Agreement and Plan of Merger – Lycos Inc. and WhoWhere? Inc.
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LYCOS, INC.
WHAT ACQUISITION CORP.
WHOWHERE? INC.
AND
CERTAIN SHAREHOLDERS OF
WHOWHERE? INC.
DATED
AUGUST 7, 1998
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TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER.....................................................- 1 -
1.1 The Merger............................................- 1 -
1.2 Effective Time........................................- 2 -
1.3 Effect of the Merger..................................- 2 -
1.4 Articles of Incorporation; By-Laws....................- 2 -
1.5 Directors and Officers................................- 2 -
1.6 Additional Actions....................................- 3 -
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES............................- 3 -
2.1 Merger Consideration..................................- 3 -
2.2 Conversion of Shares..................................- 3 -
2.3 Exchange of Certificates..............................- 6 -
2.4 No Fractional Securities..............................- 7 -
2.5 Stock Transfer Books..................................- 7 -
2.6 No Further Ownership Rights in Company Stock..........- 7 -
2.7 Adjustment Event......................................- 7 -
2.8 Escrow................................................- 8 -
2.9 Tax Consequences......................................- 8 -
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE PRINCIPAL SHAREHOLDERS
.............................................................- 8 -
3.1 Corporate Organization...............................- 8 -
3.2 Authorization........................................- 9 -
3.3 Consents and Approvals; No Violations................- 9 -
3.4 Capitalization......................................- 10 -
3.5 Financial Statements................................- 11 -
3.6 Absence of Undisclosed Liabilities..................- 11 -
3.7 Absence of Certain Changes or Events................- 11 -
3.8 Legal Proceedings, etc..............................- 12 -
3.9 Taxes...............................................- 12 -
3.10 Title to Properties and Related Matters.............- 14 -
(i)
3.11 Intellectual Property; Proprietary Rights; Employee
Restrictions........................................- 15 -
3.12 Contracts...........................................- 16 -
3.13 Employees; Employee Benefits........................- 18 -
3.14 Compliance with Applicable Law......................- 21 -
3.15 Ability to Conduct the Business.....................- 21 -
3.16 Major Customers.....................................- 22 -
3.17 Consultants, Sales Representatives and Other Agents.- 22 -
3.18 Accounts Receivable.................................- 22 -
3.19 Insurance...........................................- 23 -
3.20 Bank Accounts; Powers of Attorney...................- 23 -
3.21 Minute Books, etc...................................- 23 -
3.22 Related Person Indebtedness and Contracts...........- 23 -
3.23 Brokers; Payments...................................- 23 -
3.24 Company Action......................................- 24 -
3.25 Disclosure..........................................- 24 -
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL SHAREHOLDERS...............................- 24 -
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION...............................- 25 -
5.1 Corporate Organization.............................- 25 -
5.2 Authorization......................................- 26 -
5.3 Consents and Approvals; No Violations..............- 26 -
5.4 Capitalization.....................................- 27 -
5.5 SEC Reports and Financial Statements...............- 27 -
5.6 Absence of Certain Changes.........................- 28 -
5.7 Litigation.........................................- 28 -
5.8 Tax Treatment of Merger............................- 28 -
5.9 Disclosure.........................................- 28 -
ARTICLE VI
CONDUCT OF BUSINESS OF THE COMPANY AND
THE PARENT PRIOR TO THE EFFECTIVE TIME......................- 29 -
6.1 Conduct of Business of the Company.................- 29 -
6.2 Conduct of Business of the Parent..................- 30 -
6.3 Conduct of Business of Acquisition.................- 31 -
6.4 Other Negotiations.................................- 31 -
(ii)
ARTICLE VII
ADDITIONAL AGREEMENTS.......................................- 31 -
7.1 Access to Properties and Records...................- 31 -
7.2 Shareholder Approval...............................- 32 -
7.3 Reasonable Efforts; etc............................- 32 -
7.4 Material Events....................................- 33 -
7.5 Registration Statement on Form S-8.................- 33 -
7.6. Fees and Expenses..................................- 33 -
7.7 Employees..........................................- 33 -
7.8 Nasdaq National Market Listing.....................- 34 -
7.9 Tax Treatment......................................- 34 -
7.10 Indemnification....................................- 34 -
7.11 Shares of Parent Common Stock......................- 34 -
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF
THE PARENT AND ACQUISITION..................................- 35 -
8.1 Representations and Warranties True................- 35 -
8.2 Performance........................................- 35 -
8.3 Absence of Litigation..............................- 35 -
8.4 Consents...........................................- 36 -
8.5 Additional Agreements..............................- 36 -
8.6 Opinion of Venture Law Group.......................- 36 -
8.7 Appraisal Rights...................................- 36 -
8.8 Termination of Agreements..........................- 36 -
8.9 Certificate of Merger..............................- 37 -
8.10 Completion of Due Diligence........................- 37 -
8.11 Conversion of Company Preferred Stock..............- 37 -
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY AND THE PRINCIPAL SHAREHOLDERS.....................- 37 -
9.1 Representations and Warranties True...............- 37 -
9.2 Performance.......................................- 37 -
9.3 Absence of Litigation.............................- 38 -
9.4 Consents..........................................- 38 -
9.5 Additional Agreements.............................- 38 -
9.6 Opinion of Hutchins, Wheeler & Dittmar............- 38 -
9.7 Certificate of Merger.............................- 38 -
9.8 Tax Opinion.......................................- 38 -
(iii)
ARTICLE X
TERMINATION...............................................- 39 -
10.1 Termination......................................- 39 -
10.2 Effect of Termination............................- 39 -
ARTICLE XI
INDEMNIFICATION; SURVIVAL OF
REPRESENTATIONS AND WARRANTIES............................- 39 -
11.1 Indemnity Obligations of the Holders.............- 39 -
11.2 Appointment of Representative....................- 40 -
11.3 Notification of Claims...........................- 40 -
11.4 Duration.........................................- 41 -
11.5 Escrow...........................................- 41 -
11.6 No Contribution..................................- 42 -
11.7. Liability of Principal Shareholders..............- 42 -
ARTICLE XII
REGISTRATION RIGHTS.......................................- 42 -
12.1 Registration Rights..............................- 42 -
12.2 Indemnification..................................- 45 -
12.3 Current Public Information.......................- 46 -
12.4 Termination of Registration Rights...............- 46 -
12.5 Transferability of Registration Rights...........- 46 -
ARTICLE XIII
MISCELLANEOUS PROVISIONS..................................- 46 -
13.1 Amendment........................................- 46 -
13.2 Waiver of Compliance.............................- 47 -
13.3 Notices..........................................- 47 -
13.4 Assignment.......................................- 48 -
13.5 No Third Party Beneficiaries.....................- 48 -
13.6 Public Announcements.............................- 48 -
13.7 Brokers and Finders..............................- 48 -
13.8 Counterparts.....................................- 49 -
13.9 Headings.........................................- 49 -
13.10 Entire Agreement.................................- 49 -
13.11 Governing Law....................................- 49 -
13.12 Survival.........................................- 49 -
(iv)
EXHIBITS
Exhibit A Voting Agreement
Exhibit B-1 Certificate of Merger (Delaware
Exhibit B-2 Agreement of Merger (California)
Exhibit C Form of Letter of Transmittal
Exhibit D Escrow Agreement
Exhibit E Forms of Offer Letters
Exhibit F Form of Nondisclosure and Inventions Agreement
Exhibit G Opinion of Venture Law Group, A Professional
Corporation
Exhibit H Opinion of Hutchins, Wheeler & Dittmar
Exhibit I Form of Stock Option Assumption Agreement
Exhibit J Form of Warrant Assumption Agreement
Exhbit K Tax Opinion of Venture Law Group, A Professional
Corporation
(v)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated August 7, 1998 by and among Lycos,
Inc., a corporation organized under the laws of the State of Delaware (the
"Parent"), What Acquisition Corp., a corporation organized under the laws of the
State of Delaware and a wholly-owned subsidiary of the Parent ("Acquisition"),
WhoWhere? Inc., a corporation organized under the laws of the State of
California (the "Company"), and certain shareholders of the Company, each of
whom is listed on the signature page hereto (each a "Principal Shareholder "
and, collectively, the "Principal Shareholders").
WHEREAS, the respective Boards of Directors of the Parent, Acquisition
and the Company have approved the merger of Acquisition with and into the
Company (the "Merger"), pursuant to which the Company will be the surviving
corporation and the shareholders of the Company and all holders of options and
warrants to purchase capital stock of the Company (collectively, the "Holders")
will be entitled to receive the consideration provided for in this Agreement,
all upon the terms and subject to the conditions set forth herein;
WHEREAS, it is intended that the Merger qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"); and
WHEREAS, as a condition and inducement to Parent's willingness to enter
into this Agreement, the Principal Shareholders and certain other shareholders
of the Company have, concurrently with the execution of this Agreement, executed
and delivered a Voting Agreement in the form attached hereto as Exhibit A,
pursuant to which the Principal Shareholders and such other shareholders have
agreed to vote their shares of the Company's capital stock in favor of the
Merger and to grant Parent irrevocable proxies to vote such shares.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements set forth herein, and intending to be
legally bound hereby, the parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. (a) At the Effective Time (as defined in Section 1.2),
and subject to and upon the terms and conditions of this Agreement, the
California General Corporation Law (the "CGCL") and the Delaware General
Corporation Law (the "DGCL"), Acquisition shall be merged with and into the
Company, the separate corporate existence of Acquisition 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."
(b) Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Article X and subject to the satisfaction or waiver of the conditions set forth
in Articles VIII and IX, the consummation of
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the Merger (the "Closing") will take place as promptly as practicable (and in
any event within two business days) after satisfaction or waiver of the
conditions set forth in Articles VIII and IX, at the offices of Hutchins,
Wheeler & Dittmar, A Professional Corporation, 101 Federal Street, Boston,
Massachusetts, unless another date, time or place is agreed to in writing by the
Company and the Parent. The date of such Closing is referred to herein as the
"Closing Date".
1.2 Effective Time. As promptly as practicable after the satisfaction
or waiver of the conditions set forth in Articles VIII and IX, the parties
hereto shall cause the Merger to be consummated by filing agreements or
certificates of merger as contemplated by the CGCL and the DGCL in the forms of
Exhibit B-1 and Exhibit B-2 hereto (collectively, the "Certificate of Merger"),
together with any required related certificates, with the Secretary of State of
the State of California and the Secretary of State of the State of Delaware, in
such form as required by, and executed in accordance with the relevant
provisions of, the CGCL and the DGCL (the time of such filing being the
"Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of the CGCL and the DGCL. 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 Acquisition shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Acquisition shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Articles of Incorporation; By-Laws.
(a) Articles of Incorporation. Unless otherwise determined by
the Parent prior to the Effective Time, at the Effective Time, the Articles of
Incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended in accordance with the CGCL and such Articles of
Incorporation.
(b) By-Laws. Unless otherwise determined by the Parent prior
to the Effective Time, the By-Laws of the Company, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation
until thereafter amended in accordance with the CGCL, the Articles of
Incorporation of the Surviving Corporation and such By-Laws.
1.5 Directors and Officers. The directors of Acquisition immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Acquisition 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.
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1.6 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other acts or things are necessary or
desirable to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, its right, title or interest in or to any of the rights, properties
or assets of Acquisition or the Company acquired or to be acquired by reason of,
or as a result of, the Merger, or otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors shall
be authorized to execute and deliver, in the name and on behalf of Acquisition
or the Company, all such deeds, bills of sale, assignments and assurances and to
do, in the name and on behalf of Acquisition or the Company, all such other acts
and things necessary or desirable to vest, perfect or confirm any and all right,
title or interest in, to or under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this Agreement.
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES
2.1 Merger Consideration. Except as set forth in Section 2.2(f) hereof,
the consideration payable in the Merger to holders of shares of the Company's
Common Stock, par value $.001 per share ("Company Common Stock"), and shares of
each series of the Company's Preferred Stock, par value $.001 per share (the
"Company Preferred Stock" and, together with the Company Common Stock, the
"Company Stock"), shall consist solely of shares of the Common Stock, par value
$.01 per share, of the Parent ("Parent Common Stock"), such shares of Parent
Common Stock to be issuable at the Closing in accordance with the terms of this
Agreement.
2.2 Conversion of Shares.
(a) Conversion of Shares. Each share of Company Stock
(treating all shares of Company Preferred Stock as having been converted, as of
the Effective Time, into shares of Company Common Stock at the respective
conversion ratios therefor) issued and outstanding as of the Effective Time
(other than shares owned by holders who have properly exercised their rights of
appraisal within the meaning of Chapter 13 of the CGCL ("Dissenting Shares"))
shall, by virtue of the Merger and without any action on the part of the holder
thereof, automatically be converted into that number of shares of Parent Common
Stock as shall be obtained by dividing (A) 2,419,006 (the "Merger
Consideration") minus any Expense Shares (as defined in Section 7.6) by (B) the
number of Fully Diluted Shares (as hereinafter defined), with the resulting
quotient (carried to four decimal places) being referred to herein as the
"Exchange Ratio." "Fully Diluted Shares" shall be equal to the total number of
outstanding shares of Company Common Stock calculated on a fully diluted, fully
converted basis as though all convertible debt and equity securities (including
the Company Preferred Stock and Company Preferred Stock issuable upon the
exercise of any outstanding warrants) and outstanding options (whether vested or
unvested) and outstanding warrants had been converted or exercised into Common
Stock,
- 3 -
provided that the term "Fully Diluted Shares" shall exclude forty percent (40%)
of the sum of (x) the number of shares of Company Common Stock issuable upon the
exercise of outstanding stock options which are unvested as of the Closing Date
after giving effect to the Merger and (y) the number of shares of Company Common
Stock outstanding on the Closing Date which are unvested and subject to the
right of repurchase as of the Closing Date after giving effect to the Merger.
Schedule 2.2(a) sets forth the number of outstanding unvested stock options and
unvested shares after giving effect to the Merger and the holders thereof. The
Exchange Ratio shall not change as a result of fluctuations in the market price
of Parent Common Stock between the date of this Agreement and the Effective
Time. The aggregate number of shares of Parent Common Stock issued pursuant to
this Section 2.2(a) shall be referred to in this Agreement as the "Merger
Shares."
(b) Treasury Shares. Each share of Company Common Stock
held in the Company's treasury as of the Effective Time, if any, shall, by
virtue of the Merger, be canceled without payment of any consideration therefor.
(c) Stock Options. At the Effective Time, the outstanding
options to purchase an aggregate of up to 3,545,662 shares of Company Common
Stock (each a "Stock Option") granted under the Company's 1995 Stock Plan (the
"Company Stock Plan"), whether vested or unvested, shall be deemed assumed by
the Parent and deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Stock Option prior to the Effective
Time (including terms and conditions relating to such Stock Option's term,
exercisability, vesting schedule and status as an "incentive stock option" under
Section 422 of the Code), the number (rounded down to the nearest whole number)
of shares of Parent Common Stock equal to the aggregate of that number of shares
of Parent Common Stock (based on the Exchange Ratio) as the holder of such Stock
Option would have been entitled to receive pursuant to the Merger had such
holder exercised such Option in full immediately prior to the Effective Time
(not taking into account whether or not such Option was in fact exercisable).
The exercise price for such Stock Options shall be the price per share equal to
(x) the aggregate exercise price for Company Common Stock otherwise purchasable
pursuant to such Stock Option divided by (y) the number of shares of Parent
Common Stock deemed purchasable pursuant to such Stock Option (the exercise
price per share, so determined, being rounded up to the nearest full cent). No
payment shall be made for fractional shares. The aggregate number of shares of
Parent Common Stock issuable upon the exercise of Options assumed by Parent
pursuant to this Section 2.2(c) shall be referred to in this Agreement as the
"Option Shares." Any adjustment to an incentive stock option made under this
Section 2.2(c) shall comply with Section 424(a) of the Code. The Parent's
assumption of each Stock Option pursuant to this Section 2.2(c) shall be subject
to the holder of such Stock Option executing and delivering to the Parent the
Stock Option Assumption Agreement in the form of Exhibit I hereto providing that
ten percent (10%) of the Option Shares subject to such Stock Option will be
deposited in escrow as security for the indemnification obligations of the
Holders under Article XI hereof.
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(d) Warrants. At the Effective Time, each outstanding warrant
to purchase Company Stock (each, a "Warrant" and collectively the "Warrants")
shall, by virtue of the Merger and without any further action on the part of the
Company or the holder of any of Warrants (unless further action may be required
by the terms of any of the Warrants), be assumed by Parent and each Warrant
assumed by Parent shall be exercisable upon the same terms and conditions as
under the applicable warrant agreements with respect to such Warrants, except
that (A) each such Warrant shall be exercisable for that whole number of shares
of Parent Common Stock (rounded down to the nearest whole share) into which the
number of shares of Company Stock subject to such Warrant would be converted
under Section 2.2(a) and (B) the exercise price per share of Parent Common Stock
shall be equal to (x) the aggregate exercise price for the Company Stock subject
to such Warrant in effect immediately prior to the Effective Time divided by (y)
the number of shares of Parent Common Stock deemed purchasable pursuant to such
Warrant (the exercise price per share, so determined, being rounded down to the
nearest full cent). From and after the Effective Time, all references to the
Company in the warrant agreement underlying the Warrants shall be deemed to
refer to Parent. Parent further agrees that if required under the terms of the
Warrants it will execute a supplemental agreement with the holders of the
Warrants to effectuate the foregoing. No payment shall be made for fractional
shares. The aggregate number of shares of Parent Common Stock issuable upon the
exercise of Warrants assumed by Parent pursuant to this Section 2.2(d) shall be
referred to in this Agreement as the "Warrant Shares." The Parent's assumption
of each Warrant pursuant to this Section 2.2(d) shall be subject to the holder
of such Warrant executing and delivering to the Parent the Warrant Assumption
Agreement in the form of Exhibit J hereto providing that ten percent (10%) of
the Warrant Shares subject to such Warrant will be deposited in escrow as
security for the indemnification obligations of the Holders under Article XI
hereof.
(e) Acquisition Shares. Each share of common stock, par value
$0.01 per share, of Acquisition issued and outstanding at the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, automatically be converted into one fully paid and nonassessable share
of common stock of the Surviving Corporation, as such shares of common stock are
constituted immediately following the Effective Time.
(f) Dissenting Shares. Any Dissenting Shares shall be
converted into the right to receive from the Surviving Corporation such
consideration as may be determined to be due with respect to each such
Dissenting Share pursuant to Chapter 13 of the CGCL; provided, however, Shares
that are Dissenting Shares at the Effective Time of the Merger and are held by a
holder who shall, after the Effective Time of the Merger, withdraw his demand
for appraisal or lose his right of appraisal as provided in the Chapter 13 of
the CGCL, shall be deemed to be converted, as of the Effective Time of the
Merger, into the right to receive the Merger Shares in accordance with the
procedures specified in Section 2.3. The Company shall give Parent (i) prompt
notice of any written demands for appraisal, withdrawals of demands for
appraisal and any other instruments served pursuant to Chapter 13 of the CGCL
received by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under Chapter 13 of the CGCL.
The Company will not voluntarily make any payment
- 5 -
with respect to any demands for appraisal and will not, except with the prior
written consent of Parent, settle or offer to settle any such demands. It is
understood and agreed that the obligation to make any payment under Chapter 13
of the CGCL shall be exclusively that of the Surviving Corporation and that
Parent shall be under no obligation to perform and discharge any such obligation
or to reimburse or make any contribution to the capital of the Surviving
Corporation to enable it to perform and discharge any such obligation.
2.3 Exchange of Certificates.
(a) From and after the Effective Time, each holder of an
outstanding certificate or certificates (the "Certificates") which represented
shares of Company Common Stock or Company Preferred Stock immediately prior to
the Effective Time shall have the right to surrender each Certificate to Parent,
and receive in exchange for all Certificates held by such holder a certificate
representing the number of whole shares of Parent Common Stock (other than the
Escrow Shares (as defined below)) into which the Company Common Stock or Company
Preferred Stock evidenced by the Certificates so surrendered shall have been
converted pursuant to Section 2.2(a) of this Agreement. The surrender of
Certificates shall be accompanied by duly completed and executed Letters of
Transmittal in the form of Exhibit C attached hereto. Until surrendered, each
outstanding Certificate which prior to the Effective Time represented shares of
Company Common Stock or Company Preferred Stock shall be deemed for all
corporate purposes to evidence ownership of the number of whole shares of Parent
Common Stock into which the shares of Company Common Stock or Company Preferred
Stock have been converted but shall, subject to applicable appraisal rights
under the CGCL and Section 2.2(f), have no other rights. Subject to appraisal
rights under the CGCL and Section 2.2(f), from and after the Effective Time, the
holders of shares of Company Common Stock or Company Preferred Stock shall cease
to have any rights in respect of such shares and their rights shall be solely in
respect of the Parent Common Stock into which such shares of Company Common
Stock or Company Preferred Stock have been converted.
(b) If any shares of Parent Common Stock are to be issued in
the name of a person other than the person in whose name the Certificate(s)
surrendered in exchange therefor is registered, it shall be a condition to the
issuance of such shares that (i) the Certificate(s) so surrendered shall be
properly assigned, endorsed or accompanied by appropriate stock powers, and (ii)
the person requesting such transfer shall pay Parent, or its exchange agent, any
transfer or other taxes payable by reason of the foregoing or establish to the
satisfaction of Parent that such taxes have been paid or are not required to be
paid. Notwithstanding the foregoing, neither Parent or the Company shall be
liable to a holder of shares of Company Common Stock or Company Preferred Stock
for shares of Parent or the Company issuable to such holder pursuant to the
provisions of Section 2.2(a) of this Agreement that are delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(c) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or
- 6 -
destroyed, Parent shall issue in exchange for such lost, stolen or destroyed
Certificate the shares of Parent Common Stock issuable in exchange therefor
pursuant to the provisions of Section 2.2(a) of this Agreement. The Board of
Directors of Parent may in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificate to provide to Parent an indemnity agreement, reasonable in form and
substance, against any claim that may be made against Parent with respect to the
Certificate alleged to have been lost, stolen or destroyed.
2.4 No Fractional Securities. No fractional shares of Parent Common
Stock shall be issuable by the Parent upon the conversion of shares of Company
Common Stock or the Company Preferred Stock in the Merger pursuant to Section
2.2(a) hereof. In lieu of any such fractional shares, each holder of Company
Common Stock or Company Preferred Stock who would otherwise have been entitled
to receive a fraction of a share of Parent Common Stock shall be entitled to
receive instead an amount in cash equal to such fraction multiplied by the
Closing Market Price (as defined below). For purposes of this Agreement, the
term "Closing Market Price" shall mean the average of the last quoted sale price
for shares of Parent Common Stock on The Nasdaq National Market for each of the
twenty trading days preceding the third trading day prior to the Effective Time.
2.5 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers of Company Stock or Company Preferred Stock thereafter on the
records of the Company.
2.6 No Further Ownership Rights in Company Stock. The Merger Shares
delivered upon the surrender for exchange of shares of Company Stock 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 of Company Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.
2.7 Adjustment Event. If, between the date hereof and the Effective
Time, the issued and outstanding shares of Parent Common Stock shall have been
combined, split, reclassified or otherwise changed into a different number of
shares or a different class of shares, an appropriate adjustment to the Exchange
Ratio shall be made to fully reflect such change in such manner as is reasonably
acceptable to the Parent and the Company. Specifically, if the Parent's proposed
two-for-one stock split is effected prior to the Effective Time, the Exchange
Ratio shall be adjusted to give effect to such split. In addition, during the
period beginning on the date of this Agreement and ending on the earlier of the
termination of this Agreement and the Effective Time, Parent shall not, without
the prior written consent of the Company, declare or pay any dividend or
distribution on Parent Common Stock unless prior thereto either (i) Parent shall
have provided that holders of Company Stock, upon the Effective Time, shall
receive such dividend or distribution to the same extent they would have had
their shares of Company Stock been
- 7 -
converted into shares of Parent Common Stock immediately prior to the record
date of any such dividend or distribution, or (ii) Parent and the Company shall
have mutually agreed upon an adjustment of the Exchange Ratio to fully reflect
the effect of any such dividend or distribution.
2.8 Escrow. At the Effective Time, Parent will deposit in escrow
certificates representing ten percent (10%) of the Merger Shares (which shall
reduce on a pro rata basis the Merger Shares otherwise issuable to the Holders
of Company Stock under Section 2.2(a)) registered in the name of State Street
Bank and Trust Company, as Escrow Agent, and instruments or other documentation
representing Stock Options to purchase ten percent (10%) of the Option Shares
and Warrants to purchase ten percent (10%) of the Warrant Shares issuable to
each Holder under Section 2.2(c) or 2.2(d), as the case may be (collectively,
the "Escrow Shares"). The Escrow Shares shall be held as security for the
indemnification obligations under Article XI pursuant to the provisions of an
Escrow Agreement (the "Escrow Agreement ") in the form of Exhibit D attached
hereto.
2.9 Tax Consequences. For Federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368(a) of
the Code, and that this Agreement shall constitute a "plan of reorganization"
within the meaning of Section 368(a) of the Code.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE PRINCIPAL SHAREHOLDERS
The Company and each of the Principal Shareholders represent and
warrant to the Parent and Acquisition as set forth below, subject to the
exceptions set forth in the disclosure schedules attached hereto (the
"Disclosure Schedules"), the section numbers and letters of which correspond to
the section and subsection numbers and letters of this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, any
information disclosed in one section of the Disclosure Schedules shall, should
the existence of the information be relevant to any other section of the
Disclosure Schedules, be deemed to be disclosed in all sections of the
Disclosure Schedules, but only to the extent that the relevance of such
information to such other section is apparent. The disclosure of any information
shall not be deemed to constitute an acknowledgment that such information is
required to be disclosed in connection with the representations and warranties
made by the Company in this Agreement or that it is material, nor shall such
information be deemed to establish a standard of materiality
3.1 Corporate Organization. (a) The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California. The Company has no Subsidiaries (as that term is
hereinafter defined). The Company has all requisite corporate power and
authority to own, operate and lease the properties and assets it now owns,
operates and leases and to carry on its business as presently conducted.
The Company is duly qualified to
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transact business as a foreign corporation and in good standing in the
jurisdictions set forth in Schedule 3.1, which are the only jurisdictions where
such qualification is required by reason of the nature of the properties and
assets currently owned, operated or leased by the Company or the business
currently conducted by it, except for such jurisdictions where the failure to be
so qualified would not have a Company Material Adverse Effect (as defined
below). The Company has previously delivered to the Parent complete and correct
copies of its Articles of Incorporation (certified by the secretary of state of
the jurisdiction in which it was formed as of a recent date) and its By-Laws
(certified by the Secretary of the Company as of a recent date). Except as set
forth in Schedule 3.1, neither the Articles of Incorporation nor the By-Laws of
the Company have been amended since the respective dates of certification
thereof, nor has any action been taken for the purpose of effecting any
amendment of such instruments. The term "Company Material Adverse Effect" means,
for purposes of this Agreement, any change, event or effect that is, or that
would be, materially adverse to the business, operations, assets, liabilities,
financial condition or results of operations of the Company; provided, however,
that a Company Material Adverse Effect shall not include any adverse effect that
is attributable to the Merger or the announcement of the Merger or that is due
to any downturn in the Internet industry or any national economic downturn.
3.2 Authorization. The Company has full corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly approved by the Board of
Directors of the Company, and no other corporate action on the part of the
Company is necessary to approve and authorize the execution and delivery of this
Agreement or (subject to the approval of this Agreement and the transactions
contemplated hereby by the Holders which will be obtained in the manner set
forth in Section 7.2 hereof and the filing of the Certificate of Merger pursuant
to the CGCL and the DGCL) the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding agreement of the Company, enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting the enforcement of creditors, rights generally and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in law or in equity.
3.3 Consents and Approvals; No Violations. Subject to the filing of the
Certificate of Merger with the Secretary of State of the State of California and
the Secretary of State of the State of Delaware and compliance with applicable
federal and state securities laws, the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not: (i)
violate or conflict with any provision of the Articles of Incorporation or
By-Laws of the Company, (ii) breach, violate or constitute an event of default
(or an event which with the lapse of time or the giving of notice or both would
constitute an event of default) under, give rise to any right of termination,
cancellation, modification or acceleration under, or require any consent or the
giving of any notice under, any note, bond, indenture, mortgage, security
agreement, lease, license, franchise, permit, agreement or other instrument or
obligation to which
- 9 -
the Company is a party, or by which the Company or any of its properties or
assets may be bound, or result in the creation of any lien, claim or encumbrance
or other right of any third party of any kind whatsoever upon the properties or
assets of the Company pursuant to the terms of any such instrument or
obligation, other than any breach, violation, default, termination,
cancellation, modification or acceleration which would not have a Company
Material Adverse Effect, (iii) violate or conflict with any law, statute,
ordinance, code, rule, regulation, judgment, order, writ, injunction, decree or
other instrument of any Federal, state, local or foreign court or governmental
or regulatory body, agency or authority applicable to the Company or by which
any of its properties or assets may be bound, except for such violations and
conflicts which would not have a Company Material Adverse Effect or result in a
fine or penalty in excess of $10,000 individually or in the aggregate, or (iv)
require, on the part of the Company, any filing or registration with, or permit,
license, exemption, consent, authorization or approval of, or the giving of any
notice to, any governmental or regulatory body, agency or authority other than
any filing, registration, permit, license, exemption, consent, authorization,
approval or notice which if not obtained or made would not have a Company
Material Adverse Effect or result in a fine or penalty in excess of $10,000
individually or in the aggregate. Without limiting the generality of clause (ii)
above, except for the finder's agreements described in Section 13.7 hereof,
neither the Company nor any of the Holders is a party to any agreement,
arrangement or understanding which contemplates the sale of the business of the
Company, in whole or in part, whether by means of a sale of shares, sale of
assets, merger, consolidation or otherwise.
3.4 Capitalization.
(a) The authorized capital stock of the Company consists of
40,000,000 shares of Company Common Stock, of which 5,650,047 shares are issued
and outstanding and 10,000,000 shares of Company Preferred Stock, of which
1,444,162 shares of Series A Convertible Preferred Stock, and 5,231,577 shares
of Series B Convertible Preferred Stock, are issued and outstanding. Schedule
3.4(a) sets forth a complete and correct list of the record ownership of the
issued and outstanding shares of Company Stock. All of the issued and
outstanding shares of Company Stock were duly authorized and validly issued and
are fully paid and nonassessable, and were not issued in violation of any
preemptive rights or Federal or state securities laws. Except as disclosed in
Schedule 3.4(a) hereto, the Company has never repurchased or redeemed any shares
of its capital stock, and there are no amounts owed or which may be owed to any
person by the Company as a result of any repurchase or redemption of shares of
its capital stock. Except as disclosed in Schedule 3.4(a) hereto, there are no
agreements, arrangements or understandings to which the Company is a party or by
which it is bound to redeem or repurchase any shares of its capital stock.
Except as set forth in Schedule 3.4(a), there are no outstanding options,
warrants or other rights to purchase, or any securities convertible into or
exchangeable for, shares of the capital stock of the Company, and there are no
agreements, arrangements or understandings to which the Company is a party or by
which it is bound pursuant to which the Company is or may be required to issue
additional shares of its capital stock.
- 10 -
(b) Schedule 3.4(b) sets forth a complete and correct list of
all indebtedness for borrowed money of the Company outstanding as of the date
hereof, including, the name of the lender, the principal amount of such
indebtedness, together with all accrued and unpaid interest thereon, and any
prepayment penalties or premiums payable if such indebtedness is repaid prior to
its stated maturity date.
(c) The Company does not own, directly or indirectly, any
equity securities, or options, warrants or other rights to acquire equity
securities, or securities convertible into or exchangeable for equity
securities, of any other corporation, or any partnership interest in any general
or limited partnership or unincorporated joint venture (a "Subsidiary").
3.5 Financial Statements. Attached hereto as Schedule 3.5 are the
balance sheets of the Company as of June 28, 1998, December 31, 1997, and
December 31, 1996 and the statements of income and statements of cash flows of
the Company for the fiscal years or periods then ended, including the notes
thereto (hereinafter collectively referred to as the "Financial Statements").
The Financial Statements (i) have been prepared from the books and records of
the Company, (ii) have been prepared in accordance with generally accepted
accounting principles consistently applied (except as may be expressly indicated
therein or on the face of the schedules or notes to such Financial Statements)
during the periods covered thereby and (iii) present fairly in all material
respects the financial condition, results of operations and cash flows of the
Company as at the dates, and for the periods, stated therein, except that the
Financial Statements are subject to normal year-end adjustments which will not
be individually or in the aggregate material in amount or effect and do not
include footnotes. At July 31, 1998, the Company's total assets (as computed in
accordance with generally accepted accounting principles) did not equal or
exceed $10 million.
3.6 Absence of Undisclosed Liabilities. Except (i) as set forth or
reserved against in the balance sheet of the Company dated as of June 28, 1998,
included in the Financial Statements (the "Balance Sheet"), (ii) for obligations
incurred since June 28, 1998 in the ordinary course of business, which are not
individually or in the aggregate, material in amount, and (iii) as set forth in
Schedule 3.6, the Company does not have any liabilities or obligations of the
nature that would be reasonably required, in accordance with generally accepted
accounting principles applied on a consistent basis, to be reflected on the face
of a balance sheet or, in the case of the financial statements for the years
ended December 31, 1996 and December 31, 1997, the notes thereto.
3.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 3.7, since June 28, 1998, the Company has carried on its business in
the ordinary course and consistent with past practice. Except as set forth on
Schedule 3.7 hereto, since June 28, 1998, the Company has not: (i) incurred any
material obligation or liability (whether absolute, accrued, contingent or
otherwise) except in the ordinary course of business and consistent with past
practice; (ii) experienced any Company Material Adverse Effect; (iii)
accelerated receivables or delayed payables or made any change in any accounting
principle or practice or in its methods of
- 11 -
applying any such principle or practice; (iv) suffered any material damage,
destruction or loss, whether or not covered by insurance, affecting its
properties, assets or business; (v) mortgaged, pledged or subjected to any lien,
charge or other encumbrance, or granted to third parties any rights in, any of
its assets, tangible or intangible; (vi) sold or transferred any of its assets,
except in the ordinary course of business and consistent with past practice, or
canceled or compromised any debts or waived any claims or rights of a material
nature; (vii) issued any additional shares of capital stock or any rights,
options or warrants to purchase, or securities convertible into or exchangeable
for, shares of its capital stock other than shares of Company Common Stock
issued upon exercise of employee stock options; (viii) declared or paid any
dividends on or made any distributions (however characterized) in respect of
shares of its capital stock; (ix) repurchased or redeemed any shares of its
capital stock; (x) granted any general or specific increase in the compensation
payable or to become payable to any of their Employees (as that term is
hereinafter defined) or any bonus or service award or other like benefit, or
instituted, increased, augmented or improved any Benefit Plan (as that term is
hereinafter defined); or (xi) entered into any agreement to do any of the
foregoing.
3.8 Legal Proceedings, etc. Except as set forth in Schedule 3.8 hereto,
there are no suits, actions, claims, proceedings (including, without limitation,
arbitral or administrative proceedings) or investigations pending or, to the
best knowledge of the Company or any Principal Shareholder, threatened against
the Company or its properties, assets or business or, to the best knowledge of
the Company or any Principal Shareholder, pending or threatened against any of
the officers, directors, employees, agents or consultants of the Company in
connection with the business of the Company. There are no such suits, actions,
claims, proceedings or investigations pending, or, to the best knowledge of the
Company or any Principal Shareholder, threatened challenging the validity or
propriety of the transactions contemplated by this Agreement. There is no
judgment, order, injunction, decree or award (whether issued by a court, an
arbitrator or an administrative agency) to which the Company is a party, or
involving the Company's properties, assets or business, which is unsatisfied or
which requires continuing compliance therewith by the Company.
3.9 Taxes.
(a) Except as set forth in Schedule 3.9, the Company has duly
and timely filed, or will duly and in a timely manner file, all material Tax
returns and other filings in respect of Taxes (as that term is hereinafter
defined) required to be filed by it or which are required to be filed by it on
or prior to the Effective Time, and has in a timely manner paid (or will in a
timely manner pay) all material Taxes which are (or will be) due for all periods
ending on or before the Effective Time, whether or not shown on such returns.
All such Tax returns have been, or will be when filed, accurately and completely
prepared in all material respects in compliance with all laws, rules and
regulations. The provisions for Taxes payable reflected in the Financial
Statements are adequate under generally accepted accounting principles.
- 12 -
(b) Except as set forth in Schedule 3.9 hereto, there are no
actions or proceedings currently pending or, to the best knowledge of the
Company or any Principal Shareholder, threatened against the Company by any
governmental authority for the assessment or collection of Taxes, no claim for
the assessment or collection of Taxes has been asserted against the Company, and
there are no matters under discussion with any governmental authority regarding
claims for the assessment or collection of Taxes. Any Taxes that have been
claimed or imposed as a result of any examinations of any tax return of the
Company by any governmental authority are being contested in good faith and have
been disclosed in writing to the Parent. Except as set forth in Schedule 3.9,
there are no agreements or applications by the Company for an extension of time
for the assessment or payment of any Taxes nor any outstanding waiver of the
statute of limitations in respect of Taxes. There are no Tax liens on any of the
assets of the Company, except for liens for Taxes not yet due or payable or that
are being contested in good faith in appropriate proceedings.
(c) For purposes of this Agreement, the terms "Tax" and
"Taxes" shall mean and include any and all United States, state, local, foreign
or other income, sales, use, withholding, employment, payroll, social security,
property taxes and all other taxes of any kind, deficiencies, fees or other
governmental charges in the nature of taxes, including, without limitation, any
installment payment for taxes and contributions or other amounts determined with
respect to compensation paid to directors, officers, employees or independent
contractors from time to time imposed by or required to be paid to any
governmental authority (including penalties and additions to tax thereon,
penalties for failure to file a return or report, and interest on any of the
foregoing).
(d) The Company has not, with regard to any assets or property
held, acquired or to be acquired by the Company, filed a consent to the
application of Section 341(f) of the Code.
(e) The Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(2)(i) of the Code.
(f) There is no agreement, plan or arrangement covering any
employee or independent contractor or former employee or independent contractor
of the Company that, considered individually or considered collectively with any
other such agreement, plan or arrangement, will, or could reasonably be expected
to, give rise directly or indirectly to the payment of any amount that would not
be deductible pursuant to Section 280G of the Code or that would be subject to
an excise tax under Section 4999 of the Code.
(g) The Company is not and has never been a party to or bound
by any tax indemnity agreement, tax sharing agreement, tax allocation agreement
or similar agreement or arrangement and does not have any liability for Taxes of
any person (other than the Company) under Treasury Regulation 1.1502-6 (or any
similar provision of state, local or foreign law).
- 13 -
(h) The Company has withheld amounts from its employees and
other persons required to be withheld under the tax, social security,
unemployment and other withholding provisions of all federal, state, local and
foreign laws.
3.10 Title to Properties and Related Matters. (a) Except as set forth
on Schedule 3.10(a), the Company has good and valid title to all personal
property, tangible or intangible, which the Company purports to own, including
the properties reflected on the Balance Sheet or acquired after the date thereof
(other than properties and assets sold or otherwise disposed of in the ordinary
course of business and consistent with past practice since June 28, 1998), free
and clear of any claims, liens, pledges, security interests or encumbrances of
any kind whatsoever (other than (i) purchase money security interests and common
law vendor's liens, in each case for goods purchased on open account in the
ordinary course of business and having a fair market value of less than $10,000
in each individual case), (ii) liens for Taxes not yet due and payable, and
(iii) such imperfections of title and encumbrances, if any, that are not
material in character, amount or extent and that do not materially detract from
the value, or materially interfere with the use of, the property subject thereto
or affected thereby.
(b) The Company does not own any real property or any interest
in real property, except for the leasehold created under the leases referred to
in Schedule 3.10(d).
(c) Schedule 3.10(c) sets forth a complete and correct list of
all equipment, machinery, instruments, vehicles, furniture, fixtures and other
items of personal property currently owned, leased or used by the Company with a
book value as of June 28, 1998, in each case of $10,000 or more. All such
personal property is in satisfactory operating condition (ordinary and
reasonable wear and tear excepted), is physically located in or about one of the
Company's places of business and is owned by the Company or is leased by the
Company under one of the leases set forth in Schedule 3.10(d). None of such
personal property is subject to any agreement or commitment for its use by any
person other than the Company. The maintenance and operation of such personal
property is appropriate for personal property of such nature and is and has been
in material conformance with all applicable laws and regulations, except as
would not have a Company Material Adverse Effect or result in a fine or penalty
in excess of $10,000 individually or in the aggregate. There are no assets
leased by the Company or used in the business of the Company that are owned,
directly or indirectly, by any Related Person (as that term is hereinafter
defined).
(d) Schedule 3.10(d) sets forth a complete and correct list of
all real property and personal property leases to which the Company is a party.
The Company has previously delivered to the Parent complete and correct copies
of each lease (and any amendments or supplements thereto) listed in Schedule
3.10(d). With respect to such leases, (i) each such lease is valid and binding
and in full force and effect; (ii) neither the Company nor (to the best
knowledge of the Company or any Principal Shareholder) any other party is in
default under any such lease, and no event has occurred which constitutes, or
with the lapse of time or the giving of notice or both would constitute, a
default by the Company or (to the best knowledge of the
- 14 -
Company or any Principal Shareholder) a default by any other party under such
lease, other than any default which would not have a Company Material Adverse
Effect; (iii) to the best knowledge of the Company or any Principal Shareholder,
there are no disputes or disagreements between the Company and any other party
with respect to any such lease; and (iv) the lessor under each such lease has
consented or been given notice (or prior to the Closing shall have consented or
been given notice), where such consent or the giving of such notice is
necessary, sufficient that such lease shall remain in full force and effect
following the consummation of the transactions contemplated by this Agreement
without requiring modification in the rights or obligations of the lessee under
any such lease.
3.11 Intellectual Property; Proprietary Rights; Employee Restrictions.
(a) The Company has disclosed in Schedule 3.11 all registered copyrights,
copyright registrations and copyright applications, trademark registrations and
applications for registration, patents and patent applications, trademarks,
service marks, trade names, or Internet domain names (collectively,
"Intellectual Property Rights") used by the Company in the Company's business as
presently conducted, including all other registered Intellectual Property Rights
used in connection with or contained in all versions of the Company's World Wide
Web sites (including www.whowhere.com and www.angelfire.com) and all licenses,
assignments and releases of Intellectual Property Rights of others without which
the Company could not offer the services it currently offers. All Intellectual
Property Rights used by the Company in the Company's business held by any
employee, officer or consultant are owned by the Company by operation of law or
have been validly assigned to the Company. The Company believes that the
Intellectual Property Rights are sufficient to carry on the business of the
Company as presently conducted. The Company has exclusive ownership of or
license to use all Intellectual Property Rights identified in Schedule 3.11 or
has obtained any licenses, releases or assignments reasonably necessary to use
all third parties' Intellectual Property Rights in works embodied in its
services. The present business activities or products of the Company do not
infringe any Intellectual Property Rights of others, except as would not have a
Company Material Adverse Effect or result in a liability, fine or penalty in
excess of $10,000 individually or in the aggregate. The Company has not received
any notice or other claim from any person asserting that any of the Company's
present activities infringe or may infringe any Intellectual Property Rights of
such person.
The Company has the right to use all trade secrets, customer
lists, hardware designs, programming processes, software and other information
required for its services or its business as presently conducted or
contemplated. The Company has taken all reasonable measures to protect and
preserve the security and confidentiality of its trade secrets and other
confidential information. All employees and consultants of the Company involved
in the design, review, evaluation or development of products or Intellectual
Property Rights have executed nondisclosure and assignment of inventions
agreements to protect the confidentiality of the Company's trade secrets and
other confidential information and to vest in the Company exclusive ownership of
such Intellectual Property Rights. To the knowledge of the Company and the
Principal Shareholders, all trade secrets and other confidential information of
the Company are not part of the public domain or knowledge, nor, to the
knowledge of the Company and the
- 15 -
Principal Shareholders, have they been misappropriated by any person having an
obligation to maintain such trade secrets or other confidential information in
confidence for the Company. To the knowledge of the Company and the Principal
Shareholders, no employee or consultant of the Company has used any trade
secrets or other confidential information of any other person in the course of
their work for the Company.
The Company is the exclusive owner of all right, title and
interest in its Intellectual Property Rights as purported to be owned by the
Company, and to the Company's and the Principal Shareholders' knowledge, such
Intellectual Property Rights are valid and in full force and effect. No
university, government agency (whether federal or state) or other organization
sponsored research and development conducted by the Company or has any claim of
right to or ownership of or other encumbrance upon the Intellectual Property
Rights of the Company. The Company is not aware of any infringement by others of
its copyrights or other Intellectual Proprietary Rights in any of its technology
or services, or any violation of the confidentiality of any of its proprietary
information. To the Company's and the Principal Shareholders' knowledge, the
Company is not making unlawful use of any confidential information or trade
secrets of any past or present employees of the Company.
Neither the Company nor, to the knowledge of the Company and
the Principal Shareholders, any of the Company's employees, have any agreements
or arrangements with former employers of such employees relating to confidential
information or trade secrets of such employers or are bound by any consulting
agreement relating to confidential information or trade secrets of another
entity that are being violated by such persons. The activities of the Company's
employees on behalf of the
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