\n 9.5 Entire Agreement …………………………………………… 56<\/p>\n 9.6 Assignment ………………………………………………… 56<\/p>\n
9.7 Parties in Interest ………………………………………… 56<\/p>\n
9.8 Governing Law ……………………………………………… 57<\/p>\n
9.9 Headings ………………………………………………….. 57<\/p>\n
9.10 Counterparts ………………………………………………. 57<\/p>\n
EXHIBITS
\n——–<\/p>\n
1.3 – Articles of Merger
\n 1.7.1 – Form of Escrow Agreement
\n 2 – Disclosure Memorandum
\n 2(A) – Form of Investor Rights Agreement
\n 4.3 – Form of Opinion of Counsel for the Company
\n 4.9 – Foreign Investment in Real Property Tax Act Affidavit
\n 4.15 – Form of Confidentiality Agreement
\n 4.18 – Affiliate Letter
\n 5.3 – Form of Opinion of Counsel for Amazon.com
\n 5.12 – Forms of Option Agreement
\n<\/c><\/c><\/s><\/table>\n
-vii-<\/p>\n
9<\/p>\n
AGREEMENT AND PLAN OF MERGER<\/p>\n
This Agreement and Plan of Merger (this “Agreement”) is made and entered
\ninto as of August 3, 1998, by and among Amazon.com, Inc., a Delaware corporation
\n(“Amazon.com”), Pacific Acquisition, Inc., a Massachusetts corporation and
\nwholly owned subsidiary of Amazon.com (the “Purchaser”), and Sage Enterprises,
\nInc., a Massachusetts corporation (the “Company”).<\/p>\n
RECITALS<\/p>\n
A. The Company, Amazon.com and the Purchaser believe it advisable and in
\ntheir respective best interests to effect a merger of the Company and the
\nPurchaser pursuant to this Agreement (the “Merger”).<\/p>\n
B. The Board of Directors of the Company has approved the Merger as
\nrequired by applicable law.<\/p>\n
C. The Boards of Directors of Amazon.com and the Purchaser have approved
\nthe Merger as required by applicable law.<\/p>\n
D. It is intended that the Merger will qualify as a reorganization under
\nSection 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”),
\nand as a “pooling of interests” for accounting purposes.<\/p>\n
AGREEMENT<\/p>\n
In consideration of the terms hereof, the parties hereto agree as
\nfollows:<\/p>\n
ARTICLE I – THE MERGER<\/p>\n
1.1 THE MERGER<\/p>\n
Upon the terms and subject to the conditions hereof, (a) at the
\nEffective Time (as defined in Section 1.3 hereof), the separate existence of the
\nPurchaser shall cease and the Purchaser shall be merged with and into the
\nCompany (the Company is sometimes referred to herein as the “Surviving
\nCorporation”), and (b) from and after the Effective Time, the Merger shall have
\nall the effects of a merger under the laws of the Commonwealth of Massachusetts
\nand other applicable law.<\/p>\n
-1-
\n 10<\/p>\n
1.2 THE CLOSING<\/p>\n
The closing of the Merger pursuant to this Agreement (the “Closing”)
\nshall take place on the earliest practicable business day after the conditions
\nto the Closing set forth in Articles IV and V hereof are satisfied or waived
\n(the “Closing Date”) at 10:00 a.m. local time at the offices of Perkins Coie
\nLLP, 1201 Third Avenue, 46th Floor, Seattle, Washington, or such other time or
\nlocation as Amazon.com and the Company shall agree. At the Closing, each of the
\nparties hereto shall deliver all such documents, instruments, certificates and
\nother items as may be required under this Agreement or the other Operative
\nDocuments (as defined in Article II hereof) or otherwise.<\/p>\n
1.3 EFFECTIVE DATE AND TIME<\/p>\n
On the Closing Date and subject to the terms and conditions hereof,
\narticles of merger (the “Articles of Merger”) complying with the applicable
\nprovisions of the Massachusetts Business Corporation Law (the “Massachusetts
\nLaw”), substantially in the form or forms attached hereto as Exhibit 1.3, and in
\nsuch form and executed in such manner as required by Massachusetts Law, shall be
\ndelivered for filing to the Secretary of State of the Commonwealth of
\nMassachusetts (the “Massachusetts Secretary of State”). The Merger shall become
\neffective on the date (the “Effective Date”) and at the time (the “Effective
\nTime”) of filing of the Articles of Merger or at such other time as may be
\nspecified in the Articles of Merger as filed. If the Massachusetts Secretary of
\nState requires any changes in the Articles of Merger as a condition to filing or
\nto issuing its certificate to the effect that the Merger is effective,
\nAmazon.com, the Purchaser and the Company will execute any necessary revisions
\nincorporating such changes, provided such changes are not inconsistent with and
\ndo not result in any substantial change in the terms of this Agreement.<\/p>\n
1.4 ARTICLES OF ORGANIZATION OF THE SURVIVING CORPORATION<\/p>\n
At the Effective Time, the Articles of Organization of the Purchaser, as
\nin effect immediately prior to the Effective Time, shall be the Articles of
\nOrganization of the Surviving Corporation. Thereafter, the Articles of
\nOrganization of the Surviving Corporation may be amended in accordance with
\ntheir terms and as provided by law; provided, however, that Article 1 thereof
\nshall be amended to read as follows: “The name of this corporation is Pacific
\nCorporation.”<\/p>\n
1.5 BYLAWS OF THE SURVIVING CORPORATION<\/p>\n
At the Effective Time, the Bylaws of the Purchaser as in effect
\nimmediately prior to the Effective Time shall be the Bylaws of the Surviving
\nCorporation.<\/p>\n
-2-
\n 11<\/p>\n
Thereafter, the Bylaws may be amended or repealed in accordance with their terms
\nand the Articles of Organization of the Surviving Corporation and as provided by
\nlaw.<\/p>\n
1.6 DIRECTORS AND OFFICERS<\/p>\n
At the Effective Time, the directors of the Purchaser shall continue in
\noffice as the directors of the Surviving Corporation, and the officers of
\nPurchaser shall continue in office as the officers of the Surviving Corporation,
\nand such directors and officers shall hold office in accordance with and subject
\nto the Articles of Organization and Bylaws of the Surviving Corporation.<\/p>\n
1.7 CONVERSION OF SHARES<\/p>\n
1.7.1 EXCHANGE RATIO<\/p>\n
As of the Effective Time, by virtue of the Merger and without any action
\non the part of the holders thereof:<\/p>\n
(a) All shares of any class of capital stock of the Company held by the
\nCompany as treasury shares shall be canceled.<\/p>\n
(b) Each issued and outstanding share of common stock of the Company,
\npar value $.01 per share (the “Company Common Stock”), and each issued and
\noutstanding share of the Company’s Series A Preferred Stock, par value $.01 per
\nshare (the “Company Series A Stock”), and the Company’s Series B Preferred
\nStock, $.01 par value per share (the “Company Series B Stock”, and, together
\nwith the Company Common Stock, the Company Series A Stock and the Company Series
\nB Stock (the “Company Capital Stock”)), other than shares of Company Capital
\nStock, if any, for which dissenters’ rights have been or will be perfected in
\ncompliance with applicable law, shall be converted into the right to receive
\nfrom Amazon.com a number of shares of Amazon.com common stock, par value $.01
\nper share (“Amazon.com Common Stock”), determined by dividing 900,000 by the
\ntotal number of shares of Company Capital Stock outstanding immediately prior to
\nthe Effective Time on a fully diluted basis, assuming for this purpose that all
\noutstanding options (“Options”) and all outstanding warrants (“Warrants”) to
\npurchase shares of Company Common Stock have been validly exercised prior to the
\nEffective Time, regardless of any vesting limitations, other restrictions on
\nexercisability or repurchase rights, and that the shares of Company Common Stock
\nissuable upon such exercise have been validly issued (such shares of Amazon.com
\nCommon Stock being referred to herein as the “Merger Consideration” or the
\n“Securities” and the quotient so derived being referred to herein as the
\n“Exchange Ratio”). The number of Securities to be issued to each stockholder of
\nthe Company under this Section 1.7.1(c) shall be calculated by aggregating all<\/p>\n
-3-
\n 12<\/p>\n
shares of Company Capital Stock held by each such stockholder, so that such
\nnumber of Securities to be issued shall be equal to the number of shares of
\nCompany Capital Stock held by such stockholder multiplied by the Exchange Ratio,
\nwith cash paid in lieu of any fractional share of Amazon.com Common Stock
\npursuant to Section 1.7.3 hereof.<\/p>\n
(c) Notwithstanding the foregoing, certificates representing ten percent
\n(10%) of the Securities issuable to each holder of Company Capital Stock under
\nSection 1.7.1(b) (the “Escrow Shares”) shall be deposited in escrow with
\nChaseMellon Shareholder Services L.L.C. (“ChaseMellon”), to be held and
\nadministered in accordance with an Escrow Agreement in substantially the form
\nattached hereto as Exhibit 1.7.1 (the “Escrow Agreement”). Notwithstanding the
\nescrow of the Escrow Shares, dividends or other distributions declared and paid
\non such shares shall continue to be paid by Amazon.com to the Company
\nstockholders and all voting rights with respect to such shares shall inure to
\nthe benefit of and be enjoyed by such stockholders. Any securities received by
\nthe escrow agent in respect of any Escrow Shares held in escrow as a result of
\nany stock split or combination of shares of Amazon.com Common Stock, payment of
\na stock dividend or other stock distribution in or on shares of Amazon.com
\nCommon Stock, or change of shares of Amazon.com Common Stock into any other
\nsecurities pursuant to or as part of a merger, consolidation, acquisition of
\nproperty or stock, or separation, reorganization or liquidation of Amazon.com,
\nor otherwise, shall be held by the escrow agent as, and shall be included within
\nthe definition of, Escrow Shares, as the case may be.<\/p>\n
(d) Each issued and outstanding share of capital stock of the Purchaser
\nshall be converted into one share of common stock of the Surviving Corporation.<\/p>\n
(e)Each outstanding Option to purchase shares of Company Capital Stock
\nissued pursuant to the Company’s 1997 Amended Stock Option Plan and the
\nCompany’s MVP Stock Option Plan (the “Company Option Plans”), whether or not
\nvested or exercisable, shall be assumed by Amazon.com and shall constitute an
\noption to acquire, on the same terms and conditions as were applicable under
\nsuch assumed Option, a number of shares of Amazon.com Common Stock equal to the
\nproduct of the Exchange Ratio and the number of shares of Company Capital Stock
\nsubject to such Option (the “Option Shares”), at a price per share (rounded up
\nto the nearest $.001) equal to the aggregate exercise price for the shares of
\nCompany Capital Stock subject to such Option divided by the number of full
\nshares of Amazon.com Common Stock deemed to be purchasable pursuant to such
\nOption; provided, however, that (i) subject to the provisions of clause (ii)
\nbelow, the number of shares of Amazon.com Common Stock that may be purchased
\nupon exercise of such Option shall not include any fractional shares and, upon
\nthe last such exercise of such Option, Amazon.com<\/p>\n
-4-
\n 13<\/p>\n
shall pay to the holder thereof an amount of cash equal to such fraction
\nmultiplied by the closing price of Amazon.com Common Stock as reported on the
\nNasdaq National Market on the date of such exercise, and (ii) in the case of any
\nOption to which Section 421 of the Code applies by reason of its qualification
\nunder Section 422 of the Code, the option price, the number of shares
\npurchasable pursuant to such Option and the terms and conditions of exercise of
\nsuch Option shall be determined in order to comply with Section 424 of the Code.
\nAmazon.com shall assume the obligations of the Company under the Company Option
\nPlans and each Option and shall comply with the terms of the Company Option
\nPlans and each Option as they apply to the Options assumed as set forth above.
\nAmazon.com shall use its best efforts to cause the shares of Amazon.com Common
\nStock that are issuable upon exercise of the Options assumed in accordance with
\nthis Section 1.7.1 to be registered under the Securities Act of 1933, as amended
\n(the “Securities Act”), on Form S-8 (“Form S-8”) within 30 days following the
\nClosing Date. The Company will cooperate with Amazon.com in the preparation of
\nthe Form S-8.<\/p>\n
(f) Each outstanding Warrant to purchase shares of Company Common Stock
\nshall be assumed by Amazon.com and shall constitute a warrant to acquire, on the
\nsame terms and conditions as were applicable under such assumed Warrant, that a
\nnumber of shares of Amazon.com Common Stock equal to the product of the Exchange
\nRatio and the number of shares of Company Common Stock subject to such Warrant,
\nat a price per share equal to the aggregate exercise price for the shares of
\nCompany Common Stock subject to such Warrant divided by the number of full
\nshares of Amazon.com Common Stock deemed to be purchasable pursuant to such
\nWarrant; provided, however, that the number of shares of Amazon.com Common Stock
\nthat may be purchased upon exercise of such Warrant shall not include any
\nfractional shares and, upon the last such exercise of such Warrant, Amazon.com
\nshall pay to the holder thereof an amount of cash equal to such fraction
\nmultiplied by the closing price of Amazon.com Common Stock as reported in the
\nNasdaq National Market on the date of such exercise. Promptly after the
\nEffective Date, Amazon.com shall deliver to holders of Warrants appropriate
\nwarrant agreements representing the right to acquire shares of Amazon.com Common
\nStock on the same terms and conditions as contained in the outstanding Warrants
\n(subject to any adjustments required by the preceding sentence), upon surrender
\nof the outstanding Warrants.<\/p>\n
(g) Holders of shares of Company Capital Stock who have complied with
\nall the requirements for perfecting dissenters’ rights, as set forth in the
\nMassachusetts Law, shall be entitled to their rights under the Massachusetts Law
\nwith respect to such shares (the “Dissenting Shares”).<\/p>\n
-5-
\n 14<\/p>\n
(h) If, prior to the Effective Time, Amazon.com recapitalizes through a
\nsplit-up of its outstanding shares of capital stock into a greater number, or a
\ncombination of its outstanding shares of capital stock into a lesser number,
\nreorganizes, reclassifies or otherwise changes its outstanding shares of capital
\nstock into the same or a different number of shares of other classes of capital
\nstock, or declares a dividend on its outstanding shares of capital stock payable
\nin shares or securities convertible into shares, the number of shares of
\nAmazon.com Common Stock into which the shares of Company Capital Stock are to be
\nconverted, and the number of shares of Amazon.com Common Stock issuable upon the
\nexercise of each Assumed Option and each Warrant, will be adjusted appropriately
\nso as to maintain the proportionate interests of the holders of the Company
\nCapital Stock, Warrants and Options and the holders of shares of capital stock
\nof Amazon.com.<\/p>\n
1.7.2 EXCHANGE OF CERTIFICATES<\/p>\n
As soon as practicable after the Effective Date but in any event within
\n15 business days after the Effective Date, ChaseMellon, as exchange agent, shall
\nmake available, and each stockholder of the Company will be entitled to receive,
\nupon surrender to ChaseMellon of one or more certificates representing shares of
\nCompany Capital Stock for cancellation and a letter of transmittal containing
\nappropriate representations, certificates representing the number of shares of
\nAmazon.com Common Stock that such stockholder is entitled to receive pursuant to
\nSection 1.7.1 hereof; provided, however, that the certificates representing the
\nEscrow Shares shall be retained by ChaseMellon in accordance with the Escrow
\nAgreement. The shares of Amazon.com Common Stock that each stockholder of the
\nCompany shall be entitled to receive pursuant to the Merger shall be deemed to
\nhave been issued at the Effective Time. No interest shall accrue on the Merger
\nConsideration. If the Merger Consideration (or any portion thereof) is to be
\ndelivered to any person other than the person in whose name the certificate or
\ncertificates representing shares of Company Capital Stock surrendered in
\nexchange therefor is registered, it shall be a condition to such exchange that
\nthe person requesting such exchange shall pay to Amazon.com any transfer or
\nother taxes required by reason of the payment of the Merger Consideration to a
\nperson other than the registered holder of the certificate or certificates so
\nsurrendered, or shall establish to the satisfaction of Amazon.com that such tax
\nhas been paid or is not applicable. Notwithstanding the foregoing, neither
\nAmazon.com nor any other party hereto shall be liable to a holder of shares of
\nCompany Capital Stock for any Merger Consideration delivered to a public
\nofficial pursuant to applicable abandoned property, escheat and similar laws.<\/p>\n
-6-
\n 15<\/p>\n
1.7.3 NO FRACTIONAL SHARES<\/p>\n
No certificates or scrip representing fractional shares of Amazon.com
\nCommon Stock shall be issued upon the surrender for exchange of certificates
\nrepresenting Company Capital Stock pursuant to the Merger, and no dividend,
\nstock split or other distribution with respect to Amazon.com Common Stock shall
\nrelate to any such fractional interest, and any such fractional interests shall
\nnot entitle the owner thereof to vote or to any rights of a security holder. In
\nlieu of each such fractional share, Amazon.com shall pay to the holder thereof,
\nas soon as practicable after the Effective Date, an amount in cash equal to such
\nfraction multiplied by the closing price of Amazon.com Common Stock as reported
\non the Nasdaq National Market on the trading day prior to the Closing Date.<\/p>\n
1.7.4 NO FURTHER TRANSFERS<\/p>\n
After the Effective Time, there shall be no transfers of any shares of
\nCompany Capital Stock on the stock transfer books of the Surviving Corporation.
\nIf, after the Effective Time, certificates formerly representing shares of
\nCompany Capital Stock are presented to the Surviving Corporation, they shall be
\nforwarded to Amazon.com and be canceled and exchanged in accordance with this
\nSection 1.7, subject to applicable law in the case of the Dissenting Shares.<\/p>\n
1.8 TAX FREE REORGANIZATION<\/p>\n
(a) Except as otherwise required by the Internal Revenue Service
\npursuant to a determination (as defined in Section 1313 of the Code) or
\notherwise, or by applicable law, the parties shall not take a position on any
\ntax returns inconsistent with the treatment of the Merger for tax purposes as a
\nreorganization within the meaning of Section 368(a)(1)(A) of the Code by reason
\nof Section 368(a)(2)(E) of the Code.<\/p>\n
(b) In addition, Amazon.com represents, solely for tax purposes, now,
\nand as of the Closing Date, that it presently intends to continue the Company’s
\nhistoric business or use a significant portion of the Company’s business assets
\nin business in a manner that satisfies the continuity of business enterprise
\nrequirement set forth in Treasury Regulation Section 1.368-1(d).<\/p>\n
1.9 STOCKHOLDER REPRESENTATIVES<\/p>\n
By approving the Merger at a special meeting of stockholders or by
\nwritten consent of the stockholders, each stockholder of the Company shall have
\nirrevocably authorized and appointed Warren Adams, Guy Bradley and Thomas Hoegh
\n(the “Stockholder Representatives”), with full power of substitution and
\nresubstitution, as<\/p>\n
-7-
\n 16<\/p>\n
his, her or its representative and true and lawful attorney-in-fact and agent to
\nact with the powers set forth in the Investor Rights Agreement in his, her or
\nits name place and stead and to execute in the name and on behalf of such
\nstockholder the Escrow Agreement and any other agreement, certificate,
\ninstrument or document to be delivered by the stockholders in connection with
\nthe Escrow Agreement or Article VIII of this Agreement.<\/p>\n
ARTICLE II – REPRESENTATIONS AND WARRANTIES OF THE COMPANY<\/p>\n
Except as is otherwise set forth in the Disclosure Memorandum attached
\nhereto as Exhibit 2 (the “Disclosure Memorandum”), each of which exceptions
\nshall specifically identify or cross-reference the provision of this Article II
\nto which such exception relates, and which shall constitute in its entirety a
\nrepresentation and warranty under this Article II, and in order to induce
\nAmazon.com and the Purchaser to enter into and perform this Agreement, the
\nEscrow Agreement and the Investor Rights Agreement in substantially the form
\nattached hereto as Exhibit 2(A) (the “Investor Rights Agreement”) to be entered
\ninto as of the Closing among Amazon.com and each of the stockholders of the
\nCompany, and the other agreements and certificates that are required to be
\nexecuted pursuant to this Agreement (collectively, the “Operative Documents”),
\nthe Company represents and warrants to Amazon.com and the Purchaser as of the
\ndate of this Agreement and as of the Closing as follows in this Article II. For
\nthe purposes of this Article II, unless the context otherwise requires,
\nreferences to the Company will be deemed to include all predecessors of the
\nCompany.<\/p>\n
2.1 ORGANIZATION<\/p>\n
The Company is a corporation duly organized, validly existing and in
\ngood standing under the laws of the Commonwealth of Massachusetts. The Company
\nhas all requisite corporate power and authority to own, operate and lease its
\nproperties and assets, to carry on its business as now conducted and as proposed
\nto be conducted, and to enter into and perform its obligations under this
\nAgreement and the other Operative Documents to which the Company is a party, and
\nto consummate the transactions contemplated hereby and thereby. The Company is
\nduly qualified and licensed as a foreign corporation to do business and is in
\ngood standing in each jurisdiction in which the character of the Company’s
\nproperties occupied, owned or held under lease or the nature of the business
\nconducted by the Company makes such qualification necessary, except where the
\nfailure to be so qualified or in good standing would not have a material adverse
\neffect on the Company’s business, properties or prospects (a “Company Material
\nAdverse Effect”).<\/p>\n
-8-
\n 17<\/p>\n
2.2 ENFORCEABILITY<\/p>\n
The Company has full corporate power and authority to execute, deliver
\nand perform its obligations under this Agreement and each of the other Operative
\nDocuments to which it is a party and each of the certificates, instruments and
\ndocuments executed or delivered by it pursuant to the terms of this Agreement.
\nAll corporate action on the part of the Company and its officers, directors and
\nstockholders necessary for the authorization, execution, delivery and
\nperformance of this Agreement and the other Operative Documents to which the
\nCompany is a party, the consummation of the Merger, and the performance of all
\nthe Company’s obligations under this Agreement and the other Operative Documents
\nto which the Company is a party has been taken or will be taken as of or prior
\nto the Effective Time. This Agreement has been, and each of the other Operative
\nDocuments to which the Company is a party at the Closing will have been, duly
\nexecuted and delivered by the Company, and this Agreement is, and each of the
\nother Operative Documents to which the Company is a party will be at the
\nClosing, a legal, valid and binding obligation of the Company, enforceable
\nagainst the Company in accordance with its terms.<\/p>\n
2.3 CAPITALIZATION<\/p>\n
(a) The authorized capital stock of the Company consists of 20,000,000
\nshares of Company Common Stock and 10,400,000 shares of preferred stock, of
\nwhich 5,000,000 shares are designated as Company Series A Stock and, 5,400,000
\nshares are designated as Company Series B Stock.<\/p>\n
(b) The issued and outstanding capital stock of the Company consists
\nsolely of 3,816,458 shares of Company Common Stock, 4,941,616 shares of Company
\nSeries A Stock and 5,363,985 shares of Company Series B Stock (the “Outstanding
\nShares”), which are and as of the Closing will be held of record and
\nbeneficially by the stockholders of the Company as set forth on Schedule 2.3(b)
\nto the Disclosure Memorandum. The Outstanding Shares are, and immediately prior
\nto the Closing will be, duly authorized and validly issued, fully paid and
\nnonassessable, and issued in compliance with all applicable federal, state and
\nforeign securities laws. No Person (as defined in Section 2.5 hereof) other than
\nthe stockholders of the Company holds any interest in any of the Outstanding
\nShares. True and correct copies of the stock records of the Company, showing all
\nissuances and transfers of shares of capital stock of the Company since
\ninception, have been provided to Amazon.com.<\/p>\n
(c) Other than outstanding Options to purchase up to 1,762,296 shares of
\nCompany Common Stock that have been granted under the Company Option Plans, and
\nWarrants to purchase up to 253,146 shares of Company Common Stock, there are<\/p>\n
-9-
\n 18<\/p>\n
no outstanding rights of first refusal or offer, preemptive rights, options,
\nwarrants, conversion rights or other agreements, either directly or indirectly,
\nfor the purchase or acquisition from the Company or any stockholder of any
\nshares of Company Capital Stock or any securities convertible into or
\nexchangeable for shares of Company’s Capital Stock. Set forth on Schedule 2.3(c)
\nto the Disclosure Memorandum is a spreadsheet accurately reflecting the number
\nof such Options and Warrants outstanding, the grant dates, vesting schedules and
\nexercise prices thereof, the identities of the holders thereof and an indication
\nof their relationships to the Company. The Company has delivered to Amazon.com
\ntrue and correct copies of the Company Option Plans, the form of stock option
\nletter agreement relating to Options granted thereunder and all material
\ndeviations therefrom as well as the true and correct copies of all outstanding
\nWarrants.<\/p>\n
(d) Other than as set forth on Schedule 2.3(d), the Company is not a
\nparty or subject to any agreement or understanding, and, to the knowledge of the
\nCompany, there is no agreement or understanding between any Persons, that
\naffects or relates to the voting or giving of written consents with respect to
\nany securities of the Company or the voting by any director of the Company. No
\nstockholder of the Company or any affiliate thereof is indebted to the Company,
\nand the Company is not indebted to any stockholder of the Company or any
\naffiliate thereof. Other than as set forth on Schedule 2.3(d), the Company is
\nnot under any contractual or other obligation to register any of its presently
\noutstanding securities or any of its securities that may hereafter be issued.<\/p>\n
2.4 SUBSIDIARIES AND AFFILIATES<\/p>\n
The Company does not own or control, and has not in the past owned or
\ncontrolled, directly or indirectly, any corporation, partnership, limited
\nliability company or other business entity. The Company does not own, directly
\nor indirectly, any ownership, equity, profits or voting interest in, or
\notherwise control, any corporation, partnership, joint venture or other entity,
\nand has no agreement or commitment to purchase any such interest.<\/p>\n
2.5 NO APPROVALS; NO CONFLICTS<\/p>\n
The execution, delivery and performance by the Company of this Agreement
\nand the other Operative Documents to which the Company is a party and the
\nconsummation of the transactions contemplated hereby and thereby will not (a)
\nconstitute a violation (with or without the giving of notice or lapse of time,
\nor both) of any provision of law or any judgment, decree, order, regulation or
\nrule of any court or other governmental authority applicable to the Company, (b)
\nrequire any consent, approval or authorization of, or declaration, filing or
\nregistration with, any<\/p>\n
-10-
\n 19<\/p>\n
person, corporation, partnership, joint venture, association, organization,
\nother entity or governmental or regulatory authority (a “Person”), except (i)
\ncompliance with applicable securities laws, (ii) the filing of all documents
\nnecessary to consummate the Merger with the Massachusetts Secretary of State,
\nand (iii) the approval by the stockholders of the Company of the transactions
\ncontemplated hereby, as provided under applicable law and the Articles of
\nOrganization and Bylaws of the Company (all such consents, approvals and
\nauthorizations to be duly obtained by the Company at or prior to the Closing),
\n(c) result in a default (with or without the giving of notice or lapse of time,
\nor both) under, or acceleration or termination of, or the creation in any party
\nof the right to accelerate, terminate, modify or cancel, any agreement, lease,
\nnote or other restriction, encumbrance, obligation or liability to which the
\nCompany is a party or by which it is bound or to which any assets of the Company
\nare subject, (d) result in the creation of any Encumbrance (as defined in
\nSection 2.9(d) hereof) upon the assets of the Company or upon any Outstanding
\nShares or other securities of the Company, (e) conflict with or result in a
\nbreach of or constitute a default under any provision of the Articles of
\nOrganization or Bylaws of the Company, or (f) invalidate or adversely affect any
\nmaterial permit, license, authorization or status used in the conduct of the
\nCompany’s business.<\/p>\n
2.6 FINANCIAL STATEMENTS<\/p>\n
The Company has delivered to Amazon.com (a) audited balance sheets,
\nstatements of operations, statements of cash flow, and statements of
\nstockholders’ equity of the Company as of or for the fiscal year ended December
\n31, 1997 and the period from inception (September 5, 1996) to December 31, 1996
\nand (b) an unaudited balance sheet, statement of operations, statement of cash
\nflow and statement of stockholders’ equity of the Company as of and for the
\nsix-month period ended June 30, 1998. All the foregoing financial statements are
\nherein referred to as the “Financial Statements.” The balance sheet of the
\nCompany as of June 30, 1998 is herein referred to as the “Company Balance
\nSheet.” The Financial Statements have been prepared in conformity with generally
\naccepted accounting principles in the United States (“GAAP”) on a basis
\nconsistent with prior accounting periods and fairly present the financial
\nposition, results of operations and changes in financial position of the Company
\nas of the dates and for the periods indicated (except, solely with respect to
\nthe unaudited Financial Statements, as to footnotes and normal period-end
\nadjustments). The Company has no liabilities or obligations of any nature
\n(absolute, contingent or otherwise) that are not fully reflected or reserved
\nagainst in the Company Balance Sheet and that would be required under GAAP to be
\nreflected or reserved, except liabilities or obligations incurred since the date
\nof the Company Balance Sheet in the ordinary course of business and consistent
\nwith past practice and except for liabilities or obligations that are not
\nmaterial to the Company’s financial<\/p>\n
-11-
\n 20<\/p>\n
condition. The Company maintains standard systems of accounting that are
\nadequate for its business. The Company is not a guarantor, indemnitor, surety or
\nother obligor of any indebtedness of any other Person. The Company’s practices
\nwith respect to capitalizing software development costs, as reflected in the
\nFinancial Statements, are reasonable, in accordance with industry standards.<\/p>\n
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS<\/p>\n
Except for transactions specifically contemplated in this Agreement,
\nsince the date of the Company Balance Sheet, neither the Company nor any of its
\nofficers or directors in their representative capacities on behalf of the
\nCompany have:<\/p>\n
(a) taken any action or entered into or agreed to enter into any
\ntransaction, agreement or commitment other than in the ordinary course of
\nbusiness;<\/p>\n
(b) forgiven or canceled any indebtedness or waived any claims or rights
\nof material value (including, without limitation, any indebtedness owing by any
\nstockholder, officer, director, employee or affiliate of the Company);<\/p>\n
(c) granted, other than in the ordinary course of business and
\nconsistent with past practice or as required with the terms of any Employee
\nBenefit Plan listed in Schedule 2.13.1 of the Disclosure Memorandum, any
\nincrease in the compensation of directors, officers, employees or consultants
\n(including any such increase pursuant to any employment agreement or bonus,
\npension, profit-sharing, lease payment or other plan or commitment) or any
\nincrease in the compensation payable or to become payable to any director,
\nofficer, employee or consultant;<\/p>\n
(d) suffered any change having a Company Material Adverse Effect;<\/p>\n
(e) borrowed or agreed to borrow any funds or incurred or become subject
\nto, whether directly or by way of assumption or guarantee or otherwise, any
\nliabilities or obligations (absolute, accrued, contingent or otherwise) in
\nexcess of $25,000, except liabilities and obligations incurred in the ordinary
\ncourse of business and consistent with past practice, or increased, or
\nexperienced any change in any assumptions underlying or methods of calculating,
\nany bad debt, contingency or other reserves;<\/p>\n
(f) paid, discharged or satisfied any claims, liabilities or obligations
\n(absolute, accrued, contingent or otherwise) other than the payment, discharge
\nor satisfaction in the ordinary course of business and consistent with past
\npractice of claims, liabilities and obligations reflected or reserved against in
\nthe Company Balance Sheet or incurred in the ordinary course of business and
\nconsistent with past<\/p>\n
-12-
\n 21<\/p>\n
practice since the date of the Company Balance Sheet, or prepaid any obligation
\nhaving a fixed maturity of more than 90 days from the date such obligation was
\nissued or incurred;<\/p>\n
(g) permitted or allowed any of its property or assets (real, personal
\nor mixed, tangible or intangible) to be subjected to any mortgage, pledge, lien,
\nsecurity interest, encumbrance, restriction or charge, except in the ordinary
\ncourse of business and consistent with past practice;<\/p>\n
(h) purchased or sold, transferred or otherwise disposed of any of its
\nmaterial properties or assets (real, personal or mixed, tangible or intangible);<\/p>\n
(i) disposed of or permitted to lapse any rights to the use of any
\ntrademark, trade name, patent or copyright, or disposed of or disclosed to any
\nPerson without obtaining an appropriate confidentiality agreement from any such
\nPerson any trade secret, formula, process or know-how not theretofore a matter
\nof public knowledge;<\/p>\n
(j) made any single capital expenditure or commitment in excess of
\n$25,000 for additions to property, plant, equipment or intangible capital assets
\nor made aggregate capital expenditures in excess of $25,000 for additions to
\nproperty, plant, equipment or intangible capital assets;<\/p>\n
(k) made any change in any method of accounting or accounting practice
\nor internal control procedure;<\/p>\n
(l) issued any capital stock or other securities (other than the grant
\nof 548,435 options under the Company Option Plan), or declared, paid or set
\naside for payment any dividend or other distribution in respect of its capital
\nstock, or redeemed, purchased or otherwise acquired, directly or indirectly, any
\nshares of capital stock or other securities of the Company, or otherwise
\npermitted the withdrawal by any of the holders of capital stock of the Company
\nof any cash or other assets (real, personal or mixed, tangible or intangible),
\nin compensation, indebtedness or otherwise, other than payments of compensation
\nin the ordinary course of business and consistent with past practice;<\/p>\n
(m) paid, loaned or advanced any amount to, or sold, transferred or
\nleased any properties or assets (real, personal or mixed, tangible or
\nintangible) to, or entered into any agreement or arrangement with, any of the
\nCompany’s stockholders, officers, directors or employees or any affiliate of any
\nof the Company’s stockholders, officers, directors or employees, except
\ncompensation paid to officers and employees at rates not exceeding the rates of
\ncompensation paid during the fiscal year last ended or the compensation referred
\nto in Schedule 2.12 of the Disclosure Memorandum; or<\/p>\n
-13-
\n 22<\/p>\n
(n) agreed, whether in writing or otherwise, to take any action
\ndescribed in this Section 2.7.<\/p>\n
2.8 TAXES<\/p>\n
(a) (i) All Tax Returns (as defined below) required to be filed by or on
\nbehalf of the Company have been filed on a timely basis with the appropriate
\ngovernmental authority in all jurisdictions in which such Tax Returns are
\nrequired to be filed, and all such Tax Returns were true, correct and complete
\nin all material respects; (ii) all Taxes (as defined below) of the Company
\n(whether or not reflected on any Tax Return) have been fully and timely paid;
\n(iii) no waivers of statutes of limitation have been given or requested with
\nrespect to the Company in connection with any Tax Returns covering the Company
\nwith respect to any Taxes payable by it; and (iv) the Company has duly and
\ntimely withheld from employee salaries, wages and other compensation and paid
\nover to the appropriate governmental authority all amounts required to be so
\nwithheld and paid over for all periods under all applicable laws. There are no
\nliens with respect to Taxes on any of the Company’s property or assets other
\nthan liens for current Taxes not yet payable.<\/p>\n
(b) Neither the Company nor any other Person on behalf of the Company
\n(i) has filed a consent pursuant to Section 341(f) of the Code or agreed to have
\nSection 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
\n(as such term is defined in Section 341(f)(4) of the Code) owned by the Company;
\n(ii) has executed or entered into a closing agreement pursuant to Section 7121
\nof the Code or any predecessor provision thereof or any similar provision of
\nstate, local or foreign law; or (iii) has agreed to or is required, except as
\nmay be required as a result of the transactions contemplated hereby, to make any
\nadjustments pursuant to Section 481(a) of the Code or any similar provision of
\nstate, local or foreign law by reason of a change in accounting method initiated
\nby the Company or has notice that a governmental authority has proposed any such
\nadjustment or change in accounting method.<\/p>\n
(c) There is no dispute or claim concerning any Tax liability of the
\nCompany either (i) claimed or raised by any authority in writing or (ii) as to
\nwhich any of the directors and officers (and employees responsible for Tax
\nmatters) of the Company have knowledge based on personal contact with any agent
\nof such authority. Schedule 2.8 to the Disclosure Memorandum lists all Tax
\nReturns filed with respect to the Company for taxable periods ended on or after
\nthe Company’s inception that have been audited, and indicates those Tax Returns
\nthat currently are the subject of audit. The Company has delivered to Amazon.com
\ncorrect and complete copies of all Tax Returns, examination reports and
\nstatements of deficiencies assessed against or agreed to by the Company since
\nthe Company’s inception.<\/p>\n
-14-
\n 23<\/p>\n
(d) The Company has not made any payments, is not obligated to make any
\npayments and is not a party to any agreement that will obligate it to make any
\npayments that will not be deductible under Section 280G of the Code (or any
\nsimilar provision of state, local or foreign law) as a result of the Merger or
\nthe other transactions contemplated hereby.<\/p>\n
(e) The Company has not been a United States real property holding
\ncorporation within the meaning of Section 897(c)(2) of the Code during the
\napplicable period specified in Section 897(c)(1)(A)(2)(i) of the Code.<\/p>\n
(f) The Company is not a party to any Tax allocation or sharing
\nagreement. The Company (i) has not been a member of a Tax Group (as defined
\nbelow) filing a consolidated income Tax Return under Section 1501 of the Code
\n(or any similar provision of state, local or foreign law) and (ii) does not have
\nany liability for Taxes of any Person under Treasury Regulations Section
\n1.1502-6 (or any similar provision of state, local or foreign law) as a
\ntransferee or successor by contract or otherwise.<\/p>\n
(g) The unpaid Taxes of the Company (i) did not, as of June 30, 1998,
\nexceed the reserve for Tax liability set forth on the face (rather than any
\nreserve for deferred Taxes established to reflect timing differences between
\nbook and Tax income) of the Company Balance Sheet and (ii) do not exceed that
\nreserve as adjusted for the passage of time through the Closing Date in
\naccordance with the past custom and practice of the Company in filing Tax
\nReturns.<\/p>\n
(h) The Disclosure Memorandum sets forth the amount of any net operating
\nloss, net capital loss, net-unrealized built-in loss (as defined under Section
\n382 of the Code), unused investment or other credit, unused foreign tax or
\nexcess charitable contribution allocable to the Company.<\/p>\n
As used in this Agreement, the following terms shall have the following
\nmeanings:<\/p>\n
“Taxes” means all foreign, federal, state, county or local taxes,
\ncharges, fees, levies, imposts, duties and other assessments, including, but not
\nlimited to, any income, alternative minimum or add-on tax, estimated, gross
\nincome, gross receipts, sales, use, transfer, transactions, intangibles, ad
\nvalorem, value-added, franchise, registration, title, license, capital, paid-up
\ncapital, profits, withholding, payroll, employment, excise, severance, stamp,
\noccupation, premium, real property, recording, personal property, federal
\nhighway use, commercial rent, environmental (including, but not limited to,
\ntaxes under Section 59(a) of the Code) or windfall profit tax, custom, duty or
\nother tax, governmental fee or other like assessment or charge of any kind
\nwhatsoever, together with any interest, penalties or additions to tax.<\/p>\n
-15-
\n 24<\/p>\n
“Tax Group” means any federal, state, local or foreign consolidated,
\naffiliated, combined, unitary or other similar group of which the Company is now
\nor was formerly a member.<\/p>\n
“Tax Returns” means any return, declaration, report, claim or refund,
\ninformation return, statement, or other similar document relating to Taxes,
\nincluding any schedule or attachment thereto, and including any amendment
\nthereof.<\/p>\n
2.9 PROPERTY<\/p>\n
(a) The Company owns no real property other than the leasehold interests
\ndescribed on Schedule 2.9(a) to the Disclosure Memorandum, which contains a
\ncomplete and accurate list of all real property of the Company that is leased,
\nrented or used by the Company (the “Real Property”). The Company has delivered
\nto Amazon.com true and complete copies of all written leases, subleases, rental
\nagreements, contracts of sale, tenancies or licenses relating to the Real
\nProperty and written summaries of the terms of any oral leases, subleases,
\nrental agreements, contracts of sale, tenancies or licenses relating to the Real
\nProperty.<\/p>\n
(b) Schedule 2.9(b) to the Disclosure Memorandum contains a complete and
\naccurate list of each item of personal property having a value in excess of
\n$5,000 that is owned, leased, rented or used by the Company (the “Personal
\nProperty”); however, such list need not describe the Technology and the IP
\nRights (as defined in Section 2.14) listed on Schedule 2.14 to the Disclosure
\nMemorandum. The Company has delivered to Amazon.com true and complete copies of
\nall leases, subleases, rental agreements, contracts of sale, tenancies or
\nlicenses relating to the Personal Property.<\/p>\n
(c) The Real Property and the Personal Property include all properties
\nand assets (whether real, personal or mixed, tangible or intangible) (other
\nthan, in the case of the Personal Property, property rights with an individual
\nvalue of less than $5,000 and the Technology and the IP Rights listed on
\nSchedule 2.14 to the Disclosure Memorandum) reflected in the Company Balance
\nSheet and all the properties and assets purchased by the Company since the date
\nof the Company Balance Sheet (except for such properties or assets sold since
\nthe date of the Company Balance Sheet in the ordinary course of business and
\nconsistent with past practice). The Real Property and the Personal Property
\ninclude all material property used in the business of the Company, other than
\nthe Technology and the IP Rights listed on Schedule 2.14 to the Disclosure
\nMemorandum. The Company’s offices and other structures and the Personal Property
\nare of a quality consistent with industry standards, are in good operating
\ncondition and repair, normal wear and tear excepted, are adequate for the uses
\nto which they are being put and comply in all material respects with applicable
\nsafety and other laws and regulations.<\/p>\n
-16-
\n 25<\/p>\n
(d) The Company’s leasehold interest in each parcel of the Real Property
\nis free and clear of all liens, mortgages, pledges, deeds of trust, security
\ninterests, charges, encumbrances and other adverse claims or interests of any
\nkind (each, an “Encumbrance”). Each lease of any portion of the Real Property is
\nvalid, binding and enforceable in accordance with its terms against the parties
\nthereto and any other Person with an interest in such Real Property, the Company
\nhas performed in all material respects all obligations imposed on it thereunder,
\nand neither the Company nor any other party thereto is in default thereunder,
\nnor is there any event that with notice or lapse of time, or both, would
\nconstitute a default thereunder. The Company has not granted any lease,
\nsublease, tenancy or license of, or entered into any rental agreement or
\ncontract of sale with respect to, any portion of the Real Property.<\/p>\n
(e) The Personal Property is free and clear of all Encumbrances, and,
\nother than leased Personal Property that is so noted on the list supplied
\npursuant to Section 2.9(b), the Company owns such Personal Property. Each lease,
\nlicense, rental agreement, contract of sale or other agreement to which the
\nPersonal Property is subject is valid, binding and enforceable in accordance
\nwith its terms against the parties thereto, the Company has performed in all
\nmaterial respects all obligations imposed on it thereunder, and neither the
\nCompany nor, to the best of the Company’s knowledge, any other party thereto is
\nin default thereunder, nor is there any event that with notice or lapse of time,
\nor both, would constitute a default by the Company or, to the best of the
\nCompany’s knowledge, any other party thereunder. The Company has not granted any
\nlease, sublease, tenancy or license of any portion of the Personal Property,
\nexcept in the ordinary course of business.<\/p>\n
2.10 CONTRACTS<\/p>\n
Schedule 2.10 to the Disclosure Memorandum contains a complete and
\naccurate list (other than the IP Rights listed on Schedule 2.14 to the
\nDisclosure Memorandum) of all contracts, agreements and understandings, oral or
\nwritten, to which the Company is currently a party or by which the Company is
\ncurrently bound providing for potential payments by or to the Company in excess
\nof $25,000, including, without limitation, security agreements, license
\nagreements, software development agreements, distribution agreements, joint
\nventure agreements, reseller agreements, credit agreements and instruments
\nrelating to the borrowing of money. All contracts set forth on Schedule 2.10 are
\nvalid, binding and enforceable in accordance with their terms against each party
\nthereto, and are in full force and effect, the Company has performed in all
\nmaterial respects all obligations imposed on it thereunder, and neither the
\nCompany nor, to the best of<\/p>\n
-17-
\n 26<\/p>\n
the Company’s knowledge, any other party thereto is in default thereunder, nor
\nis there any event that with notice or lapse of time, or both, would constitute
\na default by the Company or, to the best of the Company’s knowledge, any other
\nparty thereunder. True and complete copies of each such written contract (or
\nwritten summaries of the terms of any such oral contract) have been heretofore
\ndelivered to Amazon.com. Except as specifically set forth on Schedule 2.10, the
\nCompany has no<\/p>\n
(a) contracts with directors, officers, stockholders, employees, agents,
\nconsultants, advisors, salespersons, sales representatives, distributors or
\ndealers that are not, except as provided by law to the contrary without regard
\nto the express terms of such contract, cancelable by it within 30 days’ notice
\nwithout liability, penalty or premium, any agreement or arrangement providing
\nfor the payment of any bonus or commission based on sales or earnings, or any
\ncompensation agreement or arrangement affecting or relating to former employees
\nof the Company;<\/p>\n
(b) employment agreement, whether express or implied, or any other
\nagreement for services that contains any severance or termination pay
\nliabilities or obligations;<\/p>\n
(c) noncompetition agreement or other restriction from carrying on its
\nbusiness anywhere in the world;<\/p>\n
(d) notice that any party to a contract listed on Schedule 2.10 intends
\nto cancel, terminate or refuse to renew such contract or to exercise or decline
\nto exercise any option or right thereunder;<\/p>\n
(e) material disagreement with any of its suppliers, customers,
\ndistributors, OEM resellers, licensors or licensees;<\/p>\n
(f) product distribution agreement, development agreement, or license
\nagreement as licensor or licensee (except for standard nonexclusive software
\nlicenses granted to end-user customers in the ordinary course of business the
\nform of which has been provided to Amazon.com or standard licenses purchased by
\nthe Company for off-the-shelf software), and except as otherwise set forth on
\nSchedule 2.14.2 to the Disclosure Memorandum);<\/p>\n
(g) joint venture contract or arrangement or any other agreement that
\ninvolves a sharing of profits with other persons; and<\/p>\n
(h) instrument evidencing or related in any way to indebtedness for
\nborrowed money by way of direct loan, sale of debt securities, purchase money
\nobligation, conditional sale, guarantee, or otherwise, except for trade
\nindebtedness incurred in the ordinary course of business, and except as
\ndisclosed in the Financial Statements.<\/p>\n
-18-
\n 27<\/p>\n
2.11 CLAIMS AND LEGAL PROCEEDINGS<\/p>\n
Except as set forth on Schedules 2.11 and 2.14 to the Disclosure
\nMemorandum, there are no claims, actions, suits, arbitrations, investigations or
\nproceedings pending against the Company or, to the best of the Company’s
\nknowledge, threatened against the Company before or by any court or governmental
\nor nongovernmental department, commission, board, bureau, agency or
\ninstrumentality, or any other Person. There are no outstanding or unsatisfied
\njudgments, orders, decrees or stipulations to which the Company is a party.
\nSchedule 2.11 sets forth a description of any material disputes that have been
\nsettled or resolved by litigation or arbitration since the Company’s inception.<\/p>\n
2.12 LABOR AND EMPLOYMENT MATTERS<\/p>\n
There are no material labor disputes, employee grievances or
\ndisciplinary actions pending or, to the best of the Company’s knowledge,
\nthreatened against or involving the Company or any of its present or former
\nemployees. The Company has complied with all provisions of law relating to
\nemployment and employment practices, terms and conditions of employment, wages
\nand hours. The Company is not engaged in any unfair labor practice and has no
\nliability for any arrears of wages or Taxes or penalties for failure to comply
\nwith any such provisions of law. There is no labor strike, dispute, slowdown or
\nstoppage pending or, to the best of the Company’s knowledge, threatened against
\nor affecting the Company, and the Company has not experienced any work stoppage
\nor other labor difficulty since its incorporation. No collective bargaining
\nagreement is binding on the Company. The Company has no knowledge of any
\norganizational efforts presently being made or threatened by or on behalf of any
\nlabor union with respect to employees of the Company. Each employee, officer and
\nconsultant of the Company has executed a nondisclosure agreement in the form
\nprovided to Amazon.com. To the best of the Company’s knowledge, no employee (or
\nperson performing similar functions) of the Company is in violation of any such
\nagreement or any employment agreement, noncompetition agreement, patent
\ndisclosure agreement, invention assignment agreement, proprietary information
\nagreement or other contract or agreement relating to the relationship of such
\nemployee with the Company or any other party, and the Company will use its best
\nefforts to prevent any such violation. Schedule 2.12 to the Disclosure
\nMemorandum sets forth a true and complete list of (a) the names and current
\ncompensation amounts of all directors and officers of the Company; (b) the wage
\nrates for nonsalaried and nonofficer salaried employees of the Company by
\nclassification, and all labor union contracts (if any); (c) all group insurance
\nprograms in effect for employees of the Company (other than any Employee Benefit
\nPlan listed on Schedule 2.13.1 to the Disclosure Memorandum); and (d) the names
\nand current<\/p>\n
-19-
\n 28<\/p>\n
compensation packages of all independent contractors and consultants of the
\nCompany. The Company is not in default with respect to any of its obligations
\nreferred to in clause (b) above and has no obligation or liability for severance
\nor back pay owed through or by virtue of the Closing. Except as disclosed on
\nSchedule 2.12, all employees of the Company are employed on an “at will” basis.<\/p>\n
2.13 EMPLOYEE BENEFIT PLANS<\/p>\n
2.13.1 EMPLOYEE BENEFIT PLAN LISTING<\/p>\n
Schedule 2.13.1 to the Disclosure Memorandum sets forth a true, accurate
\nand complete list of all retirement, pension, profit sharing, deferred
\ncompensation, savings, bonus, incentive, cafeteria, flexible benefits, medical,
\ndental, vision, hospitalization, life insurance, group insurance, medical
\nexpense reimbursement, dependent care assistance, tuition reimbursement,
\ndisability, accident, sick pay, holiday, vacation, severance, stock purchase,
\nstock option, stock appreciation rights, fringe benefit and other employee
\nbenefit plans, funds, policies, programs, contracts, arrangements and payroll
\npractices (including, but not limited to, all “employee benefit plans,” as
\ndefined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
\nas amended (“ERISA”)) and all employment, consulting and personal service
\ncontracts and agreements, whether formal or informal, whether written or
\nunwritten and whether legally binding or not, (a) sponsored, maintained or
\ncontributed to by the Company, (b) covering or benefiting any current or former
\nofficer, employee, agent, director or independent contractor of the Company (or
\nany dependent or beneficiary of any such individual), or (c) with respect to
\nwhich the Company has (or could have) any actual or potential obligation or
\nliability (such plans, funds, policies, programs, contracts, arrangements and
\npayroll practices are hereinafter referred to collectively as “Employee Benefit
\nPlans” and each individually as an “Employee Benefit Plan”). The Company does
\nnot have any agreement, arrangement, commitment or obligation, whether formal or
\ninformal, whether written or unwritten and whether legally binding or not, to
\ncreate (or contribute to) any additional employee benefit plan, fund, policy,
\nprogram, contract, arrangement or payroll practice or to modify or amend any
\nexisting Employee Benefit Plan. There has been no amendment, written
\ninterpretation or announcement (whether or not written) by the Company relating
\nto, or change in participation or coverage under, any Employee Benefit Plan
\nthat, either alone or together with other such items or events, could materially
\nincrease the expense of maintaining the Employee Benefit Plans above the level
\nof expense incurred with respect thereto for the most recent fiscal year
\nincluded in the Financial Statements.<\/p>\n
-20-
\n 29<\/p>\n
2.13.2 DOCUMENTS PROVIDED<\/p>\n
The Company has delivered to Amazon.com true, correct and complete
\ncopies (or, in the case of unwritten Employee Benefit Plans, descriptions) of
\nall Employee Benefit Plans (and all amendments thereto), along with, to the
\nextent applicable to the particular Employee Benefit Plan, the following
\ninformation: (a) copies of the last three annual reports (Form 5500 series)
\nfiled with respect to such Employee Benefit Plan; (b) copies of the summary plan
\ndescriptions, summary annual reports, summaries of material modifications and
\nall material employee manuals or communications filed or distributed with
\nrespect to such Employee Benefit Plan during the last three years; and (c)
\ncopies of all contracts (and any amendments thereto) relating to such Employee
\nBenefit Plan, including, but not limited to, service provider agreements,
\nadministrative service agreements, insurance contracts, annuity contracts,
\ninvestment management agreements and record-keeping agreements.<\/p>\n
2.13.3 COMPLIANCE<\/p>\n
Except as set forth on Schedule 2.13.3 to the Disclosure Memorandum,
\nwith respect to each Employee Benefit Plan: (a) such Employee Benefit Plan is,
\nand at all times since its inception has been, maintained, administered and
\noperated in accordance with its terms and in compliance in all material respects
\nwith all applicable laws, statutes, orders, rules and regulations, and all
\nrequirements prescribed thereby, including, but not limited to, ERISA and the
\nCode; (b) all amendments and actions required to bring such Employee Benefit
\nPlan into conformity with the applicable provisions of ERISA, the Code and other
\napplicable laws and regulations have been made or taken within the time
\nprescribed by law, except to the extent that such amendments or actions are not
\nrequired by law to be made or taken until after the Closing Date and are
\ndisclosed on Schedule 2.13.3 to the Disclosure Memorandum; (c) the Company and,
\nto the knowledge of the Company, each fiduciary of such Employee Benefit Plan
\nhave, at all times, properly performed all obligations, whether arising by
\noperation of law or by contract, required to be performed by each of them in
\nconnection with such Employee Benefit Plan, and there have been no defaults or
\nviolations of law by the Company, any fiduciary or any other Person with respect
\nto such Employee Benefit Plan; (d) all returns, reports and other disclosures
\nrelating to such Employee Benefit Plan required to be filed with any
\ngovernmental entity or agency or furnished to any participant or beneficiary
\nhave been properly completed or prepared and timely filed or furnished in
\naccordance with applicable law; (e) neither the Company nor any other fiduciary
\nof such Employee Benefit Plan has engaged in any transaction or acted or failed
\nto act in a manner that violates the fiduciary requirements of ERISA or any
\nother applicable law; (f) no event has occurred or is threatened or about to
\noccur that would constitute a nonexempt prohibited transaction<\/p>\n
-21-
\n 30<\/p>\n
under Section 406 or 407 of ERISA or under Section 4975 of the Code; and (g) no
\nevent or omission has occurred, or is about to occur, that could subject,
\ndirectly or indirectly, the Company or any other Person to a tax under Chapter
\n43 of Subtitle D of the Code or a penalty under Part 5 of Subtitle B of Title I
\nof ERISA. Each Employee Benefit Plan that constitutes a “group health plan,” as
\ndefined in Section 607(1) or Section 733(a)(1) of ERISA or Section 4980B(g)(2)
\nof the Code, has been maintained, administered and operated at all times since
\nits inception in compliance in all material respects with the requirements of
\nParts 6 and 7 of Subtitle B of Title I of ERISA, Section 4980B(f) of the Code,
\nany regulations under such ERISA and Code sections and any other applicable
\nfederal, state, local or foreign law regarding the provision or continuation of
\nhealth insurance coverage or other welfare benefits (within the meaning of
\nSection 3(1) of ERISA).<\/p>\n
2.13.4 CONTRIBUTIONS AND PREMIUM PAYMENTS<\/p>\n
All contributions, premiums and other payments due or required to be
\nmade to each Employee Benefit Plan under the terms of such Employee Benefit
\nPlan, ERISA, the Code or other applicable law have been timely paid, or, if not
\nyet due, have been properly recorded on the books of the Company.<\/p>\n
2.13.5 RELATED EMPLOYERS<\/p>\n
The Company is not, and has never been, a member of (a) a controlled
\ngroup of corporations, within the meaning of Section 414(b) of the Code, (b) a
\ngroup of trades or businesses under common control, within the meaning of
\nSection 414(c) of the Code, (c) an affiliated service group, within the meaning
\nof Section 414(m) of the Code, or (d) any other group of Persons treated as a
\nsingle employer under Section 414(o) of the Code.<\/p>\n
2.13.6 MULTIEMPLOYER AND TITLE IV PLANS<\/p>\n
The Company does not maintain or contribute to, and has never maintained
\nor contributed to (or been obligated to contribute to), any multiemployer plan
\nas defined in Section 3(37) or 4001(a)(3) of ERISA or 414(f) of the Code, any
\nmultiple employer plan within the meaning of Section 4063 or 4064 of ERISA or
\nSection 413(c) of the Code, or any employee benefit plan, fund, program,
\ncontract or arrangement that is subject to Section 412 of the Code, Section 302
\nof ERISA or Title IV of ERISA.<\/p>\n
2.13.7 POST-TERMINATION WELFARE BENEFITS<\/p>\n
Except as set forth on Schedule 2.13.7 to the Disclosure Memorandum,
\nneither the Company nor any Employee Benefit Plan provides or has any obligation
\nto<\/p>\n
-22-
\n 31<\/p>\n
provide (or contribute toward the cost of) health, severance or any other
\nwelfare benefits (within the meaning of Section 3(1) of ERISA) with respect to
\nany current or former officer, employee, agent, director or independent
\ncontractor of the Company or any other entity beyond such individual’s
\nretirement or other termination of service, other than continuation coverage
\nmandated by Sections 601 through 608 of ERISA or Section 4980B(f) of the Code or
\nother applicable law.<\/p>\n
2.13.8 SUITS, CLAIMS AND INVESTIGATIONS<\/p>\n
There are no actions, suits or claims (other than routine claims for
\nbenefits) pending or, to the best of the Company’s knowledge, threatened with
\nrespect to (or against the assets of) any Employee Benefit Plan, nor, to the
\nbest of the Company’s knowledge, is there a basis for any such action, suit or
\nclaim. No Employee Benefit Plan is currently under investigation, audit or
\nreview, directly or indirectly, by the Internal Revenue Service (the “IRS”), the
\nDepartment of Labor (the “DOL”) or any other governmental entity or agency, and,
\nto the best of the Company’s knowledge, no such action is contemplated or under
\nconsideration by the IRS, the DOL or any other governmental entity or agency.<\/p>\n
2.13.9 PAYMENTS RESULTING FROM TRANSACTIONS<\/p>\n
Except as set forth on Schedule 2.13.9 to the Disclosure Memorandum,
\nneither the execution and delivery of this Agreement or any of the other
\nOperative Documents nor the consummation of the transactions contemplated in (or
\nby) this Agreement or any of the other Operative Documents will (a) entitle any
\ncurrent or former officer, employee, agent, director or independent contractor
\nof the Company to severance pay, unemployment compensation or any other payment
\nfrom the Company or any other Person, or otherwise increase the amount of
\ncompensation due to any such individual, or (b) result in any benefit or right
\nbecoming established or increased, or accelerate the time of payment or vesting
\nof any benefit, under any Employee Benefit Plan, whether or not some other
\nsubsequent action or event would be required to trigger any of the items
\nspecified in clause (a) or (b) of this Section 2.13.9.<\/p>\n
2.14 INTELLECTUAL PROPERTY<\/p>\n
2.14.1 TECHNOLOGY<\/p>\n
Except for the Third Party Technologies (as defined in Section 2.14.2),
\nthe Company owns all right, title and interest in and to the following
\n(collectively, the “Technology”), free and clear of all Encumbrances: (a) all
\nproducts, computer programs, specifications, source code, object code, graphics,
\ndevices, techniques, algorithms, methods, technology, processes, procedures,
\npackaging, trade dress,<\/p>\n
-23-
\n 32<\/p>\n
formulae, drawings, designs, concepts, user interfaces, “look and feel,”
\nsoftware or development tools and content that are now or during the two (2)
\nyears prior to the date of this Agreement have been, or are currently proposed
\nto be, developed, produced, used, marketed and\/or sold in the Company’s
\nbusiness, including, without limitation, the items listed in Schedule 2.14.1 to
\nthe Disclosure Memorandum; (b) any and all updates, enhancements, corrections,
\nmodifications, improvements and new releases related to the items set forth in
\n(a), above; (c) any and all technology and work in progress related to the items
\nset forth in (a) and (b), above; and (d) all inventions, discoveries, processes,
\ndesigns, trade secrets, know-how and other confidential or proprietary
\ninformation related to the items set forth in (a), (b) and (c), above. The
\nTechnology, excluding the Third Party Technologies, is sometimes referred to
\nherein as the “Company Technology.”<\/p>\n
2.14.2 THIRD PARTY TECHNOLOGY<\/p>\n
Schedule 2.15.2 to the Disclosure Memorandum sets forth a list of all
\nTechnology used in the Company’s business for which the Company does not own all
\nright, title and interest (collectively, the “Third Party Technologies”), and
\nall license agreements or other contracts pursuant to which the Company has the
\nright to use (in the manner used by the Company, or intended or necessary for
\nuse with the Company Technology) the Third Party Technologies (the “Third Party
\nLicenses”), indicating, with respect to each of the Third Party Technologies
\nlisted therein, the owner thereof and the Third Party License applicable
\nthereto. The Company has the lawful right to use (free of any material
\nrestriction) (a) all Third Party Technology that is incorporated in or used in
\nthe development or production of the Company Technology, and (b) all other Third
\nParty Technology necessary for the conduct of the Company’s business as now
\nconducted and as proposed to be conducted. All Third Party Licenses are valid,
\nbinding and in full force and effect, the Company and, to the best of the
\nCompany’s knowledge, each other party thereto have performed in all material
\nrespects their obligations thereunder, and neither the Company nor, to the best
\nof the Company’s knowledge, any other party thereto is in default thereunder,
\nnor to the best of the Company’s knowledge has there occurred any event or
\ncircumstance which with notice or lapse of time or both would constitute a
\ndefault or event of default, on the part of the Company or, to the best of the
\nCompany’s knowledge, any other party thereto or give to any other party thereto
\nthe right to terminate or modify any Third Party License. The Company has not
\nreceived notice that any party to any Third Party License intends to cancel,
\nterminate or refuse to renew (if renewable) such Third Party License or to
\nexercise or decline to exercise any option or right thereunder.<\/p>\n
-24-
\n 33<\/p>\n
2.14.3 TRADEMARKS<\/p>\n
Schedule 2.14.3 to the Disclosure Memorandum sets forth a list of all
\ntrademarks, trade names, brand names, service marks, logos or other identifiers
\nused by the Company in its business (the “Marks”). The Company has full legal
\nand beneficial ownership, free and clear of any Encumbrances, of all rights
\nconferred by use of the Marks in the Company’s business and, as to those Marks
\nthat have been registered in the United States Patent and Trademark Office, by
\nfederal registration of the Marks.<\/p>\n
2.14.4 INTELLECTUAL PROPERTY RIGHTS<\/p>\n
Schedule 2.14.4 to the Disclosure Memorandum sets forth all patents,
\npatent applications, copyright registrations (and applications therefor) and
\ntrademark registrations (and applications therefor) (collectively, the “IP
\nRegistrations”) associated with the Company Technology and the Marks. The
\nCompany owns all right, title and interest, free and clear of any Encumbrances,
\nin and to the IP Registrations, together with any other rights in or to any
\ncopyrights (registered or unregistered), rights in the Marks (registered or
\nunregistered), trade secret rights and other intellectual property rights
\n(including, without limitation, rights of enforcement) associated with the
\nCompany Technology and the Marks (collectively, the “IP Rights”).<\/p>\n
2.14.5 MAINTENANCE OF RIGHTS<\/p>\n
Except as set forth in Schedule 2.14.5 to the Disclosure Memorandum, the
\nCompany has not conducted its business, and has not used or enforced (or failed
\nto use or enforce) the IP Rights, in a manner that would result in the
\nabandonment, cancellation or unenforceability of any item of the IP Rights or
\nthe IP Registrations, and the Company has not taken (or failed to take) any
\naction that would result in the forfeiture or relinquishment of any IP Rights or
\nIP Registrations, in each case where such abandonment, cancellation,
\nunenforceability, forfeiture or relinquishment would have a Company Material
\nAdverse Effect. Except as set forth in Schedule 2.14.5, the Company has not
\ngranted to any third party any rights or permissions to use any of the
\nTechnology or the IP Rights. To the best of the Company’s knowledge, except
\npursuant to reasonably prudent safeguards, (a) no third party has received any
\nconfidential information relating to the Technology or the IP Rights, and (b)
\nthe Company is not under any contractual or other obligation to disclose to any
\nthird party any Company Technology.<\/p>\n
-25-
\n 34<\/p>\n
2.14.6 THIRD PARTY INFRINGEMENT<\/p>\n
Except as set forth in Schedule 2.14.6 to the Disclosure Memorandum, (a)
\nthe Company has not received any notice or claim (whether written, oral or
\notherwise) challenging the Company’s ownership or rights in the Company
\nTechnology or the IP Rights or claiming that any other person or entity has any
\nlegal or beneficial ownership with respect thereto; (b) all IP Rights are
\nlegally valid and enforceable without any material qualification, limitation or
\nrestriction on their use, and the Company has not received any notice or claim
\n(whether written, oral or otherwise) challenging the validity or enforceability
\nof any IP Rights; and (c) to the best of the Company’s knowledge, no other
\nperson or entity is infringing or misappropriating any part of the IP Rights or
\notherwise making any unauthorized use of the Company Technology.<\/p>\n
2.14.7 INFRINGEMENT BY THE COMPANY<\/p>\n
Except as set forth in Schedule 2.14.7 to the Disclosure Memorandum, (a)
\nthe use of any of the Technology in the Company’s business does not and will, to
\nthe knowledge of the Company, not conflict with, infringe, violate or interfere
\nwith or constitute an appropriation of any right, title or interest (including,
\nwithout limitation, any patent, copyright or trade secret right) held by any
\nother person or entity, and there have been no claims made with respect thereto,
\n(b) the use of any of the Marks and other IP Rights in the Company’s business
\nwill not conflict with, infringe, violate or interfere with or constitute an
\nappropriation of any right, title or interest (including, without limitation,
\nany patent, copyright, trademark or trade secret right) held by any other person
\nor entity, and there have been no claims made with respect thereto, and (c) the
\nCompany has not received any notice or claim (whether written, oral or
\notherwise) regarding any infringement, misappropriation, misuse, abuse or other
\ninterference with any third party intellectual property or proprietary rights
\n(including, without limitation, infringement of any patent, copyright, trademark
\nor trade secret right of any third party) by the Company, the Technology or the
\nMarks or other IP Rights or claiming that any other entity has any claim of
\ninfringement with respect thereto.<\/p>\n
2.14.8 CONFIDENTIALITY<\/p>\n
Except as set forth in Schedule 2.14.8 to the Disclosure Memorandum, (a)
\nthe Company has not disclosed any source code regarding the Technology to any
\nperson or entity other than an employee of the Company and under a written
\nnondisclosure agreement; (b) the Company has at all times maintained and
\ndiligently enforced commercially reasonable procedures to protect all
\nconfidential information relating to the Technology; (c) neither the Company nor
\nany escrow agent is under any<\/p>\n
-26-
\n 35<\/p>\n
contractual or other obligation to disclose the source code or any other
\nproprietary information included in or relating to the Technology; and (d) the
\nCompany has not deposited any source code relating to the Technology into any
\nsource code escrows or similar arrangements. If, as disclosed on Schedule
\n2.14.8, the Company has deposited any source code to the Technology into source
\ncode escrows or similar arrangements, no event has occurred that has or could
\nreasonably form the basis for a release of such source code from such escrows or
\narrangements.<\/p>\n
2.14.9 WARRANTY AGAINST DEFECTS<\/p>\n
Except as set forth in Schedule 2.14.9 to the Disclosure Memorandum, the
\nTechnology is free from known material defects and substantially conforms to the
\napplicable specifications, documentation and samples of such Technology.<\/p>\n
2.14.10 DOMAIN NAMES<\/p>\n
Schedule 2.14.10 sets forth a list of all Internet domain names used by
\nthe Company in its business (collectively, the “Domain Names”). The Company has,
\nand after the Closing the Surviving Corporation will have, a valid registration
\nand all material rights (free of any material restriction) in and to the Domain
\nNames, including without limitation all rights necessary to continue to conduct
\nthe Company’s business as it is currently conducted.<\/p>\n
2.14.11 YEAR 2000<\/p>\n
Each hardware, software and firmware product used by the Company in its
\nbusiness (collectively, the “Software”) will accurately process date data
\n(including, but not limited to, calculating, comparing and sequencing) from,
\ninto and between the twentieth and twenty-first centuries, including, without
\nlimitation, leap year calculations, without a decrease in the functionality of
\nthe Software. The Software is designed to be used prior to, during and after the
\ncalendar year 2000 A.D. and will operate during each such time period without
\nerror relating to date data, specifically including any error relating to, or
\nthe product of, date data which represents or references different centuries or
\nmore than one century. Without limiting the generality of the foregoing, the
\nSoftware (a) will not abnormally end or provide invalid or incorrect results as
\na result of date data, specifically including date data which represents or
\nreferences different centuries or more than one century, (b) has been designed
\nto ensure year 2000 compatibility, including, but not limited to, date data
\ncentury recognition, calculations which accommodate same century and
\nmulti-century formulas and date values, and date data interface values that
\nreflect the century, and (c) includes “Year 2000 Capabilities,” meaning that the
\nSoftware (i) will manage and manipulate data involving dates, including single
\ncentury formulas and<\/p>\n
-27-
\n 36<\/p>\n
multi-century formulas, and will not cause an abnormally ending scenario within
\nthe application or generate incorrect values or invalid results involving such
\ndates, (ii) provides that all date-related user interface functionalities and
\ndata fields include the indication of century, and (iii) provides that all
\ndate-related data interface functionalities include the indication of century.<\/p>\n
2.15 CORPORATE BOOKS AND RECORDS<\/p>\n
The Company has furnished to Amazon.com or its representatives for their
\nexamination true and complete copies of (a) the Articles of Organization and
\nBylaws of the Company as currently in effect, including all amendments thereto,
\n(b) the minute books of the Company, and (c) the stock transfer books of the
\nCompany. Such minutes reflect all meetings of the Company’s stockholders, Board
\nof Directors and any committees thereof since the Company’s inception, and such
\nminutes accurately reflect in all material respects the events of and actions
\ntaken at such meetings. Such stock transfer books accurately reflect all
\nissuances and transfers of shares of capital stock of the Company since its
\ninception.<\/p>\n
2.16 LICENSES, PERMITS, AUTHORIZATIONS, ETC.<\/p>\n
Except as identified on Schedules 2.1 and 2.5 to the Disclosure
\nMemorandum, the Company has received all currently required governmental
\napprovals, authorizations, consents, licenses, orders, registrations and permits
\nof all agencies, whether federal, state, local or foreign, the failure to obtain
\nof which would have a Company Material Adverse Effect. The Company has not
\nreceived any notifications of any asserted present failure by it to have
\nobtained any such governmental approval, authorization, consent, license, order,
\nregistration or permit, or past and unremedied failure to obtain such items.<\/p>\n
2.17 COMPLIANCE WITH LAWS<\/p>\n
Except as described on Schedule 2.17 to the Disclosure Memorandum, the
\nCompany has at all times complied, and is in compliance, with all federal,
\nstate, local and foreign laws, rules, regulations, ordinances, decrees and
\norders applicable to it, to its employees, or to the Real Property and the
\nPersonal Property, including, without limitation, all such laws, rules,
\nordinances, decrees and orders relating to intellectual property protection,
\nantitrust matters, consumer protection, currency exchange, environmental
\nprotection, equal employment opportunity, health and occupational safety,
\npension and employee benefit matters, securities and investor protection
\nmatters, labor and employment matters and trading-with-the-enemy matters except
\nwhere its noncompliance would not have a Company Material Adverse Effect. The
\nCompany has not received any notification of any asserted present or past
\nunremedied<\/p>\n
-28-
\n 37<\/p>\n
failure by the Company to comply with any of such laws, rules, regulations,
\nordinances, decrees or orders.<\/p>\n
2.18 INSURANCE<\/p>\n
The Company maintains (a) insurance on all of its property (including
\nleased premises) that insures against loss or damage by fire or other casualty
\n(including extended coverage) and (b) insurance against liabilities, claims and
\nrisks of a nature and in such amounts listed on Schedule 2.18. All insurance
\npolicies of the Company are in full force and effect, all premiums with respect
\nthereto covering all periods up to and including the date this representation is
\nmade have been paid, and no notice of cancellation or termination has been
\nreceived with respect to any such policy or binder. Such policies or binders are
\nsufficient for compliance with all agreements to which the Company is a party,
\nwill remain in full force and effect through the respective expiration dates of
\nsuch policies or binders without the payment of additional premiums and will not
\nin any way be affected by, or terminate or lapse by reason of, the transactions
\ncontemplated by this Agreement. The Company has not been refused any insurance
\nwith respect to its assets or operations, nor has its coverage been limited, by
\nany insurance carrier to which it has applied for any such insurance or with
\nwhich it has carried insurance.<\/p>\n
2.19 BROKERS OR FINDERS<\/p>\n
Except as set forth on Schedule 2.19 to the Disclosure Memorandum, the
\nCompany has not incurred, and will not incur, directly or indirectly, as a
\nresult of any action taken by or on behalf of the Company, any liability for
\nbrokerage or finders’ fees or agents’ commissions or any similar charges in
\nconnection with the Merger, this Agreement or any transaction contemplated
\nhereby.<\/p>\n
2.20 ABSENCE OF QUESTIONABLE PAYMENTS<\/p>\n
Neither the Company nor, to the Company’s knowledge, any director,
\nofficer, agent, employee or other Person acting on behalf of the Company has
\nused any Company funds for improper or unlawful contributions, payments, gifts
\nor entertainment, or made any improper or unlawful expenditures relating to
\npolitical activity to domestic or foreign government officials or others. The
\nCompany has adequate financial controls to present such improper or unlawful
\ncontributions, payments, gifts, entertainment or expenditures. Neither the
\nCompany nor, to the Company’s knowledge, any current director, officer, agent,
\nemployee or other Person acting on behalf of the Company has accepted or
\nreceived any improper or unlawful contributions, payments, gifts or
\nexpenditures. The Company has at all times complied, and is in compliance, in
\nall respects with the Foreign Corrupt Practices Act<\/p>\n
-29-
\n 38<\/p>\n
and all foreign laws and regulations relating to prevention of corrupt practices
\nand similar matters.<\/p>\n
2.21 BANK ACCOUNTS<\/p>\n
Schedule 2.21 to the Disclosure Memorandum sets forth the names and
\nlocations of all banks, trust companies, savings and loan associations and other
\nfinancial institutions at which the Company maintains safe deposit boxes or
\naccounts of any nature and the names of all Persons authorized to draw thereon,
\nmake withdrawals therefrom or have access thereto.<\/p>\n
2.22 CUSTOMERS AND SUPPLIERS<\/p>\n
Schedule 2.22 to the Disclosure Memorandum sets forth (a) a complete and
\naccurate list of the customers of the Company accounting for 5% or more of the
\nCompany’s sales during the fiscal year last ended showing the approximate total
\nsales by the Company to each such customer during the fiscal year last ended and
\n(b) a complete and accurate list of the suppliers of the Company from whom the
\nCompany has purchased 5% or more of the goods or services purchased by the
\nCompany in the fiscal year last ended. The Company has no reasonable basis to
\nexpect any material modification to its relationship with any customer or
\nsupplier named on Schedule 2.22 to the Disclosure Memorandum.<\/p>\n
2.23 ACCOUNTS RECEIVABLE<\/p>\n
All accounts receivable of the Company reflected in the Company Balance
\nSheet, or existing at the Effective Time, represent sales actually made in the
\nordinary course of business and were recorded in the Company’s books consistent
\nwith the presentation applied in the Financial Statements for the year ended
\nDecember 31, 1997. Except as described on Schedule 2.23 to the Disclosure
\nMemorandum, the bad debt reserves and sales return allowances reflected in the
\nCompany Balance Sheet are adequate in all material respects. Set forth on
\nSchedule 2.23 to the Disclosure Memorandum are a full and complete list and
\naging study of all consolidated accounts receivable of the Company existing as
\nof June 30, 1998.<\/p>\n
2.24 CREDITORS’ LIST<\/p>\n
The Disclosure Memorandum sets forth a full, complete and accurate list
\nof all creditors of Company, with the amount payable to each such creditor as of
\nthe date hereof and the Closing Date.<\/p>\n
-30-
\n 39<\/p>\n
2.25 INSIDER INTERESTS<\/p>\n
Except as set forth on Schedule 2.25 to the Disclosure Memorandum, no
\nstockholder or officer or director or other representative of the Company has
\nany interest (other than as a stockholder of the Company) (a) in any Real
\nProperty, Personal Property, Technology or IP Rights used in or directly
\npertaining to the business of the Company, including, without limitation,
\ninventions, patents, trademarks or trade names, or (b) in any agreement,
\ncontract, arrangement or obligation relating to the Company, its present or
\nprospective business or its operations. Except as set forth on Schedule 2.25,
\nthere are no agreements, understandings or proposed transactions between the
\nCompany and any of its officers, directors, holders, affiliates or any affiliate
\nthereof. The Company and its officers and directors have no interest, either
\ndirectly or indirectly, in any entity, including, without limitation, any
\ncorporation, partnership, joint venture, proprietorship, firm, licensee,
\nbusiness or association (whether as an employee, officer, director, stockholder,
\nagent, independent contractor, security holder, creditor, consultant or
\notherwise) that presently (a) provides any services, produces and\/or sells any
\nproducts or product lines or engages in any activity that is the same, similar
\nto or competitive with any activity or business in which the Company is now
\nengaged or proposes to engage; (b) is a supplier, customer or creditor, or has
\nan existing contractual relationship with any of the Company’s employees (or
\npersons performing similar functions); or (c) has any direct or indirect
\ninterest in any asset or property (real, personal or mixed, tangible or
\nintangible) of the Company or any property (real, personal or mixed, tangible or
\nintangible) that is necessary or desirable for the present or anticipated future
\nconduct of the Company’s business.<\/p>\n
2.26 COMPLIANCE WITH ENVIRONMENTAL LAWS<\/p>\n
Neither the Company nor, to the best of the Company’s knowledge, any
\nother Person (including, without limitation, any previous owner, lessee or
\nsublessee) has treated, stored or disposed of any material amounts of petroleum,
\npetroleum products, hazardous waste, hazardous substances, pollutants or
\ncontaminants on the Real Property, or any real property previously owned,
\nleased, subleased or used by the Company in the operation of its business, in
\nviolation of any applicable foreign, federal, state or local statutes,
\nregulations or ordinances, or common law, in each case as in existence at or
\nprior to the Closing. There have been no releases of any material amounts of
\npetroleum, petroleum products, hazardous waste, hazardous substances, pollutants
\nor contaminants on, at or from any assets or properties, including, without
\nlimitation, the Real Property, owned, leased, subleased or used by the Company
\nin the operation of its business during the time such assets or properties were
\nowned, leased, subleased or used by the Company (or, to the best of the
\nCompany’s knowledge, prior<\/p>\n
-31-
\n 40<\/p>\n
to such time), including, without limitation, any releases of any material
\namounts of petroleum, petroleum products, hazardous waste, hazardous substances,
\npollutants or contaminants in violation of any law.<\/p>\n
2.27 POOLING MATTERS<\/p>\n
To the best knowledge of Company, the Company has not taken or failed to
\ntake any action that would prevent the accounting for the Merger as a pooling of
\ninterests in accordance with Accounting Principles Board Opinion No. 16, the
\ninterpretive releases issued pursuant thereto and the pronouncements of the
\nSecurities and Exchange Commission (the “SEC”).<\/p>\n
2.28 BUYER STOCK OWNERSHIP<\/p>\n
The Company does not own any shares of Amazon.com Common Stock or other
\nsecurities convertible into Amazon.com Common Stock.<\/p>\n
2.29 HART-SCOTT-RODINO<\/p>\n
The Company and Warren Adams, respectively, are each their own ultimate
\nparent entity as defined under the rules and regulations promulgated under the
\nHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
\n“Hart-Scott-Rodino Act”). Neither the Company nor Warren Adams is a $10 million
\nperson as defined thereunder. Lycos and CMG @Ventures II LLC (“@Ventures”) are
\nthe only stockholders of the Company whose acquisition of Amazon.com Common
\nStock would trigger the jurisdictional tests of the Hart-Scott-Rodino Act. Both
\nLycos and @Ventures have advised the Company that they are acquiring the
\nAmazon.com Common Stock solely for purposes of investment within the meaning of
\n16 C.F.R. 802.9.<\/p>\n
2.30 INFORMATION SUPPLIED BY THE COMPANY<\/p>\n
None of the information supplied or to be supplied by the Company for
\ninclusion in the information statement to be delivered to its stockholders in
\nconnection with any written consent by or meeting of such stockholders
\n(collectively, “Stockholder Materials”), at the date such information was
\nsupplied prior to the time the Company’s stockholders were requested to approve
\nthe Merger, contained or will contain any untrue statement of a material fact or
\nomits or will omit to state any material fact required to be stated therein or
\nnecessary in order to make the statements therein, in light of the circumstances
\nunder which they are made, not materially misleading; provided, however, that
\nthe Company makes no representations or warranties regarding information
\nfurnished by or related to Amazon.com or Purchaser.<\/p>\n
-32-
\n 41<\/p>\n
2.31 FULL DISCLOSURE<\/p>\n
None of this Agreement, the Financial Statements, the Disclosure
\nMemorandum, and the Exhibits hereto or the other Operative Documents, contains
\nany untrue statement of a material fact or omits to state a material fact
\nnecessary in order to make the statements so made, in light of the circumstances
\nunder which they are made, not misleading.<\/p>\n
2.32 SOLE REPRESENTATIONS AND WARRANTIES<\/p>\n
The representations and warranties contained in this Article II are the
\nonly representations and warranties made by the Company in connection with the
\ntransactions contemplated by this Agreement and supersede any and all previous
\nwritten or oral statements made by the Company to Amazon.com.<\/p>\n
ARTICLE III – REPRESENTATIONS AND WARRANTIES
\n OF AMAZON.COM AND THE PURCHASER<\/p>\n
In order to induce the Company to enter into and perform this Agreement
\nand the other Operative Documents, Amazon.com and the Purchaser jointly and
\nseverally represent and warrant to the Company as follows in this Article III:<\/p>\n
3.1 ORGANIZATION<\/p>\n
Amazon.com is a corporation validity existing and in good standing under
\nthe laws of the state of Delaware. The Purchaser is a corporation validly
\nexisting and in good standing under the laws of the Commonwealth of
\nMassachusetts. Each of Amazon.com and the Purchaser has all requisite corporate
\npower and authority to own, operate and lease its respective properties and
\nassets, to carry on its respective business as now conducted, and as proposed to
\nbe conducted and to enter into and perform its obligations under this Agreement
\nand the other applicable Operative Documents to which Amazon.com or the
\nPurchaser is a party, and to consummate the transactions contemplated hereby and
\nthereby. Each of Amazon.com and the Purchaser is duly qualified and licensed as
\na foreign corporation to do business and is in good standing in each
\njurisdiction in which the character of properties occupied, owned or held under
\nlease by Amazon.com or the Purchaser, as applicable, or the nature of the
\nbusiness conducted by Amazon.com or the Purchaser, as applicable, makes such
\nqualification necessary, except where the failure to be so qualified or in good
\nstanding would not have a material adverse effect on the business, operations,
\nassets, liabilities (absolute, accrued, contingent or otherwise), condition
\n(financial or other) or prospects of Amazon.com (an “Amazon.com Material Adverse
\nEffect”) or the Purchaser, as applicable. Each of Amazon.com and the Purchaser
\nhas full<\/p>\n
-33-
\n 42<\/p>\n
corporate power and authority to execute, deliver and perform this Agreement and
\nthe other Operative Documents to which it is a party, and to carry out the
\ntransactions contemplated hereby and thereby.<\/p>\n
3.2 ENFORCEABILITY<\/p>\n
All corporate action on the part of Amazon.com and the Purchaser and
\ntheir respective officers, directors and stockholders necessary for the
\nauthorization, execution, delivery and performance of this Agreement and the
\nother applicable Operative Documents to which Amazon.com or the Purchaser is a
\nparty, the consummation of the Merger, and the performance of all of their
\nrespective obligations under this Agreement and the other applicable Operative
\nDocuments to which Amazon.com or the Purchaser is a party has been taken or will
\nbe taken prior to the Effective Time. This Agreement has been, and each of the
\nother Operative Documents to which Amazon.com is a party will have been at the
\nClosing, duly executed and delivered by Amazon.com, and this Agreement is, and
\neach of the other Operative Documents to which Amazon.com is a party will be at
\nthe Closing, a legal, valid and binding obligation of Amazon.com, enforceable
\nagainst Amazon.com in accordance with its terms. This Agreement has been, and
\neach of the other Operative Documents to which the Purchaser is a party will
\nhave been at the Closing, duly executed and delivered by the Purchaser, and this
\nAgreement is, and each of the other Operative Documents to which the Purchaser
\nis a party will be at the Closing, a legal, valid and binding obligation of the
\nPurchaser, enforceable against the Purchaser in accordance with its terms.<\/p>\n
3.3 SECURITIES<\/p>\n
The Securities (including the Option Shares) to be issued pursuant to
\nthis Agreement have been duly authorized for issuance, and such Securities
\n(including the Option Shares), when issued and delivered to the Company’s
\nstockholders pursuant to this Agreement, shall be validly issued, fully paid and
\nnonassessable.<\/p>\n
3.4 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICTS WITH INSTRUMENTS<\/p>\n
The execution, delivery and performance of this Agreement and the other
\nOperative Documents by the Purchaser and Amazon.com, as applicable, and the
\nconsummation by them of the transactions contemplated hereby and thereby will
\nnot (a) constitute a violation (with or without the giving of notice or lapse of
\ntime, or both) of any provision of law applicable to Amazon.com or the
\nPurchaser, (b) require any consent, approval or authorization of any Person,
\nexcept compliance with applicable securities laws and the filing of all
\ndocuments necessary to consummate the<\/p>\n
-34-
\n 43<\/p>\n
Merger with the Massachusetts Secretary of State (all such consents, approvals
\nor authorizations to be duly obtained at or prior to the Closing), or (c)
\nconflict with or result in a breach of or constitute a default under any charter
\nprovision of the Articles of Organization or Bylaws of Amazon.com or the
\nPurchaser.<\/p>\n
3.5 CAPITALIZATION<\/p>\n
The authorized capital stock of Amazon.com consists of 300,000,000
\nshares of Amazon.com Common Stock of which 49,756,203 shares were issued and
\noutstanding as of July 24, 1998 and 10,000,000 shares of preferred stock, par
\nvalue $0.01 per share, none of which are issued and outstanding. Such issued and
\noutstanding shares of Amazon.com Common Stock are validly issued, fully paid and
\nnonassessable.<\/p>\n
3.6 SEC DOCUMENTS<\/p>\n
Amazon.com has furnished the stockholders of the Company with true and
\ncomplete copies of its Annual Report on Form 10-K for the fiscal year ending
\nDecember 31, 1997 (the “Form 10-K”), its Quarterly Reports on Form 10-Q filed
\nafter the date of the Form 10-K, all Form 8-Ks filed after the date of the Form
\n10-K and its Proxy Statement relating to its 1998 Annual Meeting of Stockholders
\non May 28, 1998 (collectively, the “SEC Documents”). As of their respective
\nfiling dates, each of the SEC Documents complied in all material respects with
\nthe requirements of the Securities Exchange Act of 1934, as amended (the
\n“Exchange Act”), and the rules and regulations of the SEC promulgated
\nthereunder.<\/p>\n
3.7 ABSENCE OF CERTAIN CHANGES<\/p>\n
Since the March 31, 1998 financial statements included in the SEC
\nDocuments, there has not been any change that by itself or in conjunction with
\nall other such changes has had an Amazon.com Material Adverse Effect, except as
\ndisclosed in the SEC Documents to the date of this Agreement.<\/p>\n
3.8 INFORMATION SUPPLIED BY AMAZON.COM<\/p>\n
None of the information supplied or to be supplied by Amazon.com for
\ninclusion in the Stockholder Materials, including the SEC Documents, at the date
\nsuch information was supplied prior to the time the stockholders of the Company
\nwere requested to approve the Merger at either a special meeting of stockholders
\nor by executing a written consent, contained or will contain any untrue
\nstatement of a material fact or omits or will omit to state any material fact
\nrequired to be stated therein or necessary in order to make the statements
\ntherein, in light of the circumstances under which they are made, not materially
\nmisleading; provided,<\/p>\n
-35-
\n 44<\/p>\n
however, that Amazon.com makes no representations or warranties regarding
\ninformation furnished by or related to the Company.<\/p>\n
3.9 POOLING MATTERS<\/p>\n
To the best of Amazon.com’s knowledge, Amazon.com has not taken or
\nfailed to take any action that would prevent the accounting for the Merger as a
\npooling of interests in accordance with Accounting Principles Board Opinion No.
\n16, the interpretive releases issued pursuant thereto and the pronouncements of
\nthe SEC.<\/p>\n
3.10 SELLER STOCK OWNERSHIP<\/p>\n
Neither Amazon.com nor any of its subsidiaries own any shares of Company
\nCapital Stock or other securities convertible into shares of Company Capital
\nStock.<\/p>\n
3.11 BROKERS OR FINDERS<\/p>\n
Except as set forth on Schedule 3.11 to the Disclosure Memorandum,
\nAmazon.com has not incurred, and will not incur, directly or indirectly, as a
\nresult of any action taken by or on behalf of Amazon.com, any liability for
\nbrokerage or finders’ fees or agents’ commissions or any similar charges in
\nconnection with the Merger, this Agreement or any transaction contemplated
\nhereby.<\/p>\n
ARTICLE IV – CONDITIONS PRECEDENT TO OBLIGATIONS
\n OF AMAZON.COM AND THE PURCHASER<\/p>\n
The obligations of Amazon.com and the Purchaser to perform and observe
\nthe covenants, agreements and conditions hereof to be performed and observed by
\nthem at or before the Closing shall be subject to the satisfaction of the
\nfollowing conditions, which may be expressly waived only in writing signed by
\nAmazon.com:<\/p>\n
4.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES<\/p>\n
The representations and warranties of the Company contained herein
\n(including applicable Exhibits or Schedules to the Disclosure Memorandum) and in
\nthe other Operative Documents shall have been true and correct when made and
\nshall be true and correct as of the Closing Date as though made on that date.<\/p>\n
4.2 PERFORMANCE OF AGREEMENTS<\/p>\n
The Company shall have performed all obligations and agreements and
\ncomplied with all covenants and conditions contained in this Agreement or any
\nother<\/p>\n
-36-
\n 45<\/p>\n
Operative Document to be performed and complied with by it at or prior to the
\nClosing.<\/p>\n
4.3 OPINION OF COUNSEL FOR THE COMPANY<\/p>\n
Amazon.com shall have received the opinion letter of Hutchins, Wheeler & Dittmar, counsel for the Company, dated the Closing Date, substantially in the
\nform attached hereto as Exhibit 4.3.<\/p>\n
4.4 CONSENTS TO MERGER<\/p>\n
The Company shall have received and shall have delivered to Amazon.com
\nwritten consents to the Merger from each of the parties (other than the Company)
\nto those agreements, leases, notes or other documents identified on Schedules
\n2.5, 2.10 and 2.14 to the Disclosure Memorandum that treat the Merger as an
\nassignment or otherwise by their terms require consent. In addition, the Company
\nshall have received and shall have delivered to Amazon.com consents from Lycos,
\nInc., Puma Technologies, Inc., NaviSite Internet Services, GeoCities, EMC2, and
\nFAR VII, Inc., which consents shall be reasonably satisfactory in all respects
\nto Amazon.com.<\/p>\n
4.5 COMPLIANCE CERTIFICATE<\/p>\n
Amazon.com shall have received a certificate of the President and the
\nChief Financial Officer of the Company, dated the Closing Date, in form and
\nsubstance satisfactory to Amazon.com, certifying that the conditions to the
\nobligations of Amazon.com and the Purchaser have been fulfilled.<\/p>\n
4.6 MATERIAL ADVERSE CHANGE<\/p>\n
Since the date of this Agreement and through the Closing, there shall
\nnot have occurred any change that would have a Company Material Adverse Effect,
\nexcept for such changes occurring as a direct result of the execution or
\nannouncement of this Agreement.<\/p>\n
4.7 APPROVALS AND CONSENTS<\/p>\n
All transfers of material permits or licenses and all approvals of or
\nnotices to public agencies, federal, state, local or foreign, the granting or
\ndelivery of which is necessary for the consummation of the transactions
\ncontemplated hereby, or for the continued operation of the Company, shall have
\nbeen obtained, and all waiting periods specified by law shall have passed. All
\nother consents, approvals and notices referred to in this Agreement shall have
\nbeen obtained or delivered.<\/p>\n
-37-
\n 46<\/p>\n
4.8 PROCEEDINGS AND DOCUMENTS; CLERK’S CERTIFICATE<\/p>\n
All corporate and other proceedings in connection with the transactions
\ncontemplated hereby and by the other Operative Documents, and all documents and
\ninstruments incident to such transactions, shall have been approved by
\nAmazon.com’s counsel, and Amazon.com shall have received a certificate of the
\nClerk of the Company, in form and substance satisfactory to Amazon.com, as to
\nthe authenticity and effectiveness of the actions of the Board of Directors and
\nstockholders of the Company authorizing the Merger and the transactions
\ncontemplated by this Agreement and the other Operative Documents, and such other
\ndocuments as are specified by Amazon.com’s counsel.<\/p>\n
4.9 NONFOREIGN AFFIDAVIT<\/p>\n
Amazon.com shall have received from the Company, pursuant to Section
\n1445 of the Code, a Foreign Investment in Real Property Tax Act Affidavit in
\nsubstantially the form attached hereto as Exhibit 4.9.<\/p>\n
4.10 COMPLIANCE WITH LAWS<\/p>\n
The consummation of the transactions contemplated by this Agreement and
\nthe other Operative Documents shall be legally permitted by all laws and
\nregulations to which Amazon.com or the Company is subject.<\/p>\n
4.11 STOCKHOLDER APPROVALS<\/p>\n
The principal terms of this Agreement shall have been approved by the
\nholders of not less than 90% of each class of Company Capital Stock.<\/p>\n
4.12 DISSENTING SHARES<\/p>\n
The Dissenting Shares shall not constitute more than 10% of the Company
\nCapital Stock.<\/p>\n
4.13 LEGAL PROCEEDINGS<\/p>\n
No order of any court or administrative agency shall be in effect that
\nenjoins, restrains, conditions or prohibits consummation of this Agreement or
\nany other Operative Document, and no litigation, investigation or administrative
\nproceeding shall be pending or threatened that would enjoin, restrain, condition
\nor prohibit consummation of this Agreement or any other Operative Document.<\/p>\n
-38-
\n 47<\/p>\n
4.14 ESCROW AGREEMENT<\/p>\n
ChaseMellon and a representative of the Company’s stockholders on behalf
\nof the Company’s stockholders shall have executed and delivered the Escrow
\nAgreement.<\/p>\n
4.15 EMPLOYMENT AND NONCOMPETITION ARRANGEMENTS<\/p>\n
Each of the Company’s employees set forth on Schedule 4.15 shall have
\naccepted an oral offer of employment with Amazon.com and executed the Amazon.com
\nstandard form of Confidentiality, Noncompetition and Invention Agreement
\nsubstantially in the form attached hereto as Exhibit 4.15.<\/p>\n
4.16 EMPLOYEE BENEFIT PLANS<\/p>\n
The Company shall convert any “standardized” prototype Employee Benefit
\nPlan that is intended to be qualified under Section 401(a) of the Code to a
\n“non-standardized” prototype plan, in a form satisfactory to Amazon.com and
\nPurchaser and with terms that are substantially similar to those of the
\npredecessor “standardized” Employee Benefit Plan, effective as of a date prior
\nto Closing.<\/p>\n
4.17 INVESTOR RIGHTS AGREEMENT<\/p>\n
Each of the Company’s stockholders shall have executed the Investor
\nRights Agreement.<\/p>\n
4.18 AFFILIATE LETTERS<\/p>\n
The Company shall have delivered or caused to be delivered to Amazon.com
\nan Affiliate Letter in the form attached hereto as Exhibit 4.18. from each of
\nthose Persons who were, at the record date for the Company’s stockholders
\nmeeting (or the date on which the requisite number of consents has been
\nobtained) to approve the Merger, “affiliates” of the Company within the meaning
\nof Rule 145 of the rules and regulations promulgated under the Securities Act.<\/p>\n
4.19 TERMINATION OF CERTAIN AGREEMENTS<\/p>\n
Any and all rights of refusal, co-sale rights and registration rights
\n(other than pursuant hereto) for the benefit of the holders of the Company
\nCommon Stock, the Company Series A Stock or the Company Series B Stock shall
\nhave been terminated.<\/p>\n
-39-
\n 48<\/p>\n
4.20 POOLING<\/p>\n
Ernst & Young LLP and KPMG Peat Marwick LLP each shall have delivered to
\nAmazon.com and the Purchaser an opinion in form and substance reasonably
\nsatisfactory to Amazon.com that the Merger will qualify for “pooling of
\ninterests” treatment under applicable accounting standards.<\/p>\n
ARTICLE V – CONDITIONS PRECEDENT TO OBLIGATIONS
\n OF THE COMPANY<\/p>\n
The obligations of the Company to perform and observe the covenants,
\nagreements and conditions hereof to be performed and observed by them at or
\nbefore the Closing shall be subject to the satisfaction of the following
\nconditions, which may be expressly waived only in writing signed by the Company.<\/p>\n
5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES<\/p>\n
The representations and warranties of Amazon.com and the Purchaser
\ncontained herein and in the other Operative Documents shall have been true and
\ncorrect when made and shall be true and correct as of the Closing Date as though
\nmade on that date.<\/p>\n
5.2 PERFORMANCE OF AGREEMENTS<\/p>\n
Amazon.com and the Purchaser shall have performed all obligations and
\nagreements and complied with all covenants and conditions contained in this
\nAgreement or any other Operative Document to be performed and complied with by
\nthem at or prior to the Closing.<\/p>\n
5.3 OPINION OF COUNSEL<\/p>\n
The Company shall have received the opinion letter of Perkins Coie LLP,
\ncounsel for Amazon.com, dated the Closing Date, substantially in the form
\nattached hereto as Exhibit 5.3.<\/p>\n
5.4 COMPLIANCE CERTIFICATE<\/p>\n
The Company shall have received a certificate of an officer of
\nAmazon.com, dated the Closing Date, substantially in form and substance
\nsatisfactory to the Company, certifying that the conditions to the obligations
\nof the Company have been fulfilled.<\/p>\n
-40-
\n 49<\/p>\n
5.5 LEGAL PROCEEDINGS<\/p>\n
No order of any court or administrative agency shall be in effect that
\nenjoins, restrains, conditions or prohibits consummation of this Agreement or
\nany other Operative Document, and no litigation, investigation or administrative
\nproceeding shall be pending or threatened that would enjoin, restrain, condition
\nor prohibit consummation of this Agreement or any other Operative Document.<\/p>\n
5.6 MATERIAL ADVERSE CHANGE<\/p>\n
Since the date of this Agreement and through the Closing, there shall
\nnot have occurred any change in the business, operations, assets, liabilities
\n(absolute, accrued, contingent or otherwise), sales, margins, profitability,
\ncondition (financial or other) or prospects of Amazon.com that would have an
\nAmazon.com Material Adverse Effect, except for such changes occurring as a
\ndirect result of the execution or announcement of this Agreement. Changes in the
\ntrading prices of Amazon.com Common Stock shall not be deemed to have an
\nAmazon.com Material Adverse Effect under this Agreement.<\/p>\n
5.7 APPROVALS AND CONSENTS<\/p>\n
All transfers of permits or licenses and all approvals of or notices to
\npublic agencies, federal, state, local or foreign, the granting or delivery of
\nwhich is necessary for the consummation of the transactions contemplated hereby
\nor for the continued operation of the Company, shall have been obtained, and all
\nwaiting periods specified by law shall have passed. All other consents,
\napprovals and notices referred to in this Agreement shall have been obtained or
\ndelivered.<\/p>\n
5.8 COMPLIANCE WITH LAWS<\/p>\n
The consummation of the transactions contemplated by this Agreement and
\nthe other Operative Documents shall be legally permitted by all laws and
\nregulations to which Amazon.com or the Company is subject.<\/p>\n
5.9 STOCKHOLDER APPROVALS<\/p>\n
The principal terms of this Agreement shall have been approved by the
\nholders of not less than 90% of each class of Company Capital Stock (measured on
\na fully diluted basis).<\/p>\n
5.10 ESCROW AGREEMENT<\/p>\n
Amazon.com shall have executed the Escrow Agreement.<\/p>\n
-41-
\n 50<\/p>\n
5.11 INVESTOR RIGHTS AGREEMENT<\/p>\n
Amazon.com shall have executed the Investor Rights Agreement.<\/p>\n
5.12 OPTION AGREEMENTS<\/p>\n
Amazon.com shall have executed an option agreement substantially in the
\nforms of Exhibit 5.12 with each of the individuals set forth on Schedule 5.12 in
\nwhich each individual will be granted options to purchase the number of shares
\nof Amazon.com Common Stock set forth opposite his name on such Schedule.<\/p>\n
ARTICLE VI – COVENANTS<\/p>\n
Between the date of this Agreement and the Effective Time, the parties
\ncovenant and agree as set forth in this Article VI.<\/p>\n
6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER<\/p>\n
Unless Amazon.com shall otherwise agree in writing, the business of the
\nCompany shall be conducted in and only in, and the Company shall not take any
\naction except in, the ordinary course of business and in a manner consistent
\nwith past practice and in accordance with applicable law; and the Company shall
\nuse its best efforts to preserve intact the business organization of the
\nCompany, to keep available the services of the current officers, employees and
\nconsultants of the Company and to preserve the current relationships of the
\nCompany with, and the goodwill of, customers, suppliers and other Persons with
\nwhich the Company has significant business relations. By way of amplification
\nand not limitation, except as otherwise contemplated by this Agreement, the
\nCompany shall not, between the date of this Agreement and the Effective Time,
\ndirectly or indirectly do, or propose to do, any of the following without the
\nprior written consent of Amazon.com:<\/p>\n
(a) amend or otherwise change its Articles of Organization or Bylaws or
\nequivalent organizational documents;<\/p>\n
(b) except for the issuance to a purchaser of no more than 10,000 shares
\nof Company Series B Stock upon a sale that closes prior to the Closing Date and
\nexcept for the issuance of shares of capital stock of the Company upon the
\nexercise or conversion of currently outstanding Options, Warrants, Company
\nSeries A Stock or Company Series B Stock, issue, sell, contract to issue or
\nsell, pledge, dispose of, grant, encumber or authorize the issuance, sale,
\npledge, disposition, grant or Encumbrance of (i) any shares of capital stock of
\nany class of the Company, or any options, warrants, convertible securities or
\nother rights of any kind to acquire any<\/p>\n
-42-
\n 51<\/p>\n
shares of such capital stock, or any other ownership interest (including,
\nwithout limitation, any phantom interest), of the Company or (ii) any assets of
\nthe Company, except for sales in the ordinary course of business and in a manner
\nconsistent with past practice;<\/p>\n
(c) declare, set aside, make or pay any dividend or other distribution,
\npayable in cash, stock or other securities, property or otherwise, with respect
\nto any of its capital stock;<\/p>\n
(d) reclassify, combine, split, subdivide, redeem, purchase or otherwise
\nacquire, directly or indirectly, any of its capital stock or other securities;<\/p>\n
(e) (i) acquire (including, without limitation, by merger,
\nconsolidation, or acquisition of stock or assets) any corporation, partnership,
\nother business organization or division thereof or any material amount of
\nassets; (ii) incur any indebtedness for borrowed money or issue any debt
\nsecurities or assume, guarantee or endorse, or otherwise as an accommodation
\nbecome responsible for, the obligations of any Person, or make any loans or
\nadvances, except in the ordinary course of business and consistent with past
\npractice; (iii) enter into any contract or agreement other than in the ordinary
\ncourse of business, consistent with past practice; (iv) authorize any single
\ncapital expenditure that is in excess of $25,000 or capital expenditures that
\nare, in the aggregate, in excess of $100,000 for the Company taken as a whole;
\n(v) enter into any agreement in which the obligation of the Company exceeds
\n$25,000 or that shall not terminate or be subject to termination for convenience
\nwithin 180 days following execution; (vi) license any Technology or IP Rights
\nother than in the ordinary course of business, consistent with past practice; or
\n(vii) enter into or amend any contract, agreement, commitment or arrangement
\nwith respect to any matter set forth in this Section 6.1(e);<\/p>\n
(f) enter into or amend any employment, consulting or agency agreement,
\nor, except as required by any Employee Benefit Plan listed on Schedule 2.13.1 to
\nthe Disclosure Memorandum, increase the compensation payable or to become
\npayable to its officers, employees, agents or consultants, or grant any
\nseverance or termination pay to, or enter into any employment or severance
\nagreement with, any director, officer or other employee of the Company, or
\nestablish, adopt, enter into or amend any collective bargaining, bonus, profit
\nsharing, thrift, compensation, stock option, restricted stock, pension,
\nretirement, deferred compensation, employment, termination, severance, benefit
\nor other plan, agreement, trust, fund, policy or arrangement for the benefit of
\nany director, officer or employee;<\/p>\n
(g) take any action, other than reasonable and usual actions in the
\nordinary course of business and consistent with past practice, with respect to
\naccounting<\/p>\n
-43-
\n 52<\/p>\n
methods, policies or procedures (including, without limitation, procedures with
\nrespect to the payment of accounts payable and collection of accounts
\nreceivable);<\/p>\n
(h) make any tax election or settle or compromise any federal, state,
\nlocal or foreign income tax liability;<\/p>\n
(i) pay, discharge or satisfy any claim, liability or obligation
\n(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
\nthe payment, discharge or satisfaction, in the ordinary course of business and
\nconsistent with past practice, of liabilities reflected or reserved against in
\nthe Company Balance Sheet or subsequently incurred in the ordinary course of
\nbusiness and consistent with past practice;<\/p>\n
(j) take any action that would or is reasonably likely to result in any
\nof the representations and warranties of the Company set forth in this Agreement
\nbeing untrue, or in any covenant of the Company set forth in this Agreement
\nbeing breached, or in any of the conditions to the Merger specified in Article
\nIV hereof not being satisfied; or<\/p>\n
(k) take or agree to take any action specified in Section 2.7 hereof, or
\nenter into any other material transaction other than those specified above, or
\nagree to do any of the foregoing.<\/p>\n
6.2 ACCESS TO INFORMATION; CONFIDENTIALITY<\/p>\n
From the date hereof to the Effective Time, the Company shall, and shall
\ncause the officers, directors, employees, auditors and agents of the Company to,
\nafford the officers, employees and agents of Amazon.com complete access at all
\nreasonable times to the officers, employees, agents, properties, offices, plants
\nand other facilities, books and records of the Company and shall furnish
\nAmazon.com with all financial, operating and other data and information as
\nAmazon.com, through its officers, employees or agents, may reasonably request.
\nFrom the date hereof until the Effective Time, the Company shall provide
\nAmazon.com with monthly and other financial statements of the Company as they
\nbecome available internally at the Company, all of which financial statements
\nshall fairly present the financial position and results of operations of the
\nCompany as of the dates and for the periods therein specified. No investigation
\npursuant to this Section 6.2 shall affect any representation or warranty in this
\nAgreement of any party hereto or any condition to the obligations of the parties
\nhereto. The parties shall continue to comply with and to perform their
\nrespective obligations under the Mutual Nondisclosure Agreement between
\nAmazon.com and the Company entered into as of July 16, 1998 other than with
\nrespect to Section 9 thereof.<\/p>\n
-44-
\n 53<\/p>\n
6.3 NO ALTERNATIVE TRANSACTIONS<\/p>\n
Unless this Agreement shall have been terminated in accordance with its
\nterms, the Company shall not, directly or indirectly, through any officer,
\ndirector, agent or otherwise, solicit, initiate or encourage the submission of
\nany proposal or offer from any Person relating to any acquisition or purchase of
\nall or (other than in the ordinary course of business) any portion of the assets
\nof, or, subject to Section 6.1(b) hereof, any equity interest in, the Company or
\nany business combination with the Company or participate in any negotiations
\nregarding, or furnish to any other Person any information with respect to, or
\notherwise cooperate or negotiate in any way with, or assist or participate in,
\nfacilitate or encourage, any effort or attempt by any other Person to do or seek
\nany of the foregoing. The Company shall notify Amazon.com promptly if any such
\nproposal or offer, or any inquiry or contact with any Person with respect
\nthereto, is made and shall, in any such notice to Amazon.com, indicate in
\nreasonable detail the identity of the Person making such proposal, offer,
\ninquiry or contact and the terms and conditions of such proposal, offer, inquiry
\nor contact. The Company agrees not to release any third party from, or waive any
\nprovision of, any confidentiality or standstill agreement to which the Company
\nis a party.<\/p>\n
6.4 NOTIFICATION OF CERTAIN MATTERS<\/p>\n
The Company shall give prompt notice to Amazon.com of (a) the occurrence
\nor nonoccurrence of any event that would be likely to cause any representation
\nor warranty of the Company contained in this Agreement to be untrue or
\ninaccurate and (b) any failure of the Company to comply with or satisfy any
\ncovenant, condition or agreement to be complied with or satisfied by it
\nhereunder, and Amazon.com shall give prompt notice to the Company of any of the
\nforegoing of which an officer of Amazon.com obtains actual knowledge prior to
\nthe Closing; provided, however, that the delivery of any notice pursuant to this
\nSection 6.4 shall not limit or otherwise affect the remedies available to
\nAmazon.com hereunder.<\/p>\n
6.5 FURTHER ACTION; REASONABLE BEST EFFORTS<\/p>\n
Upon the terms and subject to the conditions hereof, each of the parties
\nhereto shall use its reasonable best efforts to take, or cause to be taken, all
\nappropriate action, and to do, or cause to be done, all things necessary, proper
\nor advisable under applicable laws and regulations to consummate and make
\neffective the transactions contemplated hereby, including, without limitation,
\nusing its reasonable best efforts to obtain all waivers, licenses, permits,
\nconsents, approvals, authorizations, qualifications and orders of governmental
\nauthorities and parties to contracts with the Company as are necessary for the
\nconsummation of the transactions contemplated hereby and to fulfill the
\nconditions to the Merger. In case at any time after the<\/p>\n
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\n 54<\/p>\n
Effective Time any further action is necessary or desirable to carry out the
\npurposes of this Agreement, each party to this Agreement shall use its
\nreasonable best efforts to take all such action. No Significant Stockholder will
\nundertake any course of action inconsistent with this Agreement or which would
\nmake any representations, warranties or agreements made by such party in this
\nAgreement or any other Operative Documents untrue or any conditions precedent to
\nthis Agreement unable to be satisfied at or prior to the Closing. After the
\nClosing Date, each party hereto, at the request of and without any further cost
\nor expense to the other parties, will take any further actions necessary or
\ndesirable to carry out the purposes of this Agreement or any other Operative
\nDocument, to vest in the Surviving Corporation full title to all properties,
\nassets and rights of the Company and to effect the issuance of the Amazon.com
\nCommon Stock to the stockholders of the Company pursuant to the terms and
\nconditions hereof.<\/p>\n
6.6 STOCKHOLDERS APPROVAL<\/p>\n
The Company will obtain either the approval at a special meeting of
\nstockholders or the written consent of the stockholders of the Company at the
\nearliest practicable date approving this Agreement, the other Operative
\nDocuments, the Merger and related matters, which approval will be unanimously
\nrecommended by the Company’s Board of Directors and management.<\/p>\n
6.7 PROXY STATEMENT<\/p>\n
The Company will send the Stockholder Materials to the stockholders of
\nthe Company, in a timely manner, for the purposes of considering approval of the
\nMerger, either at a special meeting of stockholders or by executing a written
\nconsent. The Company will promptly provide all information relating to its
\nbusiness or operations necessary for inclusion in the Stockholder Materials to
\nsatisfy all requirements of applicable state and federal securities laws. The
\nCompany and Amazon.com each shall be solely responsible for any statement,
\ninformation or omission in the Stockholder Materials relating to it or its
\naffiliates based on written information furnished by it. The Company and
\nAmazon.com will not provide to or publish for the stockholders of the Company
\nany material concerning it or its affiliates that violates the Securities Act or
\nthe Exchange Act with respect to the transactions contemplated hereby.<\/p>\n
6.8 LISTING APPLICATION<\/p>\n
Amazon.com shall promptly prepare and submit to the Nasdaq National
\nMarket a listing application covering the shares of Amazon.com Common Stock
\nissuable in the Merger, and shall use its best efforts to obtain, prior to the
\nEffective Time,<\/p>\n
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\n 55<\/p>\n
approval for the listing of such shares of Amazon.com Common Stock, subject to
\nofficial notice of issuance.<\/p>\n
6.9 POOLING; REORGANIZATION<\/p>\n
From and after the date hereof and until the Effective Time, neither
\nAmazon.com nor the Company will take any action or fail to take any action or
\nenter into any contract, agreement, commitment or arrangement that would
\njeopardize the treatment of the Merger as a “pooling of interests” for
\naccounting purposes, including, without limitation, any action by the Company or
\nAmazon.com with respect to their representations and warranties in Sections 2.27
\nand 3.9 hereof, respectively, that would cause such representations not to be
\ntrue in all material respects from and after the date hereof until the Effective
\nTime.<\/p>\n
6.10 DISSENTING SHARES<\/p>\n
As promptly as practicable after the date of the special meeting of
\nstockholders or the written consent of the Company’s stockholders and prior to
\nthe Closing Date, the Company shall furnish Amazon.com with the name and address
\nof each stockholder of the Company who requests appraisal rights pursuant to the
\nMassachusetts Law (the “Dissenting Stockholder”) and the number of Dissenting
\nShares owned by such Dissenting Stockholder.<\/p>\n
6.11 PUBLICITY<\/p>\n
No party hereto shall issue any press release or otherwise make any
\nstatements to any third party with respect to this Agreement or the transactions
\ncontemplated hereby until the issuance by Amazon.com and the Company of a joint
\npress release announcing the transactions contemplated hereby that shall be
\nprepared by them in cooperation.<\/p>\n
6.12 INDEMNIFICATION AND INSURANCE<\/p>\n
Amazon.com agrees that all rights to indemnification or exculpation now
\nexisting in favor of the employees, agents, directors or officers of the Company
\n(the “Company Indemnified Parties”) as provided in its Articles of organization
\nor By-Laws, or otherwise in effect on the date hereof shall continue in full
\nforce and effect for a period of not less than one year from the Closing Date;
\nprovided, however, that, in the event any claim or claims are asserted or made
\nwithin such one-year period, all rights to indemnification in respect of any
\nsuch claim or claims shall continue until disposition of any and all such
\nclaims. Any determination required to be made with respect to whether a Company
\nIndemnified Party’s conduct complies with the<\/p>\n
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\n 56<\/p>\n
standards set forth in the Articles of Organization or By-Laws of the Company or
\notherwise shall be made by independent counsel selected by the Company
\nIndemnified Party reasonably satisfactory to Amazon.com (whose fees and expenses
\nshall be paid by Amazon.com).<\/p>\n
ARTICLE VII – TERMINATION, AMENDMENT AND WAIVER<\/p>\n
7.1 TERMINATION<\/p>\n
This Agreement may be terminated and the Merger may be abandoned at any
\ntime prior to the Effective Time (notwithstanding any approval of this Agreement
\nby the stockholders of the Company):<\/p>\n
(a) by mutual written consent;<\/p>\n
(b) by either the Company or Amazon.com, if the Merger has not been
\nconsummated by August 31, 1998; provided, however, that the right to terminate
\nthis Agreement under this Section 7.1(b) shall not be available to any party
\nwhose failure to fulfill any obligation under this Agreement has been the cause
\nof, or resulted in, the failure of the Effective Time to occur on or before such
\ndate;<\/p>\n
(c) by either the Company or Amazon.com, if there shall be any law or
\nregulation that makes consummation of the Merger illegal or otherwise prohibited
\nor if any judgment, injunction, order or decree enjoining Amazon.com, the
\nPurchaser or the Company from consummating the Merger is entered and such
\njudgment, injunction, order or decree shall become final and nonappealable;
\nprovided, however, that the party seeking to terminate this Agreement pursuant
\nto this Section 7.1(c) shall have used all reasonable efforts to remove such
\njudgment, injunction, order or decree;<\/p>\n
(d) by the Company, in the event of a material breach by Amazon.com of
\nany representation, warranty or agreement contained herein which has not been
\ncured or is not curable by August 31, 1998; or<\/p>\n
(e) by Amazon.com, in the event of a material breach by the Company of
\nany representation, warranty or agreement contained herein which has not been
\ncured or is not curable by August 31, 1998.<\/p>\n
7.2 EFFECT OF TERMINATION<\/p>\n
In the event of the termination of this Agreement pursuant to Section
\n7.1 hereof, there shall be no further obligation on the part of any party
\nhereto, except that nothing herein shall relieve any party from liability for
\nany willful breach hereof.<\/p>\n
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\n 57<\/p>\n
7.3 AMENDMENT<\/p>\n
This Agreement may be amended by the parties hereto at any time before
\nor after approval of the Company’s stockholders; but after such approval, no
\namendment will be made that by applicable law requires the further approval of
\nthe Company’s stockholders without obtaining such further approval.<\/p>\n
7.4 WAIVER<\/p>\n
At any time prior to the Effective Time, any party hereto may (a) extend
\nthe time for the performance of any obligation or other act of any other party
\nhereto, (b) waive any inaccuracy in the representations and warranties contained
\nherein or in any document delivered pursuant hereto, or (c) waive compliance
\nwith any agreement or condition contained herein. Any such extension or waiver
\nshall be valid only if set forth in an instrument in writing signed by the party
\nor parties to be bound thereby.<\/p>\n
ARTICLE VIII – SURVIVAL AND INDEMNIFICATION<\/p>\n
8.1 SURVIVAL<\/p>\n
All representations and warranties contained in this Agreement or in the
\nother Operative Documents or in any certificate delivered pursuant hereto or
\nthereto shall survive the Closing for a period of one year, except that those
\nrepresentations set forth in Sections 2.6, 2.7, 2.22, 2.23 and 2.24 shall
\nsurvive until the date of the completion of the independent audit of financial
\nstatements of Amazon.com for the fiscal year ending December 31, 1998 (the
\n“Expiration Date”), and shall not be deemed waived or otherwise affected by any
\ninvestigation made or any knowledge acquired with respect thereto, or by any
\nnotice delivered pursuant to Section 6.4 hereof; provided, however, that any
\nclaim based on fraud shall survive the Closing indefinitely. The covenants and
\nagreements contained in this Agreement or in the other Operative Documents shall
\nsurvive the Closing and shall continue until all obligations with respect
\nthereto shall have been performed or satisfied or shall have been terminated in
\naccordance with their terms.<\/p>\n
8.2 INDEMNIFICATION BY THE COMPANY AND HOLDERS OF COMPANY CAPITAL
\n STOCK OR OPTIONS<\/p>\n
(a) Up to and until the Closing, the Company shall indemnify and hold
\nAmazon.com and its officers, directors and affiliates (the “Amazon.com
\nIndemnified Parties”) harmless from and against, and shall reimburse the
\nAmazon.com Indemnified Parties for, any and all losses, damages, debts,
\nliabilities, obligations, judgments, orders, awards, writs, injunctions,
\ndecrees, fines, penalties, taxes, costs or<\/p>\n
-49-
\n 58<\/p>\n
expenses (including, but not limited to, any legal or accounting fees or
\nexpenses) (“Losses”) arising out of or in connection with (i) any inaccuracy in,
\nor misrepresentation or breach of any representation or warranty made by the
\nCompany in this Agreement or in any other Operative Document or in any
\ncertificate delivered pursuant hereto or thereto and (ii) any failure by the
\nCompany to perform or comply, in whole or in part, with any covenant or
\nagreement in this Agreement or in any other Operative Document.<\/p>\n
(b) From and after the Closing, the holders of Company Capital Stock,
\nshall severally and pro rata to the extent of their pro rata portion of the
\nEscrow Shares indemnify and hold the Amazon.com Indemnified Parties harmless
\nfrom and against, and shall reimburse the Amazon.com Indemnified Parties for,
\nany and all Losses arising out of or in connection with (i) any inaccuracy in,
\nor misrepresentation or breach of any representation or warranty made by the
\nCompany in this Agreement or in any certificate delivered pursuant hereto and
\n(ii) any failure by the Company to perform or comply, in whole or in part, with
\nany covenant or agreement in this Agreement to be performed on or prior to the
\nClosing Date.<\/p>\n
8.3 INDEMNIFICATION BY AMAZON.COM<\/p>\n
Amazon.com shall indemnify and hold the Company and its officers,
\ndirectors and affiliates and the holders of Company Capital Stock and Options
\n(the “Company Indemnified Parties” and, together with the Amazon.com Indemnified
\nParties, the “Indemnified Parties”) harmless from and against, and shall
\nreimburse the Company Indemnified Parties for, any and all Losses arising out of
\nor in connection with (i) any inaccuracy, misrepresentation or breach in any
\nrepresentation or warranty made by Amazon.com or the Purchaser in this Agreement
\nor in any other Operative Document or in any certificate delivered pursuant
\nhereto or thereto and (ii) any failure by Amazon.com or the Purchaser to perform
\nor comply, in whole or in part, with any covenant or agreement in this Agreement
\nor in any other Operative Document.<\/p>\n
8.4 THRESHOLD AND LIMITATIONS<\/p>\n
(a) No Indemnified Party shall be entitled to receive any
\nindemnification payment with respect to any claims for indemnification under
\nthis Article VIII (“Claims”) until the aggregate Losses for which such
\nIndemnified Parties would be otherwise entitled to receive indemnification
\nexceed $250,000, (the “Threshold”); provided, however, that once such aggregate
\nLosses exceed the Threshold, such Indemnified Parties shall be entitled to
\nindemnification for the aggregate amount of all Losses without regard to the
\nThreshold.<\/p>\n
-50-
\n 59<\/p>\n
(b) Except for liability based on fraud, the aggregate liability of an
\nindemnifying party hereunder for Losses incurred by any and all Indemnified
\nParties shall, in the case of the indemnification obligations of the holders of
\nCompany Capital Stock be limited to a dollar amount equal to the product
\nobtained by multiplying the pro rata portion of the Escrow Shares held by the
\nindemnifying party by the average of the closing prices of Amazon.com Common
\nStock as reported on the Nasdaq National Market for the three consecutive
\ntrading days immediately preceding the Closing Date. Except for liability based
\non fraud, the indemnification obligations of the holders of Company Common Stock
\nand Options pursuant to this Article VIII shall be limited to the Escrow Shares.
\nExcept for liability based on fraud, Amazon.com shall not be entitled to pursue
\nany claims for indemnification under this Article VIII against the holders of
\nCompany Common Stock directly or personally and the sole recourse of Amazon.com
\nshall be to make claims against the Escrow in accordance with the terms of the
\nEscrow Agreement.<\/p>\n
(c) Except for liability based on fraud, (i) no holder of Company
\nCapital Stock or Options shall have any liability to an Amazon.com Indemnified
\nParty under this Agreement, except to the extent of such holder’s Escrow Shares
\ndeposited under the Escrow Agreement, and (ii) the remedies set forth in this
\nArticle VIII shall be the exclusive remedies of Amazon.com and the other
\nAmazon.com Indemnified Parties hereunder against any such holder.<\/p>\n
(d) The Escrow Shares shall be held for a period ending on the
\nExpiration Date, except that, to the extent permitted under the Escrow
\nAgreement, Escrow Shares may be withheld after the Expiration Date to satisfy
\nclaims for indemnification which are the subject of an indemnity claim by an
\nAmazon.com Indemnified Party pursuant to a notice of such claim delivered to the
\nRepresentative prior to the Expiration Date.<\/p>\n
8.5 PROCEDURE FOR INDEMNIFICATION<\/p>\n
(a) An Indemnified Party shall notify the indemnifying party in writing
\nreasonably promptly after the assertion against the Indemnified Party of any
\nclaim by a third party (a “Third Party Claim”) in respect of which the
\nIndemnified Party intends to base a Claim for indemnification hereunder, but the
\nfailure or delay so to notify the indemnifying party shall not relieve it of any
\nobligation or liability that it may have to the Indemnified Party except to the
\nextent that the indemnifying party demonstrates that its ability to defend or
\nresolve such Third Party Claim is adversely affected thereby.<\/p>\n
(b) (i) Subject to the rights of or duties to any insurer or other third
\nparty having potential liability therefor, the indemnifying party shall have the
\nright, upon written notice given to the Indemnified Party within 30 days after
\nreceipt of the<\/p>\n
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\n 60<\/p>\n
notice from the Indemnified Party of any Third Party Claim, to assume the
\ndefense or handling of such Third Party Claim, at the indemnifying party’s sole
\nexpense, in which case the provisions of Section 8.5(b)(ii) hereof shall govern.<\/p>\n
(ii) The indemnifying party shall select counsel reasonably
\nacceptable to the Indemnified Party in connection with conducting the defense or
\nhandling of such Third Party Claim, and the indemnifying party shall defend or
\nhandle the same in consultation with the Indemnified Party and shall keep the
\nIndemnified Party timely apprised of the status of such Third Party Claim. The
\nindemnifying party shall not, without the prior written consent of the
\nIndemnified Party, agree to a settlement of any Third Party Claim, unless (A)
\nthe settlement provides an unconditional release and discharge of the
\nIndemnified Party and the Indemnified Party is reasonably satisfied with such
\ndischarge and release and (B) the Indemnified Party shall not have reasonably
\nobjected to any such settlement on the ground that the circumstances surrounding
\nthe settlement could result in an adverse impact on the business properties or
\nprospects of Amazon.com. The Indemnified Party shall cooperate with the
\nindemnifying party and shall be entitled to participate in the defense or
\nhandling of such Third Party Claim with its own counsel and at its own expense.<\/p>\n
(c) (i) If the indemnifying party does not give written notice to the
\nIndemnified Party within 30 days after receipt of the notice from the
\nIndemnified Party of any Third Party Claim of the indemnifying party’s election
\nto assume the defense or handling of such Third Party Claim, the provisions of
\nSection 8.5(c)(ii) hereof shall govern.<\/p>\n
(ii) The Indemnified Party may, at the indemnifying party’s
\nexpense (which shall be paid from time to time by the indemnifying party as such
\nexpenses are incurred by the Indemnified Party), select counsel in connection
\nwith conducting the defense or handling of such Third Party Claim and defend or
\nhandle such Third Party Claim in such manner as it may deem appropriate;
\nprovided, however, that the Indemnified Party shall keep the indemnifying party
\ntimely apprised of the status of such Third Party Claim and shall not settle
\nsuch Third Party Claim without the prior written consent of the indemnifying
\nparty, which consent shall not be unreasonably withheld. If the Indemnified
\nParty defends or handles such Third Party Claim, the indemnifying party shall
\ncooperate with the Indemnified Party and shall be entitled to participate in the
\ndefense or handling of such Third Party Claim with its own counsel and at its
\nown expense.<\/p>\n
(d) If the Indemnified Party intends to seek indemnification hereunder,
\nother than for a Third Party Claim, then it shall notify the indemnifying party
\nin writing 90 days after its discovery of facts upon which it intends to base
\nits Claim for<\/p>\n
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\n 61<\/p>\n
indemnification hereunder, but the failure or delay so to notify the
\nindemnifying party shall not relieve the indemnifying party of any obligation or
\nliability that the indemnifying party may have to the Indemnified Party except
\nto the extent that the indemnifying party demonstrates that the indemnifying
\nparty’s ability to defend or resolve such Claim is adversely affected thereby.<\/p>\n
(e) The Indemnified Party may notify the indemnifying party of a Claim
\neven though the amount thereof plus the amount of other Claims previously
\nnotified by the Indemnified Party aggregate less than the Threshold.<\/p>\n
(f) At the Closing, the Escrow Shares shall be deposited in the Escrow
\nAccount to satisfy potential claims by the Amazon.com Indemnified Parties under
\nthis Article VIII.<\/p>\n
8.6 REMEDIES<\/p>\n
Except as otherwise provided, the indemnification provisions of this
\nArticle VIII are the sole and exclusive remedy of any party to this Agreement
\nfor a breach of any representation, warranty or covenant contained herein.
\nNotwithstanding the preceding sentence, each of the parties acknowledges and
\nagrees that the other parties hereto would be damaged irreparably in the event
\nany of the provisions of this Agreement are not performed in accordance with
\ntheir specific terms or otherwise are breached. Accordingly, each of the parties
\nhereto agrees that the other parties hereto shall be entitled to an injunction
\nto prevent breaches of the provisions of this Agreement and to enforce
\nspecifically this Agreement and the terms and provisions hereof (including the
\nindemnification provisions hereof) in any competent court having jurisdiction
\nover the parties, in addition to any other remedy to which they may be entitled
\nat law or in equity.<\/p>\n
ARTICLE IX – GENERAL<\/p>\n
9.1 TAX MATTERS<\/p>\n
(a) Amazon.com, the Purchaser and the Company shall cooperate, as and to
\nthe extent reasonably requested, in connection with the preparation and filing
\nof Tax Returns pursuant to this Section 9.1 and any audit, investigation,
\nlitigation or other action with respect to Taxes that may be instituted after
\nthe Closing. Amazon.com, the Purchaser and the Company shall use commercially
\nreasonable efforts to retain all books and records with respect to Tax matters
\npertinent to the Company relating to any Tax period beginning before the Closing
\nDate until the expiration of the applicable statute of limitations (and, to the
\nextent notified by Amazon.com, the<\/p>\n
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\n 62<\/p>\n
Purchaser or the Company, any extensions thereof) and shall provide any such
\nrecords to the other party as may be reasonably requested.<\/p>\n
(b) Except as set forth in Section 1.8(b), neither Amazon.com nor the
\nPurchaser makes any representation or warranty with respect to, and expressly
\ndisclaims any responsibility for, any Tax consequences to the Company or its
\nstockholders arising out of the structure or terms of this Agreement (including,
\nwithout limitation, the qualification or failure of the purchase and sale of the
\nshares to qualify as a reorganization under Section 368 of the Code), or the
\nnegotiation or consummation hereof. The Company and its stockholders have
\nconsulted with its, his or her own tax advisor in such matters and are solely
\nresponsible for any such Tax consequences.<\/p>\n
9.2 EXPENSES<\/p>\n
Regardless of whether the transactions contemplated by this Agreement
\nare consummated, each party shall pay its own fees and expenses incident to the
\nnegotiation, preparation and execution of this Agreement and the other Operative
\nDocuments (including legal and accounting fees and expenses); provided, however,
\nthat, should any action be brought hereunder, the attorneys’ fees and expenses
\nof the prevailing party shall be paid by the other party to such action; and
\nprovided, further, that the professional fees and expenses incurred by the
\nCompany in excess of $200,000 of legal, accounting and other professional fees
\nshall be paid by the stockholders of the Company.<\/p>\n
9.3 NOTICES<\/p>\n
Any notice or demand desired or required to be given hereunder shall be
\nin writing given by personal delivery, certified or registered mail, confirmed
\nfacsimile transmission, or overnight courier service, in each case addressed as
\nrespectively set forth below or to such other address as any party shall have
\npreviously designated by such a notice. The effective date of any notice or
\nrequest shall be the date of personal delivery, four days after the date of
\nmailing by certified or registered mail, the date on which successful facsimile
\ntransmission is confirmed or the date undertaken for delivery by a reputable
\novernight courier service, as the case may be, in each case properly addressed
\nas provided herein and with all charges prepaid.<\/p>\n
TO AMAZON.COM OR THE PURCHASER:<\/p>\n
Amazon.com, Inc.
\n1516 Second Avenue<\/p>\n
-54-
\n 63<\/p>\n
Seattle, Washington 98101
\nFax: (206) 694-2082
\nAttention: Randy J. Tinsley, Treasurer<\/p>\n
with a copy to:<\/p>\n
Perkins Coie LLP
\n1201 Third Avenue, 40th Floor
\nSeattle, Washington 98101-3099
\nFax: (206) 583-8500
\nAttention: Scott L. Gelband<\/p>\n
TO THE SIGNIFICANT STOCKHOLDERS:<\/p>\n
At their respective addresses set forth on Schedule 2.32 to the
\nDisclosure Memorandum.<\/p>\n
TO THE COMPANY:<\/p>\n
Sage Enterprises, Inc.
\n17 Sellers Street
\nCambridge, Massachusetts 02139
\nFax: (617) 354-7325
\nAttention: Jim Savage, Chief Executive Officer<\/p>\n
with a copy to:<\/p>\n
Hutchins, Wheeler & Dittmar
\n101 Federal Street
\nBoston, Massachusetts 02110
\nFax: (617) 951-1295
\nAttention: Michael J. Riccio, Jr.<\/p>\n
9.4 SEVERABILITY<\/p>\n
If any term or other provision of this Agreement is invalid, illegal or
\nincapable of being enforced by any rule of law, or public policy, all other
\nconditions and provisions of this Agreement shall nevertheless remain in full
\nforce and effect so long as the economic or legal substance of the transactions
\ncontemplated hereby is not affected in any manner adverse to any party. Upon
\nsuch determination that any term or other provision is invalid, illegal or
\nincapable of being enforced, the parties hereto shall negotiate in good faith to
\nmodify this Agreement so as to effect the original intent of the parties as
\nclosely as possible in a mutually acceptable manner in order<\/p>\n
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\n 64<\/p>\n
that the transactions contemplated hereby be consummated as originally
\ncontemplated to the fullest extent possible.<\/p>\n
9.5 ENTIRE AGREEMENT<\/p>\n
This Agreement, the Mutual Nondisclosure Agreement and the other
\nOperative Documents constitute the entire agreement among the parties with
\nrespect to the subject matter hereof and thereof and supersede all prior
\nagreements and undertakings, both written and oral, among the parties, or any of
\nthem, with respect to the subject matter hereof and thereof.<\/p>\n
9.6 ASSIGNMENT<\/p>\n
This Agreement shall not be assigned by operation of law or otherwise,
\nexcept that Amazon.com may assign all or any of its rights and obligations
\nhereunder to any of its affiliates, provided that no such assignment shall
\nrelieve the assigning party of its obligations hereunder if such assignee does
\nnot perform such obligations, and further provided that any such assignment
\nshall not change the consideration due to the stockholders of the Company
\nhereunder.<\/p>\n
9.7 PARTIES IN INTEREST<\/p>\n
This Agreement shall be binding on and inure solely to the benefit of
\neach party hereto, and nothing in this Agreement, express or implied, is
\nintended to or shall confer upon any other Person any right, benefit or remedy
\nof any nature whatsoever under or by reason of this Agreement.<\/p>\n
9.8 GOVERNING LAW<\/p>\n
This Agreement shall be governed by, and construed in accordance with,
\nthe laws of the state of Delaware applicable to contracts executed in and to be
\nperformed in that state. All actions and proceedings arising out of or relating
\nto this Agreement shall be heard and determined in any Delaware state or federal
\ncourt thereof.<\/p>\n
9.9 HEADINGS<\/p>\n
The descriptive headings contained in this Agreement are included for
\nconvenience of reference only and shall not affect in any way the meaning or
\ninterpretation of this Agreement.<\/p>\n
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\n 65<\/p>\n
9.10 COUNTERPARTS<\/p>\n
This Agreement may be executed and delivered (including by facsimile
\ntransmission) in one or more counterparts, and by the different parties hereto
\nin separate counterparts, each of which when executed and delivered shall be
\ndeemed to be an original but all of which taken together shall constitute one
\nand the same agreement.<\/p>\n
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66<\/p>\n
IN WITNESS WHEREOF, the parties hereto have entered into and signed this
\nAgreement as of the date and year first above written.<\/p>\n
AMAZON.COM, INC.<\/p>\n
By Jeffrey P. Bezos
\n ____________________________________<\/p>\n
Its Chief Exeutive Officer
\n ________________________________<\/p>\n
PACIFIC ACQUISITION, INC.<\/p>\n
By Randy Tinsley
\n ____________________________________<\/p>\n
Its Treasurer
\n ________________________________<\/p>\n
SAGE ENTERPRISES, INC.<\/p>\n
By James J. Savage
\n ____________________________________<\/p>\n
Its Chief Executive Officer
\n ________________________________<\/p>\n
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