to Parent to satisfy the indemnification obligations
of the Shareholders pursuant to Section 7 hereof.
(i) Stock Options.
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(i) At the Effective Time, all Company Stock Options (as
defined in Section 3.2) then outstanding shall be assumed by Parent in
accordance with Section 5.16 below.
(ii) At the Effective Time, Parent shall grant to the
CityAuction employees stock options under the Parent's 1998 Stock Option Plan
exercisable for an aggregate of 200,000 shares of Parent Common Stock (the
"EMPLOYEE STOCK OPTIONS"). The exercise price for such option shall be equal to
$53.25 per share. The allocation of such options to employees shall be as set
forth on Exhibit B. The Employee Stock Options shall be subject to the following
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vesting provisions:
(A) Employee Stock Options to purchase an aggregate of
100,000 shares shall vest over a four year period as follows: 1/48 per month;
provided, however, that no shares shall be exercisable until the first
anniversary of the optionee's employment with the Company.
(B) Employee Stock Options to purchase an aggregate of
100,000 shares shall also vest over a four year period in accordance with the
vesting provisions set forth in subsection (i) above. Such stock options shall
be subject to acceleration in accordance with the following terms:
(1) In the event that aggregate revenues (i.e.
winning bids multiplied by units won whether or not such sales actually occur)
in auctions completed on the Company's web site (the "CITYAUCTION REVENUE")
during the one year period ending on the first anniversary of this Agreement
exceeds $12.0 million (the "YEAR 1 AUCTION TARGET AMOUNT"),
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then a total of 37,500 options shall be vested as of the first anniversary date
(which total shall include the options which shall otherwise have vested during
such year) and 37,500 options shall vest ratably on a monthly basis for the
twelve months following the first anniversary date (which total shall include
the options which shall otherwise have vested during such year);
(2) In the event that CityAuction Revenue during the
one year period ending on the first anniversary of this Agreement is between 70%
and 99.9% (the "YEAR 1 ACTUAL PERCENTAGE") of the Year 1 Auction Target Amount,
then the total number of options which shall be vested as of such first
anniversary date shall equal 25,000 options plus the Year 1 Actual Percentage
multiplied by 12,500 options (which total shall include the options which
otherwise shall have vested during such year) and 25,000 options plus the Year 1
Actual Percentage multiplied by 12,500 which shall vest ratably on a monthly
basis for the twelve months following such date (which total shall include the
options which shall otherwise have vested during such year);
(3) In the event that CityAuction Revenue during the
one year period ending on the second anniversary of this Agreement exceeds $30.0
million (the "YEAR 2 AUCTION TARGET AMOUNT"), then all remaining unvested
options shall vest as of such second anniversary date; and
(4) In the event that CityAuction Revenue during the
one year period ending on the second anniversary of the Agreement is between 70%
and 99.9% (the "YEAR 2 ANNUAL PERCENTAGE") of the Year 2 Auction Target Amount,
then the number of remaining unvested options multiplied by the Year 2 Annual
Percentage shall vest as of the second anniversary date, and the remainder shall
vest ratably over the next two years.
In the event that there is a material and fundamental change in the
business condition and structure of the Parent (either through an extraordinary
merger, acquisition or similar event involving the Parent which the parties
agree is beyond the scope of what is reasonably contemplated presently as part
of the Parent's growth strategy) prior to the second anniversary of this
Agreement, the parties agree that they shall discuss in good faith whether the
performance criteria set forth in this Section 2.1 (i)(ii)(B) for the
acceleration of the stock options referenced thereunder should be modified in
recognition of such fundamental change in Parent.
(j) ▇▇▇▇▇▇ Shares. Fifty percent (50%) shares of Parent Common
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Stock received in the Merger pursuant to Section 2.1(c) by ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall
be subject to vesting over a two year period following the Closing on a pro rata
monthly basis.
2.2 EXCHANGE OF CERTIFICATES.
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(a) Exchange Agent. Prior to the Effective Time, Parent shall
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designate a bank or trust company, reasonably acceptable to the Company, to act
as exchange agent (the "EXCHANGE AGENT") in the Merger.
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(b) Parent to Provide Common Stock. Promptly after the Effective
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Time, Parent shall deliver to the Exchange Agent in accordance with this Section
2 and the Merger Agreement, the shares of Parent Common Stock issuable pursuant
to Section 2.1 and the Merger Agreement in exchange for outstanding shares of
capital stock of the Company, and cash in an amount sufficient for payment in
lieu of fractional shares pursuant to Section 2.1(f).
(c) Exchange Procedures. As soon as practicable after the Effective
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Time, the Surviving Corporation shall cause to be mailed to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock (the "Certificates")
whose shares are being converted into Parent Common Stock pursuant to Section
2.1 and the Merger Agreement, (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor the number of shares of Parent Common Stock to which the
holder of Company Common Stock is entitled pursuant to Section 2.1. The
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock which is not registered on the
transfer records of the Company, the appropriate number of shares of Parent
Common Stock may be delivered to a transferee if the Certificate representing
such capital stock of the Company is presented to the Exchange Agent and
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent the right to receive
upon such surrender the number of shares of Parent Common Stock as provided by
this Section 2 and the provisions of the California Code.
(d) No Further Ownership Rights in Capital Stock of the Company. All
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Parent Common Stock delivered upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof shall be deemed to have
been delivered in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and following the Effective Time, the Certificates shall
have no further rights to, or ownership in, shares of capital stock of the
Company. There shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Section 2.
(e) Lost, Stolen or Destroyed Certificates. In the event any
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certificates evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, the
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Exchange Agent shall make payment in exchange for such lost, stolen or destroyed
certificates, upon the making of an affidavit of that fact by the holder
thereof, such shares of Parent Common Stock and cash for fractional shares, if
any, as may be required pursuant to Section 2.1(f); provided, however, that
Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent or the Exchange Agent with respect to the
certificates alleged to have been lost, stolen or destroyed.
(f) No Liability. Notwithstanding anything to the contrary in this
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Section 2.2, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of shares of Company Common Stock for any
amount paid to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(g) Dissenting Shares. The provisions of this Section 2.2 shall
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also apply to Dissenting Shares that lose their status as such, except that the
obligations of Parent under this Section 2.2 shall commence on the date of loss
of such status.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE PRINCIPAL SHAREHOLDER
Except as disclosed in writing in a disclosure letter referring
specifically to the representations and warranties in this Agreement that
specifically identifies the section and subsection to which such disclosure
relates and that is delivered to Parent by the Company and the Principal
Shareholders and certified by a duly authorized officer of the Company and the
Principal Shareholder prior to the date of this Agreement (the "COMPANY
SCHEDULES"), each of the Company and the Principal Shareholders represents and
warrants to Parent and Sub as set forth below.
3.1 ORGANIZATION, STANDING AND CORPORATE POWER. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization and has all requisite corporate power
and authority to carry on its business as now being conducted. The Company is
duly qualified to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary. The Company has
delivered to the Parent complete and correct copies of its Articles of
Incorporation and Bylaws.
3.2 COMPANY CAPITAL STRUCTURE.
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(a) The authorized capital stock of the Company consists (i) of
10,000,000 shares of Common Stock, of which 2,400,000 shares are issued and
outstanding and (ii) 1,015,000 shares
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of Preferred Stock, of which 415,000 shares, designated Series A Preferred
Stock, are outstanding. All of such outstanding shares have been duly
authorized, validly issued, fully paid and non-assessable and have been issued
in compliance with all applicable federal and state securities laws. The
outstanding shares of capital stock of the Company are not subject to preemptive
rights created by statute, the Articles of Incorporation or Bylaws of the
Company, or any agreement to which the Company is a party or by which it may be
bound. There are no voting agreements or voting trusts with respect to any of
the outstanding shares of capital stock of the Company. The outstanding shares
of capital stock of the Company are held by the persons and in the amounts set
forth in Section 3.2 of the Company Schedules.
(b) The Company has reserved 300,000 shares of Company Common Stock
for issuance to employees and consultants pursuant to the Company's 1998 Stock
Option Plan (the "COMPANY'S STOCK OPTION PLAN"), of which stock options to
purchase 22,394 shares of Company Common Stock have been granted to date (the
"COMPANY STOCK OPTIONS") and 277,606 shares remain available for future grant
under the plan. Section 3.2 (b) of the Company Schedules sets forth for each
outstanding Company Stock Options the name of the holder of such option, the
number of shares of Company Common Stock subject to such option, the exercise
price of such option and the vesting schedule for such option, including the
extent vested to date. The Company has reserved 600,000 shares of Series A
Preferred Stock issuable upon exercise of a warrant issued to Snap! LLC (the
"WARRANT"). Except for the Company Stock Options described in Section 3.2 (b)
of the Company Schedules and the Warrant, there are no options, warrants, calls,
rights, commitments or agreements of any character, written or oral, to which
the Company is a party or by which it is bound obligating the Company to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of the Company or
obligating the Company to grant, extend, accelerate the vesting of, change the
price of, otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. The Company's Stock Options and the Warrant have been
issued in compliance with all applicable federal and state securities laws. The
holders of Company Stock Options and the Warrant have been or will be given, or
shall have properly waived, any required notice prior to the Merger. As a
result of the Merger, Parent will be the record and beneficial owner of all
outstanding capital stock of the Company and, except for stock options granted
pursuant to the Company's Stock Option Plan and the Warrant, rights to acquire
capital stock of the Company.
3.3 SUBSIDIARIES. The Company does not have and has never had any
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subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of capital stock or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
3.4 AUTHORITY/NONCONTRAVENTION. The Company has the requisite corporate
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power and authority to execute and deliver this Agreement and, subject to the
approval and adoption of this Agreement and approval of the Merger by the
Company's shareholders, to consummate the transactions contemplated by this
Agreement. The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions
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contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby, subject, in each case, to the
approval and adoption of this Agreement and approval of the Merger by the
Company's shareholders. This Agreement has been duly executed and delivered by
the Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The execution and
delivery of this Agreement do not, and subject to the approval and adoption of
this Agreement and approval of the Merger by the Company's shareholders as
required in connection with this Agreement and the transactions contemplated by
this Agreement, the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
or require any consent, approval or authorization under, or result in the
creation of any pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "LIENS") in or upon
any of the properties or assets of the Company under, any provision of (a) the
Articles of Incorporation or Bylaws of the Company, (b) any loan or credit
agreement, bond, debenture, note, mortgage, indenture, lease or other material
contract, commitment, agreement, arrangement, obligation, undertaking,
instrument, permit, concession, franchise or license applicable to the Company
or its properties or assets (including, without limitation, any of the contracts
of the Company set forth in the Company Schedules) or (c) subject to the
governmental filings and other matters referred to in the following sentence,
any statute, law, ordinance, rule or regulation or judgment, order or decree, in
each case, applicable to the Company or its properties or assets, other than, in
the case of clauses (b) and (c), any such conflicts, violations, defaults,
rights, or Liens or other occurrences that individually or in the aggregate
would not have a Material Adverse Effect on the Company. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Federal, state or local, domestic or foreign, government or any court,
administrative agency or commission or other governmental authority or agency,
domestic or foreign (a "GOVERNMENTAL ENTITY"), is required by or with respect to
the Company in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the Merger or the other
transactions contemplated by this Agreement, except for (a) the receipt of a
valid exemption from the registration requirements of the Securities Act of
1933, as amended (the "SECURITIES ACT"), (b) the filing of the Agreement of
Merger with the California Secretary of State and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business and (c) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made individually or in the aggregate would not have a Material Adverse Effect
on the Company or impair the ability of the Company to perform its obligations
under this Agreement.
-10-
3.5 FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES.
------------------------------------------------
(a) The unaudited balance sheet (the "COMPANY BALANCE SHEET") of the
Company as of December 31, 1998 (the "BALANCE SHEET DATE") and the related
profit and loss statement for the year then ended (the "COMPANY FINANCIAL
STATEMENTS") are in accordance with the books and records of the Company and are
complete and correct in all material respects, have each been prepared in
accordance with GAAP in conformity with the practices consistently applied by
the Company throughout the periods involved and present fairly the financial
position, results of operations and cash flows of the Company as of the dates
and for the periods specified. True and complete copies of the Company
Financial Statements have previously been supplied to the Parent.
(b) As of the Balance Sheet Date, the Company did not have any
indebtedness, obligations or liabilities of any kind (whether accrued, absolute,
contingent or otherwise, and whether due or to become due or asserted or
unasserted), which were not fully reflected in, reserved against or otherwise
described in the Company Balance Sheet that would be required to be disclosed on
a balance sheet prepared as of the Balance Sheet Date in conformity with GAAP
applied on a basis consistent with the Company Financial Statements. Since the
Balance Sheet Date, the Company has not incurred any indebtedness, obligations
or liabilities of any kind (whether accrued, absolute, contingent or otherwise,
and whether due or to become due or asserted or unasserted) that would be
required to be disclosed on a balance sheet prepared as of the date hereof in
conformity with GAAP applied on a basis consistent with the Company Financial
Statements, other than those incurred in the ordinary course of business
consistent with past practice, none of which would have a Material Adverse
Effect on the Company.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in Section
------------------------------------
3.6 of the Company Schedules, since the Balance Sheet Date and until the date
hereof, the Company has conducted its businesses only in the ordinary course
consistent with past practice, and there has not been (a) any Material Adverse
Effect with respect to the Company, (b) any declaration, setting aside or
payment of any dividend on, or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital stock, (c) any split,
combination, reclassification or repurchase of any of the Company's capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of the
Company's capital stock, (d) (i) any granting by the Company to any officer of
the Company of any increase in compensation, except in the ordinary course of
business consistent with past practice or as required under employment
agreements in effect as of the date hereof, (ii) any granting by the Company to
any officer of the Company of any increase in severance or termination pay,
except as was required under any employment, severance or termination agreement
in effect as of the date hereof, or (iii) any entry by the Company into (A) any
currently effective employment, severance, termination or indemnification
agreement, or consulting agreement (other than in the ordinary course of
business consistent with past practice), with any current or former officer,
director, employee or consultant or (B) any agreement with any current or former
officer, director, employee or consultant the benefits of which are contingent,
or the
-11-
terms of which are materially altered, upon the occurrence of a transaction
involving the Company of the nature contemplated by this Agreement, (e) any
damage, destruction or loss, whether or not covered by insurance, that
individually or in the aggregate would have a Material Adverse Effect on the
Company, (f) any change in accounting methods, principles or practices by the
Company, except insofar as may have been required by a change in GAAP or (g) any
tax election that individually or in the aggregate would have a Material Adverse
Effect on the Company.
3.7 LITIGATION. There is no suit, claim, action, proceeding or, to the
----------
knowledge of the Company, investigation, pending or, to the knowledge of the
Company, threatened, against or affecting the Company, nor is there any
judgment, order, decree or injunction of any Governmental Entity or arbitrator
outstanding against, or, to the knowledge of the Company, investigation by any
Governmental Entity involving, the Company.
3.8 CONTRACTS. Except as set forth in Section 3.8 of the Company
---------
Schedules, as of the date hereof, the Company is not a party to, nor are any of
their properties or assets bound by, any currently binding (i) contracts,
licenses or agreements, with respect to any intellectual property with a value
or cost in excess of $50,000, (ii) any employment or consulting agreement or
contract (or commitment to enter into any such agreement or contract) with an
employee or individual consultant or salesperson or consulting or sales
agreement or contract (or commitment to enter into any such agreement or
contract) with a firm or other organization in excess of $50,000 annually, (iii)
any agreement or plan, including, without limitation, any stock option plan,
stock appreciation rights plan or stock purchase plan, any of the benefits of
which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement, (iv) any
fidelity or surety bond or completion bond, (v) any lease of personal property
having a value individually in excess of $50,000, (vi) any agreement of
indemnification, agreement providing for reimbursement of payments or providing
a right of rescission, hold harmless or guaranty, or any obligation or liability
with respect to infringement of the intellectual property rights of another
person, in excess of, or entered into in connection with a transaction in excess
of, $50,000, (vii) any agreement, contract or commitment containing any covenant
limiting the freedom of such party, any of its subsidiaries or the Surviving
Corporation to engage in any line of business or to compete with any person,
(viii) any agreement, contract or commitment relating to capital expenditures
and involving future payments by such party or any of its subsidiaries in excess
of $50,000 in one or in a series of transactions, (ix) any agreement, contract
or commitment relating to the disposition or acquisition of assets or any
interest in any business enterprise outside the ordinary course of business, (x)
any mortgages, indentures, loans or credit agreements, security agreements or
other agreements or instruments relating to the borrowing of money or extension
of credit, (xi) any purchase order or contract for the purchase of materials
involving in excess of $50,000, (xii) any construction contracts, (xiii)
contracts that relate to corporate governance, the voting or transfer of any
equity securities of such party, the registration of any securities of such
party under the Securities Act or that grants any redemption or preemptive
rights or (xiv) any other agreement, contract or commitment that involves
$50,000 or more or is not cancelable without penalty within thirty (30) days
(collectively,
-12-
the "CONTRACTS"). The Company has delivered or otherwise made available to
Parent true, correct and complete copies of the Contracts listed in Section 3.8
of the Company Schedules, together with all amendments, modifications and
supplements thereto and all side letters to which the Company is a party
affecting the obligations of any party thereunder. The Company is not in
violation of or in default (with or without notice or lapse of time, or both)
under any lease, permit, concession, franchise, license or any other Contract,
commitment, agreement, arrangement, obligation or understanding to which it is a
party or by which it or any of its properties or assets is bound. As of the
Closing, after giving effect to the Merger and the transactions contemplated
hereby, the Surviving Corporation, shall be entitled to all of the benefits
under the agreements (as the same may be amended) set forth on Section 3.8 of
the Company Schedules to which the Company is entitled on the date hereof,
except as may be adversely affected by agreements (as the same may be amended)
to which Parent is a party on the date hereof.
3.9 COMPLIANCE WITH LAWS. The Company is in compliance with all
--------------------
statutes, laws, ordinances, rules, regulations, judgments, orders and decrees of
any Governmental Entity applicable to its business or operations, except for
instances of possible noncompliance that individually or in the aggregate would
not have a Material Adverse Effect on the Company, impair in any material
respect the ability of the Company to perform its obligations under this
Agreement or prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement. The Company has in effect all
Federal, state and local, domestic and foreign, governmental consents,
approvals, orders, authorizations, certificates, filings, notices, permits,
franchises, licenses and rights (collectively "PERMITS") necessary for it to
own, lease or operate its properties and assets and to carry on its business as
now conducted and there has occurred no violation of, or default under, any such
Permit, except for the lack of Permits and for violations of, or defaults under,
Permits which lack, violation or default individually or in the aggregate would
not have a Material Adverse Effect on the Company.
3.10 ABSENCE OF CHANGES IN BENEFIT PLANS; EMPLOYMENT AGREEMENTS; LABOR
-----------------------------------------------------------------
RELATIONS. Since the Balance Sheet Date and until the date hereof, there has
---------
not been any termination, adoption, amendment or agreement to amend in any
material respect by the Company any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
appreciation, restricted stock, stock option, phantom stock, performance,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical or other material plan, arrangement or understanding providing benefits
to any current or former officer, director or employee of such party or any of
its subsidiaries (collectively, "BENEFIT PLANS"). Except as set forth in
Section 3.10 of the Company Schedules, as of the date hereof there exist no
currently binding employment, severance or termination agreements or consulting
agreements between the Company and any current or former officer of the Company.
There are no collective bargaining or other labor union agreements to which the
Company is a party or by which it is bound. The Company has not encountered any
labor union organizing activity, nor had any actual or threatened employee
strikes, work stoppages, slowdowns or lockouts.
-13-
3.11 ERISA COMPLIANCE.
----------------
(a) Section 3.11(a) of the Company Schedules contains a list of all
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "PENSION PLANS"), "employee welfare benefit plans" (as
defined in Section 3(l) of ERISA) and all other Benefit Plans maintained or
contributed to by the Company or any person or entity that, together with the
Company, is treated as a single employer under Section 414(b), (c), (m) or (o)
of the Code (a "COMMONLY CONTROLLED ENTITY") for the benefit of any current or
former officers, directors or employees of the Company. The Company has made
available to Parent true, complete and correct copies of (i) each Benefit Plan
(or, in the case of any unwritten Benefit Plans, descriptions thereof), (ii) the
most recent annual report on Form 5500 required to be filed with the Internal
Revenue Service (the "IRS") with respect to each Benefit Plan (if any such
report was required), (iii) the most recent summary plan description for each
Benefit Plan for which such summary plan description is required and (iv) each
trust agreement and group annuity contract relating to any Benefit Plan. Each
Benefit Plan has been administered in accordance with its terms, except where
the failure to so administer would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. The Company and all the Benefit Plans
are all in compliance with applicable provisions of ERISA and the Code, except
for instances of possible noncompliance that would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(b) Each of the Pension Plans has been the subject of a
determination letter (or its equivalent) from the IRS to the effect that such
Pension Plan is qualified and exempt from United States Federal income taxes
under Sections 401(a) and 501(a), respectively, of the Code, and no such
determination letter (or its equivalent) has been revoked nor has any event
occurred since the date of its most recent determination letter (or its
equivalent) or application therefor that would adversely affect its
qualification or materially increase its costs.
(c) Neither the Company nor any Commonly Controlled Entity of the
Company has maintained, contributed to or been obligated to contribute to any
Benefit Plan that is subject to Title IV of ERISA.
(d) No officer or employee of the Company will be entitled to any
additional compensation or benefits or any acceleration of the time of payment
or vesting of any compensation or benefits under any Benefit Plan as a result of
the transactions contemplated by this Agreement or any benefits under any
Benefits Plan the value of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
3.12 TAXES. The Company has filed all material tax returns and reports
-----
required to be filed by it and all such returns and reports were true and
correct in all material respects. All taxes that accrue or are payable by the
Company in respect of taxable periods that end on or before the Closing Date and
for any taxable period that begins before the Closing Date and ends thereafter
to the extent such taxes are attributable to the portion of such period ending
on the Closing Date, as
-14-
determined under the closing of the books method of allocation, have been (or
will have been, on or before the Closing Date) timely paid or an adequate
reserve has been established on the Company Balance Sheet. The most recent
financial statements, dated December 31, 1998, (a true, correct complete copy of
which has been delivered to the Parent by the Company) reflect an adequate
reserve for all taxes payable by the Company for all taxable periods and
portions thereof through the date of such financial statements and no
liabilities for taxes have been incurred since the date of such financial
statements except in the ordinary course of business. No deficiencies for any
taxes have been proposed, asserted or assessed against the Company, and no
requests for waivers of the time to assess any such taxes are pending. As used
in this Agreement, "TAXES" shall include all Federal, state, local and foreign
income, property, sales, excise and other taxes, tariffs or governmental charges
of any nature whatsoever, together with an interest and penalties, whether as
primary obligor or as a result of being a "transferor" (within the meaning of
section 6901 of the Code and any corresponding state and local law) of another
person or a member of an affiliated, consolidated or combined group.
3.13 NO EXCESS PARACHUTE PAYMENTS. No amount that could be received
----------------------------
(whether in cash or property or the vesting of property) in connection with any
of the transactions contemplated by this Agreement by any employee, officer or
director of the Company who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or Benefit
Plan currently in effect would be an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code). No such person is entitled to
receive any additional payment from the Company, the Surviving Corporation or
any other person (a "PARACHUTE GROSS-UP PAYMENT") in the event that the excise
tax of Section 4999(a) of the Code is imposed on such person. The Board of
Directors of the Company has not granted to any officer, director or employee of
the Company any right to receive any Parachute Gross-Up Payment.
3.14 TITLE TO PROPERTIES.
-------------------
(a) The Company has good and marketable title to, or valid leasehold
interests in, all of its properties and assets except for such as are no longer
used or useful in the conduct of its business or as have been disposed of in the
ordinary course of business and except for defects in title, easements,
restrictive covenants and similar encumbrances that individually or in the
aggregate would not have a Material Adverse Effect on the Company. All such
material assets and properties, other than assets and properties in which the
Company has a leasehold interest, are free and clear of all Liens (other than
Liens for current taxes not yet due and payable), except for Liens that
individually or in the aggregate would not have a Material Adverse Effect on the
Company.
(b) The Company has complied in all material respects with the terms
of all leases to which it is a party and under which it is in occupancy, all
such leases are in full force and
-15-
effect and have been made available to the Parent. The Company enjoys peaceful
and undisturbed possession under all such leases.
3.15 INTELLECTUAL PROPERTY.
---------------------
(a) The Company owns, or has the right to use, sell or license all
intellectual property necessary or required for the conduct of its business as
presently conducted and as presently contemplated (such intellectual property
and the rights thereto are collectively referred to as the "COMPANY IP RIGHTS").
(b) Section 3.15 of the Company Schedules sets forth with respect to
the intellectual property of the Company: (i) for each patent and patent
application, the number, normal expiration date, title and priority information
for each country in which such patent has been issued, or, the application
number, date of filing, title and priority information for each country, (ii)
for each trademark, trade name or service ▇▇▇▇, whether or not registered, the
date first used, and, if registered, the application serial number or
registration number, the class of goods covered, the nature of the goods or
services, the countries in which the names or ▇▇▇▇ is used and the expiration
date for each country in which a trademark has been registered and (iii) for
each copyright for which registration has been sought, whether or not
registered, the date of creation and first publication of the work, the number
and date of registration for each country in which a copyright application has
been registered.
(c) The Company has taken all reasonable steps necessary or
appropriate (including, entering into appropriate confidentiality, nondisclosure
agreements with officers, directors, subcontractors, independent contractors,
full-time and part-time employees, licensees and customers) to safeguard and
maintain the secrecy and confidentiality of, and the proprietary rights in, the
Company IP Rights.
(d) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any Company IP Right (the
"COMPANY IP RIGHTS AGREEMENTS"), will not cause the forfeiture or termination or
give rise to a right of forfeiture or termination of any Company IP Right or
impair the right of the Company, the Surviving Corporation or the Parent to use,
sell or license any Company IP Right or portion thereof.
(e) (i) Neither the manufacture, marketing, license, sale or
intended use of any product or technology currently licensed or sold by the
Company violates any license or agreement between the Company and any third
party or infringes any proprietary right of any other party; and (ii) there is
no pending or, to the knowledge of the Company, threatened claim or litigation
contesting the validity, ownership or right to use, sell, license or dispose of
any Company IP Right or operate the Company's Web service.
-16-
3.16 YEAR 2000 COMPLIANCE.
--------------------
(a) All of the current or past products and services offered by the
Company, including each item of hardware, software, or firmware, any system,
equipment, or products consisting of or containing one or more thereof, any and
all enhancements, upgrades, customizations, modifications, maintenance and the
like are Year 2000 Compliant (as defined below). The Company is not subject to
any pending or threatened claim, regulatory action, processing or investigation
concerning the Year 2000 Compliance of its respective products, services or
operations, and, to the best of the Company's knowledge, there is no basis for
any such claim, regulatory action, investigation or proceeding. To the Best of
the Company's knowledge, all of the internal management information systems
(including hardware, firmware, operating system software, utilities, and
applications software) and all facilities and systems used in the ordinary
course of business by or on behalf of the Company, including payroll,
accounting, billing/receivables, customer service, human resources, and e-mail
systems used by the Company, are Year 2000 Compliant. To the best of the
Company's knowledge, all vendors of products or services to the Company, and its
respective products, services and operations, are Year 2000 Compliant, and each
such vendor will continue to furnish its products or services to the Company,
without interruption or material delay, on and after January 1, 2000.
(b) For purposes of this Agreement, "Year 2000 Compliant" means that
(i) the products, services, or other items (s) at issue accurately process,
provide and/or receive all date/time data (including calculating, comparing, and
sequencing) within, from, into, and between centuries (including the twentieth
and twenty-first centuries and the years 1999 and 2000), including leap year
calculations, and (ii) neither the performance nor the functionality nor the
Company's provision of the products, services, and other item (s) at issue will
be affected by any dates/times prior to, on, after, or spanning January 1, 2000.
The design of the products, services, and other item (s) at issue includes
proper date/time data century recognition and recognition of 1999 and 2000,
calculations that accommodate single century and multi-century formulae and
date/time values before, on, after spanning January 1, 2000, and date/time data
interface values that reflect the century, 1999, and 2000.
3.17 VOTING REQUIREMENTS. The affirmative vote of the holders of a
-------------------
majority of the outstanding shares of Company Common Stock and of a majority of
the outstanding Company Preferred Stock, voting as separate classes, are the
only votes of the holders of any capital stock of the Company necessary to
approve and adopt this Agreement and approve the Merger.
3.18 PAYMENTS. Neither the Company nor any of its representatives acting
--------
on its behalf have, directly or indirectly, paid or delivered any fee,
commission or other sum of money or property, however characterized, to any
finder, agent, government official or other party, in the U.S. or any other
country which the Company knows or has reason to believe to have been illegal
under any federal, state or local laws of the U.S. or any other country having
jurisdiction. Neither the Company nor any of its representatives acting on its
behalf, have accepted or received any unlawful contributions, payments, gifts or
expenditures.
-17-
3.19 TRANSACTIONS WITH RELATED PARTIES. Except for compensation
---------------------------------
arrangements in the ordinary course of business, as disclosed on Section 3.18 of
the Company Schedules or for amounts less than $10,000, no Related Party (as
defined below) of the Company has (a) borrowed or loaned money or other property
to the Company which has not been repaid or returned, (b) any currently
enforceable contractual or other claims, express or implied, of any kind
whatsoever against the Company or (c) has or had any material economic interest
in any property currently used by the Company or any subsidiary thereof. For
purposes of this Agreement, (I) "RELATED PARTY" means as to any person, any of
such person's officers and directors, any Affiliate thereof or the respective
officers and directors of any such Affiliate, or any other person in which any
of the foregoing persons have any direct or material indirect interest, (ii)
"AFFILIATE" of a person means any other person which directly or indirectly
controls, is controlled by, or is under common control with, such person and
(iii) "CONTROL" (including, with correlative meaning, the terms "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH"), as used with respect to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of voting securities, by contract or otherwise.
3.20 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
-----------------------------------
(noncompete, grant of exclusivity or otherwise), commitment, judgment,
injunction, order or decree to which the Company is a party or otherwise binding
upon the Company which has or reasonably could be expected to have the effect of
prohibiting or impairing any business practice of the Company, any acquisition
of property (tangible or intangible) by the Company or the conduct of business
by the Company.
3.21 ACCOUNTS RECEIVABLE; INVENTORY.
------------------------------
(a) The Company has made available to Parent a list of all accounts
receivable of the Company reflected on the Balance Sheet ("ACCOUNTS RECEIVABLE")
along with a range of days elapsed since invoice.
(b) All Accounts Receivable of the Company are collectible except to
the extent of reserves therefor set forth in the Balance Sheet. No person has
any Lien on any of such Accounts Receivable and no request or agreement for
deduction or discount has been made with respect to any of such Accounts
Receivable.
(c) All of the inventories of the Company reflected on the Balance
Sheet and the Company's books and records on the date of this Agreement were
purchased, acquired or produced in the ordinary and regular course of business
and in a manner consistent with the Company's regular inventory practices and
are set forth on the Company's books and records in accordance with the
practices and principles of the Company consistent with the method of treating
said items in prior periods.
-18-
3.22 MINUTE BOOKS. The minute books of the Company made available to
------------
counsel for Parent are the only minute books of the Company and contain an
accurate summary of all meetings of directors (or committees thereof) and
shareholders or actions by written consent since the date of incorporation of
the Company.
3.23 ENVIRONMENTAL MATTERS.
---------------------
(a) Except as set forth in Section 3.22 of the Company Schedules, to
the knowledge of the Company, no underground storage tanks and no amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state, local or other applicable law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all substances
listed as hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or defined as a
hazardous waste pursuant to the United States Resource Conservation and Recovery
Act of 1976, as amended, and the regulations promulgated pursuant to said laws,
but excluding office and janitorial supplies properly and safely maintained (a
"HAZARDOUS MATERIAL"), are present in, on or under any property, including the
land and the improvements, ground water and surface water thereof, that the
Company has at any time owned, operated, occupied or leased.
(b) To the knowledge of the Company, the Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has the Company disposed of, transported, sold,
or manufactured any product containing a Hazardous Material (collectively,
"COMPANY HAZARDOUS MATERIALS ACTIVITIES") in violation of any rule, regulation,
treaty or statute promulgated by any Governmental Entity in effect prior to or
as of the date hereof to prohibit, regulate or control Hazardous Materials or
any Hazardous Material Activity.
(c) To the knowledge of the Company, the Company currently holds all
environmental approvals, permits, licenses, clearances and consents (the
"ENVIRONMENTAL PERMITS") necessary for the conduct of the Company's Hazardous
Material Activities and other business of the Company as such activities and
business are currently being conducted other than any Environmental Permits, the
lack of which would not, individually or in the aggregate, have a Material
Adverse Effect. All Environmental Permits are in full force and effect. The
Company (A) is in compliance with all material terms and conditions of the
Environmental Permits and (B) is in compliance in all material respects with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the laws of all
Governmental Entities relating to pollution or protection of the environment or
contained in any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder.
(d) No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending, or to the Company's knowledge,
threatened, concerning any
-19-
Environmental Permit, Hazardous Material or any Company Hazardous Materials
Activity. The Company is not aware of any fact or circumstance which could
involve the Company in any environmental litigation or impose upon the Company
any material environmental liability.
3.24 INSURANCE. Section 3.23 of the Company Schedules lists all insurance
---------
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company. There
is no claim by the Company pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such policies
and bonds have been paid and the Company is otherwise in material compliance
with the terms of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). The Company has not received any
notice that the insurers intend to terminate or materially increase the premiums
payable under any of such policies.
3.25 WARRANTIES; INDEMNITIES. Section 3.24 of the Company Schedules sets
-----------------------
forth a list of all agreements containing warranties and indemnities relating to
products sold or services rendered by the Company, and no warranty or indemnity
has been given by the Company which differs therefrom in any material respect.
Section 3.24 of the Company Schedules also indicates all warranty and indemnity
claims in excess of $5,000 made against the Company.
3.26 REPRESENTATIONS COMPLETE. None of the representations or warranties
------------------------
made by the Company, nor any document, written information, statement, financial
statement, certificate, schedule or exhibit prepared or furnished by the Company
or its representatives pursuant to this Agreement or in connection with the
transactions contemplated hereby, or furnished in or in connection with the
Shareholder Materials (or defined in Section 5.3) mailed or delivered to the
shareholders of the Company in connection with soliciting their consent to this
Agreement and the transactions contemplated hereby, contains or will contain at
the Effective Time, any untrue statement of a material fact, or omits or will
omit at the Effective Time to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading. To the Company's knowledge, there is no
event, fact or condition that has resulted in, or could reasonably be expected
to result in, a Material Adverse Effect that has not been set forth in this
Agreement or in the Company Schedules.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Except as disclosed in writing in a disclosure letter referring
specifically to the representations and warranties in this Agreement that
specifically identifies the section and subsection to which such disclosure
relates and that is delivered to the Company by the Parent and
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certified by a duly authorized officer of the Parent prior to the date of this
Agreement, Parent and Sub represent and warrant to the Company as follows:
4.1 ORGANIZATION, STANDING AND CORPORATE POWER. Each of the Parent and
------------------------------------------
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has all requisite corporate
power and authority to carry on its business as now being conducted. Each of
the Parent and Sub is duly qualified to do business and is in good standing in
each jurisdiction in which the nature of its business or the ownership, leasing
or operation of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed or be in good standing individually or in the aggregate would not have
a Material Adverse Effect on Parent.
4.2 AUTHORITY/NONCONTRAVENTION. Each of the Parent and Sub has the
--------------------------
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement by the Company and the
consummation by each of the Parent and Sub of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate action on
the part of each of the Parent and Sub and no other corporate proceedings on the
part of each of the Parent and Sub are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of the Parent and Sub and constitutes valid
and binding obligations of Parent and Sub, enforceable against the Parent and
Sub in accordance with its terms. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated by this Agreement
and compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit or require any
consent, approval or authorization under, or result in the creation of any Liens
in or upon any of the properties or assets of the Parent under, any provision of
(a) the Certificate of Incorporation or Bylaws of the Parent or the certificates
of incorporation or bylaws (or similar organizational documents) of any of its
subsidiaries, (b) any loan or credit agreement, bond, debenture, note, mortgage,
indenture, lease or other material contract, commitment, agreement, arrangement,
obligation, undertaking, instrument, permit, concession, franchise or license
applicable to Parent or its properties or assets or (c) subject to the
governmental filings and other matters referred to in the following sentence,
any statute, law, ordinance, rule or regulation or judgment, order or decree, in
each case, applicable to Parent or its properties or assets, other than, in the
case of clauses (b) and (c), any such conflicts, violations, defaults, rights,
or Liens or other occurrences that individually or in the aggregate would not
have a Material Adverse Effect on Parent. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to the Parent or Sub in connection with
the execution and delivery of this Agreement by Parent or Sub or the
consummation by Parent or Sub of the Merger or the other transactions
contemplated by this Agreement, except for (a) the receipt of a valid exemption
from the registration requirements of the Securities Act, (b) the filing of the
Agreement of Merger with the California Secretary of State and appropriate
documents with the
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relevant authorities of other states in which Parent is qualified to do business
and (c) such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made
individually or in the aggregate would not have a Material Adverse Effect on the
Parent or impair the ability of Parent or Sub to perform their obligations under
this Agreement.
4.3 SEC DOCUMENTS; PARENT FINANCIAL STATEMENTS. Parent has furnished or
------------------------------------------
made available to the Company a true and complete copy of its Registration
Statement on Form S-1 dated December 2, 1998 (the "REGISTRATION STATEMENT"),
which Parent filed under the Securities Act with the Securities and Exchange
Commission (the "SEC"). As of its date, the Registration Statement complied in
all material respects with the requirements of the Securities Act and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading. The
financial statements of Parent, including the notes thereto, included in the
Registration Statement (the "PARENT FINANCIAL STATEMENTS") comply as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP consistently applied (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by applicable rules and regulations of the SEC) and fairly present the
consolidated financial position of Parent at the dates thereof and of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring audit adjustments). There has been
no change in Parent accounting policies except as described in the notes to the
Parent Financial Statements. Parent has no material obligations other than (i)
those set forth in the Parent Financial Statements and (ii) those not required
to be set forth in the Parent Financial Statements under generally accepted
accounting principles.
4.4 PARENT COMMON STOCK. The shares of Parent Common Stock, when issued
-------------------
in the Merger in compliance with this Agreement, will be validly issued, fully
paid and nonassessable. Such shares will be issued in compliance with
applicable state and federal securities laws.
SECTION 5
COVENANTS
5.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date
----------------------------------
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as conducted
prior to the date of this Agreement and, to the extent consistent with such
business, use all commercially reasonable efforts consistent with past practice
and policies to preserve intact its present business organization, keep
available the services of its present officers and key employees and preserve
its relationships with customers, suppliers, distributors, licensors, licensees,
and others having business dealings with it, with the objective
-22-
that its goodwill and ongoing business shall be unimpaired at the Effective
Time. The Company shall promptly notify Parent of any event or occurrence not in
the ordinary course of business of the Company. Except as expressly contemplated
by this Agreement or disclosed in the Company Schedules, the Company shall not,
without the prior written consent of Parent:
(a) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock, or
split, combine or reclassify any of its capital stock, or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or repurchase or otherwise acquire, directly or
indirectly, any shares of its capital stock;
(b) Issue, deliver or sell, authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of its
capital stock or securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities or
authorize or propose any change in its equity capitalization;
(c) Accelerate, amend or change the period of exercisability of the
Company Stock Options or authorize cash payments in exchange therefor, except as
contemplated by this Agreement;
(d) Solicit approval for or effect any amendments to the Company's
Articles of Incorporation or Bylaws;
(e) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the Company;
(f) Sell, lease, license, pledge or otherwise dispose of or encumber
any of its properties or assets except in the ordinary course of business
consistent with past practice (including without limitation any indebtedness
owed to it or any claims held by it);
(g) Except in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee, endorse or
otherwise become responsible for the obligations of others, or make loans or
advances;
(h) Pay, discharge or satisfy in an amount in excess of $10,000 in
any one case any claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business consistent with past practice of
liabilities reflected or reserved against in the Company's Financial Statements
or those incurred after the Balance Sheet in the ordinary course of business;
-23-
(i) Adopt or amend any employee benefit or employee stock purchase or
employee option plan, or enter into any employment contract, pay any special
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates of its officers or employees other than in the ordinary
course of business, consistent with past practice, or change in any material
respect any management policies or procedures;
(j) Commence a lawsuit other than for the routine collection of
bills;
(k) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Company IP Rights or
enter into grants to future patent rights, other than in the ordinary course of
business;
(l) Except in the ordinary course of business with prior notice to
Parent, violate, amend or otherwise modify the terms of any of the Company's
contracts binding on the Company as set forth in Section 3.8 of the Company
Schedules;
(m) Revalue any of its assets, including without limitation, writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business and consistent with past practice;
(n) Make any material tax election other than in the ordinary course
of business and consistent with past practice, change any material tax election,
adopt any material tax accounting method other than in the ordinary course of
business and consistent with past practice, change any material tax accounting
method, file any material tax return (other than any estimated tax returns,
payroll tax returns or sale tax returns) or any amendment to a material tax
return, enter into any closing agreement, settle any tax claim or assessment, or
consent to any tax claim or assessment, without the prior written consent of the
Parent, which consent will not be reasonably withheld;
(o) Engage in any activities or transactions that are outside the
ordinary course of its business consistent with past practice;
(p) Fail to pay or otherwise satisfy its monetary obligations as they
become due, except such as are being contested in good faith; or waive or commit
to waive any rights of substantial value; or cancel, materially amend or renew
any insurance policy; or
(q) Take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 5.1(a) through (p) above, or any action which
would make any of the representations or warranties of the Company contained in
this Agreement untrue or incorrect or result in any of the conditions to the
Merger set forth in Section 6 not being satisfied.
5.2 NO SOLICITATION. Until the earlier of the Effective Time or the
---------------
termination of this Agreement pursuant to the provisions of Section 8.1, neither
the Company nor the Principal
-24-
Shareholders will (nor will the Company permit any of the Company's officers,
directors, agents, representatives or affiliates to) directly or indirectly,
take any of the following actions with any party other than Parent and its
designees: (a) solicit, conduct discussions with or engage in negotiations with
any person or take any other action intended or designed to facilitate the
efforts of any person, other than Parent, relating to the possible acquisition
of the Company (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise) or any material portion of its capital stock or assets, (b)
provide information with respect to it to any person, other than Parent,
relating to the possible acquisition of the Company (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise) or any portion of
its or their capital stock or assets, (c) enter into an agreement with any
person, other than Parent, providing for the acquisition of the Company (whether
by way of merger, purchase of capital stock, purchase of assets or otherwise) or
any portion of its capital stock or assets or (d) make or authorize any
statement, recommendation or solicitation in support of any possible acquisition
of the Company (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise) or any portion of its capital stock or assets by any
person, other than by Parent. In addition to the foregoing, if the Company or
the Principal Shareholder receives any unsolicited bona fide offer or proposal
---- ----
relating to any of the above, the Company or the Principal Shareholder (as the
case may be) shall immediately notify Parent thereof, including information as
to the identity of the offeror or the party making any such offer or proposal
and the specific terms of such offer or proposal, as the case may be.
5.3 SHAREHOLDER APPROVAL. The Company will call a meeting of its
--------------------
shareholders (the "SHAREHOLDERS' MEETING") to be held as promptly as practicable
for the purpose of obtaining the shareholder approval required in connection
with the transactions contemplated hereby and by the Merger Agreement and shall
use all reasonable efforts to obtain such approval. In connection with the
Shareholders Meeting, the Company shall submit materials to its shareholders
(the "SHAREHOLDERS MATERIALS") in compliance with federal and state laws and
shall include information regarding the Company, the terms of the Merger and
this Agreement and the unanimous recommendation of the Board of Directors of the
Company in favor of the Merger. The Shareholder Materials shall further include
an investment representation statement and questionnaire in the form provided to
the Company by Parent, as well as Parent's SEC Documents and other information
regarding the Parent and the Company as may be required to comply with Federal
and state securities laws. The Company shall provide the Shareholder Materials
to Parent for its review and approval prior to distributing the Shareholder
Materials to the Company's shareholders. The Company shall coordinate and
cooperate with the Parent with respect to the timing of the Shareholders'
Meeting. The Company shall not change the date of the Shareholders' Meeting
without the prior written consent of the Parent, nor shall the Company adjourn
the Shareholders' Meeting without the prior written consent of the Parent,
unless such adjournment is due to the lack of a quorum, in which case the
Chairman of the Shareholders' Meeting shall announce at such meeting the time
and place of the adjourned meeting.
5.4 ACCESS TO INFORMATION. Upon reasonable notice, the Company shall
---------------------
afford Parent and its accountants, counsel and other representatives, reasonable
access during normal business
-25-
hours during the period prior to the Effective Time to (a) all of the Company's
properties, books, contracts, commitments and records, and (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of the Company as Parent may reasonably
request, including without limitation access upon reasonable request to the
Company's employees, customers and vendors for due diligence inquiry. The
Company agrees to provide to Parent and its accountants, counsel and other
representatives copies of internal financial statements, business plans and
projections promptly upon request. No information or knowledge obtained in any
investigation pursuant to this Section 5.4 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.5 CONFIDENTIALITY. Each of the parties agrees to keep such information
---------------
or knowledge obtained in any investigation pursuant to Section 5.4, or pursuant
to the negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby, confidential pursuant to the mutual
Nondisclosure Agreement dated as of January 5, 1999 by and between Parent and
the Company (the "CONFIDENTIALITY AGREEMENT").
5.6 EXPENSES. Whether or not the Merger is consummated, all reasonable
--------
and customary fees and expenses incurred in connection with the Merger
including, without limitation, all legal, accounting, financial advisory,
consulting and all other fees and expenses of third parties incurred by a party
in connection with the negotiation and effectuation of the terms and conditions
of this Agreement and the transactions contemplated hereby, shall be the
obligation of the respective party incurring such fees and expenses. Such fees
and expenses of the Company and its shareholders shall be incurred entirely by
the Company.
5.7 PUBLIC DISCLOSURE. Unless otherwise required by law, prior to the
-----------------
Effective Time, no disclosure (whether or not in response to an inquiry) of the
subject matter of this Agreement shall be made by any party hereto unless
approved by Parent and the Company prior to release, provided that such approval
shall not be unreasonably withheld, subject, in the case of Parent, to Parent's
obligation to comply with applicable securities laws.
5.8 CONSENTS. Each of Parent and the Company shall promptly apply for or
--------
otherwise seek, and use its reasonable efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the Merger, and
the Company shall use all reasonable efforts to obtain all consents, waivers and
approvals under any of the Company's agreements, contracts, licenses or leases
in order to preserve the benefits thereunder for the Surviving Corporation and
otherwise in connection with the Merger. All of such Company consents and
approvals are set forth in Section 5.8 of the Company Schedules.
5.9 FIRPTA COMPLIANCE. On the Closing Date, the Company shall deliver to
-----------------
Parent a properly executed statement in a form reasonably acceptable to Parent
for purposes of satisfying Parent's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
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5.10 REASONABLE EFFORTS. Subject to the terms and conditions provided in
------------------
this Agreement, each of the parties hereto shall use all reasonable efforts to
take promptly, or cause to be taken, all actions, and to do promptly, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby to obtain all necessary waivers, consents and approvals and to effect all
necessary registrations and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement;
provided that Parent shall not be required to agree to any divestiture by Parent
or the Company or any of Parent's subsidiaries or affiliates of shares of
capital stock or of any business, assets or property of Parent or its
subsidiaries or affiliates or the Company or its affiliates, or the imposition
of any material limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and stock.
5.11 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice
-------------------------------
to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which may cause any representation or warranty of the Company and Parent,
respectively, contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time and (ii) any failure of the
Company or Parent, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.11
-------- -------
shall not limit or otherwise affect any remedies available to the party
receiving such notice.
5.12 BLUE SKY LAWS. Parent shall take such steps as may be necessary to
-------------
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of Parent Common Stock pursuant hereto. The Company
shall use its best efforts to assist Parent as may be necessary to comply with
the securities and blue sky laws of all jurisdictions which are applicable in
connection with the issuance of Parent Common Stock pursuant hereto.
5.13 NONCOMPETITION AND EMPLOYMENT AGREEMENTS. At the Effective Time (a)
----------------------------------------
the Parent and the Company mangers identified in Section 5.14 of the Company
Schedules shall enter into noncompetition agreements in the form attached as
Exhibit C (the "NONCOMPETITION AGREEMENTS") and (b) ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇
---------
shall enter into employment agreements with the Parent in a form satisfactory to
the parties thereto (the "EMPLOYMENT AGREEMENTS"). The Noncompetition
Agreements and the Employment Agreements shall become effective as of the
Effective Time.
5.14 INVESTMENT REPRESENTATION AGREEMENTS. All of the holders of
------------------------------------
outstanding shares of capital stock of the Company shall execute and deliver to
Parent Investment Representation Agreements in the form attached hereto as
Exhibit D.
---------
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5.15 APPOINTMENT. ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be appointed by the Parent as an
-----------
Executive Vice President of the Parent and General Manager of the CityAuction
division, effective as of the Effective Time. ▇▇. ▇▇▇▇▇▇ shall report to either
the Chief Executive Officer, the President or the Chief Operating Officer of the
Parent at the discretion of the Board of Directors of the Parent.
5.16 STOCK OPTIONS.
-------------
(a) At the Effective Time, each outstanding Company Stock Option,
whether vested or unvested, shall be assumed by Parent. Accordingly, each
Company Stock Option shall be deemed to constitute an option to acquire, on the
same terms and conditions as were applicable under such Company Stock Option,
the number, rounded down to the nearest whole integer, of full shares of Parent
Common Stock the holder of such Company Stock Option would have been entitled to
receive pursuant to the Merger had such holder exercised such Company Stock
Option in full, including as to unvested shares, immediately prior to the
Effective Time, at a price per share equal to (y) the aggregate exercise price
for the shares of Company Common Stock otherwise purchasable pursuant to such
Company Stock Option divided by (z) the number of full shares of Parent Common
Stock deemed purchasable pursuant to such Company Stock Option with such
exercise price per share rounded up to the nearest whole cent. The term,
vesting schedule, status as an "incentive stock option" under Section 422 of the
Code, if applicable, and all other terms and conditions of the Company Stock
Options will otherwise be unchanged, except that all CityAuction employees, who
held stock options under the Company Stock Option Plan, shall receive 12 months
vesting credit and acceleration effective as of the Effective Time.
(b) Form S-8 Registration. As soon as practicable after the
---------------------
Effective Time, Parent shall file a registration statement on Form S-8 (or any
successor or other appropriate form), or another appropriate form with respect
to the shares of Parent Common Stock subject to such assumed Company Stock
Options (the "ASSUMED OPTIONS") and shall use its reasonable efforts to maintain
the effectiveness of such registration statement (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
Assumed Options remain outstanding.
SECTION 6
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Shareholder Approval. This Agreement, the agreements
--------------------
contemplated hereunder and the Merger and other transactions contemplated hereby
and thereby shall have been approved and adopted by the affirmative vote or
consent of the holders of at least a majority of the
-28-
outstanding Company Common Stock and at least a majority of the outstanding
Company Preferred Stock present, in person or by proxy, at the Shareholders
Meeting contemplated by Section 5.3, in compliance with applicable law and the
Company's Articles of Incorporation and Bylaws.
(b) Employment Agreements. The Employment Agreements shall have been
---------------------
executed and delivered by the parties thereto.
6.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUB. The
----------------------------------------------------------
obligations of Parent and Sub to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent:
(a) Representations, Warranties and Covenants. The representations
-----------------------------------------
and warranties of the Company and the Principal Shareholders in this Agreement
shall be true and correct in all material respects (such that a breach of such
representations and warranties would not have a Material Adverse Effect on the
Company) on and as of the date of this Agreement and as of the Closing Date as
though such representations and warranties were made on and as of such time and
the Company and the Principal Shareholders shall have performed and complied
with all covenants, obligations and conditions of this Agreement required to be
performed and complied with by each of them as of the Closing Date. Parent
shall have been provided with a certificate dated as of the Closing Date
executed on behalf of the Company by its Chief Executive Officer and Chief
Financial Officer to such effect.
(b) Legal Opinion. Parent shall have received a legal opinion from
-------------
General Counsel Associates LLP, legal counsel to the Company, substantially in
the form of Exhibit E.
---------
(c) No Injunctions or Restraints on Conduct of Business. No temporary
---------------------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
provision challenging Parent's proposed acquisition of the Company, or limiting
or restricting Parent's conduct or operation of the business of the Company (or
its own business) following the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending.
(d) Litigation. There shall be no action, suit, claim or proceeding
----------
of any nature pending, or overtly threatened, against the Parent, Sub or the
Company, their respective properties or any of their officers or directors,
arising out of, or in any way connected with, the Merger or the other
transactions contemplated by the terms of this Agreement, or that could
materially and adversely affect the business, assets, liabilities, financial
condition, results of operations or prospects of the Company.
-29-
(e) Due Diligence. The Parent shall be satisfied with the results of
-------------
its due diligence review of the Company.
(f) Investment Representations. Parent shall have received from each
--------------------------
of the shareholders of the Company an executed Investment Representation
Agreement which shall be in full force and effect.
(g) No Dissenters. Holders of more than 5% of the outstanding capital
-------------
stock of the Company shall not have exercised, nor shall they continue to have
the right to exercise, appraisal rights with respect to the transactions
contemplated by this Agreement.
(h) Noncompetition Agreements. The Noncompetition Agreements shall
-------------------------
have been duly executed and delivered by the parties thereto.
(i) Securities Law Compliance. Parent shall have received from the
-------------------------
shareholders of the Company executed investment representation statements and
completed questionnaires in form and substance satisfactory to Parent that the
issuance of the shares of Parent Common Stock pursuant to the Merger is exempt
from the registration requirements of the Securities Act and is exempt from
registration under applicable state securities laws.
(j) Exercise/Conversion. The Warrant shall have been exercised and/or
-------------------
terminated and all outstanding shares of Preferred Stock of the Company shall
have been converted into Company Common Stock prior to the Effective Time.
(k) Board of Directors' Approval. The Board of Directors of Parent
----------------------------
shall have approved the Merger.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The obligations of
-----------------------------------------------
the Company to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) Representations, Warranties and Covenants. The representations
-----------------------------------------
and warranties of Parent and Sub in this Agreement shall be true and correct in
all material respects (such that a breach of such representations and warranties
would not have a Material Adverse Effect on Parent) on and as of the date of
this Agreement and as of the Closing Date as though such representations and
warranties were made on and as of such time and each of Parent and Sub shall
have performed and complied with all covenants, obligations and conditions of
this Agreement required to be performed and complied with by it as of the
Closing Date. The Company shall have been provided with a certificate dated as
of the Closing Date and executed on behalf of Parent by an executive officer of
Parent to such effect.
(b) Registration Rights Agreement. The Registration Rights Agreement
-----------------------------
in the form of Exhibit F shall have been executed and delivered by Parent.
---------
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(c) Employee Stock Options. The Employee Stock Options shall have
----------------------
been delivered by Parent.
(d) Litigation. There shall be no action, suit, claim or proceeding
----------
of any nature pending, or overtly threatened, against Parent or Sub, their
respective properties or any of their officers or directors, arising out of, or
in any way connected with, the Merger or the other transactions contemplated by
the terms of this Agreement, or that would materially and adversely affect the
business, assets, liabilities, financial condition, results of operations or
prospects of Parent.
SECTION 7
INDEMNIFICATION
7.1 GENERAL INDEMNIFICATION. The Shareholders covenant and agree to
-----------------------
indemnify, defend, protect and hold harmless Parent and the Surviving
Corporation and their respective officers, directors, employees, shareholders,
assigns, successors and affiliates (individually, an "INDEMNIFIED PARTY" and
collectively, "INDEMNIFIED PARTIES") from, against and in respect of:
(a) all liabilities, losses, claims, damages, punitive damages,
courses of actions, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) (collectively, "DAMAGES") suffered,
sustained or incurred by the Indemnified Persons in connection with, resulting
from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of the
Company or the Principal Shareholders set forth in this Agreement or any
certificate, document or instrument delivered by or on behalf of the Company or
the Principal Shareholders in connection herewith;
(ii) any nonfulfillment of any covenant or agreement on the
part of the Company or the Principal Shareholders in this Agreement;
(iii) the business, operations or assets of the Company prior to
the Closing Date, including without limitation all taxes due and payable prior
to the Closing Date, except as otherwise disclosed in the Company Financial
Statements or the Company Schedules; or
(iv) the actions or omissions of the Company's directors,
officers, shareholders, employees or agents prior to the Closing Date; and
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(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 8.1.
7.2 LIMITATION AND EXPIRATION. Notwithstanding the above:
-------------------------
(a) There shall be no liability for indemnification under Section 7.1
unless the aggregate amount of Damages exceeds $100,000 (the "INDEMNIFICATION
THRESHOLD"), in which event the liability for indemnification will apply to the
entire aggregate amount of Damages. The Pledged Shares shall represent the
exclusive means of satisfying any claims under this Section 7 except with
respect to Claims (as defined below) relating to any breach of the
representations and warranties set forth in Section 3.12 (Taxes) and 3.22
(Environmental Matters) or for Claims relating to fraud or willful misconduct.
For purposes of satisfying indemnification obligations pursuant to Section 7.1,
the Pledged Shares shall be valued at the average of the closing price of the
Parent Common Stock as reported on the Nasdaq National Market for the ten
trading days preceding the Closing. Any Damages paid pursuant to this Section 7
shall be paid on a prorated basis by the Shareholders in relation to their
allocable portion of the Pledged Shares; and
(b) The indemnification obligations under this Section 7 shall
terminate as follows:
(i) with respect to claims or demands (a "CLAIM") relating to
a breach of the representations and warranties set forth in Section 3.12 (Taxes)
and 3.22 (Environmental Matters) or fraud or willful misconduct, upon the later
of the expiration of the applicable statute of limitations period or the final
resolution of any and all such Claims pending as of such date; and
(ii) with respect to all other Claims for indemnification under
this Section 7, upon the later of the first anniversary of the Closing Date or
the final resolution of any such claims pending as of the first anniversary.
The term "INDEMNIFICATION DEADLINE DATE" refers to the expiration date
of the applicable statute of limitations period with respect to Claims under
clause (i) above and the first anniversary with respect to claims under clause
(ii) above. The term "PENDING CLAIMS" refers to the pending claims described in
clauses (i) and (ii) above. From and after the applicable Indemnification
Deadline Date, the indemnification obligations under this Section 7 shall
survive only to the extent of Pending Claims.
7.3 INDEMNIFICATION PROCEDURES. All Claims for indemnification under this
--------------------------
Section 7 shall be asserted and resolved as follows:
(a) In the event the Indemnified Party has a Claim hereunder which
does not involve a Claim being asserted against or sought to be collected by a
third party, the Indemnified Party shall with reasonable promptness send a Claim
Notice (as defined in Section 7.3(c) below)
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with respect to such Claim to the Shareholder Representative (as defined in
Section 7.4 below). If the Shareholder Representative does not notify the
Indemnified Party within 45 days from the date of receipt of such Claim Notice
that the Shareholders dispute such Claim, the amount of such Claim shall be
conclusively deemed a liability of the Shareholders hereunder. In case the
Shareholder Representative shall object in writing to any Claim made in
accordance with this Section 7.3(a), the Indemnified Party shall have fifteen
(15) days to respond in a written statement to the objection of the Shareholder
Representative. If after such fifteen (15) day period there remains a dispute as
to any Claims, the parties shall attempt in good faith for sixty (60) days to
agree upon the rights of the respective parties with respect to each of such
Claims. If the parties should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties. If no such agreement can
be reached after good faith negotiation, either party may demand arbitration of
the matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall not be commenced
until such amount is ascertained or both parties agree to arbitration; and in
either such event the matter shall be settled by arbitration conducted by three
arbitrators. Parent and the Shareholders' Representative shall each select one
arbitrator, and the two arbitrators so selected shall select a third arbitrator,
each of which arbitrators shall be independent and have at least ten years
relevant experience. The arbitrators shall set a limited time period and
establish procedures designed to reduce the cost and time for discovery while
allowing the parties an opportunity, adequate in the sole judgment of the
arbitrators, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrators shall rule upon motions to
compel or limit discovery and shall have the authority to impose sanctions,
including attorneys fees and costs, to the extent as a court of competent law or
equity, should the arbitrators determine that discovery was sought without
substantial justification or that discovery was refused or objected to without
substantial justification. The decision of a majority of the three arbitrators
as to the validity and amount of any Claim in such Claim Notice shall be binding
and conclusive upon the parties to this Agreement. Such decision shall be
written and shall be supported by written findings of fact and conclusions which
shall set forth the award, judgment, decree or order awarded by the arbitrators.
(b) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Los Angeles County, California under the rules then in effect of the American
Arbitration Association. For purposes of this Section 7.3, in any arbitration
hereunder in which any claim or the amount thereof stated in the Claim Notice is
at issue, the Indemnified Party shall be deemed to be the Non-Prevailing Party
in the event that the arbitrators award such Indemnified Party less than the sum
of one-half (1/2) of the disputed amount plus any amounts not in dispute;
otherwise, the Indemnifying Party shall be deemed to be the Non-Prevailing
Party. The Non-Prevailing Party to an arbitration shall pay its own expenses,
the fees of each arbitrator, the administrative costs of the arbitration, and
the expenses, including without limitation, reasonable attorneys' fees and
costs, incurred by the other party to the arbitration.
(c) In the event that any Claim for which the Shareholders would be
liable to an Indemnified Party hereunder is asserted against an Indemnified
Party by a third party, the Indemnified Party shall with reasonable promptness
notify the Shareholder Representative of such
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Claim, including a copy of the Claim made if the Claim was made in writing,
specifying the nature of such claim and the amount or the estimated amount
thereof to the extent then feasible (which estimate shall not be conclusive of
the final amount of such Claim) (the "CLAIM NOTICE"). The Shareholder
Representative shall have 30 days from the receipt of the Claim Notice (the
"NOTICE PERIOD") to notify the Indemnified Party (i) whether or not the
Shareholder Representative disputes the Shareholders' liability to the
Indemnified Party hereunder with respect to such Claim and (ii) if the
Shareholder Representative does not dispute such liability, whether or not the
Shareholder Representative desires, at the sole cost and expense of the
Shareholders, to defend against such Claim, provided that the Shareholder is
hereby authorized (but not obligated) prior to and during the Notice Period to
file any motion, answer or other pleading and to take any other action which the
Shareholder Representative shall deem necessary or appropriate to protect the
Shareholders' interests. In the event that the Shareholder Representative
notifies the Indemnified Party within the Notice Period that the Shareholder
Representative does not dispute the Shareholders' obligation to indemnify
hereunder and desires to defend the Indemnified Party against such Claim and
except as hereinafter provided, the Shareholder Representative shall have the
right to defend by appropriate proceedings, which proceedings shall be
diligently settled or prosecuted by the Shareholder Representative to a final
conclusion; provided that, unless the Indemnified Party otherwise agrees in
--------
writing, the Shareholder Representative may not settle any matter (in whole or
in part) unless such settlement includes a complete and unconditional release of
the Indemnified Party. If the Indemnified Party desires to participate in, but
not control, any such defense or settlement the Indemnified Party may do so at
the Indemnified Party's sole cost and expense. If the Shareholder Representative
elects not to defend the Indemnified Party against such Claim, whether by
failure of the Shareholder Representative to give the Indemnified Party timely
notice as provided above or otherwise, then the Indemnified Party, without
waiving any rights against the Shareholders, may settle or defend against any
such Claim in the Indemnified Party's sole discretion and the Indemnified Party
shall be entitled to recover from the Shareholders the amount of any settlement
or judgment and, on an ongoing basis, all indemnifiable costs and expenses of
the Indemnified Party with respect thereto, including interest from the date
such costs and expenses were incurred.
(d) Notwithstanding Section 7.4(b) above, the Indemnified Party shall
have the right to control or assume (as the case may be) the defense of any
Claim and the amount of any judgment or settlement and the reasonable costs and
expenses of defense shall be included as part of the indemnification obligations
of the Shareholders hereunder if any Claim seeks material prospective relief
which, in the reasonable opinion of the Indemnified Party, could have a material
adverse effect on the assets, liabilities, financial condition, results of
operations or business prospects of Parent and the Indemnified Party shall have
given the Shareholder Representative written notice of the same. If the
Indemnified Party should elect to exercise such right, the Shareholder
Representative shall have the right to participate in, but not control, the
defense of such claim or demand at the sole cost and expense of the
Shareholders. Notwithstanding the foregoing, the Indemnified Party shall not
settle any Claim without the written consent of the Shareholder Representative,
which consent shall not be unreasonably withheld.
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(e) Nothing herein shall be deemed to prevent the Indemnified Party
from making a Claim, and an Indemnified Party may make a Claim hereunder, for
potential or contingent claims or demands provided the Claim Notice sets forth
the specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such a claim or demand may be made.
(f) The Indemnified Party's failure to give reasonably prompt notice
to the Shareholder Representative of any actual, threatened or possible claim or
demand which may give rise to a right of indemnification hereunder shall not
relieve the Shareholders of any liability which the Shareholders may have to the
Indemnified Party unless the failure to give such notice materially and
adversely prejudiced the Shareholders.
(g) The parties will make appropriate adjustments for any tax
benefits, tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under Section 7, provided that the Shareholder
--------
Representative shall not be obligated to seek any payment pursuant to the terms
of any insurance policy.
(h) The Pledged Shares shall be available to satisfy the
indemnification obligations of the Shareholder pursuant to this Section 7
through the first anniversary of this Agreement; provided however, that in the
event that any Pending Claims are outstanding as of such date, an amount of
Pledged Shares equal to 125% of such Pending Claims shall remain available to
satisfy such Pending Claims until the resolution of such Pending Claims (the
"PLEDGED SHARES EXPIRATION DATE"). As soon as reasonably practicable following
the Pledged Shares Expiration Date, Parent shall distribute all Pledged Shares
not required to satisfy indemnification obligations under this Section 7 to the
Shareholders. The Pledged Shares shall bear a restrictive legend preventing
their transfer pending expiration of such indemnification obligations in
substantially the form set forth below:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN PLEDGED AS COLLATERAL
PURSUANT TO THAT CERTAIN AGREEMENT AND PLAN OF REORGANIZATION DATED JANUARY
8, 1999 BY AND AMONG TICKETMASTER ONLINE-CITYSEARCH, INC., NERO ACQUISITION
CORPORATION AND CITYAUCTION. PRIOR TO THE EXPIRATION OF THE PLEDGE AS SET
FORTH IN SUCH AGREEMENT, SUCH SHARES MAY NOT BE OFFERED, SOLD, EXCHANGED,
TRANSFERRED OR OTHERWISE DISPOSED OF."
Within three (3) business days following the Indemnification Deadline Date,
Parent shall use its reasonable commercial efforts to remove any stop transfer
orders made to the Transfer Agent, shall authorize the Transfer Agent to remove
the restrictive legend relating to the obligations of this Section 7 and shall
release the number of Pledged Shares equal to (i) the total number of Pledged
Shares minus (ii) the number of Pledged Shares having a Value (as defined below)
equal to the amount of all indemnification obligations of the Shareholders
through the Indemnification Deadline Date plus any amount necessary to satisfy
any Pending Claims as of the Indemnification Deadline Date. Upon final
resolution of all Pending Claims, Parent shall remove any stop transfer
-35-
orders made to the Transfer Agent, shall authorize its Transfer Agent to remove
the restrictive legend relating to the indemnification obligations of this
Section 7 and shall release the number of Pledged Shares equal to (i) the number
of Pledged Shares that were retained by Parent on the Indemnification Deadline
Date pursuant to the foregoing sentence minus (ii) the number of Pledged Shares
having a Value equal to the amount of the indemnification obligations of the
Shareholders under this Section 7 as determined upon the resolution of the
Pending Claims. For purposes of this Agreement, the term "Value" per Pledged
Share shall mean the lower of the per share price of Parent Company Common Stock
as reported on the Nasdaq National Market on (i) the Effective Date or (ii) date
of delivery of a Claim.
7.4 SHAREHOLDERS' REPRESENTATIVE.
----------------------------
(a) Upon the closing of the Merger, ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be
constituted and appointed as agent and attorney-in-fact (the "SHAREHOLDERS'
REPRESENTATIVE") for and on behalf of each of the Shareholders to give and
receive notices and communications, to authorize delivery to Parent of Pledged
Shares in satisfaction of Claims, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to Claims,
and to take all actions necessary or appropriate in the judgment of the
Shareholders' Representative for the accomplishment of the foregoing. Such
agency may be changed (whether pursuant to vacancy, removal or resignation) by
the vote of a majority of the Shareholders from time to time upon not less than
thirty (30) days prior written notice to Parent. No bond shall be required of
the Shareholders' Representative, and the Shareholders' Representative shall
receive no compensation for its services, except for payment by the Shareholders
of expenses, including fees of counsel, reasonably incurred by the Shareholders'
Representative in connection with the performance of its duties hereunder.
(b) The Shareholders' Representative shall not be liable for any act
done or omitted hereunder as Shareholders' Representative while acting in good
faith, and any act done or omitted pursuant to the advice of counsel shall be
conclusive evidence of such good faith. The Shareholders shall severally
indemnify the Shareholders' Representative and hold such agent harmless against
any loss, liability or expense incurred without bad faith on the part of the
Shareholders' Representative and arising out of or in connection with the
acceptance or administration of the Shareholders' Representative's duties
hereunder.
(c) A decision, act, consent or instruction of the Shareholders'
Representative shall constitute a decision of all Shareholders and shall be
final, binding and conclusive upon each Shareholder, and Parent may rely upon
any decision, act, consent or instruction of the Shareholders' Representative
taken in such manner as being the decision, act, consent or instruction of each
and every Shareholder. The Parent is hereby relieved from any liability to any
person for any acts done by them in accordance with such decision, act, consent
or instruction of the Shareholders' Representative.
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7.5 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
-----------------------------------------------------
representations, warranties and covenants made by the Company and the Principal
Shareholders in or pursuant to this Agreement or in any document delivered
pursuant hereto will survive the Closing and will remain in effect until, and
will expire upon the Indemnification Deadline Date, provided, however, that the
indemnification obligations with respect to any Pending Claim (and the related
representations, warranties and covenants) will survive until the final
resolution of such Pending Claim.
SECTION 8
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated and the Merger
-----------
abandoned at any time prior to the Effective Time, whether before or after
approval of the Merger by the shareholders of the Company:
(a) by mutual written consent of the Company and Parent;
(b) by Parent or the Company if the Closing has not occurred by March
31, 1998: provided however, that the right to terminate this Agreement under
this Section 8.1(b) shall not be available to any party whose action or failure
to act has been the principal cause of the failure of the Merger to occur on or
before such date and such action or failure to act constitutes a material breach
of this Agreement;
(c) by Parent or the Company if there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
Merger; or there shall be any action taken, or any statute, rule, regulation or
order enacted, promulgated or issued or deemed applicable to the Merger by any
Governmental Entity which would make the consummation of the Merger illegal;
(d) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger by any Governmental Entity, which would: (i) prohibit Parent's or the
Company's ownership or operation of all or a portion of the business of the
Company or (ii) compel Parent or the Company to dispose of or hold separate all
or a portion of the business or assets of the Company or Parent as a result of
the Merger;
(e) by Parent if it is not in breach of its obligations under this
Agreement and there has been a breach of any representation, warranty, covenant
or agreement contained in this Agreement on the part of the Company or the
Principal Shareholders and such breach has not been cured within five (5)
business days after written notice to the Company and the Principal Shareholder
(provided that no cure period shall be required for a breach which by its nature
cannot be cured); or
-37-
(f) by the Company if it is not in breach of its obligations under
this Agreement and there has been a breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of Parent or Sub
and such breach has not been cured within five (5) business days after written
notice to Parent (provided that no cure period shall be required for a breach
which by its nature cannot be cured).
Where action is taken to terminate this Agreement pursuant to this Section
8.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
---------------------
as provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Sub, the Company or
the Principal Shareholders, or their respective officers, directors or
shareholders, provided that each party shall remain liable for any breaches of
this Agreement prior to its termination; and provided further that, the
provisions of Sections 5.5, 5.6, 8 and 9 of this Agreement shall remain in full
force and effect and survive any termination of this Agreement.
8.3 AMENDMENT. This Agreement may be amended by the parties hereto at any
---------
time prior to the Closing by execution of an instrument in writing signed on
behalf of each of the parties hereto, provided however that no amendment shall
be made which by law requires the further approval of the shareholders of the
Company without obtaining such approval.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, Parent
-----------------
and Sub, on the one hand, and the Company, on the other, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
8.5 NOTICE OF TERMINATION. Any termination of this Agreement under
---------------------
Section 8.1 above will be effective immediately upon the delivery of written
notice of the terminating party to the other parties hereto.
SECTION 9
MISCELLANEOUS
9.1 NOTICES. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by
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registered or certified mail (return receipt requested) or sent via facsimile
(with acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to:
Ticketmaster Online - CitySearch, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy at the same address to the attention of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, Chief Legal Counsel
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
CityAuction, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
General Counsel Associates LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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(c) if to the Principal Shareholders, to:
▇▇▇▇▇▇ ▇▇▇▇▇▇
c/o: CityAuction, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇
c/o: CityAuction, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
9.2 INTERPRETATION.
--------------
(a)iv When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement unless otherwise indicated. The words "INCLUDE,"
"INCLUDES" and "INCLUDING" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "THE BUSINESS OF" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity.
(b)iv For purposes of this Agreement the term "KNOWLEDGE" means with
respect to a party hereto, with respect to any matter in question, that any of
the chief executive officer, chief operating officer, president, chief financial
officer, general counsel or controller of such party, has actual knowledge of
such matter.
(c)iv For purposes of this Agreement, the term "MATERIAL ADVERSE
EFFECT" when used in connection with an entity means any change, event,
violation, inaccuracy, circumstance or other matter, if such change, event,
violation, inaccuracy, circumstance or other matter would have a material
adverse effect on the business, assets (including intangible assets),
capitalization or financial condition of (i) such entity and its subsidiaries
taken as a whole, or (ii) the Surviving Corporation, except for those changes,
events and effects that (x) are primarily caused by conditions affecting the
United States or world economy as a whole or affecting the industry in which
such entity competes as a whole, or (y) result from announcement or pendency of
the Merger.
(d)iv For purposes of this Agreement, the term "SUBSIDIARY" of any
entity means any other entity of which securities or other ownership interests
having ordinary voting power to
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elect a majority of the board of directors or other persons performing similar
functions are directly or indirectly owned or controlled by such entity.
9.3 COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the schedules and
----------------------------
Exhibits hereto, the Confidentiality Agreement and the documents and instruments
and other agreements among the parties hereto referenced herein: (a) constitute
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof; (b) are not
intended to confer upon any other person any rights or remedies hereunder; and
(c) shall not be assigned by operation of law or otherwise except as otherwise
specifically provided, except that Parent and Sub may assign their respective
rights and delegate their respective obligations hereunder to their respective
affiliates. This Agreement is binding upon and will inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
9.5 SEVERABILITY. In the event that any provision of this Agreement or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 OTHER REMEDIES. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.7 GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
9.8 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.
-41-
9.9 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provision of this
-----------------------------------------
Agreement is intended, nor will be interpreted, to provide to create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, employee, partner of any party hereto or any
other person or entity.
9.10 MUTUAL DRAFTING. This Agreement is the joint product of the parties
---------------
hereto, and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of each of the parties, and shall not be construed for
or against any party hereto.
9.11 FURTHER REPRESENTATIONS. Each party to this Agreement acknowledges
------------------------
and represents that it has been represented by its own legal counsel in
connection with the transactions contemplated by this Agreement, with the
opportunity to seek advice as to its legal rights from such counsel. Each party
further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences. The Company also represents that it has communicated the
above to its shareholders.
-42-
IN WITNESS WHEREOF, Parent, Sub, the Company and the Principal Shareholders
have entered into this Agreement as of the date first written above.
CITYAUCTION, INC. TICKETMASTER ONLINE - CITYSEARCH, INC.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------ ---------------------------------------
Name ▇▇▇▇▇▇ ▇▇▇▇▇▇ Name ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------- -------------------------------------
Title President Title Chief Legal Officer / V.P.
--------------------- -------------------------------------
PRINCIPAL SHAREHOLDERS NERO ACQUISITION CORPORATION
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------- ---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Name ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------
/s/ ▇▇▇▇▇▇ ▇▇▇
----------------------------
▇▇▇▇▇▇ ▇▇▇ Title Chief Legal Officer / V.P.
------------------------------------
[SIGNATURE PAGE TO REORGANIZATION AGREEMENT]
-43-
EXHIBIT A
---------
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (the "Merger Agreement") is made and entered into
as of March 29, 1999, by and between Nero Acquisition Corporation, a California
corporation ("Sub") and CityAuction, Inc., a California corporation (the
"Company" or the "Surviving Corporation"; Sub and the Company are sometimes
referred to as the "Constituent Corporations"). Capitalized terms used herein
and not defined in this Merger Agreement shall have their defined meanings as
set forth in the Agreement and Plan of Reorganization, dated as of January 8,
1999 (the "Reorganization Agreement"), entered into by and among TicketMaster
Online-CitySearch Inc., a Delaware corporation ("Parent"), Sub and the Company.
NOW THEREFORE, in consideration of the premises and mutual covenants and
agreements contained herein, Sub and the Company agree as follows:
ARTICLE I
1.1 Merger of Sub With and Into the Company.
---------------------------------------
(a) Agreement to Acquire the Company. Subject to the terms of this
--------------------------------
Merger Agreement and the Reorganization Agreement, the Company shall be acquired
by Parent through a merger (the "Merger") of Sub with and into the Company.
(b) Effective Time of the Merger. The Merger shall become effective upon
----------------------------
the filing of this Merger Agreement and officers' certificates of each
Constituent Corporation with the Secretary of State of the State of California
pursuant to Section 1103 of the California Corporations Code (the "Code"). The
time of such filing is referred to as the "Effective Time."
(c) Surviving Corporation. At the Effective Time, Sub shall be merged
---------------------
into the Company and the separate corporate existence of Sub shall thereupon
cease. The Company shall be the surviving corporation in the Merger and shall
succeed, without other transfer, to all the rights and property of Sub and shall
be subject to all the debts and liabilities of Sub in the same manner as if the
Surviving Corporation had itself incurred them.
1.2 Effect of the Merger; Additional Actions.
----------------------------------------
(a) Effects. The Merger shall have the effects set forth in Section 1107
-------
of the Code.
(b) Additional Actions. If, at any time after the Effective Time, the
------------------
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable (i) to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or
assets of either Constituent Corporation acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger or (ii)
to otherwise carry out the purposes of this Merger Agreement, each Constituent
Corporation and its officers and directors shall be deemed to have granted to
the Surviving Corporation an irrevocable power of attorney to execute and
deliver all such deeds, bills of sale, assignments and assurances and to take
and do all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation and otherwise to
carry out the purposes of this Merger Agreement; and the officers and directors
of the Surviving Corporation are fully authorized in the name of each
Constituent Corporation or otherwise to take any and all such actions.
ARTICLE II
THE CONSTITUENT CORPORATIONS
2.1 Organization of the Company.
---------------------------
(a) Incorporation. The Company was incorporated under the laws of the
-------------
State of California on April 21, 1998.
(b) Authorized Stock. The Company is authorized to issue an aggregate of
----------------
10,000,000 shares of Common Stock, no par value ("Company Common Stock") and an
aggregate of 1,015,000 shares of Preferred Stock, no par value ("Company
Preferred Stock").
(c) Outstanding Securities.
----------------------
(i) Outstanding Stock. At the close of business on March 29, 1999,
-----------------
2,815,000 shares of Company Common Stock were issued and outstanding.
(ii) Outstanding Options. At the close of business on March 29, 1999,
-------------------
the Company has reserved 300,000 shares of Company Common Stock for issuance to
employees and consultants pursuant to outstanding options (the "Company Stock
Options"), of which 22,394 were issued pursuant to the Company's 1998 Stock
Option Plan and 277,606 shares remain available for future grant.
2.2 Organization of Sub.
-------------------
(a) Incorporation. Sub was incorporated under the laws of the State of
-------------
California on January 8, 1999.
(b) Authorized Stock. Sub is authorized to issue an aggregate of 1,000
----------------
shares of Common Stock, no par value ("Sub Stock").
(c) Outstanding Stock. On the date of this Merger Agreement, an
-----------------
aggregate of 1,000 shares of Sub Stock are outstanding.
-2-
ARTICLE III
ARTICLES OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
3.1 Articles of Incorporation of the Surviving Corporation. The Articles of
------------------------------------------------------
Incorporation of Sub in effect at the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation unless and until amended as provided
by law and such Articles of Incorporation.
3.2 Bylaws of Surviving Corporation. The Bylaws of Sub as in effect
-------------------------------
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation unless and until amended or repealed as provided by applicable law,
the Articles of Incorporation of the Surviving Corporation and such Bylaws.
ARTICLE IV
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
4.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
-----------------------
Merger and without any action on the part of the holder of any shares of capital
stock of the Company:
(a) Capital Stock of Sub. Each issued and outstanding share of capital
--------------------
stock of Sub shall continue to be issued and outstanding and shall be converted
into one share of validly issued, fully paid and non-assessable Common Stock of
the Surviving Corporation. Each stock certificate of Sub evidencing ownership of
any such shares shall continue to evidence ownership of such shares of capital
stock of the Surviving Corporation.
(b) Cancellation of Certain Shares of Capital Stock of the Company. All
--------------------------------------------------------------
shares of Common Stock and Preferred Stock of the Company that are owned
directly or indirectly by the Company shall be canceled and no stock of Parent
or other consideration shall be delivered in exchange therefor.
(c) Conversion of Capital Stock of the Company. Subject to Sections
------------------------------------------
4.1(d), (e), (f) and (g) below, each issued and outstanding share of Common
Stock of Company (other than shares to be canceled pursuant to Section 4.1(b)
hereof and the Reorganization Agreement) that is issued and outstanding
immediately prior to the Effective Time shall automatically be canceled and
extinguished and converted, without any action on the part of the holder
thereof, into the right to receive 0.279971340 shares of Class B Common Stock,
$.01 par value, of Parent ("Parent Common Stock"). Each issued and outstanding
share of Preferred Stock of the Company that is issued and outstanding
immediately prior to the Effective Time shall automatically be canceled and
exstinguished and converted, without any action on the part of the holder
thereof, into the right to receive the number of shares of Parent Common Stock
equal to the number of shares of Company Preferred Stock held multiplied by
0.013520482 plus the number of shares of Company Preferred
-3-
Stock held multiplied by 0.279971340. All such shares of Company capital stock,
when so converted, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the shares of Parent Class B Common Stock
to be issued or paid in consideration therefor upon the surrender of such
certificate in accordance with Section 4.2 hereof and the Reorganization
Agreement. The ratios pursuant to which each share of Company Common Stock and
each share of Company Preferred Stock will be exchanged for shares of Parent
Class B Common Stock, determined in accordance with the foregoing provisions, is
referred to as the "Exchange Ratios."
(d) Dissenters' Rights. Any shares of Company Common or Preferred Stock
------------------
held by a holder who has properly exercised dissenters' rights for such shares
in accordance with the California Code and who, as of the Effective Time, has
not effectively withdrawn or lost such dissenters' rights ("Dissenting Shares")
shall not be converted into Parent Common Stock but shall be converted into the
right to receive such consideration as may be determined to be due with respect
to such Dissenting Shares pursuant to the California Code. The Company shall
give Parent prompt notice of any demand received by the Company to require the
Company to purchase shares of Company Common or Preferred Stock, and Parent
shall have the right to participate in all negotiations and proceedings with
respect to such demand. The Company agrees that, except with the prior written
consent of Parent, or as required under the California Code, it will not
voluntarily make any payment with respect to, or settle or offer to settle, any
such purchase demand. Each holder of Dissenting Shares (a "Dissenting
Shareholder") who, pursuant to the provisions of the California Code, becomes
entitled to payment of the value of shares of Company Common Stock shall receive
payment therefor (but only after the value therefor shall have been agreed upon
or finally determined pursuant to such provisions). In the event of legal
obligation, after the Effective Time, to deliver shares of Parent Common Stock
to any holder of shares of Company Common or Preferred Stock who shall have
failed to make an effective purchase demand or shall have lost its status as a
Dissenting Shareholder, Parent shall issue and deliver, upon surrender by such
Dissenting Shareholder of such holder's certificate or certificates representing
shares of capital stock of the Company, the shares of Parent Common Stock to
which such Dissenting Shareholder is then entitled under this Section 2.1 and
the Reorganization Agreement.
(e) Fractional Shares. No fractional shares of Parent Common Stock shall
-----------------
be issued, but in lieu thereof each holder of shares of Company Preferred Stock
or Common Stock who would otherwise be entitled to receive a fraction of a share
of Parent Common Stock shall receive from Parent an amount of cash equal to the
per share market value of Parent Common Stock (based on the last sales price of
Parent Common Stock as reported on the Nasdaq National Market on the date of
confirmation of the filing of the Merger Agreement, together with the required
officers' certificates, in accordance with the Code on the closing date of the
Merger) multiplied by the fraction of a share of Parent Common Stock to which
such holder would otherwise be entitled. The fractional share interests of each
shareholder of the Company shall be aggregated, so that no Company shareholder
shall receive cash in an amount greater than the value of one full share of
Parent Common Stock.
-4-
(f) Pledged Shares. Upon the Closing, 75,000 shares (of Parent Common
--------------
Stock) of the purchase price shall be held by Parent and shall be available for
satisfaction of indemnification claims made by Parent under Section 7 of the
Reorganization Agreement and such shares shall bear a restrictive legend to such
effect.
(g) Stock Options. At the Effective Time, all Company Stock Options then
-------------
outstanding shall be assumed by Parent in accordance with Section 5.16 of the
Reorganization Agreement.
4.2 Exchange of Certificates.
------------------------
(a) Exchange Agent. Prior to the Effective Time, Parent shall designate
--------------
a bank or trust company, reasonably acceptable to the Company, to act as
exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the Effective Time,
------------------------------
Parent shall deliver to the Exchange Agent in accordance with Section 4 hereof
and the Reorganization Agreement, the shares of Parent Common Stock issuable
pursuant to Section 4.1 hereof and the Reorganization Agreement in exchange for
outstanding shares of capital stock of the Company, and cash in an amount
sufficient for payment in lieu of fractional shares pursuant to Section 4.1(f)
above.
(c) Exchange Procedures. As soon as practicable after the Effective
-------------------
Time, the Survivin g Corporation shall cause to be mailed to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Preferred Stock or Common Stock
(the "Certificates") whose shares are being converted into Parent Common Stock
pursuant to Section 4.1 hereof and the Reorganization Agreement, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for Parent Common Stock.
Upon surrender of a Certificate for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by Parent, together with such
letter of transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor the number of shares of Parent Common
Stock to which the holder of Company Preferred Stock or Common Stock is entitled
pursuant to Section 4.1 hereof and the Reorganization Agreement. The Certificate
so surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Company Preferred Stock or Common Stock which is not registered on
the transfer records of the Company, the appropriate number of shares of Parent
Common Stock may be delivered to a transferee if the Certificate representing
such capital stock of the Company is presented to the Exchange Agent and
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 4.2, each Certificate shall be
deemed at any time after the Effective Time to represent the right to receive
upon such surrender the
-5-
number of shares of Parent Common Stock as provided by this Section 2 and the
provisions of the California Code.
(d) No Further Ownership Rights in Capital Stock of the Company. All
-----------------------------------------------------------
Parent Common Stock delivered upon the surrender for exchange of shares of
Company Preferred Stock or Common Stock in accordance with the terms hereof
shall be deemed to have been delivered in full satisfaction of all rights
pertaining to such shares of Company Preferred Stock or Common Stock, and
following the Effective Time, the Certificates shall have no further rights to,
or ownership in, shares of capital stock of the Company. There shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Preferred Stock or Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Section 4.
(e) Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
certificates evidencing shares of Company Preferred Stock or Common Stock shall
have been lost, stolen or destroyed, the Exchange Agent shall make payment in
exchange for such lost, stolen or destroyed certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent Common Stock
and cash for fractional shares, if any, as may be required pursuant to Section
4.1(f) hereof and the Reorganization Agreement; provided, however, that Parent
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificates to deliver a
bond in such sum as it may reasonably direct as indemnity against any claim that
may be made against Parent or the Exchange Agent with respect to the
certificates alleged to have been lost, stolen or destroyed.
(f) No Liability. Notwithstanding anything to the contrary in this
------------
Section 4.2, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of shares of Company Preferred or Common
Stock for any amount paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(g) Dissenting Shares. The provisions of this Section 4.2 shall also
-----------------
apply to Dissenting Shares that lose their status as such, except that the
obligations of Parent under this Section 4.2 shall commence on the date of loss
of such status.
ARTICLE V
TERMINATION
5.1 Termination by Mutual Agreement. Notwithstanding the approval of this
-------------------------------
Merger Agreement by the shareholders of the Company and Sub, this Merger
Agreement may be terminated at any time prior to the Effective Time by mutual
agreement of the Boards of Directors of the Company and Sub.
-6-
5.2 Termination of Reorganization Agreement. Notwithstanding the approval of
---------------------------------------
this Merger Agreement by the shareholders of the Company and Sub, this Merger
Agreement shall terminate forthwith in the event that the Reorganization
Agreement shall be terminated as therein provided.
5.3 Effects of Termination. In the event of the termination of this Merger
----------------------
Agreement, this Merger Agreement shall forthwith become void and there shall be
no liability on the part of Parent, Sub or the Company or their respective
officers or directors, except as otherwise provided in the Reorganization
Agreement.
ARTICLE VI
GENERAL PROVISIONS
6.1 Amendment. This Merger Agreement may be amended by the parties hereto at
---------
any time before or after approval hereof by the shareholders of the Company or
Sub by execution of an instrument in writing signed on behalf of each of the
parties hereto, provided however that no amendment shall be made which by law
requires the further approval of the shareholders of the Company without
obtaining such approval.
6.2 Counterparts. This Merger Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one agreement.
6.3 Governing Law. This Merger Agreement shall be governed in all respects,
-------------
including validity, interpretation and effect, by the laws of the State of
California.
-7-
IN WITNESS WHEREOF, the parties have duly executed this Merger Agreement as of
the date first written above.
NERO ACQUISITION CORPORATION
By:
-----------------------------
Title:
---------------------------
CITYAUCTION, INC.
By:
-----------------------------
Title:
---------------------------
[SIGNATURE PAGE TO MERGER AGREEMENT]
-8-
EXHIBIT B
---------
ALLOCATION OF EMPLOYEE STOCK OPTIONS
First 100,000 Options (No acceleration provision)
---------------------
======================================================================
Name Number of Options
======================================================================
▇▇▇▇▇▇ ▇▇▇▇▇▇ 85,200
----------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇ 8,500
----------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 4,000
----------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1,500
----------------------------------------------------------------------
▇▇▇▇▇▇ Birmingham 800
----------------------------------------------------------------------
Second 100,000 Options (Accleration based on performance)
----------------------
======================================================================
Name Number of Options
======================================================================
▇▇▇▇▇▇ ▇▇▇▇▇▇ 89,000
----------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇ 9,000
----------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 2,000
----------------------------------------------------------------------
----------------------------------------------------------------------
EXHIBIT C
---------
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (the "Agreement") is entered into as of
___________, 1999 by and among Ticketmaster Online-CitySearch, Inc., a Delaware
corporation ("Parent"), CityAuction, Inc., a California corporation (the
"Company") and ________________________________ (the "Manager").
Background
A. Parent, Caligula Acquisition Corporation ("Sub") and the Company have
entered into an Agreement and Plan of Reorganization dated as of January __,
1999 (the "Reorganization Agreement"), which provides for the merger (the
"Merger") of Sub with and into the Company. Capitalized terms not otherwise
defined in this Agreement have the meanings defined for them in the
Reorganization Agreement.
B. As a condition to the Merger, to preserve the value of the business
being acquired by Parent, the Reorganization Agreement contemplates, among other
things, that the Manager enter into this Agreement effective upon the Effective
Time of the Merger.
NOW THEREFORE, in consideration of the mutual promises made in this
Agreement, Parent, the Company and the Manager agree as follows:
1. Covenant Not to Compete or Solicit.
----------------------------------
(a) For two (2) years after the termination of Manager's employment
with Parent, the Company or any sudsidiary thereof (the "Non-Compete Period"),
the Manager shall not directly or indirectly for himself/herself or on behalf of
or in conjunction with any other person, company, partnership, corporation,
business, group or other entity, without the prior written consent of Parent,
engage anywhere in the world in (whether as an employee, consultant, proprietor,
partner, director or otherwise), or have any ownership interest in (except for
ownership of one percent (1%) or less of the outstanding securities of an entity
whose securities are listed on a national securities exchange), or participate
in the financing, operation, management or control of, any firm, corporation or
business or any business unit of any firm or corporation in any business selling
products or services in direct competition with the Parent's or the Company's
business, including the on-line ticketing, city guide, on-line auctions, and/or
on-line classifieds businesses.
During the Non-Compete Period, the Manager shall not, directly or
indirectly, without the prior written consent of Parent, (i) solicit, encourage,
hire or take any other action which is intended to induce any employee of the
Company or Parent or any subsidiary thereof to terminate his or her
employment with the Company or Parent or any subsidiary thereof (as the case may
be), or (ii) interfere in any manner with the contractual or employment
relationship between the Company and any employee of the Company or Parent and
any employee of Parent or any subsidiary of the Company or Parent and any
employee of any such subsidiary.
(b) The covenants contained in the preceding paragraphs shall be
construed as a series of separate convents, one of each county, city and state
of any geographic area where any business is presently carried on by Parent or
the Company. Except for geographic coverage, each such separate covenant shall
be identical in terms to the covenant contained in the preceding paragraphs. If,
in any judicial proceeding, a court refuses to enforce any of such separate
covenants (or any part thereof), then such unenforceable covenant (or such part)
shall be eliminated from this Agreement to the extent necessary to permit the
remaining separate covenants (or portions thereof) to be enforced. In the event
that the provisions of this Section 1 are deemed to exceed the time, geographic
or scope limitations permitted by applicable law, then such provisions shall be
reformed to the maximum time, geographic or scope limitations, as the case may
be, permitted by applicable laws.
(c) The Manager acknowledges that the Manager's covenant not to compete
or solicit contained in this Section 1 is a condition precedent to the Merger to
preserve the value of the business being purchased by Parent pursuant to the
Merger. The Manager further acknowledges that breach of this Section 1 would
cause irreparable injury to Parent and the Company and agrees that in the event
of such breach, Parent and the Company shall each be entitled to injunctive
relief without the necessity of proving actual damages.
2. Miscellaneous.
-------------
(a) Severability. If any portion of this Agreement is held by a court of
------------
competent jurisdiction to conflict with any federal, state or local law, such
portion of this Agreement shall be of no force or effect and this Agreement
shall otherwise remain in full force and effect and be construed as if such
portion had not been included in this Agreement.
(b) No Assignment. The Manager shall not assign this Agreement or any
-------------
rights or obligations under this Agreement without the prior written consent of
Parent.
(c) Notice. Any notice or other communication required or permitted
------
under this Agreement shall be made in writing and delivered personally to the
other parties or sent by certified or registered mail, return receipt requested
and postage prepaid to the addresses set forth on the signature page hereto or
such other address as any such party shall have furnished to the other parties
in writing in accordance with this Section 2(c).
(d) Entire Agreement. This Agreement contains the entire agreement and
----------------
understanding of the parties and supersedes all prior discussions, agreements
and understandings relating to the subject matter of this Agreement. This
Agreement may not be changed or modified, except by an agreement in writing
executed by Parent and the Manager.
(e) Effectiveness: Term. This Agreement shall become effective upon the
-------------------
Effective Date and shall continue in full force and effect for two (2) years
from its effectiveness.
-2-
(f) Other. The waiver of a breach of any term or provision of this
-----
Agreement shall not operate as or be construed to be a waiver of any other
previous or subsequent breach of this Agreement. This Agreement shall be
governed by the laws of the State of California. All captions and section
headings used in this Agreement are for convenient reference only and do not
form a part of this Agreement. This Agreement may be executed in counterparts,
and each counterpart shall have the same force and effect as an original and
shall constitute an effective, binding agreement on the part of each of the
undersigned.
-3-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written above.
TICKETMASTER ONLINE-CITYSEARCH, INC. MANAGER
By: ________________________________ _______________________________
Name: Name:
Title: Address:
Address:
CITYAUCTION, INC.
By: ________________________________
Name:
Title:
Address:
[Signature Page to Non-Competition Agreement]
-4-
EXHIBIT D
---------
INVESTMENT REPRESENTATION AGREEMENT
The undersigned is aware that pursuant to an Agreement and Plan of
Reorganization, dated as of January 8, 1999, (the "Reorganization Agreement"),
entered into by and among Ticketmaster Online - CitySearch, Inc., a Delaware
corporation ("Parent"), Nero Acquisition Corporation, a California corporation
and a wholly owned subsidiary of Parent ("Sub"), CityAuction, Inc., a California
corporation (the "Company"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇, individuals and
principal shareholders of the Company (each, a "Principal Shareholder"), Sub
will merge (the "Merger") with and into the Company and all shares of Company
Capital Stock will be exchanged for shares of Parent Common Stock set forth in
the Reorganization Agreement (the "Merger Consideration"). Unless otherwise
indicated, capitalized terms not defined herein have the meanings set forth in
the Reorganization Agreement.
The undersigned understands that the execution of this Certificate is a
condition precedent to Parent and Sub's obligation to consummate the Merger and
to the receipt of the shares of Parent Common Stock in connection with the
Merger (pursuant to the terms and conditions of the Reorganization Agreement).
The undersigned hereby represents and warrants as follows:
1. The Parent Common Stock issued to the undersigned will be
acquired for investment for the undersigned's own account, not as a nominee or
agent, and not with a view to the sale or distribution of any part thereof in
violation of the Securities Act of 1933, as amended (the "1933 Act"), and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same. The undersigned represents that the entire
legal and beneficial interest of the Parent Common Stock will be held for the
undersigned's account only, and neither in whole or in part for any other person
other than a wholly owned subsidiary of the undersigned. By executing this
Agreement, the undersigned further represents that the undersigned has no
present contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participation to such person or to any third person, with
respect to any of the Parent Common Stock.
2. The undersigned represents that (without limiting or affecting
the representations and warranties of Parent or Sub under the Reorganization
Agreement) it: (i) has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of the undersigned's
prospective investment in the shares of Parent Common Stock; (ii) has received
copies of Parent's Registration Statement on Form S-1 dated December 2, 1998;
(iii) has received all the information it has requested from the Parent and the
Company it considers necessary or appropriate for deciding whether to accept the
Parent Common Stock; (iv) has the ability to bear the economic risks of the
undersigned's prospective investment; and (v) is able, without materially
impairing its financial
condition, to hold the Parent Common Stock for an indefinite period of time and
to suffer complete loss on its investment.
3. Each certificate representing Parent Company Stock issued
pursuant hereto to the undersigned and any shares issued or issuable in respect
of any such Parent Common Stock upon any stock split, stock dividend,
recapitalization, or similar event, shall be stamped or otherwise imprinted with
legends in the following form (in addition to any legend required under
applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THESE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF
THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING
THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER, AS SET FORTH IN AN AGREEMENT BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THE CORPORATION. SUCH TRANSFER RESTRICTIONS
ARE BINDING ON TRANSFEREES OF THESE SHARES.
4. The certificates evidencing the Parent Common Stock shall also
bear any legend required pursuant to any state, local or foreign law governing
such securities or the Reorganization Agreement.
5. The undersigned understands and acknowledges that the Parent
Common Stock has not been registered under the 1933 Act and Parent Common Stock
must be held indefinitely unless subsequently registered under the 1933 Act or
an exemption from such registration is available and that the Parent is
obligated to register the Parent Common Stock only in accordance with the terms
of the Registration Rights Agreement.
6. The undersigned acknowledges that the Parent Common stock shall
not be transferable except upon the conditions specified in this Agreement and
the Reorganization Agreement.
7. Prior to any proposed transfer of any Parent Common Stock, unless
there is in effect a registration statement under the 1933 Act covering the
proposed transfer, the undersigned shall
-2-
give written notice to the Company of its intention to effect such transfer.
Each such notice shall describe the manner and circumstances of the proposed
transfer in sufficient detail, and shall, if the Parent so requests, be
accompanied by either (i) a written opinion of legal counsel who shall be
satisfactory to Parent, addressed to Parent and satisfactory in form and
substance to Parent's counsel, to the effect that the proposed transfer of
Parent Common Stock may be effected without registration under the 1933 Act, or
(ii) a "No Action" letter from the Securities and Exchange Commission (the
"Commission") to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such Parent
Common Stock shall be entitled to transfer such shares of Parent Common Stock in
accordance with the terms of the notice delivered by the holder to Parent. Each
certificate evidencing the shares of Parent Common Stock transferred as above
provided shall bear the appropriate restrictive legend set forth in Section (c)
above, except that such certificate shall not bear such restrictive legend if in
the opinion of counsel for Parent such legend is not required in order to
establish compliance with any provisions of the 1933 Act.
8. The undersigned is familiar with the provisions of Rule 144,
promulgated under the 1933 Act, which in substance, permits limited public
resale of "restricted securities" acquired, directly or indirectly from the
issuer thereof (or from an affiliate of such issuer) in a non-public offering
subject to the satisfaction of certain conditions, including, among other
things: (i) a public trading market then exists for the Parent Common Stock;
(ii) the availability of certain public information about Parent; (iii) the
resale occurring not less than one (1) year after the party has purchased, and
made full payment for, within the meaning of Rule 144, the securities to be
sold; and (iv) the sale being made through a broker in an unsolicited "broker
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934) and the amount of securities
being sold during any three (3) month period not exceeding the specified
limitations stated therein, if applicable. The undersigned further understands
that at the time the undersigned wishes to sell the shares of Parent Common
Stock received from Parent there may be no public market upon which to make such
a sale, and that, even if such a public market then exists, Parent may not be
satisfying the current public information requirements of Rule 144, and that, in
such event, the undersigned would be precluded from selling the shares of Parent
Common Stock received from Parent under Rule 144 even if the one (1) year
minimum holding period had been satisfied. The undersigned further understands
that in the event all of the applicable requirements of Rule 144 are not
satisfied, registration under the 1933 Act, compliance with Regulation A, or
some other registration exemption would be required to sell the shares of Parent
Common Stock received from Parent.
9. The undersigned is the sole record and beneficial owner of
capital stock of the Company in the amount set forth next to its name on the
signature page hereto. Such capital stock is not subject to any claim, lien,
pledge, charge, security interest or other encumbrance or to any rights of first
refusal of any kind, and the undersigned has not granted any rights to purchase
such shares to any other person or entity. The undersigned has the sole right
to transfer such shares. Such shares constitute all of the capital stock owned,
beneficially or of record, by the undersigned, and the undersigned has no other
rights to acquire any capital stock of the Company except as set forth on the
signature page hereto.
-3-
10. The undersigned has had an opportunity to review with its own tax
advisors the tax consequences to the undersigned of the Merger and the
transactions contemplated by the Reorganization Agreement. The undersigned
understands that it must rely solely on its advisors and not on any statements
or representations by Parent, the Company or any of their agents with respect to
tax matters. The undersigned understands that it (and not Parent or the
Company) shall be responsible for its own tax liability that may arise as a
result of the Merger or the transactions contemplated by the Reorganization
Agreement.
11. The undersigned will have sufficient assets, after completion of
the Merger, to satisfy all of the undersigned's obligations to its creditors, as
the same become due and payable.
12. This Agreement shall be governed in all respects, including
validity, interpretation and effect, by the laws of the State of California.
13. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one agreement.
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IN WITNESS WHEREOF, the undersigned has executed this Certificate this ____
day of March, 1999.
-------------------------------------------
Print Name of Stockholder
-------------------------------------------
Signature of Authorized Signatory
Number of Shares and Type of
Capital Stock of the Company:
(indicate class of stock, i.e.,
common, preferred, etc.)
-------------------------------------------
[SIGNATURE PAGE TO INVESTMENT REPRESENTATION STATEMENT]
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EXHIBIT E
---------
FORM OF OPINION
Reference is made to the Agreement and Plan of Reorganization, dated as of
January 8, 1999 the "Reorganization Agreement"), excluding all listed exhibits
thereto, by and among Ticketmaster Online - CitySearch, Inc., a Delaware
corporation ("Parent"), and CityAuction, Inc., a California corporation (the
"Company"), which provides for the merger (the "Merger") of a wholly-owned
subsidiary of Parent with and into the Company. Reference is also made to the
Registration Rights Agreement, the Employment Agreements, the Non-Competition
Agreements and the Voting Agreement, dated January ___, 1999 by and among Parent
and certain shareholders of the Company (such agreements, including the
Reorganization Agreement, are referred to collectively hereinafter as the
"Agreements"). This opinion is rendered to you pursuant to Section 6.2(b) of the
Agreement, and all terms used herein have the meanings defined for them in the
Agreement unless otherwise defined herein.
Based upon and subject to the foregoing, and except as set forth in the
Company Schedules, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation and is duly qualified
as a foreign corporation and in good standing in each other jurisdiction in
which the failure to so qualify would have a material adverse effect on such
Company's business condition. The Company has no subsidiaries. The Company has
all requisite power and authority to own, operate and lease its properties and
to carry on its business as now being conducted.
2. (a) The authorized capital stock of the Company consists (i) of
10,000,000 shares of Common Stock, of which 2,400,000 shares are issued and
outstanding and (ii) 1,015,000 shares of Preferred Stock, of which 415,000
shares, designated Series A Preferred Stock, are outstanding. All of such
outstanding shares have been duly authorized, validly issued, fully paid and
non-assessable and have been issued in compliance with all applicable federal
and state securities laws. The outstanding shares of Company Capital Stock are
not subject to preemptive rights created by statute, the Articles of
Incorporation or Bylaws of the Company, or any agreement to which the Company is
a party or by which it may be bound. There are no voting agreements or voting
trusts with respect to any of the outstanding shares of capital stock of the
Company. The outstanding shares of capital stock of the Company are held by the
persons and in the amounts set forth in Section 3.2 of the Company Schedules.
(b) The Company has reserved 300,000 shares of Company Common Stock for
issuance to employees and consultants pursuant to outstanding options (the
"Company Stock Options"), of which 15,019 were issued pursuant to the Company's
1998 Stock Option Plan (the "Company's Stock Option Plan") and 284,981 shares
remain available for future grant under the
-1-
plan. Section 3.2(b) of the Company Schedules sets forth for each outstanding
Company Stock Options the name of the holder of such option, the number of
shares of Company Common Stock subject to such option, the exercise price of
such option and the vesting schedule for such option, including the extent
vested to date. The Company has reserved 600,000 shares of Series A Preferred
Stock issuable upon exercise of a warrant issued to Snap! LLC (the "Warrant").
Except for the Company Stock Options described in Section 3.2(b) of the Company
Schedules and the Warrant, there are no options, warrants, calls, rights,
commitments or agreements of any character, written or oral, to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of the Company or
obligating the Company to grant, extend, accelerate the vesting of, change the
price of, otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. The Company's Stock Options and the Warrant have been
issued in compliance with all applicable federal and state securities laws. The
holders of Company Stock Options and the Warrant have given, or have properly
waived, any required notice prior to the Merger. As a result of the Merger,
Parent will be the record and beneficial owner of all outstanding capital stock
of the Company and, except for stock options granted pursuant to the Company's
Stock Option Plan [and the Warrant], rights to acquire capital stock of the
Company.
3. The execution and delivery of the Reorganization Agreement, the
Agreement of Merger, the Non-Competition Agreement, the Employment Agreement(s)
and the Registration Rights Agreement (the "Agreements") do not, and the
consummation of the transactions contemplated by the Agreements will not,
conflict with or result in any violation of any statute, law, rule, regulation,
judgment, or, to our knowledge, any order, decree or ordinance applicable to the
Company or its properties or assets, or, conflict with or result in any material
breach or default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation, or acceleration of any
obligation or to loss of a material benefit under, or result in the creation of
a material lien or encumbrance on any of the properties or assets of the Company
pursuant to (i) any provision of the Articles of Incorporation or Bylaws of the
Company currently in effect or (ii) to the best of our knowledge, except as
disclosed in the Reorganization Agreement and the Company Schedules, any
agreement, contract, note, mortgage, indenture, lease, instrument, permit,
concession, franchise or license to which the Company is a party or by which the
Company or any of its properties or assets may be bound or affected.
4. The Company has all requisite corporate power and authority to enter
into the Agreements, to perform its obligations thereunder and to consummate the
transactions contemplated thereby. The execution and delivery of the Agreements,
the performance by the Company of its obligations thereunder and the
consummation of the transactions contemplated thereby have been duly and validly
authorized by all necessary corporate action on the part of the Company, and
have been approved by the Board of Directors and shareholders of the Company. No
other corporate proceeding on the part of the Company is necessary to authorize
the Agreements by the Company or the performance of the Company's obligations
thereunder or the consummation of the transactions contemplated thereby. The
Agreements to which the Company is a party have been duly executed
-2-
and delivered by the Company and constitute legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms.
5. No consent, approval, authorization or order of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to the Company or in connection with the execution and delivery by the
Company of the Agreements to which it is a party, or the consummation by the
Company of the transactions contemplated thereby, except for (i) the filing of
the Merger Agreement by the California Secretary of State, (ii) such as have
been obtained or accomplished, and (iii) such consents, approvals, orders
authorizations, registrations, declarations and filings as may be required under
the laws of California, which if not obtained or made would not have a material
adverse effect on the business condition of the Company.
6. The Agreements have been duly approved and adopted by the affirmative
vote of a number of outstanding shares of the Company's capital stock that
equals or exceeds the number of such shares required to approve the Agreements,
under the California Corporations Code and the Company's Articles of
Incorporation.
7. There is no action, suit, proceeding, claim or investigation pending
or, to the best of our knowledge, threatened against the Company which could,
individually or in the aggregate, have a material adverse effect on the business
condition of the Company or which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay any of the transactions contemplated by the
Agreements.
8. To the best of our knowledge, the Company has not received notice that
it would be, with the passage of time, in default or violation of any material
term, condition or provision of any material judgment, order, injunction or
stipulation applicable to the Company.
-3-
EXHIBIT F
---------
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), is made as of March
__, 1999, by and among Ticketmaster Online-CitySearch, Inc., a Delaware
corporation ("Parent"), and certain former shareholders of CityAuction, Inc., a
California corporation (the "Company"), listed on the signature pages hereto
(the "Shareholders").
WHEREAS:
A. Pursuant to the terms of the Agreement and Plan of Reorganization dated
as of January 8, 1999 (the "Reorganization Agreement"), by and among Parent, the
Company, and Nero Acquisition Corporation, a California corporation and wholly
owned subsidiary of Parent ("Sub"), Sub is being merged with and into the
Company (the "Merger"), with the Company being the surviving corporation.
B. In connection with the Merger, the Shareholders shall receive shares
(the "Shares") of Class B Common Stock of Parent, par value $.01 per share
("Parent Common Stock").
C. The Reorganization Agreement provides for the execution and delivery of
this Agreement at the closing of the transactions contemplated thereby which
grants the Shareholders certain rights to have their Shares registered under the
Securities Act of 1933, as amended.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. DEFINITIONS.
-----------
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "Lock-up Period" means the time period commencing on the closing
date of Parent's initial public offering and expiring 180 days therefrom.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(iii) "Registrable Securities" means the Shares and any shares of
capital stock issued or issuable as a dividend on or in exchange for or
otherwise with respect to the Shares, provided, however, that such securities
shall only be treated as Registrable Securities if and so long as they have not
been (A) sold to or through a broker or dealer or underwriter in a public
distribution
or a public securities transaction, or (B) sold or are, in the opinion of
counsel for Parent, available for sale in a single transaction exempt from the
registration and prospectus delivery requirements of the 1933 Act so that all
transfer restrictions and restrictive legends with respect thereto are removed
upon the consummation such sale.
(iv) "Registration Statement" means a registration statement of
Parent under the ▇▇▇▇ ▇▇▇.
b. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Purchase Agreement.
2. REGISTRATION.
------------
a. Parent shall prepare and file with the SEC a Registration Statement
on Form S-1 (or, another appropriate form in the discretion of Parent as is then
available to effect a registration of the Registrable Securities) covering the
resale of the Registrable Securities as soon as practicable following the
Closing of the Merger.
b. As a condition of Parent's efforts to file a Registration Statement,
the Shareholders shall execute and deliver to Parent, in forms acceptable to
Parent (i) agreements prohibiting the sale or other transfer of the Registrable
Securities until the expiration of the Lock-up Period and (ii) agreements
prohibiting the sale or other transfer of the Registrable Securities during
periods outside of the trading windows applicable to the officers of Parent as
set forth in Parent's ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Program adopted by Parent's Board of
Directors.
3. OBLIGATIONS OF THE COMPANY.
-------------------------
In connection with the registration of the Registrable Securities, Parent
shall have the following obligations:
a. Parent shall prepare promptly and file with the SEC a Registration
Statement with respect to the Registrable Securities as provided in Section
2(a), and thereafter use its reasonable commercial efforts to cause such
Registration Statement relating to Registrable Securities to become effective,
and keep the Registration Statement effective pursuant to Rule 415 at all times
until such date as is the earlier of (i) the date on which all of the
Registrable Securities have been sold and (ii) the date on which the Registrable
Securities (in the opinion of counsel to the Shareholders) may be immediately
sold without restriction (including without limitation as to volume by each
holder thereof) without registration under the 1933 Act (the "Registration
Period").
b. Parent shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by the Registration Statement until such time as all of such
Registrable Securities
-2-
have been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in the Registration Statement.
c. Parent shall furnish to the Shareholders (i) promptly after the
Registration Statement is prepared and publicly distributed, filed with the SEC,
or received by Parent, one copy of the Registration Statement and any amendment
thereto, each preliminary prospectus and prospectus and each amendment or
supplement thereto and (ii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as the Shareholders may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Shareholders. Parent will immediately notify the Shareholders by facsimile of
the effectiveness of the Registration Statement or any post-effective amendment.
Parent will promptly file an acceleration request as soon as practicable
following the resolution or clearance of all SEC comments or, if applicable,
following notification by the SEC that the Registration Statement or any
amendment thereto will not be subject to review.
d. Parent shall use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or "blue sky" laws of such jurisdictions in the United States as the
Shareholders reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that Parent shall not be
-------- -------
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws.
e. In the event the Shareholders select underwriters for the offering,
Parent shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering.
f. As promptly as practicable after becoming aware of such event, Parent
shall notify the Shareholders of (x) the issuance by the SEC of a stop order
suspending the effectiveness of the Registration Statement, (y) the happening of
any event, of which Parent has knowledge, as a result of which the prospectus
included in the Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, (z)
the occurrence or existence of any pending corporate development that, in the
reasonable discretion of Parent, makes it appropriate to suspend the
availability of the Registration Statement and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to the Shareholders,
-3-
as the Shareholders may reasonably request; provided that, for not more than
twenty (20) consecutive trading days (or a total of not more than thirty (30)
trading days in any twelve (12) month period) (or 60 trading days in any 12
month period, in the case of an event described in clause (z) above that arises
from an acquisition or a probable acquisition or financing, recapitalization,
business combination or other similar transaction), Parent may delay the
disclosure of material non-public information concerning Parent (as well as
prospectus or Registration Statement updating) the disclosure of which at the
time is not, in the good faith opinion of Parent, the best interests of Parent
(an "Allowed Delay"); provided, further, that Parent shall promptly (i) notify
the Shareholders in writing of the existence of (but in no event, without the
prior written consent of the Shareholders, shall Parent disclose to such
Shareholder any of the facts or circumstances regarding) material non-public
information giving rise to an Allowed Delay and (ii) advise the Shareholders in
writing to cease all sales under the Registration Statement until the end of the
Allowed Delay. Upon expiration of the Allowed Delay, Parent shall again be bound
by the first sentence of this Section 3(f) with respect to the information
giving rise thereto.
g. Parent shall use its best efforts to prevent the issuance of any stop
order or other suspension of effectiveness of a Registration Statement, and, if
such an order is issued, to obtain the withdrawal of such order at the earliest
possible moment and to notify each Shareholder who holds Registrable Securities
being sold (or, in the event of an underwritten offering, the managing
underwriters) of the issuance of such order and the resolution thereof.
h. Parent shall permit a single firm of counsel designated by the
Shareholders to review the Registration Statement and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof) a reasonable period of time prior to their filing with the SEC, and not
file any document in a form to which such counsel reasonably objects and will
not request acceleration of the Registration Statement without prior notice to
such counsel. The sections of the Registration Statement covering information
with respect to the Shareholders, the Shareholders' beneficial ownership of
securities of Parent or the Shareholders' intended method of disposition of
Registrable Securities shall conform to the information provided to Parent by
each of the Shareholders.
i. Parent shall (i) cause all the Registrable Securities covered by the
Registration Statement to be listed on each national securities exchange on
which securities of the same class or series issued by Parent are then listed,
if any, if the listing of such Registrable Securities is then permitted under
the rules of such exchange, or (ii) secure the designation and quotation, of all
the Registrable Securities covered by the Registration Statement on the Nasdaq
or, if not eligible for the Nasdaq on the Nasdaq SmallCap.
4. OBLIGATIONS OF THE SHAREHOLDERS.
-------------------------------
In connection with the registration of the Registrable Securities, the
Shareholders shall have the following obligations:
-4-
a. It shall be a condition precedent to the obligations of Parent to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities that the Shareholders shall furnish to Parent such
information regarding themselves, the Registrable Securities held by them and
the intended method of disposition of the Registrable Securities held by them as
shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such registration
as Parent may reasonably request. At least three (3) business days prior to the
first anticipated filing date of the Registration Statement, Parent shall notify
the Shareholders of the information Parent requires from the Shareholders.
b. The Shareholders, by their acceptance of the Registrable Securities,
agree to cooperate with Parent as reasonably requested by Parent in connection
with the preparation and filing of the Registration Statement hereunder, unless
the Shareholders have notified Parent in writing of the Shareholders' election
to exclude all of their Registrable Securities from the Registration Statement.
c. In the event the Shareholders determine to engage the services of an
underwriter, the Shareholders agree to enter into and perform the Shareholders'
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities.
d. The Shareholders agree that, upon receipt of any notice from Parent
of the happening of any event of the kind described in Section 3(f) or 3(g), the
Shareholders will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until the Shareholders' receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(f) or 3(g) and, if so directed by Parent,
the Shareholders shall deliver to Parent (at the expense of Parent) or destroy
(and deliver to Parent a certificate of destruction) all copies in the
Shareholders' possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
e. The Shareholders may not participate in any underwritten registration
hereunder unless they (i) agree to sell their Registrable Securities on the
basis provided in any underwriting arrangements in usual and customary form
entered into by Parent, (ii) complete and execute all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and (iii) agree to
pay all underwriting discounts and commissions and any expenses in excess of
those payable by Parent pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualification fees, printers and accounting fees, the
-5-
fees and disbursements of counsel for Parent, and the reasonable fees and
disbursements of one counsel selected by the Shareholders pursuant to Section
3(h) hereof, up to a maximum of [$20,000], shall be borne by Parent.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, Parent will indemnify, hold harmless
and defend (i) each Shareholder who holds such Registrable Securities, (ii) the
directors, officers, partners, employees, agents and each person who controls
any Shareholder within the meaning of the 1933 Act or the Securities Exchange
Act of 1934, as amended (the "1934 Act"), if any, (iii) any underwriter (as
defined in the ▇▇▇▇ ▇▇▇) for the Shareholders, and (iv) the directors, officers,
partners, employees and each person who controls any such underwriter within the
meaning of the 1933 Act or the 1934 Act, if any (each, an "Indemnified Person"),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, "Claims") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading; (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
Parent files any amendment thereof or supplement thereto with the SEC) or the
omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading; or (iii) any violation or alleged
violation by Parent of the 1933 Act, the 1934 Act, any other law, including,
without limitation, any state securities law, or any rule or regulation
thereunder relating to the offer or sale of the Registrable Securities (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(c) with
respect to the number of legal counsel, Parent shall reimburse the Indemnified
Person, promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to Parent by any Indemnified Person or
underwriter for such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by Parent
pursuant to Section 3(c) hereof; (ii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of Parent, which consent shall not be unreasonably withheld; and (iii)
with respect to any preliminary prospectus, shall not inure to the benefit of
any Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a
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timely basis in the prospectus, as then amended or supplemented, such corrected
prospectus was timely made available by Parent pursuant to Section 3(c) hereof,
and the Indemnified Person was promptly advised in writing not to use the
incorrect prospectus prior to the use giving rise to a Violation and such
Indemnified Person, notwithstanding such advice, used it. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person.
b. In connection with any Registration Statement in which the
Shareholders are participating, the Shareholders agree to indemnify, hold
harmless and defend, to the same extent and in the same manner set forth in
Section 6(a), Parent, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls Parent within the
meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation by
such Shareholder, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished to Parent by such Shareholder expressly for use in connection with
such Registration Statement; and subject to Section 6(c) such Shareholder will
reimburse any legal or other expenses (promptly as such expenses are incurred
and are due and payable) reasonably incurred by them in connection with
investigating or defending any Claim; provided, however, that the indemnity
-------- -------
agreement contained in this Section 6(b) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Shareholder, which consent shall not be unreasonably withheld;
provided, further, however, that the Shareholder shall be liable under this
-------- ------- -------
Agreement (including this Section 6(b)) for only that amount as does not exceed
the net proceeds to such Shareholder as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
--------
however, that an Indemnified Person or Indemnified Party shall have the right to
-------
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable
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opinion of counsel retained by the indemnifying party, the representation by
such counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. The indemnifying party shall pay
for only one separate legal counsel for the Indemnified Persons or the
Indemnified Parties, as applicable, and such legal counsel shall be selected by
the Shareholders, if the Shareholders are entitled to indemnification hereunder,
or Parent, if Parent is entitled to indemnification hereunder, as applicable.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
actually prejudiced in its ability to defend such action. The indemnification
required by this Section 6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.
7. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof may
be waived only by the mutual written consent of Parent and the Shareholders.
8. MISCELLANEOUS.
-------------
a. Any notices required or permitted to be given under the terms hereof
shall be sent by certified or registered mail (return receipt requested) or
delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed in
the mail, if mailed by regular U.S. mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If to Parent:
Ticketmaster Online - CitySearch, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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If to the Shareholders: to the address set forth immediately below each
Shareholder's name on the signature page to the Purchase Agreement. Each party
shall provide notice to the other party of any change of its address.
b. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
c. This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof.
d. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.
e. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
f. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
g. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
h. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
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IN WITNESS WHEREOF, Parent and the undersigned Shareholder have caused this
Agreement to be duly executed as of the date first above written.
TICKETMASTER ONLINE - CITYSEARCH, INC.
By:
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Chief Legal Officer
SHAREHOLDER
By:
-----------------------------------
Name:
Title:
Address:
[Signature Page to Registration Rights Agreement]
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AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF REORGANIZATION (this
"Amendment") is entered into as of March 19, 1999, by and between Ticketmaster
Online -CitySearch, Inc., a Delaware corporation ("Parent"), Nero Acquisition
Corporation, a California corporation and wholly-owned subsidiary of Parent
("Sub"), CityAuction, Inc., a California corporation (the "Company"), ▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇ (collectively, the "Shareholders").
RECITALS
A. Parent and the Company are parties to that certain Agreement and Plan
of Reorganization, dated as of January 8, 1999 (the "Reorganization Agreement"),
subject to the terms and conditions of which Sub will merge with and into the
Company (the "Merger"). Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Reorganization Agreement.
B. On February __, 1999, the Company restated its Articles of
Incorporation, changing the liquidation preference of the holders of the Series
A Preferred Stock to an amount equal to $0.50 per share.
C. Parent and the Company wish to amend the Reorganization Agreement upon
the terms set forth in this Amendment.
NOW, THEREFORE, the parties hereby agree as follows:
1. Amended Provisions. Sections 2.1(c), (d) and (e) of the Reorganization
Agreement shall be amended and restated in their entirety as follows:
"(c) Conversion of Capital Stock of the Company. Subject to Sections
------------------------------------------
2.1(d), (e), (f), (g) and (h) below, each issued and outstanding share of
preferred stock of the Company, $0.01 par value ("COMPANY PREFERRED STOCK")
(other than shares canceled pursuant to Section 2.1(b)), and each issued and
outstanding share of common stock of the Company, $0.01 par value, ("COMPANY
COMMON STOCK") (other than shares cancelled pursuant to Section 2.1(b)), that is
issued and outstanding immediately prior to the Effective Time shall
automatically be canceled and extinguished and converted, without any action on
the part of the holder thereof into the right to receive the number of shares of
Parent Common Stock calculated as set forth below.
For purposes of this Section 2.1(c), the following terms shall have the
meanings set forth below:
"Average Trading Price" shall mean average of the closing prices of
---------------------
the securities on the NASDAQ National Market System over the 30-day period
ending three (3) days prior to the Closing.
"Liquidation Preference Amount" shall mean $207,500.
-----------------------------
"Preference Shares" shall mean the number of shares of Parent Common
-----------------
Stock equal to the Liquidation Preference divided by the Average Trading Price.
"Primary Exchange Ratio" shall equal the Preference Shares divided by
----------------------
415,000 (the number of outstanding shares of Company Preferred Stock).
"Remainder Shares" shall equal the number of shares of Parent Common
----------------
Stock equal to 800,000 shares minus the Preference Shares.
"Secondary Exchange Ratio" shall equal the Remainder Shares divided by
------------------------
2,837,394 (the number of outstanding shares of Parent capital Stock plus
outstanding stock options).
The Primary Exchange Ratio and the Secondary Ratio shall be subject to
recalculation in the manner set forth in the definitions above in the event the
number of outstanding shares of Company Preferred Stock of Common Stock or
outstanding Company Stock options is changed prior to the Effective Time.
Each holder of Company Preferred Stock shall be entitled to receive the
number of shares of Parent Common Stock at the Effective Time equal to the
following:
[Number of shares of Company Preferred Stock held multiplied by the
Primary Exchange Ratio] plus [Number of shares of Preferred Stock held
multiplied by the Secondary Exchange Ratio]
Each holder of Company Common Stock shall be entitled to receive the number
of shares of Parent Common Stock at the Effective Time equal to the following:
[Number of shares of Company Common Stock held multiplied by the
Secondary Exchange Ratio]
FOR EXAMPLE, if the Average Trading Price equaled $45, the Primary Exchange
Ratio would equal 0.01111111 and the Secondary Exchange Ratio would equal
0.280323737. In such event, a holder of 400,000 shares of Company Preferred
Stock would receive 116,574 shares of Parent Common Stock at the Effective Time,
and a holder of 400,000 shares of Company Common Stock would receive 112,129
shares of Parent Common Stock at the Effective Time.
(d) Adjustment of Exchange Ratios. If, between the date of this
-----------------------------
Agreement and the Effective Time, the outstanding shares of Parent Common Stock
(or, subject to Section 5.1 below, Company Preferred Stock or Common Stock)
shall have been changed into a different
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number of shares or a different class by reason of any reclassification, split-
up, stock dividend, stock combination, then the Primary and Secondary Exchange
Ratios shall be correspondingly adjusted.
(e) Dissenters' Rights. Any shares of Company Preferred Stock or
------------------
Common Stock held by a holder who has properly exercised dissenters' rights for
such shares in accordance with the California Code and who, as of the Effective
Time, has not effectively withdrawn or lost such dissenters' rights ("DISSENTING
SHARES") shall not be converted into Parent Common Stock but shall be converted
into the right to receive such consideration as may be determined to be due with
respect to such Dissenting Shares pursuant to the California Code. The Company
shall give Parent prompt notice of any demand received by the Company to require
the Company to purchase shares of Company Preferred Stock or Common Stock, and
Parent shall have the right to participate in all negotiations and proceedings
with respect to such demand. The Company agrees that, except with the prior
written consent of Parent, or as required under the California Code, it will not
voluntarily make any payment with respect to, or settle or offer to settle, any
such purchase demand. Each holder of Dissenting Shares (a "DISSENTING
SHAREHOLDER") who, pursuant to the provisions of the California Code, becomes
entitled to payment of the value of shares of Company Common Stock shall receive
payment therefor (but only after the value therefor shall have been agreed upon
or finally determined pursuant to such provisions). In the event of legal
obligation, after the Effective Time, to deliver shares of Parent Common Stock
to any holder of shares of Company Preferred Stock or Common Stock who shall
have failed to make an effective purchase demand or shall have lost its status
as a Dissenting Shareholder, Parent shall issue and deliver, upon surrender by
such Dissenting Shareholder of such holder's certificate or certificates
representing shares of capital stock of the Company, the shares of Parent Common
Stock to which such Dissenting Shareholder is then entitled under this Section
2.1 and the Merger Agreement."
The second sentence of Section 2.1(i)(ii) is amended and restated to
read as follows: "The exercise price for such option shall be equal to the
closing price of the Parent Common Stock on the NASDAQ National Market System on
the date of the Closing."
The first sentence of Section 2.1(f) is amended and restated to read
as follows: "No fractional shares of Parent Common Stock shall be issued, but in
lieu thereof each holder of shares of Company Preferred Stock or Common Stock
who would otherwise be entitled to receive a fraction of a share of Parent
Common Stock shall receive from Parent an amount of cash equal to the per share
market value of Parent Common Stock (based on the last sales price of Parent
Common Stock as reported on the Nasdaq National Market on the Effective Date)
multiplied by the fraction of a share of Parent Common Stock to which such
holder would otherwise be entitled."
The first sentence of Section 2.2(g) shall be amended and restated to
read as follows:
The maximum consideration to be paid by Parent (including Parent
Common Stock to be reserved for issuance upon exercise of the Company's options
assumed by Parent
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pursuant to Section 5.16) pursuant to the Merger shall be equal to (i) 800,000
shares of Parent Common Stock (plus any additional shares of Parent Common Stock
exchanged in the Merger at the Secondary Exchange Ratio for shares of capital
stock of the Company issued upon exercise of the Warrant (as defined in Section
3.2)) plus (ii) an additional 200,000 shares of Parent Common Stock to be
reserved for issuance upon exercise of options to purchase Parent Common Stock
to be granted to the employees of CityAuction as set forth in Section 2.1(i)(b)
below.
The second paragraph of Section 2.1(h)(i)(B) is amended and restated
to read as follows: "The Pledged Shares shall be withheld from the shareholders
in relation to the prorated percentage of shares of Parent Common Stock issuable
to such shareholders in the Merger as set forth in Section 2.1(c)."
Sections 2.2 (c), (d), (e) and (f) shall be amended and restated in their
entirety as follows:
"(c) Exchange Procedures. As soon as practicable after the Effective
-------------------
Time, the Surviving Corporation shall cause to be mailed to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Preferred Stock or Common Stock
(the "Certificates") whose shares are being converted into Parent Common Stock
pursuant to Section 2.1 and the Merger Agreement, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor the number of shares of Parent Common Stock to
which the holder of Company Preferred Stock or Common Stock is entitled pursuant
to Section 2.1. The Certificate so surrendered shall forthwith be canceled. In
the event of a transfer of ownership of Company Preferred Stock or Common Stock
which is not registered on the transfer records of the Company, the appropriate
number of shares of Parent Common Stock may be delivered to a transferee if the
Certificate representing such capital stock of the Company is presented to the
Exchange Agent and accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed at any time after the Effective Time to represent the right to
receive upon such surrender the number of shares of Parent Common Stock as
provided by this Section 2 and the provisions of the California Code.
(d) No Further Ownership Rights in Capital Stock of the Company. All
-----------------------------------------------------------
Parent Common Stock delivered upon the surrender for exchange of shares of
Company Preferred Stock or Common Stock in accordance with the terms hereof
shall be deemed to have been delivered in full satisfaction of all rights
pertaining to such shares of Company Preferred Stock or Common Stock, and
following the Effective Time, the Certificates shall have no further rights to,
or
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ownership in, shares of capital stock of the Company. There shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Preferred Stock or Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Section 2.
(e) Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
certificates evidencing shares of Company Preferred Stock or Common Stock shall
have been lost, stolen or destroyed, the Exchange Agent shall make payment in
exchange for such lost, stolen or destroyed certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent Common Stock
and cash for fractional shares, if any, as may be required pursuant to Section
2.1(f); provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the certificates alleged to have been lost, stolen or
destroyed.
(f) No Liability. Notwithstanding anything to the contrary in this
------------
Section 2.2, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of shares of Company Preferred or Common
Stock for any amount paid to a public official pursuant to any applicable
abandoned property, escheat or similar law."
2. Agreement of Merger. The parties agree that the Agreement of Merger
shall be revised to reflect the amendments, described above.
3. Authority. The Company represents and warrants that the execution and
delivery of this Amendment by the Company has been duly authorized by all
necessary corporate action on the part of the Company, that this Amendment has
been duly executed and delivered by the Company and that this Amendment is the
valid and binding obligation of the Company, enforceable in accordance with its
terms, except that such enforceability may be subject to (i) bankruptcy,
insolvency, reorganization or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles. Parent represents and warrants that the execution and delivery of
this Amendment by Parent has been duly authorized by all necessary corporate
action on the part of Parent, that this Amendment has been duly executed and
delivered by Parent and that this Amendment is the valid and binding obligation
of Parent, enforceable in accordance with its terms, except that such
enforceability may be subject to (i) bankruptcy, insolvency, reorganization or
other similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
4. Governing Law; Counterparts. The internal laws of the State of
California (irrespective of its choice of law principles) will govern the
validity of this Amendment, and this Amendment may be executed in counterparts
each of which shall be deemed an original and all of which shall constitute one
instrument.
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TICKETMASTER ONLINE - CITYAUCTION, INC.
CITYSEARCH, INC.
By: s/s ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------- --------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Chief Legal Officer President
NERO ACQUISITION CORPORATION SHAREHOLDERS
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------- --------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
President
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇▇▇
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