AGREEMENT AND PLAN OF REORGANIZATION
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BY AND AMONG
INDIVIDUAL, INC.,
CN MERGER CORP.,
CLARINET COMMUNICATIONS CORP.
and
CERTAIN SHAREHOLDERS OF CLARINET COMMUNICATIONS CORP.
June 13, 1997
iii
288LAG4525/25.365579-5--Agt. & Plan of Reorg.
TABLE OF CONTENTS
PAGE
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ARTICLE I - DEFINITIONS 2
1.01. Definitions 2
ARTICLE II - PLAN OF REORGANIZATION 4
2.01. The Merger 4
2.02. Effective Time 4
2.03. Effect of the Merger 5
2.04. Certificate of Incorporation; By-Laws 5
2.05. Directors and Officers 5
2.06. Effect on Capital Stock 5
2.07. Exchange of Certificates 6
2.08. Stock Transfer Books 8
2.09. Dissenting Shares 8
2.10. No Further Ownership Rights in Company Common Stock 8
2.11. Lost, Stolen or Destroyed Certificates 9
2.12. Tax and Accounting Consequences 9
2.13. Taking of Necessary Action; Further Action 9
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLER 9
3.01. Binding Effect 10
3.02. Corporate Existence and Power 10
3.03. Governmental Authorization; Consents 10
3.04. Non-Contravention 11
3.05. Capitalization 11
3.06. Subsidiaries 11
3.07. Financial Statements 11
3.08. Absence of Certain Changes 12
3.09. Property and Equipment 13
3.10. No Undisclosed Material Liabilities 14
3.11. Litigation 14
3.12. Material Contracts 14
3.13. Insurance Coverage 16
3.14. Compliance with Laws; Permits; No Defaults 16
3.15. Finder's Fees 17
3.16. Intellectual Property 17
3.17. Taxes 18
3.18. Employees 20
3.19. Transactions with Affiliates 21
3.20. Other Information 21
3.21. Investment Representations 21
(a) No Distribution 21
(b) Investor Qualification 21
(c) Restrictions on Resale 21
(d) Access to Information 22
3.22. Option Plans 22
3.23. Vote Required 22
3.24. Content Provider Agreements 23
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE BUYER 23
4.01. Binding Effect 23
4.02. Corporate Existence and Power 23
4.03. Governmental Authorization 24
4.04. Non-Contravention 25
4.05. Finders' Fees 25
4.06. Capitalization 25
4.07. Purchase for Investment 26
4.08. SEC Reports 26
4.09 Broadview Fee Payment Agreement 26
4.10 Absence of Certain Changes 26
4.11 Valid Issuance 27
ARTICLE V - COVENANTS OF THE SELLER 27
5.01. Conduct of the Company 27
5.02. Access to Information 28
5.03. Notices of Certain Events 29
5.04. No Negotiations with Third Parties 29
5.05. Confidentiality 29
5.06. Continuing Disclosure 30
5.07. Stockholder Approval 30
5.08. Approval of Parachute Payments 30
ARTICLE VI - COVENANTS OF THE BUYER 30
6.01. Confidentiality 30
6.02. Access 31
6.03. Documents to be Furnished 31
6.04. Notices of Certain Events 31
6.05. Continuing Disclosure 32
ARTICLE VII - COVENANTS OF ALL PARTIES 32
7.01. Best Efforts 32
7.02. Certain Filings 32
7.03. Public Announcements 33
7.04. Assumption of Company Stock Options 33
ARTICLE VIII - EMPLOYEE BENEFITS 33
8.01. Employee Benefits Definitions 34
8.02. Employee Benefit Representations 34
8.03. No Third Party Beneficiaries 36
ARTICLE IX - CONDITIONS TO CLOSING 36
9.01. Conditions to the Obligations of Each Party 36
9.02. Conditions to Obligation of the Buyer 37
9.03. Additional Conditions to Obligation of the Company 38
ARTICLE X - SURVIVAL; INDEMNIFICATION 40
10.01. Survival 40
10.02. Indemnification 41
10.03. Procedures; No Waiver 41
ARTICLE XI - TERMINATION 42
11.01. Grounds for Termination 42
11.02. Effect of Termination 42
11.03 Break-up Fee 43
ARTICLE XII - MISCELLANEOUS 43
12.01. Notices 43
12.02. Amendments; No Waivers 44
12.03. Expenses 45
12.04. Successors and Assigns 45
12.05. Further Assurances 45
12.06. Governing Law 45
12.07. Counterparts; Effectiveness 45
12.08. Entire Agreement 45
12.09. Captions 46
12.10. Jurisdiction 46
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SCHEDULES
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Schedule 7.04 Terms of Assumed Options
Schedule 8.02 Employee Plans and Benefit Arrangements
Schedule 9.02(c) Opinion of Company Counsel
Schedule 9.03(c) Opinion of Buyer's Counsel
EXHIBITS
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Exhibit 1 Agreement of Merger
Exhibit 2 Form of Registration Rights Agreement
Exhibit 3 Form of Fee Payment Agreement
Exhibit 4 Form of Noncompetition Agreement
Exhibit 9.02(n) Form of Affiliate Agreement
288LAG4525/25.365579-4
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is dated as of
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June 13, 1997 by and among Individual, Inc., a Delaware corporation
("Buyer"), CN Merger Corp., a Delaware corporation and wholly-owned subsidiary
of the Buyer ("Merger Sub"), ClariNet Communications Corp., a California
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corporation (the "Company"), and certain shareholders of the Company listed on
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the signature pages hereto (the "Shareholders").
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WITNESSETH:
WHEREAS, the Boards of Directors of the Buyer, Merger Sub and the Company
have each determined that it is advisable and in the best interests of their
respective stockholders and shareholders for the Buyer to enter into a
business combination with the Company upon the terms and subject to the
conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
the Buyer, Merger Sub and the Company have each approved the merger (the
"Merger") of Merger Sub with and into the Company, all pursuant to the terms
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and conditions of this Agreement and an Agreement of Merger in the form of
Exhibit 1 (the "Agreement of Merger") and the applicable provisions of the
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Delaware General Corporation Law ("Delaware Law") and the California General
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Corporation Law ("California Law");
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WHEREAS, pursuant to the Merger, each outstanding share (a "Share") of
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the Company's Common Stock, no par value per share, shall be converted into
the right to receive shares of Common Stock of the Buyer, $.01 par value per
share, upon the terms and subject to the conditions set forth herein and in
the Agreement of Merger;
WHEREAS, the Buyer, Merger Sub and the Company intend, by approving
resolutions authorizing this Agreement, to adopt this Agreement as a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the regulations thereunder, and to
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cause the Merger to qualify as a reorganization under the provisions of
Section 368(a) of the Code;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, and intending to be legally bound,
the parties hereto agree as follows:
ARTICLE I"ARTICLEI-DEFINITIONS"
DEFINITIONS
1.01. DEFINITIONS1.01. DEFINITIONS. In addition to the other
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capitalized terms defined in this Agreement, the following terms, as used
herein, shall have the following meanings:
"Affiliate" means, with respect to any Person, any Person directly
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or indirectly controlling, controlled by, or under common control with such
Person.
"Ancillary Agreements" means the Registration Rights Agreement, the
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Noncompetition Agreement, the Fee Payment Agreement and the Affiliate
Agreements.
"Balance Sheet" means the balance sheet of the Company as of April
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30, 1997 referred to in Section 3.07.
"Balance Sheet Date" means April 30, 1997.
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"Buyer Stock" means Common Stock, $.01 par value per share, of the
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Buyer.
"Buyer's Counsel" means the law firm of Xxxxx, Xxxxxxx & Xxxxxxxxx,
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LLP, Boston, Massachusetts.
"Closing Date" means the date of the Closing.
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"Company Common Stock" means the Common Stock, no par value per
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share, of the Company.
"Company Counsel" means Xxxxxx Godward LLP, Palo Alto, California.
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"Intellectual Property" shall mean all domestic and foreign letters
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patent, patents, patent applications and patent licenses; proprietary know-how
and know-how licenses; inventions, discoveries, ideas, trade secrets and
trade secret licenses; proprietary (including "confidential") information of
every nature, and proprietary information licenses; software and software
licenses, including all source code and object code, algorithms, architecture,
structure, display screens, layouts, development tools, and documentation and
media constituting, describing or relating to the foregoing; all moral rights
or other similar rights of paternity, integrity or authorship; common law
trademarks; trademarks and trademark registration applications and
registrations therefor; service marks, registered service marks and service
xxxx registration applications; trade names, registered trade names and trade
name registration applications; domain names and URLs; common law copyrights,
registered copyrights and copyright registration applications; all other
technical or technological information or intellectual property rights of
every nature, owned by or licensed to the Company or any Subsidiary, whether
or not used by the Company or any such Subsidiary in, or necessary to the
conduct of, its business as presently conducted; and all rights, claims,
credits, causes of action or rights of set-off against third parties relating
to the foregoing.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
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charge, security interest, restriction or encumbrance of any kind in respect
of such asset.
"Material Adverse Change" means a material adverse change in the
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business, assets, liabilities, condition (financial or otherwise) or results
of operations of the Company or the Buyer, as the case may be.
"Material Adverse Effect" means a material adverse effect on the
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business, assets, liabilities, condition (financial or otherwise) or results
or operations of the Company or the Buyer, as the case may be.
"1934 Act" means the Securities Exchange Act of 1934, as amended,
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and the rules and regulations promulgated thereunder.
"1933 Act" means the Securities Act of 1933, as amended, and the
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rules and regulations promulgated thereunder.
"1933 Act Legend" means the following legend:
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"The Securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be sold, transferred or
otherwise disposed of except in accordance with the terms thereof and unless
registered with the Securities and Exchange Commission of the United States
and the securities regulatory authorities of certain states or unless an
exemption from such registration is available."
"Noncompetition Agreement" means the Noncompetition, Nondisclosure
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and Developments Agreement entered into by each of the Shareholders in
substantially the form attached hereto as Exhibit 4.
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"Person" means an individual, corporation, partnership, limited
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liability company or partnership, association, trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Registration Rights Agreement" means the Registration Rights
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Agreement entered into among the Buyer and certain shareholders of the Company
in substantially the form attached hereto as Exhibit 2.
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"Subsidiary" means any entity of which securities or other
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ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are owned
directly or indirectly by the Company.
ARTICLE IIARTICLE II - PLAN OF REORGANIZATION
THE PLAN OF REORGANIZATION
2.01. THE MERGER.2.01. THE MERGER
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(a) Effective Time. At the Effective Time (as defined in
Section 2.02), and subject to and upon the terms and conditions of this
Agreement and in accordance with California Law and Delaware Law, Merger Sub
shall be merged with and into the Company, the separate corporate existence of
Merger Sub shall cease, and the Company shall continue as the surviving
corporation. The Company as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving Corporation."
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(b) Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 11.01 and subject to the satisfaction or waiver of the conditions set
forth in Article IX, the consummation of the Merger (the "Closing") will take
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place on Wednesday, June 18, 1997, or, if later, as promptly as practicable
(and in any event within two business days) after satisfaction or waiver of
the conditions set forth in Article IX, at the offices of Xxxxx, Xxxxxxx &
Xxxxxxxxx, LLP, 000 Xxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx, unless another date,
time or place is agreed to in writing by the parties hereto.
2.02. EFFECTIVE TIME.2.02. EFFECTIVE TIME As promptly as practicable
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after the satisfaction or waiver of the conditions set forth in Article IX,
the parties hereto shall cause the Merger to be consummated by filing a
properly executed Agreement of Merger as contemplated by Chapter 11 of
California Law and a duly executed Certificate of Merger as contemplated by
Section 252 of Delaware Law (the "Certificate of Merger"), in each case
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together with any required related certificates, with the Secretaries of State
of the States of California and Delaware, respectively, in such forms as
required by, and executed in accordance with, the relevant provisions of,
California Law and Delaware Law, respectively, and the Merger shall become
effective in accordance with applicable law upon such filings (the time of
such effectiveness being the "Effective Time"). Upon the filing of both the
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Agreement of Merger and the Certificate of Merger, this Agreement shall be
binding upon each of the parties hereto, and the parties agree to use their
best efforts to facilitate the review of the Agreement of Merger and
Certificate of Merger, and accompanying documents, by the Secretaries of State
of the States of California and Delaware, respectively, and to cause the
Merger to become effective as expeditiously as possible. In no event shall
any shares of Buyer Stock be issued to any shareholders of the Company unless
and until the Agreement of Merger and Certificate of Merger are accepted and
the Merger becomes effective.
2.03. EFFECT OF THE MERGER.2.03. EFFECT OF THE MERGER At the Effective
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Time, the effect of the Merger shall be as provided in this Agreement, the
Agreement of Merger, the Certificate of Merger and the applicable provisions
of California Law and Delaware Law. 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 Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of
the Company and Merger Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
2.04. ARTICLES OF INCORPORATION; BY-LAWS2.04. CERTIFICATE OF
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INCORPORATION; BY-LAWS.
(a) Articles of Incorporation. Unless otherwise determined by
the Buyer in its sole discretion prior to the Effective Time, at the Effective
Time, the Articles of Incorporation of the Company, as amended and restated in
the form set forth in Exhibit I to the Agreement of Merger, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter
amended as provided by California Law and such Articles of Incorporation
(b) By-Laws. The By-Laws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation until thereafter amended as provided by California Law, the
Certificate of Incorporation of the Surviving Corporation and such By-Laws.
2.05. DIRECTORS AND OFFICERS.2.05. DIRECTORS AND OFFICERS The
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directors of Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and By-Laws of the Surviving
Corporation, and the officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
2.06. EFFECT ON CAPITAL STOCK.2.06. EFFECT ON CAPITAL STOCK At the
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Effective Time, by virtue of the Merger and without any action on the part of
the Buyer, Merger Sub, the Company or the holders of any of the following
securities:
(a) Conversion of Securities. Each Share issued and outstanding
(or issuable pursuant to outstanding stock options of the Company immediately
prior to the Effective Time) (excluding any Dissenting Shares (as defined in
Section 2.09)) shall be converted into the right to receive .21954874 shares
(as adjusted to reflect any permitted changes to the Company's capitalization
prior to the Effective Time) of validly issued, fully paid and nonassessable
shares of Buyer Stock (the ratio of such number of shares of Buyer Stock for
each Share hereinafter referred to as the "Exchange Ratio"), provided that the
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maximum number of shares of Buyer Stock to be issued in the Merger shall be
1,475,000 (including shares of Buyer Stock reserved for issuance upon exercise
of all outstanding Company Options (as defined in Section 7.04) assumed in
connection with the Merger). The Exchange Ratio shall be adjusted to reflect
fully the effect of any stock split, reverse stock split, stock dividend,
reorganization, recapitalization or other like change with respect to Buyer
Stock or Shares that occurs or has a record date after the date hereof and
prior to the Effective Time.
(b) Cancellation. Each Share held in the treasury of the
Company and each Share owned by the Buyer, Merger Sub or any direct or
indirect wholly-owned subsidiary of the Company or the Buyer immediately prior
to the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, cease to be outstanding, be canceled and
retired without payment of any consideration therefor and cease to exist.
(c) Assumption of Stock Options. All Company Options, whether
vested or unvested, shall be assumed by the Buyer in accordance with Section
7.04.
(d) Capital Stock of Merger Sub. Each share of Common Stock,
$0.01 par value per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable share of Common Stock, no par
value per share, of the Surviving Corporation. Each stock certificate of
Merger Sub evidencing ownership of any such shares shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation.
(e) Fractional Shares. No fraction of a share of Buyer Stock
will be issued, but, except as provided in Section 7.04, in lieu thereof, each
holder of Company Common Stock who would otherwise be entitled to a fraction
of a share of Buyer Stock (after aggregating all fractional shares of Buyer
Stock to be received by such holder) shall receive from the Buyer an amount of
cash (rounded to the nearest whole cent), without interest, equal to the
product of (i) such fraction, multiplied by (ii) the closing sale price of
Buyer Stock on the Nasdaq National Market on the day immediately preceding the
Closing Date.
2.07. EXCHANGE OF CERTIFICATES.2.07. EXCHANGE OF CERTIFICATES
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(a) Exchange Agent. Immediately prior to the Effective Time,
the Buyer shall supply, or shall cause to be supplied, to or for the account
of a bank or trust company designated by the Buyer, which may in the Buyer's
sole discretion be the Buyer's transfer agent (the "Exchange Agent"), in trust
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for the benefit of the holders of Company Common Stock (other than Dissenting
Shares), for exchange in accordance with this Section 2.07, through the
Exchange Agent, certificates evidencing the shares of Buyer Stock issuable
pursuant to Section 2.06 in exchange for outstanding Shares plus cash in an
amount sufficient for payment in lieu of fractional shares as provided in
Section 2.06(e).
(b) Exchange Procedures. Promptly after the Effective Time, the
Buyer shall cause the Exchange Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
evidenced outstanding Shares (other than Dissenting Shares) (the
"Certificates") (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 proper delivery of the Certificates to the Exchange Agent and shall
be in such form and have such other provisions as the Buyer may reasonably
specify) and (ii) instructions to effect the surrender of the Certificates in
exchange for the certificates evidencing shares of Buyer Stock and, in lieu of
any fractional shares thereof, cash. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant
to such instructions, the holder of such Certificate shall be entitled to
receive in exchange therefor (A) certificates evidencing that number of whole
shares of Buyer Stock which such holder has the right to receive in accordance
with the Exchange Ratio in respect of the Shares formerly evidenced by such
Certificate, (B) any dividends or other distributions to which such holder is
entitled pursuant to Section 2.07(c), and (C) cash in lieu of fractional
shares of Buyer Stock to which such holder is entitled pursuant to Section
2.06(e) (the Buyer Stock, dividends, distributions and cash described in this
clause (C) being, collectively, the "Merger Consideration"), and the
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Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Shares which is not registered in the transfer
records of the Company immediately prior to the Effective Time, Buyer Stock
and cash may be issued and paid in accordance with this Article to a
transferee if the Certificate evidencing such Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer pursuant to this Section 2.07(b) and by evidence that any
applicable stock transfer taxes have been paid. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time, represented shares
of the Company Common Stock will be deemed from and after the Effective Time,
for all corporate purposes, other than the payment of dividends, to evidence
the ownership of the number of full shares of Buyer Stock into which such
shares of the Company Common Stock shall have been so converted and the right
to receive an amount in cash in lieu of the issuance of any fractional shares
in accordance with Section 2.06.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time
with respect to Buyer Stock with a record date after the Effective Time, shall
be paid to the holder of any unsurrendered Certificate until the holder of
such Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Buyer Stock issued in
exchange therefor, without interest, at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective
Time theretofore paid with respect to such whole shares of Buyer Stock.
(d) Transfers of Ownership. If any certificate for shares of
Buyer Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to the Buyer or any person designated by it any
transfer or other taxes required by reason of the issuance of a certificate
for shares of Buyer Stock in any name other than that of the registered holder
of the certificate surrendered, or established to the satisfaction of the
Buyer or any agent designated by it that such tax has been paid or is not
payable.
(e) Withholding Rights. The Buyer, the Surviving Corporation
and the Exchange Agent shall be entitled to deduct and withhold from the
Merger Consideration otherwise payable pursuant to this Agreement to any
holder of Company Common Stock such amounts as the Buyer, the Surviving
Corporation or the Exchange Agent are required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code") or any provision of state, local, provincial or
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foreign tax law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been
paid to the holder of the Shares in respect of which such deduction and
withholding was made by the Buyer or the Exchange Agent.
2.08. STOCK TRANSFER BOOKS.2.08. STOCK TRANSFER BOOKS At the Effective
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Time, the stock transfer books of the Company shall be closed, and there shall
be no further registration of transfers of the Company Common Stock thereafter
on the records of the Company.
2.09. DISSENTING SHARES2.09. DISSENTING SHARES.
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(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of capital stock of the Company held by a holder who has
exercised dissenters' rights for such shares in accordance with California Law
and who, as of the Effective Time, has not effectively withdrawn or lost such
dissenters' rights ("Dissenting Shares"), shall not be converted into or
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represent a right to receive Merger Consideration pursuant to Section 2.06,
but the holder thereof shall only be entitled to such rights as are granted by
California Law.
(b) Notwithstanding the provisions of subsection (a), if any
holder of Dissenting Shares shall effectively withdraw or lose (through
failure to perfect or otherwise) such holder's dissenters' rights, then, at
the later of the Effective Time or the occurrence of such event, such holder's
shares shall automatically be converted into and represent only the right to
receive the Merger Consideration, without interest thereon, upon surrender of
the certificate or certificates representing such Dissenting Shares.
(c) The Company shall give the Buyer (i) prompt notice of any
written demands received by the Company for an appraisal of shares of capital
stock of the Company pursuant to Chapter 13 of California Law, withdrawals of
such demands, and any other related instruments served pursuant to California
Law and received by the Company and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of the Buyer, voluntarily make any
payment with respect to any such demands or offer to settle or settle any such
demands.
2.10. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK.2.10. NO
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FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK The Merger Consideration
delivered upon the surrender for exchange of Shares in accordance with the
terms hereof shall be deemed to have been issued in full satisfaction of all
rights pertaining to such Shares, and there shall be no further registration
of transfers on the records of the Surviving Corporation of Shares 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 Article II.
2.11. LOST, STOLEN OR DESTROYED CERTIFICATES2.11. LOST, STOLEN OR
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DESTROYED CERTIFICATES. In the event any Certificates shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
and an indemnity by the holder thereof, such shares of Buyer Stock as may be
required pursuant to Section 2.06; provided, however, that, in the event a
Shareholder cannot exchange his Certificate(s) because they have been lost,
stolen or destroyed, the Buyer may, in its sole discretion and as a condition
precedent to the issuance thereof, require the Shareholder to deliver a bond
in such sum as it may reasonably direct as indemnity against any claim that
may be made against the Buyer or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
2.12. TAX CONSEQUENCES.2.12. TAX AND ACCOUNTING CONSEQUENCES It is
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intended by the parties hereto that the Merger shall constitute a
reorganization within the meaning of Section 368 of the Code.
2.13. TAKING OF NECESSARY ACTION; FURTHER ACTION.2.13. TAKING OF
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NECESSARY ACTION; FURTHER ACTION Subject to the terms and conditions herein,
each of the Buyer, Merger Sub and the Company in good faith will take all such
commercially reasonable and lawful action as may be necessary or appropriate
in order to effectuate the Merger in accordance with this Agreement as
promptly as possible. If, at any time after the Effective Time, any such
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises
of the Company and Merger Sub, the officers and directors of the Company and
Merger Sub are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action.
ARTICLE III"ARTICLEIII-REPRESENTATIONSANDWARRANTIESOFTHESELLER""1"
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
Except as is otherwise set forth in the schedules (the "Disclosure
Schedules") contained in the disclosure letter provided by the Company and the
Shareholders to Buyer contemporaneously with the execution and delivery of
this Agreement (the "Disclosure Letter"), which Disclosure Schedules shall
specifically identify or cross-reference the paragraph or paragraphs of this
Article III to which the exceptions therein relate, the Company and the
Shareholders hereby jointly and severally represent and warrant to the Buyer
that:
3.01. BINDING EFFECT3.01. BINDING EFFECT. The Company and the
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Shareholders have full legal right, power and authority to enter into this
Agreement and the Ancillary Agreements, to perform their obligations hereunder
and thereunder, and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action 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 so contemplated
(other than the approval and adoption of the Merger by the holders of at least
a majority of the outstanding shares of the Company Common Stock entitled to
vote in accordance with California Law and the Company's charter and by-laws).
The Board of Directors of the Company has determined that it is advisable and
in the best interest of the Company's shareholders for the Company to enter
into a business combination with the Buyer upon the terms and subject to the
conditions of this Agreement. This Agreement and the Ancillary Agreements
have been duly and validly executed and delivered by the Company and the
Shareholders, as applicable, and constitute the legal, valid and binding
obligation of the Company and the Shareholders, as the case may be,
enforceable against them in accordance with their respective terms.
3.02. CORPORATE EXISTENCE AND POWER3.02. CORPORATE EXISTENCE AND POWER.
----------------------------- -----------------------------
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of California, and has all corporate
powers and authority and all governmental licenses, authorizations, consents
and approvals required to own, lease and operate the properties it purports to
own, operate or lease and to carry on its business as now conducted. The
Company is duly qualified to do business as a foreign corporation, and is in
good standing as a foreign corporation, in each of the jurisdictions listed in
Schedule 3.02 of the Disclosure Schedules, which constitute all jurisdictions
--------------
where the character of the property owned or leased by the Company or the
nature of its activities make such qualification necessary, except for those
jurisdictions where the failure to be so qualified and in good standing would
not, individually or in the aggregate, have a Material Adverse Effect. The
Company has heretofore delivered to the Buyer true and complete copies of the
corporate charter and bylaws of the Company as currently in effect.
3.03. GOVERNMENTAL AUTHORIZATION;
----------------------------
CONSENTS"3.03.GOVERNMENTALAUTHORIZATION;CONSENTS". (a) The execution,
------------------------------------
delivery and performance by the Company and the Shareholders of this Agreement
and the Ancillary Agreements requires no action by or in respect of, or filing
with, any governmental body, agency, official or authority (each a
"Governmental Authority").
-------------
(b) No consent, approval, waiver or other action by any Person
under any contract, agreement, indenture, lease, instrument or other document
to which the Company or any Subsidiary or any Shareholder is a party or by
which any of them is bound is required or necessary for the execution,
delivery and performance of this Agreement and each of the Ancillary
Agreements by the Company and the Shareholders or the consummation of the
transactions contemplated hereby and thereby, except for those consents,
approvals, waivers or other actions as shall have been obtained and provided
to Buyer prior to the Closing.
3.04. NON-CONTRAVENTION"3.04.NON-CONTRAVENTION""2". The execution,
----------------- -----------------
delivery and performance by the Company and the Shareholders of this Agreement
and each of the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) contravene or conflict
with the corporate charter or bylaws of the Company, (ii) contravene or
conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable
to the Company, which would result in a Material Adverse Effect on the
Company; (iii) constitute a default under or give rise to any right of
termination, cancellation or acceleration of any right or obligation of the
Company or to a loss of any benefit to which the Company is entitled under any
provision of any agreement, contract or other instrument binding upon the
Company or any permit held by the Company, in each case which would result in
a Material Adverse Effect on the Company or (iv) assuming the receipt of all
required consents, result in the creation or imposition of any Lien on any
asset of the Company, which would result in a Material Adverse Effect on the
Company.
3.05. CAPITALIZATION"3.05.CAPITALIZATION". The authorized capital stock
-------------- --------------
of the Company consists of 10,000,000 shares of Company Common Stock, of which
6,087,350 shares are outstanding as of the date hereof. All outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable and are not subject to any right
of rescission. As of the date hereof, there are outstanding Company Options
to purchase an aggregate of 630,976 shares of Company Common Stock, of which
Company Options to purchase 149,281 shares are now exercisable. A complete
and accurate list of the holders of all such outstanding shares of Company
Common Stock and Company Options as of the date hereof is set forth in
Schedule 3.05 of the Disclosure Schedules. Except as set forth in this
-------
Section 3.05, there are no outstanding (i) shares of capital stock, other
securities or phantom or other equity interests of the Company, (ii)
securities of the Company convertible into or exchangeable for shares of
capital stock or other securities of the Company or (iii) options, warrants or
other rights to acquire from the Company any capital stock, other securities
or phantom or other equity interests of the Company (the items in clauses (i),
(ii) and (iii) being referred to collectively as the "Company Securities").
------------------
There are no outstanding obligations of the Company, actual or contingent, to
issue or deliver or to repurchase, redeem or otherwise acquire any Company
Securities, except as disclosed on Schedule 3.05 of the Disclosure Schedules.
-------------
3.06. SUBSIDIARIES"3.06.SUBSIDIARIES". Except as set forth in Schedule
------------ ------------ --------
3.06 of the Disclosure Schedules, the Company does not own, directly or
----
indirectly, any capital stock or other equity ownership or proprietary
----
interest in any Subsidiary or other Person.
----
3.07. FINANCIAL STATEMENTS"3.07.FINANCIALSTATEMENTS""2". The Company
--------------------- -------------------
has previously furnished to the Buyer a true and complete copy of the audited
Balance Sheet of the Company and its Subsidiaries as of November 30, 1996 and
its statement of operations for the fiscal year then ended, certified by KPMG
Peat Marwick LLP, the Company's independent public accountants, and the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
April 30, 1997 and the related statement of income for the five months then
ended (as well as copies of the respective United States federal and state
income tax returns of the Company for all periods through November 30, 1995)
(collectively, the "Financial Statements," copies of which, except for the tax
--------------------
returns, are set forth in Schedule 3.07 of the Disclosure Schedules). Each
-------------
of the balance sheets and statements of operations included in the Financial
Statements has been prepared from the books and records of the Company and
fairly and accurately presents in all material respects the financial position
of the Company as of its date and the results of operations of the Company for
the periods therein set forth, in each case in accordance with generally
accepted accounting principles, subject, in the case of the unaudited
financial statements, to normal year-end audit adjustments and the absence of
footnotes, which are not expected to be material.
3.08. ABSENCE OF CERTAIN CHANGES"3.08.ABSENCEOFCERTAINCHANGES"67.
----------------------------- -----------------------
Except as set forth on Schedule 3.08 of the Disclosure schedules, since the
-------------
Balance Sheet Date, the Company has conducted its business in the ordinary
course consistent with past practices and there has not been:
(a) any Material Adverse Change or any event, occurrence,
development or state of circumstances or facts which could reasonably be
expected to result in a Material Adverse Change;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any Company Securities or any repurchase,
redemption or other acquisition by the Company of any outstanding shares of
capital stock or other securities of, or other ownership interests in, the
Company;
(c) any amendment of any outstanding security of the Company;
(d) any incurrence, assumption or guarantee by the Company of
any indebtedness for borrowed money, except for loans or indebtedness made,
assumed or guaranteed in the ordinary course of business consistent with past
practices and which do not exceed $25,000 in the aggregate;
(e) any creation or assumption by the Company of any Lien on any
asset, except for liens created or assumed in the ordinary course of business
consistent with past practices and which do not exceed $25,000 in the
aggregate;
(f) any making of any loan, advance or capital contribution to
or investment in any Person other than loans, advances or capital
contributions made in the ordinary course of business consistent with past
practices;
(g) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of the Company that
has or could reasonably be expected to have a Material Adverse Effect;
(h) any material transaction or material commitment made, or any
material contract or agreement entered into, by the Company relating to its
assets or business (including the acquisition or disposition of any assets) or
any relinquishment by the Company of any contract or other right, other than
those made in the ordinary course of business consistent with past practices
and those contemplated by this Agreement;
(i) any change in any method of accounting or accounting
practice by the Company; or
(j) any (i) grant of any severance or termination pay to any
director, officer or employee of the Company, (ii) entering into of any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any director, officer or employee of the
Company, (iii) change in benefits payable under existing severance or
termination pay policies or employment agreements or (iv) change in
compensation, bonus or other benefits payable to directors, officers or
employees of the Company, other than in the ordinary course of business
consistent with past practices or as specifically contemplated by this
Agreement.
3.09. PROPERTY AND EQUIPMENT"3.09.PROPERTYANDEQUIPMENT""2". (a) The
------------------------ --------------------
Company does not own any real property. The Company has good and marketable
title to, or in the case of leased property has valid leasehold interests in,
all property and assets (whether real or personal, tangible or intangible)
reflected on the Balance Sheet or acquired after the Balance Sheet Date,
except for properties and assets sold since the Balance Sheet Date in the
ordinary course of business consistent with past practices and except for such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the
value of, or materially interfere with the present use of, the property
subject thereto or affected thereby. Except as set forth in Schedule 3.09 of
-------------
the Disclosure Schedules, none of such properties or assets is subject to any
Liens, except:
(i) Liens disclosed on the Balance Sheet;
(ii) Liens for purchase money security interests;
(iii) Liens for taxes not yet due or being contested in
good faith (and for which adequate accruals or reserves have been established
on the Balance Sheet); or
(iv) Liens which do not materially detract from the value
of such property or assets as now used, or materially interfere with any
present or intended use of such property or assets.
(b) There are no developments affecting any of such properties
or assets pending or, to the knowledge of the Company and the Shareholders,
threatened, which might materially detract from the value of such property or
assets, materially interfere with any present or intended use of any such
property or assets or materially adversely affect the marketability of such
properties or assets.
(c) To the best knowledge of the Company and the Shareholders,
the equipment owned by the Company has no material defects, is in good
operating condition and repair (ordinary wear and tear excepted), and is
substantially adequate for the uses to which it is being put.
(d) Except as set forth in Schedule 3.09 of the Disclosure
-------------
Schedules, the assets owned or leased by the Company, or which it otherwise
has the right to use, constitute all of the assets held for use or used in
connection with the business of the Company and are generally adequate to
conduct such business as currently conducted.
3.10. NO UNDISCLOSED MATERIAL
-------------------------
LIABILITIES"3.10.NOUNDISCLOSEDMATERIALLIABILITIES". To the best knowledge of
-----------------------
the Company and the Shareholders after due inquiry, except as set forth in
Schedule 3.10 of the Disclosure Schedules, there are no liabilities of the
-----------
Company which should, in accordance with GAAP, be reflected on the Company's
balance sheet as liabilities, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability, other than:
(a) liabilities disclosed or provided for in the Balance Sheet;
and
(b) liabilities incurred in the ordinary course of business
consistent with past practices since the Balance Sheet Date, including,
without limitation, accounts payable or accrued salaries incurred in the
ordinary course of business consistent with past practices, and which,
individually or in the aggregate, are not material to the Company.
3.11. LITIGATION"3.11.LITIGATION". There is no action, suit,
---------- ----------
investigation or proceeding before any court or arbitrator or any Governmental
Authority (or, to the knowledge of the Company and the Shareholders, any basis
therefor) pending against, or to the knowledge of the Company and the
Shareholders, threatened against or affecting, the Company or any of its
properties or the transactions contemplated hereby (including, without
limitation, challenging or seeking to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement).
3.12. MATERIAL CONTRACTS"3.12.MATERIALCONTRACTS""2". (a) Except for
------------------- -----------------
agreements, contracts, plans, leases, arrangements or commitments (including
oral agreements, contracts, plans, leases, arrangements or commitments)
disclosed in Schedule 3.12 of the Disclosure Schedules, the Company is not a
-------------
party to or subject to:
(i) any lease providing for annual rentals of $50,000 or
more;
(ii) any contract for the purchase of materials, supplies,
goods, services, equipment or other assets providing for annual payments by
the Company of $50,000 or more;
(iii) any sales, distribution or other similar agreement
providing for the sale by the Company of materials, supplies, goods, services,
equipment or other assets providing for annual payments to the Company of
$50,000 or more;
(iv) any partnership, joint venture or other similar
arrangement or agreement;
(v) any contract relating to indebtedness for borrowed
money or the deferred purchase price of property (whether incurred, assumed,
guaranteed or secured by any asset), except such contracts relating to
indebtedness incurred in the ordinary course of business in an amount not
exceeding $50,000;
(vi) any license agreement, franchise agreement or
agreement in respect of similar rights granted to or held by the Company;
(vii) any agency, dealer, sales representative or other
similar agreement, except for such agreements entered into in the ordinary
course of business consistent with past practices;
(viii) any contract or agreement, or any judgment, decree
or order of any Governmental Authority, that currently prohibits, limits or
materially impairs, or could reasonably be expected to prohibit, limit or
materially impair, the ability of the Company or either of the Shareholders to
engage in any line of business or with any Person or in any area, or which
would so prohibit, limit or impair the freedom of the Company or either of the
Shareholders after the Effective Time, and in any case which has had, or is
likely to have, a Material Adverse Effect;
(ix) any material agreement with any current or, in the
event that any rights or obligations under such agreement survived the
termination of the business relationship, any former consultant or independent
contractor engaged by the Company to perform product development, engineering
or other technical services;
(x) any contract or agreement relating to the bartering or
other non-monetary exchange of goods or services; or
(xi) any other contract or commitment that is material to
the Company.
(b) Each agreement, contract, plan, lease, arrangement and
commitment disclosed in any Schedule of the Disclosure Schedules or required
to be disclosed pursuant to Section 3.12(a) is a valid and binding agreement
of the Company and is in full force and effect (except for any such
agreements, contracts, plans, leases, arrangements or commitments which have
terminated as disclosed on such Schedule), and neither the Company, nor, to
the knowledge of the Company and the Shareholders, any other party thereto is
in default in any material respect under the terms of any such agreement,
contract, plan, lease, arrangement or commitment.
3.13. INSURANCE COVERAGE"3.13.INSURANCECOVERAGE""2". Schedule 3.13 of
------------------ ----------------- -------------
the Disclosure Schedules sets forth a complete and correct list of all
insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of the
Company. To the knowledge of the Company and the Shareholders and after due
inquiry, 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 payable under all such
policies and bonds have been paid and the Company is otherwise in full
compliance with the terms and conditions of all such policies and bonds. Such
policies of insurance and bonds (or other policies and bonds providing
substantially similar insurance coverage) have been in effect since the
respective dates set forth in Schedule 3.13 of the Disclosure Schedules and
-------------
remain in full force and effect. To the knowledge of the Company and the
Shareholders, such policies of insurance and bonds are of the type and in
amounts customarily carried by Persons conducting businesses similar to those
of the Company. Neither the Company nor either of the Shareholders knows of
any threatened termination of, or premium increase with respect to, any of
such policies or bonds.
3.14. COMPLIANCE WITH LAWS; PERMITS; NO
-------------------------------------
DEFAULTS"3.14.COMPLIANCEWITHLAWS;PERMITS;NODEFAULTS".
---------------------------------------
(a) To the best knowledge of the Company and the Shareholders
after due inquiry, the Company is in compliance with all applicable laws,
rules, regulations, orders, judgments, awards and decrees, including, without
limitation, all federal, state and local laws relating to (i) the sale,
licensing, ownership or operation of the Company's Intellectual Property, (ii)
employment practices, terms and conditions of employment and wages and hours,
and (iii) safety, health, environmental protection, toxic waste disposal and
other similar matters, except where the failure to be so in compliance would
not, individually or in the aggregate, have a Material Adverse Effect.
(b) To the best knowledge of the Company, Schedule 3.14 of the
-------------
Disclosure Schedules correctly sets forth and describes each business license,
franchise and permit, (each a "Permit") material to the business of the
------
Company, together with the name of the Governmental Authority issuing such
Permit. Such Permits are valid and in full force and effect and none of such
Permits will be terminated or impaired or become terminable as a result of the
transactions contemplated hereby.
(c) The Company is not in default under, and no condition exists
that with notice or lapse of time or both would constitute a default under,
(i) any mortgage, loan agreement, indenture or evidence of indebtedness for
borrowed money or any other material agreement or instrument to which the
Company is a party or by which the Company or any of its assets is bound or
(ii) any judgment, order or injunction of any court, arbitrator or
Governmental Authority, in either case which defaults or potential defaults
individually or in the aggregate could result in a Material Adverse Effect.
3.15. FINDERS' FEES"3.15.FINDER'SFEES""2". Except for Broadview
-------------- ------------
Associates, there is no investment banker, broker, "finder" or other
intermediary which has been retained by or is authorized to act on behalf of
the Company and/or the Shareholders who might be entitled to any fee or
commission from the Buyer, the Company, or any of their respective Affiliates
upon consummation of the transactions contemplated by this Agreement.
3.16. INTELLECTUAL PROPERTY"3.16.INTELLECTUALPROPERTY". (a) Schedule
---------------------- -------------------- --------
3.16(a) of the Disclosure Schedules lists all of the Company's Intellectual
-----
Property, including, without limitation, a separate listing of all
Intellectual Property licensed by the Company to others. Unless otherwise
indicated on Schedule 3.16(a), the Company owns the entire right, title and
-----------------
interest in and to the Intellectual Property (including, without limitation,
the exclusive and unrestricted right to use and license the same) and is not
contractually obligated to pay any compensation or other amount to any third
party in respect thereof. Each item constituting part of the Intellectual
Property which is owned by the Company, to the extent indicated on Schedule
--------
3.16(a), has been duly registered with, filed in or issued by, as the case may
-----
be, the United States Patent and Trademark Office or such other government
entities, domestic or foreign, as are indicated on Schedule 3.16(a), and such
----------------
registrations, filings and issuances remain in full force and effect.
(b) Schedule 3.16(a) also identifies all of the Intellectual
----------------
Property used by the Company in its business which is owned or controlled by
any shareholder, director, officer or employee of the Company. Except as set
forth in Schedule 3.16(b) of the Disclosure Schedules, the Company will cause
----------------
full right, title and interest in any such Intellectual Property to be duly
and effectively transferred to the Company as of or prior to the Effective
Time, and no royalties will be due and payable by the Company or the Buyer
with respect to such Intellectual Property.
(c) Except as set forth in Schedule 3.16(c) of the Disclosure
----------------
Schedules, all current and former employees and consultants of the Company
have entered into non-disclosure and assignment of inventions agreements with
the Company relating to Intellectual Property, substantially in the form of
the agreements attached to Schedule 3.16(c) and previously furnished to the
----------------
Buyer.
(d) There are no pending or, to the knowledge of the Company and
the Shareholders, threatened, proceedings, litigation or other adverse claims
affecting or with respect to any part of the Intellectual Property, and, to
the knowledge of the Company and the Shareholders, no Person is infringing the
Intellectual Property. The Intellectual Property comprises all such rights
necessary to permit the operation of the business of the Company in all
material respects as it is now being conducted. None of the Intellectual
Property is subject to any material outstanding order, decree, judgment,
stipulation, lien, charge, encumbrance or attachment other than as set forth
in Schedule 3.16(d) of the Disclosure Schedules.
-----------------
(e) Schedule 3.16(e) of the Disclosure Schedules lists all
-----------------
notices or claims (whether written or oral) received by the Company which
claim infringement, violation or breach by the Company of any domestic and
foreign letters patent, patents, patent applications and patent licenses;
proprietary know-how and know-how licenses; inventions, discoveries, ideas,
trade secrets and trade secret licenses; proprietary (including
"confidential") information of every nature, and proprietary information
licenses; software and software licenses, including all source code and object
code, algorithms, architecture, structure, display screens, layouts,
development tools, and documentation and media constituting, describing or
relating to the foregoing; all moral rights or other similar rights of
paternity, integrity or authorship; common law trademarks; trademarks and
trademark registration applications and registrations therefor; service marks,
registered service marks and service xxxx registration applications; trade
names, registered trade names and trade name registration applications; domain
names and URLs; common law copyrights, registered copyrights and copyright
registration applications; and all other technical or technological
information or intellectual property rights of every nature, owned or
controlled by parties other than the Company or any of their respective
directors, officers and employees (collectively, "Others' Intellectual
---------------------
Property") and which infringements, violations or breaches have, or could
-
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. To the knowledge of the Company and the Shareholders, except
as set forth in Schedule 3.16(e), neither the Company nor either of the
-----------------
Shareholders infringes, violates or is in breach of any part of Others'
Intellectual Property which is likely to result, individually or in the
aggregate, in a Material Adverse Effect on the Company. The execution,
delivery and performance by the Company and the Shareholders of this Agreement
and each of the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby and, to the best knowledge of the Company and
the Shareholders, the Buyer's ownership and usage of the Intellectual Property
as presently used after the Effective Time, will not infringe, violate or
breach any part of Others' Intellectual Property.
3.17. TAXES"3.17.TAXES". (a) The term "Taxes" as used herein means all
----- ----- -----
federal, state, local, foreign and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits, customs
duties, unemployment insurance, environmental, worker's compensation, Pension
Benefit Guaranty Corporation premiums and all other taxes, fees, assessments
or other charges of any kind similar to such Taxes, together with any interest
and any penalties, additions to tax or additional amounts with respect
thereto, and the term "Tax" means any one of the foregoing taxes. The term
---
"Returns" as used herein means all returns, declarations, reports, statements
------
and other documents required to be filed in respect of Taxes, including
information returns or reports with respect to backup withholding and other
payments to third parties, and "Return" means any one of the foregoing
------
returns. All citations to the Code, or the Treasury Regulations promulgated
thereunder, shall include any amendments or any substitute or successor
provisions thereto. The Representations and Warranties contained in this
Section 3.17 shall pertain to the period from the Company's inception up to
and including the Effective Time.
(b) Except as disclosed on Schedule 3.17 of the Disclosure
-------------
Schedules, the Company has filed all Returns required to be filed by or on its
behalf on a timely basis and such Returns are true, complete and correct in
all material respects. None of the Returns filed or required to be filed by
the Company contains or will contain a disclosure statement under former
Section 6661 or Section 6662 of the Code or any similar provision of any
state, local or foreign law.
(c) Except as disclosed on Schedule 3.17(c) of the Disclosure
-----------
Schedules, all Taxes shown to be payable on the Returns or on subsequent
assessments with respect thereto have been paid in full on a timely basis, and
no other Taxes are payable by the Company with respect to items or periods
covered by such Returns (whether or not shown on or reportable on such
Returns) or with respect to any period ending on or prior to the Effective
Time. The Company has withheld and paid over all Taxes required to have been
withheld and paid over by it, and complied with all information reporting and
backup withholding requirements, including maintenance of required records
with respect thereto, in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party. There are no
Liens on any of the assets of the Company with respect to Taxes, other than
Liens for Taxes not yet due and payable or for Taxes that the Company is
contesting in good faith through appropriate proceedings and for which
appropriate reserves have been established, which reserves are fully reflected
in the Financial Statements.
(d) Except as set forth in Schedule 3.17(d) of the Disclosure
----------------
Schedules, the amount of the Company's liability for unpaid Taxes for all
periods ending as of or prior to the Effective Time does not, in the
aggregate, exceed the amount of the net current liability accruals for Taxes
set forth on the Balance Sheet, and the Company will incur no additional Taxes
subsequent to the Balance Sheet Date until the Effective Time, except in the
ordinary course of business and except for Taxes which do not have, and are
not likely to have, a Material Adverse Effect.
(e) No issues have been raised (and are currently pending) by
any taxing authority in connection with any of the Returns. No waivers of
statutes of limitation with respect to any of the Returns have been given by
or requested from the Company. All deficiencies asserted or assessments made
as a result of any examinations have been fully paid, or are fully reflected
as a liability in the Financial Statements, or are being contested and an
appropriate reserve therefor has been established and is fully reflected in
the Financial Statements. All material elections with respect to Taxes
affecting the Company, as of the date hereof, are set forth in the Returns,
other than any such elections which are not required to be included in the
Returns, copies of which have been made available to Buyer. The Company is
not a party to any agreement, contract, arrangement or plan that has resulted
or would result, separately or in the aggregate, in the payment of (i) any
"excess parachute payments" within the meaning of Section 280G of the Code
(without regard to the exception in Sections 280G(b)(4) and 280G(b)(5) of the
Code) or (ii) any other amount for which a deduction would be disallowed under
Section 162(m) or Section 404 of the Code, except as may be contemplated by
this Agreement or any Ancillary Agreement. The Company has not agreed to make
any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise, and the Company will not be required to make
any such adjustment as a result of the acquisition of the Shares by the Buyer.
Except as set forth in Schedule 3.17(e) to the Disclosure Schedules, the
-----------------
Company has not had a permanent establishment in any foreign country, as
defined in any applicable tax treaty or convention between the United States
of America and such foreign country. The Company is not a party to any safe
harbor lease within the meaning of Section 168(f)(8) of the Code, as in effect
prior to amendment by the Tax Equity and Fiscal Responsibility Act of 1982.
The Company is not and has not ever been, a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the Code.
None of the Shareholders nor any other holder of Company Common Stock is a
"foreign person" as that term is defined in Section 1445 of the Code. The
Company is not (and has not ever been) a party to a tax-sharing agreement and
has not assumed the liability of any other Person, for Taxes under contract.
The Company has not ever been a member of a group of corporations filing a
consolidated, unitary or combined Return. The Company has not taken any
action that would have the effect of deferring any material liability for
Taxes for the Company from any taxable period ending at or before the
Effective Time to any taxable period thereafter. No consent has been filed
under Section 341(f) of the Code with respect to the Company. The Company has
not participated in or cooperated with any international boycott within the
meaning of Section 999 of the Code. As of the Closing Date the ability of the
Company to use its net operating loss and other carryovers will not have been
affected by Sections 382, 383 or 384 of the Code (other than as a result of
the Merger). To the best knowledge of the Company, no claim has ever been
made by a tax authority in a jurisdiction where the Company does not file
Returns that it is or may be subject to Tax in that jurisdiction. The
transactions set forth in this Agreement are not subject to the Tax
withholding provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code or of any other provision of law. The Company is not a
party to any joint venture, partnership, or other arrangement or contract
which could be treated as a partnership for federal income tax purposes. Any
adjustment of Taxes made by the Internal Revenue Service in any examination
which is required to be reported to state, local, foreign or other taxing
authorities has been so reported, and any additional Taxes due with respect
thereto have been paid. No power of attorney has been granted by the Company,
and is currently in force, with respect to any matter relating to Taxes.
Except as set forth in Schedule 3.17(e) of the Disclosure Schedules,each
----------------- -
Company Option (as defined in Section 7.04 below) qualified, when granted, was
an incentive stock option within the meaning of Section 422 of the Code.
3.18. EMPLOYEES"3.18.EMPLOYEES". Schedule 3.18 of the Disclosure
--------- --------- --------------
Schedules sets forth a true and complete list of (a) the names, titles, annual
salaries and other compensation of all employees of the Company (the
"Employees") and the location at which such Employees regularly perform
-
services for the Company and (b) the wage rates for non-salaried Employees of
the Company (by classification). Any agreements or commitments between the
Company and any Employee concerning such Employee's future salary,
compensation or terms of employment are described in Schedule 3.18 of the
-------------
Disclosure Schedules. None of such Employees has indicated to the Company
that he intends to resign or retire as a result of the transactions
contemplated by this Agreement or otherwise. The Company has no employees
represented by a union and the Company (i) is in compliance with all
applicable laws and regulations respecting employment wages and laws and (ii)
is not engaged in any unfair labor practice.
3.19. TRANSACTIONS WITH AFFILIATES"3.19.TRANSACTIONSWITHAFFILIATES".
------------------------------ --------------------------
Except as set forth in Schedule 3.19 of the Disclosure Schedules, there are no
-------------
loans, leases, royalty agreements or other continuing transactions between the
Company, on the one hand, and any Affiliate of the Company, either of the
Shareholders, any Affiliate of either Shareholder, or any member of either
Shareholder's family, on the other hand. To the knowledge of the Company and
the Shareholders, none of the officers or directors of the Company (a) has any
material direct or indirect interest in any entity which does business with
the Company; (b) has any direct or indirect interest in any property, asset or
right which is used by the Company in the conduct of its business; or (c) has
any contractual relationship with the Company other than such relationships
which occur from being an officer, director or shareholder of the Company.
3.20. OTHER INFORMATION"3.20.OTHERINFORMATION""2". None of the
------------------ ----------------
documents or information delivered to the Buyer in connection with the
transactions contemplated by this Agreement and the Ancillary Agreements
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein not
misleading.
3.21. INVESTMENT REPRESENTATIONS3.21. INVESTMENT REPRESENTATIONS.
--------------------------- ---------------------------
(a) NO DISTRIBUTION(A) NO DISTRIBUTION. The Shareholders
--------------- ---------------
are acquiring the shares of Buyer Stock solely for the purpose of investment
for the Shareholders' own accounts, and not with a view to, or for resale in
connection with, any distribution of such shares. Except as set forth in
Schedule 3.21 of the Disclosure Schedules, the Shareholders are not a party to
---------
any contract, undertaking, agreement or arrangement with any Person to sell,
transfer or grant participation rights to any such Person or any third party
with respect to such shares of Buyer Stock.
(b) INVESTOR QUALIFICATION"(B)INVESTORQUALIFICATION". Each of
---------------------- ---------------------
the Shareholders, either alone or with such Shareholder's purchaser
representative, has such knowledge and experience in financial and business
matters so as to enable the Shareholder to evaluate the merits and risks
attendant to receipt of and investment in the Buyer Stock. The Shareholder is
able to bear the risk of a complete loss of his investment in the Buyer Stock.
(c) RESTRICTIONS ON RESALE"(C)RESTRICTIONSONRESALE". Each of
---------------------- --------------------
the Shareholders acknowledges and understands that:
(i) The shares of Buyer Stock are being issued without
registration under the 1933 Act based upon an exemption provided under the
1933 Act, and the Shareholder's representations contained in this Agreement
are a material factor with respect to that exemption.
(ii) The shares of Buyer Stock are "restricted securities"
within the meaning of Rule 144 under the 1933 Act and as such may not be sold
or disposed of other than pursuant to Rule 144, pursuant to an exemption from
registration provided by the 1933 Act or pursuant to an effective registration
statement thereunder.
(iii) The Shareholder hereby consents to the 1933 Act
Legend being placed on the certificates representing the Buyer Stock.
(d) ACCESS TO INFORMATION(D) ACCESS TO INFORMATION. Each of
--------------------- ---------------------
the Shareholders acknowledges that he has had the opportunity to ask questions
of and receive answers from officers and employees of the Buyer relating to
the terms and conditions of this Agreement and the Ancillary Agreements. Each
Shareholder has received and reviewed complete and accurate copies, as amended
or supplemented, of the Buyer's SEC Reports (as defined in Section 4.08).
Each Shareholder has had the opportunity to receive and review such other
documents concerning the Buyer as the Shareholder has requested.
3.22. OPTION PLANS3.22. OPTION PLANS. Except as disclosed in Schedule
------------ ------------ --------
3.22 of the Disclosure Schedules, the Board of Directors of the Company has
--
taken all necessary action (or refrained from taking action, where
--
appropriate) under the Company Stock Option Plans (as defined in Section 7.04)
--
so that no Company Options (or any portion thereof) will be accelerated or
entitled to receive cash or other property as a result of the consummation of
the transactions contemplated hereby, but instead shall be assumed by the
Buyer as provided in Sections 2.06(c) and 7.04 hereof.
3.23. VOTE REQUIRED3.23. VOTE REQUIRED. The affirmative vote of the
-------------- -------------
holders of at least a majority of the outstanding shares of Company Common
Stock are the only votes of the holders of any class or series of the
Company's capital stock necessary to approve the Merger.
3.24. CONTENT PROVIDER AGREEMENTS3.24. CONTENT PROVIDER AGREEMENTS.
----------------------------- ---------------------------
(a) Set forth in Schedule 3.24 of the Disclosure Schedules is a
-------------
list of all of the third-party providers of content for any of the Company's
products or services (collectively, the "Content Providers"). The agreements
-----------------
for the provision of content from the Content Providers are referred to herein
as the "Content Provider Agreements".
-----------------------------
(b) Except as set forth in Schedule 3.24 of the Disclosure
-------------
Schedules, all of such Content Provider Agreements are legally valid and
binding obligations of the Company and the respective Content Providers and
are in full force and effect, and, to the Company's knowledge, there exists no
material default under any such Content Provider Agreements or any material
breach of any of the provisions thereof on the part of the Company, and no
event or condition which, upon the giving of notice or the passage of time, or
both, would constitute a material default or material breach thereunder,
including in each case, without limitation, a material breach of the
proprietary rights of any Content Provider thereunder. Except as set forth in
Schedule 3.24 of the Disclosure Schedules, no Content Provider has given
------------
written notice to the Company of a material default under such Content
-----
Provider Agreements or a breach of any of the terms thereof. Except as set
-----
forth in Schedule 3.24 of the Disclosure Schedules, the operation of the
-- ------------
Company's business as it is currently conducted, including without limitation
--
the sale of its products and services thereunder, does not materially conflict
with any of the material terms and conditions of any of the Content Provider
Agreements and, assuming that the Content Provider Agreements remain in effect
in accordance with their terms and the conduct of the Company's business does
not change, is not reasonably expected to result in a material default under,
or a material breach with respect to any of the material terms and conditions
of, any of the Content Provider Agreements, including, without limitation, the
proprietary rights of any Content Provider.
(c) Except as set forth in Schedule 3.24 of the Disclosure
-----------
Schedules, each such Content Provider Agreement is in writing and the Company
has originals or copies of all such Content Provider Agreements.
(d) Except as set forth in Schedule 3.24 of the Disclosure
-----------
Schedules, the execution and delivery of this Agreement and the Ancillary
Agreements and the performance of the transactions contemplated hereby and
thereby will not result in and of themselves either automatically or at the
discretion of any Content Provider, in the termination of any of the Content
Provider Agreements, or result either automatically or at the discretion of
any of the Content Providers in any increase, acceleration or other change in
any of the royalties, commissions, fees, disbursements or other costs (the
"Costs of Content") payable to the Content Providers under any of the Content
---------------
Provider Agreements. Except as set forth in Schedule 3.24 of the Disclosure
-----------
Schedules, except for ordinary accounts payable obligations, none of which
exceed 90 days past due, the Company has made all payments currently due and
payable under the Content Provider Agreements to the satisfaction of the
applicable Content Provider, and to the Company's knowledge, there exists no
material default under any such Content Provider Agreements or any material
breach of any of the provisions thereof on the part of the Company. In the
case of each Content Provider Agreement, any restrictive provisions contained
in such Content Provider Agreement are limited solely to restrictions on the
content provided thereunder. Without limiting the foregoing, none of the
Content Provider Agreements require the Company to use the Content Provider as
a sole source of content.
ARTICLE IV"ARTICLEIV-REPRESENTATIONSANDWARRANTIESOFTHEBUYER"
REPRESENTATIONS AND WARRANTIES
OF THE BUYER AND MERGER SUB
The Buyer and, where applicable, Merger Sub, hereby represent and warrant
to the Company and the Shareholders that:
4.01. BINDING EFFECT4.01. BINDING EFFECT. Each of the Buyer and Merger
-------------- --------------
Sub has full legal right, power and authority to enter into this Agreement and
the Ancillary Agreements to be executed by it, to perform its obligations
hereunder and thereunder, and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement by the Buyer
and Merger Sub and the consummation by the Buyer and Merger Sub of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action of the Buyer and Merger Sub, respectively, and no
other corporate proceedings on the part of the Buyer or Merger Sub are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. The Board of Directors of the Buyer has determined that it is
advisable and in the best interest of the Buyer's stockholders for the Buyer
to enter into a business combination with the Company upon the terms and
subject to the conditions of this Agreement. This Agreement and the Ancillary
Agreements to be executed by the Buyer and Merger Sub have been duly and
validly executed and delivered by the Buyer and Merger Sub, as the case may
be, and constitute the legal, valid and binding obligation of the Buyer and
Merger Sub, respectively, enforceable against it in accordance with their
respective terms.
4.02. CORPORATE EXISTENCE AND POWER4.02. CORPORATE EXISTENCE AND POWER.
----------------------------- -----------------------------
The Buyer is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, and has all corporate powers
and authority and all governmental licenses, authorizations, consents and
approvals required to own, lease and operate the properties it purports to
own, operate or lease and to carry on its business as now conducted. The
Buyer is duly qualified to do business as a foreign corporation in the States
of New York and California and the Commonwealth of Massachusetts and in each
other jurisdiction where the character of the property owned or leased by it
or the nature of its activities make such qualification necessary, except for
those jurisdictions where the failure to be so qualified and in good standing
would not, individually or in the aggregate, have a Material Adverse Effect.
Merger Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware.
4.03. GOVERNMENTAL AUTHORIZATION"4.03.GOVERNMENTALAUTHORIZATION".
--------------------------- -------------------------
(a) The execution, delivery and performance by the Buyer and
Merger Sub of this Agreement and each of the Ancillary Agreements to be
executed by them requires no action by or in respect of, or filing with, any
Governmental Authority, other than compliance with any applicable requirements
of the 1933 Act and United States state securities or "Blue Sky" laws and
compliance with any applicable requirements of the Nasdaq Stock Market.
(b) Except for consents, approvals or waivers or other actions
which have been received by the Buyer or will be received by the Buyer prior
to the Effective Time, no consent, approval, waiver or other action by any
Person under any contract, agreement, indenture, lease, instrument or other
document to which the Buyer or Merger Sub is a party or by which it is bound
is required or necessary for the execution, delivery and performance by the
Buyer and Merger Sub of this Agreement and each of the Ancillary Agreements to
be executed by the Buyer or Merger Sub or the consummation of the transactions
contemplated hereby and thereby.
4.04. NON-CONTRAVENTION"4.04.NON-CONTRAVENTION""2". The execution,
----------------- -----------------
delivery and performance by the Buyer and Merger Sub of this Agreement and
each of the Ancillary Agreements to be executed by them and the consummation
of the transactions contemplated hereby and thereby does not and will not (i)
contravene or conflict with the corporate charter or bylaws of the Buyer or
Merger Sub, (ii) assuming compliance with the matters referred to in Section
4.03, materially contravene or conflict with any provision of any material
law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Buyer or Merger Sub, (iii) assuming receipt of all required
consents, constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of the Buyer or Merger
Sub or to a loss of any material benefit to which the Buyer or Merger Sub is
entitled under any provision of any agreement, contract or other instrument
binding upon the Buyer or Merger Sub or any permit held by the Buyer or Merger
Sub or (iv) assuming the receipt of all required consents, result in the
creation or imposition of any material Lien on any asset of the Buyer or
Merger Sub.
4.05. FINDERS' FEES"4.05.FINDERS'FEES". There is no investment banker,
------------- ------------
broker, "finder" or other intermediary which has been retained by or is
authorized to act on behalf of the Buyer who might be entitled to any fee or
commission from the Shareholders, the Company or any of their respective
Affiliates upon consummation of the transactions contemplated by this
Agreement.
4.06. CAPITALIZATION"4.06.CAPITALIZATION". (a) The authorized share
-------------- --------------
capital of the Buyer consists of (i) 25,000,000 million shares of Common
Stock, $.01 par value per share, and (ii) 1,000,000 shares of Preferred Stock
(the "Preferred Stock"). As of June 6, 1997, there were outstanding
----------------
14,658,446 shares of Buyer Stock and no shares of Preferred Stock. Except for
---
outstanding stock options and warrants to acquire up to an aggregate of
5,674,414 shares of Buyer Stock, as of June 6, 1997 there were no outstanding
(i) shares of capital stock, other securities or phantom or other equity
interests of the Buyer, (ii) securities of the Buyer convertible into or
exchangeable for shares of capital stock or other securities of the Buyer or
(iii) options, warrants or other rights to acquire from the Buyer any capital
stock, other securities or phantom or other equity interests of the Buyer.
(b) The authorized share capital of Merger Sub consists of 3,000
shares of Common Stock, $.01 par value per share, of which 1,000 shares were
outstanding as of the date hereof. As of the date hereof, there were no
outstanding (i) shares of capital stock, other securities or phantom or other
equity interests of Merger Sub, (ii) securities of Merger Sub convertible into
or exchangeable for shares of capital stock or other securities of Merger Sub
or (iii) options, warrants or other rights to acquire from Merger Sub any
capital stock, other securities or phantom or other equity interests of Merger
Sub.
4.07. PURCHASE FOR INVESTMENT"4.07.PURCHASEFORINVESTMENT". The Buyer is
----------------------- ---------------------
purchasing the Shares for investment for its own account and not with a view
to, or for sale in connection with, any distribution thereof; provided,
--------
however, that the disposition of the Buyer's property shall at all times
-
remain within the sole control of the Buyer.
4.08. SEC REPORTS4.08. SEC REPORTS. The Buyer has previously furnished
----------- -----------
to the Company true and correct copies of its (i) Annual Report on Form 10-K
for the fiscal year ended December 31, 1996; (ii) its Quarterly Report on Form
10-Q for the first quarter of 1997; (iii) its Proxy Statement for the Annual
Meeting of Stockholders held in 1997 and (iv) all other reports and
registration statements filed by the Buyer with the United States Securities
and Exchange Commission (the "SEC") under the 1934 Act and the 1933 Act since
---
December 31, 1996 (other than Reports on Forms 3, 4 or 5), all in the forms so
filed (collectively, the "SEC Reports"). The Company has no reason to believe
-----------
that, as of their respective dates, the SEC Reports did not comply in all
material respects with the requirements of the 1933 Act or the 1934 Act, as
the case may be, or contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. Each of the audited consolidated financial
statements and unaudited interim financial statements included in the SEC
Reports has been prepared in accordance with GAAP (except as may be indicated
therein or in the notes thereto) and fairly presents in all material respects
the consolidated financial position of the Buyer as at its date or the results
of operations, stockholders equity or cash flows, subject to normal year-end
adjustments and any other adjustments described therein.
4.09 BROADVIEW FEE PAYMENT AGREEMENT4.09 BROADVIEW FEE PAYMENT
---------------------------------- -----------------------
AGREEMENT. Buyer has entered into a Fee Payment Agreement (the "Fee Payment
- -----------
Agreement") with Broadview Associates ("Broadview") in substantially the form
-------- ---------
attached hereto as Exhibit 3.
----------
4.10 ABSENCE OF CERTAIN CHANGES4.10 ABSENCE OF CERTAIN CHANGES. Except
-------------------------- --------------------------
as disclosed in a letter provided by Buyer to the Company contemporaneously
with the execution of this Agreement (the "Buyer Update Letter"), since the
date of the Buyer's Quarterly Report on Form 10-Q for the first quarter of
1997, the Company has conducted its business in the ordinary course of its
business consistent with past practices and there has not been:
(a) any Material Adverse Change or any event, occurrence,
development or state of affairs which would require the filing of any report
or other filing with the SEC that was not so filed;
(b) any amendment to the Buyer's Certificate of Incorporation or
By-Laws; or
(c) any damage, destruction or casualty loss of or to any assets
of the Buyer (whether or not covered by insurance) that has had or could
reasonably be expected to have a Material Adverse Effect to Buyer.
4.11 VALID ISSUANCE4.11 VALID ISSUANCE. The shares of Buyer Stock to
-------------- --------------
be issued in the Merger will, when issued in accordance with the provisions of
this Agreement, be validly issued, fully paid and nonassessable.
ARTICLE V"ARTICLEV-COVENANTSOFTHESELLER"
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders agree that:
5.01. CONDUCT OF THE COMPANY"5.01.CONDUCTOFTHECOMPANY""2". From the
------------------------ -------------------
date hereof until the Effective Time, the Company and the Shareholders shall,
and the Shareholders shall cause the Company to, conduct its businesses in the
ordinary course consistent with past practices and to use their best efforts
to preserve intact its business organizations and relationships with third
parties and to keep available the services of its present officers and
employees. Without limiting the generality of the foregoing, from the date
hereof until the Effective Time, the Company and the Shareholders will not,
and the Shareholders will not permit the Company, without the prior written
consent of the Buyer, which such consent shall not be unreasonably withheld,
to:
(a) adopt or propose any change in its corporate charter or
bylaws;
(b) merge or consolidate with any other Person or acquire a
material amount of assets or share capital of any other Person;
(c) sell, lease, license or otherwise dispose of any material
assets or property or enter into any distribution agreement with respect to
any of its products except (i) pursuant to existing contracts or commitments
or (ii) in the ordinary course of its business consistent with past practices;
(d) effect any direct or indirect redemption, purchase or other
acquisition of any Company Securities, or declare, set aside or pay any
dividend or make any other distribution of assets of any kind whatsoever with
respect to any Company Securities;
(e) issue any Company Securities, except pursuant to the
exercise of Company Options outstanding on the date hereof and the issuance of
additional stock options exercisable to purchase up to a maximum of 20,000
shares of Company Common Stock;
(f) enter into any license agreement in which the Company is
either a licensor or licensee or any OEM, distributor, or other reseller
agreement, or any Content Provider Agreement, involving annual payments either
to or from the Company in excess of $50,000 in the aggregate;
(g) enter into any agreements or commitments involving
expenditures by the Company in excess of $50,000 singly or $100,000 in the
aggregate, or incur any liabilities, contingent or otherwise, in excess of
$50,000 singly or $100,000 in the aggregate, except for the refinancing,
renewal or replacement of lines of credit existing as of the date hereof and
disclosed in the Disclosure Schedules, and except for an increase in the
Company's existing bank line of credit to up to $750,000 in the aggregate and
new equipment and lease lines of up to $150,000 in the aggregate;
(h) take any action which would have the effect of preventing
the Buyer from accounting for the Merger as a "pooling-of-interests"; or
(i) agree or commit to do any of the foregoing.
Neither the Company nor either of the Shareholders will, and neither of the
Shareholders will permit the Company to, (i) take or agree or commit to take
any action that would make any representation and warranty of the Company or
either of the Shareholders under this Agreement on the date of its execution
and delivery inaccurate in any respect at, or at any time prior to the
Effective Time or (ii) omit or agree or commit to omit to take any action
necessary to prevent any such representation or warranty from being inaccurate
in any respect at any such time.
5.02. ACCESS TO INFORMATION"5.02.ACCESSTOINFORMATION""2". From the date
--------------------- -------------------
hereof until the Effective Time, the Company and the Shareholders shall, and
the Shareholders shall cause the Company, to (a) give the Buyer, its counsel,
financial advisors, financing sources, auditors and other authorized
representatives full access to the offices, properties, books and records of
the Company, (b) furnish the Buyer, its counsel, financial advisors, auditors
and other authorized representatives such financial and operating data and
other information relating to the Company as such Persons may reasonably
request and (c) instruct the employees, counsel and financial advisors of the
Company to cooperate with the Buyer in its investigation of the Company,
except to the extent any such access or disclosure is prohibited by a
confidentiality obligation binding upon the Company as of the date of this
Agreement pursuant to a Content Provider Agreement and disclosed in the
Disclosure Schedules; and provided in any case that no investigation pursuant
--------------------
to this Section shall affect any representation or warranty given by the
Company or either of the Shareholders.
5.03. NOTICES OF CERTAIN EVENTS"5.03.NOTICESOFCERTAINEVENTS". The
---------------------------- ----------------------
Company and the Shareholders will, and the Shareholders will cause the Company
to, promptly notify the Buyer of:
(i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement and/or the Ancillary Agreements;
(ii) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this Agreement
and/or the Ancillary Agreements; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or involving or
otherwise affecting the Company and/or either of the Shareholders which are
required to be disclosed pursuant to Section 3.11.
5.04. NO NEGOTIATIONS WITH THIRD
-----------------------------
PARTIES"5.04.NONEGOTIATIONSWITHTHIRDPARTIES". From the date hereof until the
--------------------------
earlier of the Effective Time or the date on which this Agreement is
terminated, none of the Shareholders, the Company nor any of their respective
Affiliates, agents or representatives, shall, directly or indirectly,
encourage, solicit or engage in any discussions or negotiations with, or
provide any information to, any Person or group concerning the possible
acquisition by such third party of all or any part of the business of the
Company, whether by purchase of assets, stock, merger or otherwise, other than
as contemplated or permitted by this Agreement. Each of the Company and the
Shareholders agrees to, and the Shareholders agree to cause the Company to,
promptly notify the Buyer of any indication of interest by any Person with
respect to any such possible transaction.
5.05. CONFIDENTIALITY"5.05.CONFIDENTIALITY". Prior to the Effective
--------------- ---------------
Time and after any termination of this Agreement, the Company and the
Shareholders will hold, and the Shareholders will cause the Company and its
Affiliates to hold, and use their best efforts to cause their respective
officers, directors, employees, accountants, counsel, consultants, advisors
and agents to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all confidential
documents and information concerning the Buyer or any of its Affiliates
furnished to the Shareholders, the Company or any of their Affiliates in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements, and (after the Effective Time) all confidential
documents and information concerning the Company, except to the extent that
such information can be shown to have been (i) previously known on a
nonconfidential basis by the Company or the Shareholders, (ii) in the public
domain through no fault of the Company or the Shareholders or (iii) later
lawfully acquired by the Company or the Shareholders from sources other than
the Buyer; provided that the Company may disclose such information to its
--------
officers, directors, employees, accountants, counsel, consultants, advisors
and agents in connection with the transactions contemplated by this Agreement,
in each case so long as such Persons are informed by the Company of the
confidential nature of such information and are directed by the Company and
agree to treat such information confidentially. The obligation of the
Shareholders, the Company and their Affiliates to hold any such information in
confidence shall be satisfied if they exercise the same care with respect to
such information as they would take to preserve the confidentiality of their
own similar information. If this Agreement is terminated, the Company, the
Shareholders and their respective Affiliates will, and will use their best
efforts to cause their respective officers, directors, employees, accountants,
counsel, consultants, advisors and agents to, destroy or deliver to the Buyer,
upon request in the Buyer's sole discretion, all documents and other
materials, and all copies thereof, obtained by the Shareholders, the Company,
and/or their Affiliates or on their behalf from the Buyer in connection with
this Agreement that are subject to such confidence. The terms of this
Agreement and the Ancillary Agreements shall be treated as confidential
information of Buyer for purposes of this Section.
5.06. CONTINUING DISCLOSURE"5.06.CONTINUINGDISCLOSURE""2". The Company
--------------------- --------------------
and the Shareholders shall have the continuing obligation promptly to advise
the Buyer with respect to any matter hereafter arising or discovered that, if
existing or known at the date of this Agreement, would have been required to
be set forth or described in a Schedule in the Disclosure Schedules, or that
constitutes a breach or prospective breach of this Agreement by the Company or
either of the Shareholders. The delivery of any such notice shall not affect
the Buyer's remedies hereunder.
5.07. SHAREHOLDER APPROVAL5.07. STOCKHOLDER APPROVAL. The Company and
-------------------- --------------------
the Shareholders shall promptly convene a duly and validly constituted meeting
of the shareholders of the Company, or prepare and circulate to the
shareholders of the Company a written consent in lieu of meeting, for the
purposes of obtaining the approval of the Merger by such shareholders in
accordance with California law and shall use their respective best efforts to
obtain such approval as promptly as possible after the execution of this
Agreement.
5.08. APPROVAL OF PARACHUTE PAYMENTS5.08. APPROVAL OF PARACHUTE
--------------------------------- ----------------------
PAYMENTS. With respect to all payments that would constitute "excess
-
parachute payments" (within the meaning of Section 280G of the Code) but for
-
the exceptions set forth in Sections 280G(b)(4) and 280G(b)(5) of the Code,
the Company shall obtain the shareholder approval described in Section
280G(b)(5)(B) of the Code so that such payments will not be nondeductible
under Section 280G of the Code and will not be subject to the tax imposed
under Section 4999 of the Code.
ARTICLE VI"ARTICLEVI-COVENANTSOFTHEBUYER"
COVENANTS OF THE BUYER
The Buyer agrees that:
6.01. CONFIDENTIALITY"6.01.CONFIDENTIALITY". Prior to the Effective
--------------- ---------------
Time and after any termination of this Agreement, the Buyer and its Affiliates
will hold, and will use their best efforts to cause their respective officers,
directors, employees, accountants, counsel, consultants, advisors and agents
to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all confidential
documents and information concerning the Company or any of its Affiliates and
the Shareholders furnished to the Buyer or its Affiliates in connection with
the transactions contemplated by this Agreement and the Ancillary Agreements,
except to the extent that such information can be shown to have been (i)
previously known on a nonconfidential basis by the Buyer, (ii) in the public
domain through no fault of the Buyer or (iii) later lawfully acquired by the
Buyer from sources other than the Company or the Shareholders; provided that
--------
the Buyer may disclose such information to its officers, directors, employees,
accountants, counsel, consultants, advisors and agents in connection with the
transactions contemplated by this Agreement in each case so long as such
Persons are informed by the Buyer of the confidential nature of such
information and are directed by the Buyer and agree to treat such information
confidentially. The obligation of the Buyer and its Affiliates to hold any
such information in confidence shall be satisfied if they exercise the same
care with respect to such information as they would take to preserve the
confidentiality of their own similar information. If this Agreement is
terminated, the Buyer and its Affiliates will, and will use their best efforts
to cause their respective officers, directors, employees, accountants,
counsel, consultants, advisors and agents to, destroy or deliver to the
Company or either of the Shareholders (with respect to documents and materials
pertaining to such Shareholder), upon request in the sole discretion of the
Company or either Shareholder (with respect to documents and materials
pertaining to such Shareholder), all documents and other materials, and all
copies thereof, obtained by the Buyer or its Affiliates or on their behalf
from the Shareholders or the Company in connection with this Agreement that
are subject to such confidence.
6.02. ACCESS"6.02.ACCESS". After the Effective Time, Buyer will afford
------ ------
promptly to the Shareholders and their agents reasonable access to their
properties, books, records, employees and auditors to the extent necessary to
permit the Shareholders to determine any matter relating to their rights and
obligations hereunder or to any period ending prior to the Effective Time.
The Shareholders will hold, and will cause their accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of
law, all confidential documents and information concerning the Company and the
Subsidiaries provided to them pursuant to this Section.
6.03. DOCUMENTS TO BE FURNISHED"6.03.DOCUMENTSTOBEFURNISHED". The Buyer
------------------------- ----------------------
shall furnish to the Shareholders promptly after such documents are available
to the Buyer's stockholders all reports, statements, documents and other items
the Buyer delivers, or is required to deliver, to its stockholders prior to
the Effective Time.
6.04. NOTICES OF CERTAIN EVENTS6.04. NOTICES OF CERTAIN EVENTS. The
-------------------------- -------------------------
Buyer and Merger Sub will promptly notify the Company and the Shareholders of:
(i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement and/or the Ancillary Agreements;
(ii) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this Agreement
and/or the Ancillary Agreements; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or involving or
otherwise affecting the Buyer.
6.05. CONTINUING DISCLOSURE6.05. CONTINUING DISCLOSURE. The Buyer
---------------------- ---------------------
shall have the continuing obligation promptly to advise the Company and the
Shareholders with respect to any matter hereafter arising or discovered that,
if existing or known at the date of this Agreement, would constitute a breach
or prospective breach of this Agreement by Buyer or Merger Sub. The delivery
of any such notice shall not affect the Company's or the Shareholders'
remedies hereunder.
ARTICLE VII"ARTICLEVII-COVENANTSOFALLPARTIES"
COVENANTS OF ALL PARTIES
The parties hereto agree that:
7.01. BEST EFFORTS"7.01.BESTEFFORTS". Subject to the terms and
------------- -----------
conditions of this Agreement, each party will use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement, including the seeking and
obtaining of any consents or approvals required to be obtained by it to
consummate the transactions contemplated hereby or by the Ancillary
Agreements. Each of the Company, the Shareholders and the Buyer agree, and
the Shareholders, prior to the Effective Time, and the Buyer, after the
Effective Time, agree to cause the Company to execute and deliver such other
documents, certificates, agreements and other writings and to take such other
actions as may be necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement.
7.02. CERTAIN FILINGS"7.02.CERTAINFILINGS". The Company and the Buyer
--------------- --------------
shall cooperate with each other (a) in determining whether any action by or in
respect of, or filing with, any Governmental Authority is required, or any
actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements and
(b) in taking such actions or making any such filings, furnishing information
required in connection therewith and seeking timely to obtain any such
actions, consents, approvals or waivers.
7.03. PUBLIC ANNOUNCEMENTS"7.03.PUBLICANNOUNCEMENTS""2". The parties
--------------------- -------------------
agree to consult with each other before issuing any press release or making
any public statement with respect to this Agreement or the transactions
contemplated hereby and, except as may be required by applicable law
(including, without limitation, the 1933 Act, the 1934 Act or any rules or
regulations thereunder) or any listing agreement with any securities exchange
or similar entity (including, without limitation, the Nasdaq National Market),
will not issue any such press release or make any such public statement prior
to the execution of this Agreement unless approved verbally by Xxx Xxxx on
behalf of the Company.
7.04. ASSUMPTION OF COMPANY STOCK OPTIONS.7.04. ASSUMPTION OF COMPANY
----------------------------------- ---------------------
STOCK OPTIONS.
-------------
(a) At the Effective Time, the Company's obligations with
respect to each outstanding option to purchase shares of Company Common Stock
(each, a "Company Option") under the Company's 1994 Incentive Stock Option
---------------
Plan, 1995 Incentive Stock Option Plan and 1996 Stock Option Plan (the
"Company Stock Option Plans"), whether vested or unvested, shall be assumed by
--------------------
the Buyer. Each Company Option so assumed by the Buyer under this Agreement
shall continue to have, and be subject to, the same terms and conditions set
forth in the Company Stock Option Plans and option agreement pursuant to which
such Company Option was issued as is in effect immediately prior to the
Effective Time, except that (i) such Company Option will be exercisable for
that number of shares of Buyer Stock equal to the product of the number of
shares of Company Common Stock that were purchasable under such Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Buyer Stock and (ii) the
per share exercise price for the shares of Buyer Stock issuable upon exercise
of such assumed Company Option will be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
Company Option was exercisable immediately prior to the Effective Time by the
Exchange Ratio, and rounding the resulting exercise price up to the nearest
whole cent.
(b) It is the intention of the parties that the Company Options
assumed by the Buyer qualify following the Effective Time as incentive stock
options as defined in the Code ("ISO's") to the extent the Company Options
-----
qualified as ISO's prior to the Effective Time, provided, however, that no
representation is made by any party to that effect.
(c) After the Effective Time, the Buyer will issue to each
holder of an outstanding Company Option an agreement evidencing the foregoing
assumption of such Company Option by the Buyer, in substantially the form set
forth in Schedule 7.04 attached hereto.
--------------
(d) The Buyer will file a registration statement on Form S-8
with the SEC covering the Company Options assumed by the Buyer under this
Section promptly after the Effective Time.
ARTICLE VIII"ARTICLEVIII-EMPLOYEEBENEFITS"
EMPLOYEE BENEFITS
8.01. EMPLOYEE BENEFITS DEFINITIONS"8.01.EMPLOYEEBENEFITSDEFINITIONS".
----------------------------- ---------------------------
The following terms, as used herein, shall have the following meanings:
"Benefit Arrangement" means each employment, severance or other
--------------------
similar contract, arrangement or policy (written or oral) and each plan or
arrangement (written or oral) providing for severance benefits, insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing, bonuses,
stock options, stock appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which (i)
is not an Employee Plan, (ii) is entered into, maintained or contributed to,
as the case may be, by the Shareholders, the Company or any Subsidiary or any
of their Affiliates and (iii) covers any employee or former employee of the
Company or any of its Subsidiaries.
"Employee Plans" means each "employee benefit plan", as such term is
-------------- ---------------------
defined in Section 3(3) of ERISA, that (i) is subject to any provision of
ERISA and (ii) is maintained or contributed to by the Company, any Subsidiary
or any of their ERISA Affiliates, as the case may be.
"ERISA" means the Employment Retirement Income Security Act of 1974,
-----
as amended.
"ERISA Affiliate" of any entity means any other entity that,
----------------
together with such entity, would be treated as a single employer under Section
414 of the Code.
"Multiemployer Plan" means each Employee Plan that is a
-------------------
multiemployer plan, as defined in Section 3(37) of ERISA.
-
8.02. EMPLOYEE BENEFIT
-----------------
REPRESENTATIONS"8.02.EMPLOYEEBENEFITREPRESENTATIONS". The Company represents
----------------
and warrants to the Buyer that:
(a) Schedule 8.02 lists each Employee Plan that covers any
--------------
employee of the Company or any of its Subsidiaries, copies or descriptions of
all of which have previously been made available or furnished to the Buyer.
With respect to each Employee Plan, the Company has provided the most recently
filed Form 5500 and an accurate summary plan description. The Company has
provided the Buyer with complete age, salary, service and related data as of
the most recent practicable date for employees of the Company.
(b) Schedule 8.02 also includes a list of each Benefit
--------------
Arrangement of the Company, copies or descriptions of which have been made
available or furnished previously to the Buyer.
(c) Except as set forth in Schedule 8.02, none of the Employee
-------------
Plans or other arrangements listed on Schedule 8.02 covers any non-United
-------------
States employee or former employee of the Company.
(d) No "prohibited transaction", as defined in Section 406 of
----------------------
ERISA or Section 4975 of the Code, has occurred to the knowledge of the
Company or the Shareholders with respect to any Employee Plan.
(e) No Employee Plan is a Multiemployer Plan and no Employee
Plan is subject to Title IV of ERISA. The Company and its Affiliates have not
incurred any liability under Title IV of ERISA arising in connection with the
termination of any plan covered or previously covered by Title IV of ERISA.
(f) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during
the period from its adoption to date, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. The Company has
furnished to the Buyer copies of the most recent Internal Revenue Service
determination letters with respect to each such plan. Each Employee Plan has
been maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including
but not limited to ERISA and the Code, which are applicable to such plan.
(g) Each Employee Plan and each Benefit Arrangement has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Benefit Arrangement.
(h) With respect to the employees and former employees of the
Company, there are no employee post-retirement medical or health plans in
effect, except as required by Section 4980B of the Code.
(i) All contributions and payments accrued under each Employee
Plan and Benefit Arrangement, determined in accordance with prior funding and
accrual practices, as adjusted to include proportional accruals for the period
ending at the Effective Time, will be discharged and paid prior to the
Effective Time except to the extent reflected on the Balance Sheet. Except as
disclosed in writing to the Buyer prior to the date hereof, there has been no
amendment to, written interpretation of or announcement (whether or not
written) by the Shareholders or any of their ERISA Affiliates relating to, or
change in employee participation or coverage under, any Employee Plan or
Benefit Arrangement that would increase materially the expense of maintaining
such Employee Plan or Benefit Arrangement above the level of the expense
incurred in respect thereof for the fiscal year ended prior to the date
hereof.
(j) No tax under Section 4980B of the Code has been incurred in
respect of any Employee Plan that is a group health plan, as defined in
Section 5000(b)(1) of the Code.
(k) No employee of the Company will become entitled to any
bonus, retirement, severance or similar benefit or enhanced benefit solely as
a result of the transactions contemplated hereby.
(l) The Company does not have, and is it not reasonably expected
to have, any liability under Title IV of ERISA.
8.03. NO THIRD PARTY BENEFICIARIES"8.03.NOTHIRDPARTYBENEFICIARIES".
------------------------------- -------------------------
(a) No provision of this Article VIII shall create any third
party beneficiary or other rights in any employee or former employee
(including any beneficiary or dependent thereof) of the Company in respect of
continued employment (or resumed employment) with the Company and no provision
of this Article VIII shall create any such rights in any such Persons in
respect of any benefits that may be provided, directly or indirectly, under
any Employee Plan or Benefit Arrangement or any plan or arrangement that may
be established by the Buyer or any of its Affiliates. No provision of this
Agreement shall constitute a limitation on rights to amend, modify or
terminate after the Effective Time any Employee Plan or Benefit Arrangement.
(b) Notwithstanding the foregoing, Employees of the Company
shall be eligible following consummation of the Merger to participate in
Employee Plans and Benefit Arrangements of Buyer on the same basis as
employees of Buyer generally, including, to the extent permissible under the
terms of such Employee Plan or Benefit Arrangement, with full credit for
employment with the Company for purposes of eligibility and vesting.
ARTICLE IX"ARTICLEIX-CONDITIONSTOCLOSING"
CONDITIONS TO THE MERGER
9.01. CONDITIONS TO THE OBLIGATIONS OF EACH
------------------------------------------
PARTY"9.01.CONDITIONSTOTHEOBLIGATIONSOFEACHPARTY". The respective obligations
------------------------------------
of each party to consummate the Merger are subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) No proceeding challenging this Agreement or the Ancillary
Agreements or the transactions contemplated hereby or thereby or seeking to
prohibit, alter, prevent or materially delay the Closing shall have been
instituted by any Person before any court, arbitrator or governmental body,
agency or official and be pending.
(b) All actions by or in respect of or filings with any
Governmental Authority required to permit the consummation of the Closing
shall have been obtained.
(c) This Agreement and the Merger shall have been authorized and
approved by the requisite vote of the shareholders of the Company.
9.02. ADDITIONAL CONDITIONS TO OBLIGATION OF THE
-----------------------------------------------
BUYER"9.02.CONDITIONSTOOBLIGATIONOFTHEBUYER". The obligation of the Buyer to
-------------------------------
consummate the Merger is subject to the satisfaction of the following further
conditions:
(a)(i) The Company and the Shareholders shall have performed in
all material respects all of their obligations hereunder required to be
performed as of or prior to the Effective Time, (ii) the representations and
warranties of the Company and the Shareholders contained in this Agreement at
the time of its execution and delivery and in any certificate or other writing
delivered by the Company or the Shareholders pursuant hereto, shall be true
and correct at and as of the Effective Time, as if made at and as of such date
and (iii) the Buyer shall have received a certificate signed by the Company
and the Shareholders to the foregoing effect.
(b) No court, arbitrator or governmental body, agency or
official shall have issued any order, and there shall not be any statute, rule
or regulation, restraining the effective operation by the Buyer of the
business of the Company after the Effective Time, and no proceeding
challenging this Agreement or the transactions contemplated hereby or seeking
to prohibit, alter, prevent or materially delay the Closing shall have been
instituted by any Person before any court, arbitrator or governmental body,
agency or official and be pending.
(c) The Buyer shall have received an opinion of Company Counsel,
dated the Closing Date, in form and substance reasonably satisfactory to Buyer
and Buyer's Counsel, covering the matters set forth in Schedule 9.02(c)
----------------
attached hereto.
(d) The Company shall have received and provided copies to Buyer
of all consents, authorizations or approvals from the Governmental Authorities
referred to in Section 3.03(a), in each case in form and substance reasonably
satisfactory to the Buyer, and no such consent, authorization or approval
shall have been revoked.
(e) The Buyer shall have received all other closing documents
specified in Section 2.02 of this Agreement and all other closing documents
that it may reasonably request, all in form and substance reasonably
satisfactory to the Buyer.
(f) Each of the Shareholders shall have executed and delivered
to the Buyer a Noncompetition Agreement.
(g) There shall have been no Material Adverse Change with
respect to the Company as of or prior to the Effective Time.
(h) There shall be no action, suit, investigation or proceeding
pending or threatened against or affecting the Company or any Subsidiary or
any of their respective properties before any court, arbitrator or
Governmental Authority.
(i) The Company shall have delivered to the Buyer the
resignations of all officers and directors of the Company from their positions
with the Company at or prior to the Effective Time, unless otherwise specified
by the Buyer.
(j) The Dissenting Shares shall not constitute more than 4% of
the total number of shares of Company Common Stock outstanding immediately
prior to the Effective Time.
(k) Any registration rights, rights of first refusal, rights to
any liquidation preference or redemption rights of any Company shareholder
shall have been terminated or irrevocably waived as of the Closing.
(l) [Intentionally Omitted.]
(m) The Buyer shall have received a written opinion from Coopers
& Xxxxxxx L.L.P. ("Coopers"), dated as of the Effective Time and satisfactory
-------
to the Board of Directors of the Buyer, to the effect that, in the opinion of
Coopers, the Merger qualifies for pooling-of-interests accounting treatment if
consummated in accordance with the terms of this Agreement.
(n) Each affiliate of the Company shall have executed and
delivered to the Buyer an Affiliate Agreement in substantially the form
attached hereto as Exhibit 9.02(n) (each, an "Affiliate Agreement"), and each
--------------- -------------------
such Affiliate Agreement shall be in full force and effect.
(o) The Company shall have delivered to Buyer a clearance
certificate or similar document(s) to the extent required by any tax authority
to relieve Buyer of any obligation to withhold Taxes in connection with the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements. The Company shall have paid any sales, use, transfer
and documentary Taxes and recording and filing fees applicable to the
consummation of the transactions contemplated by this Agreement. The Company
shall have delivered to Buyer a properly executed statement satisfying the
requirements of Treasury Regulation Sections 1.897-2(h) and 1.1445-1(c)(3) in
a form reasonably acceptable to Buyer.
9.03. ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY9.03.
--------------------------------------------------------
ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY. The obligations of the
--------------------------------------------
Company and the Shareholders to consummate the Closing are subject to the
satisfaction of the following further conditions:
(a)(i) The Buyer and Merger Sub shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Effective Time, (ii) the representations and warranties
of the Buyer and Merger Sub contained in this Agreement at the time of its
execution and delivery and in any certificate or other writing delivered by
the Buyer pursuant hereto shall be true and correct at and as of the Effective
Time, as if made at and as of such date and (iii) the Company shall have
received a certificate signed by the President and the Chief Financial Officer
of the Buyer to the foregoing effect.
(b) No proceeding challenging this Agreement or the transactions
contemplated hereby or seeking to prohibit, alter, prevent or materially delay
the Closing shall have been instituted by any Person before any court,
arbitrator or governmental body, agency or official and be pending.
(c) The Company shall have received an opinion of Buyer's
Counsel, dated the Closing Date, in form and substance reasonably satisfactory
to the Company and Company Counsel covering the matters set forth in Schedule
--------
9.03(c).
-------
(d) The Buyer shall have received all consents, authorizations
or approvals from the Governmental Authorities referred to in Section 4.03, in
each case in form and substance reasonably satisfactory to the Shareholders,
and no such consent, authorization or approval shall have been revoked.
(e) The Buyer shall have executed and delivered to the
Shareholders the Registration Rights Agreement and the Buyer and Broadview
shall have executed the Fee Payment Agreement.
(f) There shall have been no material adverse change in the
business, assets, liabilities, condition (financial or otherwise) or results
of operations of the Buyer since the Balance Sheet Date.
(g) There shall be no action, suit, investigation or proceeding
pending or threatened against or affecting the Buyer or any of its properties
before any court, arbitrator or Government Authority, except for the amended
consolidated securities class action lawsuit filed against the Buyer and
certain other parties in the U.S. District Court for the District of
Massachusetts on February 28, 1997.
(h) In connection with the Shareholders' employment by Buyer
following the Merger, the Buyer shall have granted the Shareholders incentive
stock options (each, a "Shareholder Option") under the Buyer's Amended and
------------------
Restated 1989 Stock Option Plan, as amended, exercisable for the purchase of
an aggregate of 250,000 shares of Buyer Stock, at an exercise price equal to
the last sale price of Buyer Stock on the Nasdaq National Market on the day
immediately preceding the Closing Date, each such Shareholder Option to vest
over a four-year period commencing upon the Effective Time on the Closing
Date, as follows: (x) 12.5% of each Shareholder Option shall become
exercisable on the six-month anniversary of the Closing Date, (y) an
additional 12.5% of each Shareholder Option shall become exercisable on the
one-year anniversary of the Closing Date (the "One-Year Anniversary") and (z)
--------------------
the remaining 75% of each Shareholder Option shall become exercisable in 35
equal monthly installments commencing on the last day of the month immediately
following the month of the One Year Anniversary.
ARTICLE X"ARTICLEX-SURVIVAL;INDEMNIFICATION"
SURVIVAL; INDEMNIFICATION
10.01. SURVIVAL"10.01.SURVIVAL". The covenants, agreements,
-------- --------
representations and warranties of the parties hereto contained in this
Agreement or in any certificate or other writing delivered pursuant hereto or
in connection herewith shall survive the Closing and any investigation at any
time made by or on behalf of any party until March 31, 1998; provided,
---------
however, that the covenants, agreements, representations and warranties set
forth in Sections 3.17 and 9.02(o) shall survive until the applicable statutes
of limitations with respect to Taxes shall have expired. Notwithstanding the
preceding sentence, any covenant, agreement, representation or warranty in
respect of which indemnity may be sought under Section 10.02 shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if notice of the inaccuracy or breach thereof giving rise to such right to
indemnity shall have been given to the party against whom such indemnity may
be sought prior to such time. Notwithstanding anything herein to the
contrary, this Article 10 shall survive the Closing and the termination of
this Agreement.
10.02. INDEMNIFICATION"10.02.INDEMNIFICATION". (a) Each shareholder of
--------------- ---------------
the Company (individually, a "Company Shareholder" and collectively, the
"Company Shareholders") , jointly and severally, hereby indemnifies Buyer and,
effective at and as of the Effective Time, without duplication, the Company
against, and hold them harmless from, any and all damage, loss, liability and
expense (including without limitation reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any action, suit or
proceeding) (collectively, "Loss") incurred or suffered by the Buyer or the
----
Company arising out of any misrepresentation or breach of warranty or covenant
made or to be performed by the Company or either or any Company Shareholder
pursuant to this Agreement; provided that (x) no Company Shareholder shall be
--------
liable for greater than his pro rata share of any Loss (calculated based on
each Company Shareholder's relative percentage ownership of Company Common
Stock immediately prior to the Effective Time as between all of the Company
Shareholders) and (y) the maximum aggregate liability of the Company
Shareholders under this Section shall not exceed 10% of the aggregate Merger
Consideration received by the Company Shareholders, payable in accordance with
paragraph (d) of this Section 10.02.
(b) The Buyer hereby indemnifies the Company Shareholders
against and agrees to hold the Company Shareholders harmless from any and all
Loss incurred or suffered by such Company Shareholders arising out of any
misrepresentation or breach of warranty or covenant made or to be performed by
the Buyer pursuant to this Agreement, including, without limitation, any
misrepresentation or breach of warrant or covenant made in or required to be
performed by Buyer pursuant to the terms of the Fee Payment Agreement;
provided that the Buyer's maximum liability under this Section shall not
exceed 10% of the aggregate Merger Consideration received by the Company
Shareholders. In the event that Buyer shall be liable for any Loss under this
Section 10.02, Buyer's liability must be satisfied solely by issuing and
delivering to the Company Shareholders the number of shares of Buyer Stock
determined by dividing (i) the aggregate dollar amount of such liability by
(ii) the closing sale price of Buyer Stock on the Nasdaq National Market on
the Closing Date, as adjusted as appropriate to reflect any stock split,
reverse stock split, stock dividend, recapitalization or other similar
transaction effected by Buyer between the Effective Time and the date of
delivery of such shares.
(c) The Indemnifying Party (as defined below) shall not be
liable for indemnification pursuant to this Section 10.02 until such time as
the total amount of all Losses exceeds Seventy-Five Thousand dollars
($75,000), and then only to the extent of such excess.
(d) In the event that any Company Shareholders shall be liable
for any Loss under this Section 10.02, such Company Shareholder must, to the
extent that such Company Shareholder continues to hold shares of Buyer Stock,
satisfy such liability by delivering to Buyer for cancellation on the stock
records of Buyer the number of shares of Buyer Stock determined by dividing
(i) the aggregate dollar amount of such liability by (ii) the closing sale
price of Buyer Stock on the Nasdaq National Market on the Closing Date, as
adjusted as appropriate to reflect any stock split, reverse stock split, stock
dividend, recapitalization or other similar transaction effected by Buyer
between the Effective Time and the date of delivery of such shares. If the
Company Shareholder certifies to the Company that the Company Shareholder no
longer holds any shares of Buyer Stock, the Company Shareholder shall instead
satisfy any liability hereunder through a cash payment.
10.03. PROCEDURES; NO WAIVER"10.03.PROCEDURES;NOWAIVER""2". (a) The
----------------------- -------------------
party seeking indemnification under Section 10.02 (the "Indemnified Party")
-----------------
agrees to give prompt notice to the party against whom indemnity is sought
(the "Indemnifying Party") of the assertion of any claim, or the commencement
------------------
of any suit, action or proceeding in respect of which indemnity may be sought
under such Section. The Indemnifying Party may, and at the request of the
Indemnified Party shall, participate in and control the defense of any third
party suit, action or proceeding at its own expense. The Indemnifying Party
shall not be liable for any settlement effected without its consent of any
claim, litigation or proceeding in respect of which indemnity may be sought
hereunder.
(b) No waiver of a closing condition by either the Buyer or the
Shareholders shall limit its rights under Section 10.02.
ARTICLE XI"ARTICLEXI-TERMINATION"
TERMINATION
11.01. GROUNDS FOR TERMINATION"11.01.GROUNDSFORTERMINATION". This
------------------------- ---------------------
Agreement may be terminated at any time prior to the Effective Time:
(i) by mutual written agreement duly authorized by the Board of
Directors of the Buyer and the Company;
(ii) by either the Buyer or the Company if the Merger shall not
have been consummated on or before June 30, 1997 (provided that the right to
terminate this Agreement under this subsection shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been
the cause of or resulted in the failure of the Merger to occur on or before
such date);
(iii) by either the Buyer or the Company if there shall be any
law or regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any court or Governmental Authority having competent jurisdiction;
(iv) by the Buyer in the event of a material breach by the
Company or the Shareholders of any of their covenants, representations or
warranties set forth herein and the Company or the Shareholders, as the case
may be, fail to cure such breach within 15 days of written notice of such
material breach from the Buyer; or
(v) by the Company in the event of a material breach by the
Buyer of any of its covenants, representations or warranties set forth herein
and the Buyer fails to cure such breach within 15 days of written notice of
such material breach from the Company.
The party desiring to terminate this Agreement pursuant to clauses (ii),
(iii), (iv) or (v) shall give notice of such termination to the other party.
11.02. EFFECT OF TERMINATION"11.02.EFFECTOFTERMINATION""2". If this
----------------------- -------------------
Agreement is terminated as permitted by Section 11.01, such termination shall
be without liability of any party (or any shareholder, director, officer,
employee, agent, consultant or representative of such party) to the other
parties to this Agreement; provided that if such termination shall result from
--------
the willful failure of any party to fulfill a condition to the performance of
the obligations of another party or from the failure to perform a covenant of
this Agreement or from a breach of any representation or warranty by any party
to this Agreement, such party shall be fully liable for any and all damages
incurred or suffered by the other party as a result of such failure or breach.
The provisions of Sections 5.05, 6.01, 7.03 and 12.03 shall survive any
termination hereof pursuant to Section 11.01.
11.03 BREAK-UP FEE11.03 BREAK-UP FEE. In the event that Buyer
------------ ------------
shall announce the execution of this Agreement prior to the consummation of
the Merger, then, in the event that the Merger is not consummated prior to
5:00 p.m. Eastern Standard Time on the later to occur of (i) the seventh day
after the execution of this Agreement or (ii) the day on which all of the
Company's and the Shareholders' conditions to Buyer's obligation to consummate
the Merger set forth in Section 9.02 of this Agreement are satisfied in full
(assuming for purposes of this clause (ii) the full satisfaction of any
conditions which were not satisfied solely because Buyer acted or failed to
act with the intention of causing such failure of satisfaction), Buyer shall
immediately pay the Company the sum of Two Hundred Thousand dollars ($200,000)
cash (the "Break-up Fee"), provided, however, that the Company shall
------------------
immediately return the Break-up Fee to Buyer in the event that the Merger is
consummated on or before June 30, 1997 or both parties agree in writing to
continue negotiations for the consummation of the Merger beyond June 30, 1997.
Notwithstanding the foregoing, upon the satisfaction in full of the conditions
to the Buyer's obligations set forth in Section 9.02 and the filing of the
Agreement of Merger with the Secretary of State of the State of California
pursuant to Section 2.02, the preceding 7-day period shall be suspended and
Buyer shall have no obligation to pay the Break-up Fee to the Company pending
the Secretary of State's review and approval of the Merger, for so long as the
parties are engaged in efforts to obtain such approval. If the Secretary of
State's approval is not so obtained and the Merger does not become effective
due to Individual's failure to proceed with such efforts, Individual shall
promptly pay the Break-up Fee to the Company.
ARTICLE XII"ARTICLEXII-MISCELLANEOUS"
MISCELLANEOUS
12.01. NOTICES"12.01.NOTICES". All notices, requests and other
------- -------
communications to either party hereunder shall be in writing (including
telecopy or similar writing) and shall be given,
if to the Buyer, to:
Individual, Inc.
0 Xxx Xxxxxxx Xxxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: President
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxx, Xx., Esq.
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
High Street Tower
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
if to the Company, to:
ClariNet Communications Corp.
0000 Xxxxxxx Xxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: President
Telecopy: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxx, Esq.
Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Telecopy: (000) 000-0000
if to the Shareholders, to:
The Shareholders at the addresses set forth
on the signature pages hereto.
12.02. AMENDMENTS; NO WAIVERS"12.02.AMENDMENTS;NOWAIVERS". (a) Any
------------------------ --------------------
provision of this Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and signed by all of the parties hereto.
(b) No failure or delay by either party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
12.03. EXPENSES"12.03.EXPENSES". All costs and expenses incurred in
-------- --------
connection with this Agreement shall be paid by Buyer if such costs and
expenses were incurred on behalf of Buyer, its shareholders or Merger Sub and
by the Shareholders if such costs and expenses were incurred on behalf of the
Company or the Shareholders, provided, however, that (i) if the Merger is
consummated, Buyer shall pay all reasonable, documented accounting and legal
fees and expenses incurred on behalf of the Company and the Shareholders in
connection with the Merger and (ii) Buyer shall pay the expenses of Broadview
Associates pursuant to the Fee Payment Agreement. Any such expenses of the
Company and the Shareholders paid by Buyer shall be assumed and paid directly
by Buyer and shall only include such expenses which are permitted to be
assumed and paid directly by Buyer under Revenue Ruling 73-54 1973-1 C.B. 187.
12.04. SUCCESSORS AND ASSIGNS"12.04.SUCCESSORSANDASSIGNS". The
------------------------ --------------------
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns; provided that
--------
no party may assign, delegate or otherwise transfer any of his or its rights
or obligations under this Agreement without the consent of the other parties
hereto, except that the Buyer may transfer or assign, in whole or from time to
time in part, to one or more of its Affiliates, the Shares or the right to
purchase all or a portion of the Shares, but no such transfer or assignment
will relieve the Buyer of its obligations hereunder.
12.05. FURTHER ASSURANCES"12.05.FURTHERASSURANCES""2". From time to
------------------- -----------------
time after the Closing, at the request of a party hereto and without further
consideration, the other party will execute and deliver to such requesting
party such other documents, and take such other action, as such party may
reasonably request in order to consummate more effectively the transactions
contemplated hereby and to vest in the Buyer good, valid and marketable title
to the Shares, or to vest in the Shareholders good, valid and marketable title
to the shares of Buyer Stock, as the case may be.
12.06. GOVERNING LAW"12.06.GOVERNINGLAW". This Agreement shall be
-------------- ------------
construed in accordance with and governed by the laws of the State of
Delaware, without regard to the conflicts of laws rules of such State.
12.07. COUNTERPARTS; EFFECTIVENESS"12.07.COUNTERPARTS;EFFECTIVENESS".
---------------------------- --------------------------
This Agreement may be signed in any number of counterparts, each of which
shall be an original, but all of which taken together shall constitute the
same instrument with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Agreement shall become effective when
each party hereto shall have received a counterpart or counterparts hereof
signed by the other parties hereto.
12.08. ENTIRE AGREEMENT"12.08.ENTIREAGREEMENT""2". This Agreement and
---------------- ---------------
the Ancillary Agreements constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior agreements,
understandings and negotiations, both written and oral, between the parties
with respect to the subject matter hereof. No representation, inducement,
promise, understanding, condition or warranty not set forth herein has been
made or relied upon by either party hereto. Neither this Agreement nor any
provision hereof is intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
12.09. CAPTIONS"12.09.CAPTIONS". The captions herein are included for
-------- --------
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
12.10. JURISDICTION"12.10.JURISDICTION". Any action or proceeding
------------ ------------
seeking to enforce any provision of, or based on any right arising out of,
this Agreement may be brought against any of the parties in the federal or
state courts of The Commonwealth of Massachusetts, and each of the parties
hereby consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any such action or proceeding may be served on
any party anywhere in the world, whether within or without The Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
INDIVIDUAL, INC.
By:
Name:
Title:
CN MERGER CORP.
By:
Name:
Title:
CLARINET COMMUNICATIONS CORP.
By:
Name:
Title:
SHAREHOLDERS:
Xxxx Xxxxxxxxx
Address:
Xxx Xxxx
Address:
00000 Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxx 00000
------
The following schedules and exhibits have been omitted here. The Company will
furnish
supplementally to the Commission upon request a copy of any omitted exhibit or
schedule.
SCHEDULES
---------
Schedule 7.04 Terms of Assumed Options
Schedule 8.02 Employee Plans and Benefit Arrangements
Schedule 9.02(c) Opinion of Company Counsel
Schedule 9.03(c) Opinion of Buyer's Counsel
EXHIBITS
--------
Exhibit 1 Agreement of Merger
Exhibit 2 Form of Registration Rights Agreement (Filed as Exhibit 99.1 to
the Report on Form 8-K of which this Exhibit 2.1 is a part)
Exhibit 3 Form of Fee Payment Agreement (Filed as Exhibit 99.2 to the
Report on Form 8-K of which this Exhibit 2.1 is a part)
Exhibit 4 Form of Noncompetition Agreement
Exhibit 9.02(n)
Form of Affiliate Agreement
AFFILIATE AGREEMENT
June 18, 1997
INDIVIDUAL, INC.
0 Xxx Xxxxxxx Xxxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Ladies and Gentlemen:
Pursuant to the terms of the Agreement and Plan of Reorganization dated
as of June 18, 1997 (the "Agreement"), among INDIVIDUAL, INC., a Delaware
corporation ("Parent"), CN MERGER CORP., a Delaware corporation and
wholly-owned subsidiary of Parent ("Merger Sub"), and ClariNet Communications
Corp., a California corporation (the "Company"), Parent will acquire the
Company through the merger of Merger Sub with and into the Company (the
"Merger"). Subject to the terms and conditions of the Agreement, at the
Effective Time (as defined in the Agreement), outstanding shares of the Common
Stock, no par value per share, of the Company (the "Company Common Stock")
will be converted into the right to receive shares of the Common Stock, $.01
par value per share, of Parent (the "Parent Common Stock"), on the basis
described in the Agreement. Capitalized terms used herein without definition
shall have the meanings given such terms in the Agreement.
The undersigned has been advised that as of the date hereof it may be
deemed to be an "affiliate" of the Company, as the term "affiliate" is (i)
defined for purposes of paragraphs (c) and (d) of Rule 145 of the Rules and
Regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended
(the "Act"), and/or (ii) used in and for purposes of Accounting Series
Releases 130 and 135, as amended, and Staff Accounting Bulletins 65 and 76 of
the Commission.
The undersigned understands that the representations, warranties and
covenants set forth herein will be relied upon by Parent, stockholders of
Parent, the Company, other shareholders of the Company and their respective
counsel and accountants.
The undersigned represents and warrants to and agrees with Parent that:
1. The undersigned has full power to execute and deliver this
Affiliate Agreement and to make the representations and warranties herein and
to perform its obligations hereunder;
2. The undersigned has carefully read this Affiliate Agreement and
the Agreement and discussed the requirements and other applicable limitations
upon its ability to sell, transfer or otherwise dispose of Parent Common Stock
to the extent the undersigned felt necessary, with its counsel or counsel for
the Company.
3. The undersigned shall not make any sale, transfer or other
disposition of Parent Common Stock in violation of the Act or the Rules and
Regulations.
4. Except as otherwise provided in the Agreement or the Ancillary
Agreements, Parent is under no obligation to register the sale, transfer or
other disposition of Parent Common Stock by the undersigned or on its behalf
under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
5. Parent, in its sole discretion, may cause stop transfer orders to
be placed with the transfer agent with respect to the undersigned's shares of
Parent Common Stock and may cause legends to be placed on the certificate(s)
representing such shares relating to this Affiliate Agreement and other
transfer restrictions applicable to such shares.
6. The undersigned is the lawful record and beneficial owner of (i.e.
has sole or shared voting or investment power with respect to) all of the
shares of Company Common Stock and options to purchase Company Common Stock
indicated on Annex A attached hereto (the "Company Securities"). Except for
-------
the Company Securities, the undersigned does not beneficially own any shares
of Company Common Stock or any other equity securities of any kind of the
Company or any options, warrants or other rights of any kind to acquire any
equity securities of any kind of the Company.
7. The undersigned has not at any time since May 10, 1997 or in
contemplation of the Merger engaged, and will not, after the Effective Time
(as defined in the Agreement) and until such time as results covering at least
30 days of combined operations of the Company and Parent have been published
by Parent, in the form of a quarterly or annual earnings report, an effective
registration statement filed with the Commission, a report to the Commission
on Form 10-K, 10-Q or 8-K, or any other public filing or announcement
(including a press release) which includes the combined results of operations,
engage, in any sale, exchange, transfer, pledge, disposition of or grant of
any option, the establishment of any "short" or put-equivalent position with
respect to or the entry into any similar transaction intended to reduce the
risk of the undersigned's risk of ownership of or investment in, any of the
following:
(a) any shares of Parent Common Stock which the undersigned acquires
in connection with the Merger, or any securities which may be paid as a
dividend or otherwise distributed thereon or with respect thereto or issued or
delivered in exchange or substitution therefor (all such shares and other
securities being referred to herein, collectively, as "Restricted
Securities"), or any option, right or other interest with respect to any
Restricted Securities;
(b) any Company Securities; or
(c) any shares of Company Common Stock or other Company equity
securities which the undersigned purchases or otherwise acquires after the
execution of this Affiliate Agreement.
8. As promptly as practicable following the Merger, Parent shall
publish financial results covering at least 30 days of combined operations of
the Company and Parent in the form of a quarterly or annual earnings report,
an effective registration statement filed with the Commission, a report to the
Commission on Form 10-K, 10-Q or 8-K, or any other public filing or
announcement (including a press release) which includes the combined results
of operations of the Company and Parent; provided, however, that Parent shall
be under no obligation to publish any such financial information other than
with respect to a fiscal quarter of Parent.
9. The undersigned has no present plan or intention to engage in a
sale, exchange, transfer, distribution, (including a distribution by a
partnership to its partners or by a corporation to its stockholders),
redemption or reduction in any way of the undersigned's risk of ownership by
short sale or otherwise, or other disposition, directly or indirectly (such
actions being collectively referred to herein as a "Sale") of any of the
shares of Parent Common Stock to be received by the undersigned in the Merger.
The undersigned is not aware of, or participating in, any plan on the part of
the shareholders of the Company to engage in a Sale or Sales of the Parent
Common Stock to be received in the Merger such that the aggregate fair market
value, as of the Effective Date of the Merger, of the shares subject to such
Sales would exceed 50% of the aggregate fair market value of all shares of
outstanding Company Common Stock immediately prior to the Merger. Except to
the extent written notification to the contrary is received by Parent from the
undersigned prior to the Merger, the representations and warranties contained
herein shall be true and correct at all times from the date hereof through the
date on which the Merger occurs.
10. The undersigned intends to vote all Company Common Stock held by
him in favor of the Merger.
11 The undersigned will not exercise dissenters' rights in connection
with the Merger.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
Very truly yours,
(Print name of shareholder above)
By:
(Sign name above)
Title:
(if applicable)
Accepted this ____ day of
June __, 1997, by
INDIVIDUAL, INC.
By:
Name:
Title:
ANNEX A
[OMITTED]
